State Farm total-loss offers in Wisconsin: how the appraisal clause works

Wisconsin regulates first-party automobile total losses through layered authorities: the claim-settlement-practices rule at Wis. Admin. Code Ins 6.11, the timely-payment and interest statute at Wis. Stat. § 628.46 (interest rate reduced from 12% to 7.5% by 2017 Wis. Act 235, effective April 5, 2018), and the common-law tort of first-party bad faith recognized by the Wisconsin Supreme Court in Anderson v. Continental Insurance Co., 85 Wis. 2d 675 (1978). Wis. Admin. Code Ins 6.11 — Insurance Claim Settlement Practices. Ins 6.11(3)(a) lists acts that are unfair methods and practices in the business of insurance if committed without just cause and performed with such frequency as to indicate a general business practice, and Ins 6.11(3)(b) lists acts that are unfair whenever committed; Ins 6.11(4) defines "promptly" as responsive action within 10 consecutive days from receipt of a communication concerning a claim. The (3)(a) list includes failure to promptly acknowledge pertinent communications; failure to initiate and conclude a claims investigation with all reasonable dispatch; failure to attempt in good faith to effectuate fair and equitable settlement of claims in which liability has become reasonably clear; knowingly misrepresenting to claimants pertinent facts or policy provisions; failure to affirm or deny coverage within a reasonable time after proof of loss has been completed; and compelling insureds and claimants to institute suits to recover amounts due by offering substantially less than the amounts ultimately recovered. (3)(b) adds failure to adopt reasonable standards for investigation of claims, among other practices. The Office of the Commissioner of Insurance enforces the rule. Ins 6.11 does NOT contain a codified total-loss valuation methodology — no list of comparable-vehicle / dealer-quotation / statistically-valid-source rules, no codified sales-tax-inclusion mandate, and no codified "right of recourse." Wis. Stat. § 628.46 — Timely Payment of Claims; Interest. A claim is overdue if not paid within 30 days after the insurer is furnished written notice of the fact of a covered loss and of the amount of the loss, and all overdue payments bear simple interest at the rate of 7.5 percent per year (12 percent before 2017 Wis. Act 235). A payment is not overdue when the insurer has reasonable proof to establish that it is not responsible for the payment, and § 628.46(2) does not treat a claim as overdue until 30 days after the insurer receives the proof of loss the policy requires. Anderson v. Continental Insurance Co., 85 Wis. 2d 675 (1978). The Wisconsin Supreme Court recognized first-party bad faith as a tort separate from breach of contract — "a separate intentional wrong, which results from a breach of duty imposed as a consequence of the relationship established by contract." To prove bad faith, "a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and the defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim"; when a claim is fairly debatable, the insurer is entitled to debate it. Some breach of contract is a fundamental prerequisite for the claim (Brethorst v. Allstate, 2011 WI 41). Wis. Stat. § 342.065 — Salvage Title Threshold. Under § 342.065(1)(c), if the owner's interest in a vehicle titled in Wisconsin is not transferred upon payment of an insurance claim that, including any deductible, exceeds 70 percent of the vehicle's fair market value, the insurer must notify the Department of Transportation in writing, within 30 days of the claim payment, that the vehicle meets the statutory definition of a salvage vehicle. The 70% threshold is keyed to the insurance claim payment against fair market value, not to repair cost against actual cash value. Separately, § 342.06(1)(hr) requires the insurer to state in a title application when a vehicle less than 7 years old, damaged to the extent that the cost of repair exceeds 30 percent of its fair market value, was transferred to an insurer upon payment of an insurance claim.