Wisconsin’s New Assignment of Benefits for Property Insurers
Governor Evers recently signed 2025 Senate Bill 531, creating 2025 Wis. Act 230. This bill enacts a new provision of Wisconsin’s insurance statutes: § 632.11, which imposes new regulations on assignments of benefits obtained by contractors. These new provisions are relevant to contractors, consumers, and insurers. However, there is also an impact on insurance companies.
To start, here is some background to help you understand what this all means. An “assignment” is a contract where one party gives to a second party the first party’s rights against a third party. While most policies include “anti-assignment” provisions, Wisconsin courts hold that the anti-assignment provisions apply only to assigning rights under the policy before the loss. Pepsi-Cola Metro. Bottling Co., Inc. v. Emps. Ins. Co. of Wausau, 2022 WI App 45, ¶ 18, 404 Wis. 2d 337, 350, 979 N.W.2d 627, 633, aff'd by an equally divided court, 2023 WI 42, 407 Wis. 2d 384, 990 N.W.2d 267. Essentially, an individual typically can’t assign their rights whenever they want but may be able to after an accident. The idea is that anti-assignment provisions are a good idea before a loss because the terms of a policy are often based on the risk presented by the particular insured. That said, once a loss occurs, the loss is the loss, so the insurer (i.e. insurance company) is no worse off if the insured assigns its rights under the policy. Id. It does not matter who holds the rights at that point as the incident already occurred.
In an assignment, the assignee (i.e. the contractor) essentially takes the place of the assignor (i.e., the insured) as to the third party (i.e. the insurance company). For example, if a policy provides limited or no coverage for a loss, then the contractor (assignee) is bound by the terms of the policy and cannot recover more than the insured could have. Similarly, the contractor is bound to all terms of the policy, such as appraisal and proof of loss. The assignment does not change anything with the policy or incident, essentially acting as a pinch hitter in baseball where someone else takes that player’s spot in the lineup for that at-bat.
Section 632.11is fairly narrow in that it only applies in certain situations. Those situations being assignment of benefits in first-party property insurance policies, but only to certain types of claims in that category: earthquake, fire, flood, hailstorm, tornado, windstorm, or “any naturally occurring weather event for which the governor declares a state of emergency under § 323.10.” § 632.11(1)(a), (b). This certainly covers many types of loss, but there is a noticeable absence from this list: water leaks from frozen or broken pipes and vehicles running into buildings. One scenario being more common in Wisconsin than the other, which also highlights the importance of winterizing pipes in summer homes up north.
Importantly for insurers, certain provisions clarify how an insurer should address its insured after the insured assigns its rights under the policy to a contractor:
Paragraph (3)(a) – an assignment only requires the insurer to name the contractor as a co-payee with the named insured on any checks.
Paragraph (3)(e) – an assignment does not impair a mortgagee’s right.
Paragraph (3)(f) – the insurer may still communicate with the insured notwithstanding the assignment.
Insurers may find § 632.11 the most important as it regulates an insurer’s relationship with a contractor who obtains an assignment. A contractor that obtains an assignment of benefits may pursue onlythe insurance company until the contractor exhausts all legal rights against the insurer. § 632.11(6)(a). This means a contractor cannot threaten a lien against the insured as leverage against the insurer, so an insurer can comfortably assert all policy defenses without fear of a claim by the insured. The provision also makes contractors have to decide whether a lien or assignment is their best option to recover any losses they suffered.
When a contractor obtains an assignment of benefits, then the insurer automatically gets an assignment of the insured’s rights against the contractor. § 632.11(6)(b). Insurers can then assert any defenses under the insured’s contract with the contractor. Without this provision, the insurer would potentially need an assignment of the insured’s rights against the contractor to raise certain types of defenses.
Interestingly, an insured’s bad faith claim also transfers to a contractor who obtains an assignment of benefits but based solely on the insurer’s pre-assignment conduct. § 632.11(6)(c). This highlights that contractors are not insureds, meaning contractors cannot claim an independent bad faith claim based on the insurer’s conduct towards the contractor. This is consistent with existing case law in Kranzush v. Badger State Mut. Cas. Co., 103 Wis. 2d 56, 73, 307 N.W.2d 256, 265 (1981) (refusing to recognize a cause of action for bad faith to non-insured third parties).
There are some consequences for contractors who violate this new section. First, the contract is void. § 632.11(5)(a). Second, the Wisconsin Office of the Commissioner of Insurance (“OCI”) may instigate forfeiture proceedings to seek forfeitures of up to $5,000 per violation. Third, OCI, the Attorney General, or any District Attorney may institute injunction proceedings.
As a note, this section does not take effect until “the first day of the 8th month beginning after publication.” 2025 Wis. Act 230, § 2. Since it was published on April 9, 2026, § 632.11 will not take effect until December 1, 2026. Given the recent string of storms in the state, especially if they are an indication for how the summer weather will be, insurers should consider how they will address assignments after this law takes effect.
Author: Samuel P. Aschliman
Wisconsin’s New Assignment of Benefits for Property Insurers
Governor Evers recently signed 2025 Senate Bill 531, creating 2025 Wis. Act 230. This bill enacts a new provision of Wisconsin’s insurance statutes: § 632.11, which imposes new regulations on assignments of benefits obtained by contractors. These new provisions are relevant to contractors, consumers, and insurers. However, there is also an impact on insurance companies.
To start, here is some background to help you understand what this all means. An “assignment” is a contract where one party gives to a second party the first party’s rights against a third party. While most policies include “anti-assignment” provisions, Wisconsin courts hold that the anti-assignment provisions apply only to assigning rights under the policy before the loss. Pepsi-Cola Metro. Bottling Co., Inc. v. Emps. Ins. Co. of Wausau, 2022 WI App 45, ¶ 18, 404 Wis. 2d 337, 350, 979 N.W.2d 627, 633, aff'd by an equally divided court, 2023 WI 42, 407 Wis. 2d 384, 990 N.W.2d 267. Essentially, an individual typically can’t assign their rights whenever they want but may be able to after an accident. The idea is that anti-assignment provisions are a good idea before a loss because the terms of a policy are often based on the risk presented by the particular insured. That said, once a loss occurs, the loss is the loss, so the insurer (i.e. insurance company) is no worse off if the insured assigns its rights under the policy. Id. It does not matter who holds the rights at that point as the incident already occurred.
In an assignment, the assignee (i.e. the contractor) essentially takes the place of the assignor (i.e., the insured) as to the third party (i.e. the insurance company). For example, if a policy provides limited or no coverage for a loss, then the contractor (assignee) is bound by the terms of the policy and cannot recover more than the insured could have. Similarly, the contractor is bound to all terms of the policy, such as appraisal and proof of loss. The assignment does not change anything with the policy or incident, essentially acting as a pinch hitter in baseball where someone else takes that player’s spot in the lineup for that at-bat.
Section 632.11is fairly narrow in that it only applies in certain situations. Those situations being assignment of benefits in first-party property insurance policies, but only to certain types of claims in that category: earthquake, fire, flood, hailstorm, tornado, windstorm, or “any naturally occurring weather event for which the governor declares a state of emergency under § 323.10.” § 632.11(1)(a), (b). This certainly covers many types of loss, but there is a noticeable absence from this list: water leaks from frozen or broken pipes and vehicles running into buildings. One scenario being more common in Wisconsin than the other, which also highlights the importance of winterizing pipes in summer homes up north.
Importantly for insurers, certain provisions clarify how an insurer should address its insured after the insured assigns its rights under the policy to a contractor:
Insurers may find § 632.11 the most important as it regulates an insurer’s relationship with a contractor who obtains an assignment. A contractor that obtains an assignment of benefits may pursue only the insurance company until the contractor exhausts all legal rights against the insurer. § 632.11(6)(a). This means a contractor cannot threaten a lien against the insured as leverage against the insurer, so an insurer can comfortably assert all policy defenses without fear of a claim by the insured. The provision also makes contractors have to decide whether a lien or assignment is their best option to recover any losses they suffered.
When a contractor obtains an assignment of benefits, then the insurer automatically gets an assignment of the insured’s rights against the contractor. § 632.11(6)(b). Insurers can then assert any defenses under the insured’s contract with the contractor. Without this provision, the insurer would potentially need an assignment of the insured’s rights against the contractor to raise certain types of defenses.
Interestingly, an insured’s bad faith claim also transfers to a contractor who obtains an assignment of benefits but based solely on the insurer’s pre-assignment conduct. § 632.11(6)(c). This highlights that contractors are not insureds, meaning contractors cannot claim an independent bad faith claim based on the insurer’s conduct towards the contractor. This is consistent with existing case law in Kranzush v. Badger State Mut. Cas. Co., 103 Wis. 2d 56, 73, 307 N.W.2d 256, 265 (1981) (refusing to recognize a cause of action for bad faith to non-insured third parties).
There are some consequences for contractors who violate this new section. First, the contract is void. § 632.11(5)(a). Second, the Wisconsin Office of the Commissioner of Insurance (“OCI”) may instigate forfeiture proceedings to seek forfeitures of up to $5,000 per violation. Third, OCI, the Attorney General, or any District Attorney may institute injunction proceedings.
As a note, this section does not take effect until “the first day of the 8th month beginning after publication.” 2025 Wis. Act 230, § 2. Since it was published on April 9, 2026, § 632.11 will not take effect until December 1, 2026. Given the recent string of storms in the state, especially if they are an indication for how the summer weather will be, insurers should consider how they will address assignments after this law takes effect.