215 ILCS 5/ Illinois Insurance Code.

(215 ILCS 5/532) (from Ch. 73, par. 1065.82)

Sec. 532. Purpose.

(a) The purpose of this Article is to provide a mechanism for the payment of covered claims under certain insurance policies, to avoid excessive delay in payment of covered claims, to avoid financial loss to claimants or policyholders because of the entry of an Order of Liquidation against an insolvent company, including through services offered to the Director in her or his capacity as receiver under Article XIII of this Code that relate to covered claims, to provide a Fund to assess among member companies the costs of such protection and maintain the continuity and self-sufficient operation of the Fund, and to offset the costs associated with maintaining the Fund's continuity and self-sufficient operations when practical by providing assistance and services to the Director in her or his capacity as receiver under Article XIII of this Code as described in this Section.

(b) The purpose of this Article is also to provide a mechanism for the Fund to participate in and facilitate the process by which the assets of an insolvent company are marshaled and distributed pursuant to Article XIII of this Code beyond reimbursing the cost of covered claims. This subsection (b) is inoperative 5 years after the effective date of this amendatory Act of the 102nd General Assembly.

(Source: P.A. 102-396, eff. 8-16-21.)

(215 ILCS 5/533) (from Ch. 73, par. 1065.83)

Sec. 533. Scope. This Article applies to all of the kinds of insurance written on a direct basis which are included in Class 2 and Class 3 of Section 4 of this Code, except that it shall not apply to:

(a) accident and health insurance written under clause (a) of Class 2, or

(b) mortgage guaranty or other financial guaranty written as suretyship obligations or insurance under clause (g), clause (h) or clause (i) of Class 2 or otherwise, or

(c) fidelity or surety bonds, or any other bonding obligations other than employee fidelity bonds, or

(d) marine insurance other than inland marine insurance, written under clause (d) of Class 3, or

(e) insurance of warranties or service contracts, including insurance that provides for the repair, replacement, or service of goods or property or indemnification for repair, replacement, or service for the operational or structural failure of the goods or property due to a defect in materials, workmanship, or normal wear and tear or provides reimbursement for the liability incurred by the issuer of agreements or service contracts that provide these benefits, or

(f) any claim servicing agreement or insurance policy which contains a retrospective rating or other premium adjustment agreement under which premiums are substantially equal to the losses and loss expenses covered under the policy or any policy providing retroactive insurance of known loss, or

(g) any insurance which is provided, guaranteed or reinsured pursuant to the Federal Crop Insurance Program or the National Flood Insurance Program, including flood insurance written by National Flood Insurance Program Write Your Own Companies.

(Source: P.A. 103-113, eff. 6-30-23.)

(215 ILCS 5/534) (from Ch. 73, par. 1065.84)

Sec. 534. Definitions. For the purposes of this Article, unless the context requires otherwise, the words and phrases defined in Sections 534.1 through 534.9 have the meanings set forth in those Sections.

(Source: P.A. 103-113, eff. 6-30-23.)

(215 ILCS 5/534.1) (from Ch. 73, par. 1065.84-1)

Sec. 534.1. "Fund" means the Illinois Insurance Guaranty Fund created by this Article.

(Source: P.A. 77-305.)

(215 ILCS 5/534.2) (from Ch. 73, par. 1065.84-2)

Sec. 534.2. "Director" means the Director of Insurance of the State of Illinois.

(Source: P.A. 77-305.)

(215 ILCS 5/534.3) (from Ch. 73, par. 1065.84-3)

Sec. 534.3. Covered claim; unearned premium defined.

(a) "Covered claim" means an unpaid claim for a loss arising out of and within the coverage of an insurance policy to which this Article applies and which is in force at the time of the occurrence giving rise to the unpaid claim, including claims presented during any extended discovery period which was purchased from the company before the entry of a liquidation order or which is purchased or obtained from the liquidator after the entry of a liquidation order, made by a person insured under such policy or by a person suffering injury or damage for which a person insured under such policy is legally liable, and for unearned premium, if:

(i) The company issuing, assuming, or being allocated the policy becomes an insolvent company as defined in Section 534.4 after the effective date of this Article; and

(ii) The claimant or insured is a resident of this State at the time of the insured occurrence, or the property from which a first party claim for damage to property arises is permanently located in this State or, in the case of an unearned premium claim, the policyholder is a resident of this State at the time the policy was issued; provided, that for entities other than an individual, the residence of a claimant, insured, or policyholder is the state in which its principal place of business is located at the time of the insured event.

(b) "Covered claim" does not include:

(i) any amount in excess of the applicable limits of liability provided by an insurance policy to which this Article applies; nor

(ii) any claim for punitive or exemplary damages or fines and penalties paid to government authorities; nor

(iii) any first party claim by an insured who is an affiliate of the insolvent company; nor

(iv) any first party or third party claim by or against an insured whose net worth on December 31 of the year next preceding the date the insurer becomes an insolvent insurer exceeds $25,000,000; provided that an insured's net worth on such date shall be deemed to include the aggregate net worth of the insured and all of its affiliates as calculated on a consolidated basis. However, this exclusion shall not apply to third party claims against the insured where the insured has applied for or consented to the appointment of a receiver, trustee, or liquidator for all or a substantial part of its assets, filed a voluntary petition in bankruptcy, filed a petition or an answer seeking a reorganization or arrangement with creditors or to take advantage of any insolvency law, or if an order, judgment, or decree is entered by a court of competent jurisdiction, on the application of a creditor, adjudicating the insured bankrupt or insolvent or approving a petition seeking reorganization of the insured or of all or substantial part of its assets; nor

(v) any claim for any amount due any reinsurer, insurer, insurance pool, or underwriting association as subrogated recoveries, reinsurance recoverables, contribution, indemnification or otherwise. No such claim held by a reinsurer, insurer, insurance pool, or underwriting association may be asserted in any legal action against a person insured under a policy issued by an insolvent company other than to the extent such claim exceeds the Fund obligation limitations set forth in Section 537.2 of this Code.

(c) "Unearned Premium" means the premium for the unexpired period of a policy which has been terminated prior to the expiration of the period for which premium has been paid and does not mean premium which is returnable to the insured for any other reason.

(Source: P.A. 101-60, eff. 7-12-19; 102-558, eff. 8-20-21.)

(215 ILCS 5/534.4) (from Ch. 73, par. 1065.84-4)

Sec. 534.4. "Insolvent company" means a company organized as a stock company, mutual company, reciprocal or Lloyds (a) which holds a certificate of authority to transact insurance in this State either at the time the policy was issued or when the insured event occurred, or any company which has assumed or has been allocated such policy obligation through merger, division, insurance business transfer, consolidation, or reinsurance, whether or not such assuming company held a certificate of authority to transact insurance in this State at the time such policy was issued or when the insured event occurred; and (b) against which a final Order of Liquidation with a finding of insolvency to which there is no further right of appeal has been entered by a court of competent jurisdiction in the company's State of domicile after the effective date of this Article.

(Source: P.A. 103-75, eff. 6-9-23.)

(215 ILCS 5/534.5) (from Ch. 73, par. 1065.84-5)

Sec. 534.5. Member company. "Member Company" means any insurance company organized as a stock company, mutual company, reciprocal or Lloyds, which holds a certificate of authority to transact any kind of insurance in this State to which this Article applies, and which is either:

(a) a domestic insurance company formed before or after the effective date of this Article; or

(b) a foreign or alien insurance company.

An insurance company shall cease to be a member company effective on the day following the termination or expiration of its license to transact the kinds of insurance to which this Article applies; provided, however, that the insurance company shall remain liable as a member company for any and all obligations, including obligations for assessments levied before the termination or expiration of the insurance company's license and assessments levied after the termination or expiration, based on any insolvency as to which the determination of insolvency by a court of competent jurisdiction occurs before the termination or expiration of the insurance company's license.

(Source: P.A. 89-97, eff. 7-7-95.)

(215 ILCS 5/534.6) (from Ch. 73, par. 1065.84-6)

Sec. 534.6. "Net direct written premiums" means direct gross premiums written in this State on insurance policies to which this Article applies, less return premiums thereon and dividends paid or credited to policyholders on such direct business. "Net direct written premiums" does not include premiums on contracts of reinsurance or other contracts between insurers or reinsurers.

(Source: P.A. 85-576.)

(215 ILCS 5/534.7) (from Ch. 73, par. 1065.84-7)

Sec. 534.7. Affiliate. An "affiliate" of a specified person means a person who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the specified person on December 31 of the year next preceding the date the insolvent company became an insolvent company.

(Source: P.A. 89-97, eff. 7-7-95.)