Illinois Compiled Statutes
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INSURANCE215 ILCS 5/513a8
(215 ILCS 5/) Illinois Insurance Code.
(215 ILCS 5/513a8)
(from Ch. 73, par. 1065.60a8)
(a) The Director may examine any applicant for or holder of a premium
(b) All persons being examined, as well as their officers and directors,
shall provide to the Director convenient and free access, at all reasonable
hours at their offices, to all books, records, documents, and other papers
relating to the person's insurance and premium financing business affairs.
The licensee or its officers, directors, and employees shall facilitate and
aid the Director in the examinations as much as it is in their power to do so.
(c) The Director may designate an examiner or examiners to conduct any
examination under this Section. The Director or his designee may administer
oaths and examine under oath any individual relative to the business of the
person being examined.
(d) The examiners designated by the Director under this Section may make
reports to the Director. Any report alleging substantive violations of this
Code or the rules and regulations thereunder shall be in writing and be
based upon facts obtained by the examiners. The report of examination shall
be verified by the examiners.
(e) If a report is made, the Director shall either deliver a duplicate
thereof to the licensee being examined or send the duplicate by certified
or registered mail to the licensee's address of record. The Director shall
afford the licensee an opportunity to request a hearing with reference to
the facts and other evidence contained in the report. The licensee may
request a hearing within 14 calendar days after he receives the duplicate
of the examination report by giving the Director written notice of that
request, together with written statement of the licensee's objection to the
report. The Director shall, if requested to do so, conduct a hearing in
accordance with Sections 402 and 403. The Director shall issue a written
order based upon the examination report within 90 days after the report is
filed or within 90 days after the hearing, if a hearing is held. If the
report is refused or otherwise undeliverable or a hearing is not requested
in a timely fashion, the right to a hearing is waived. After the hearing or
the expiration of the time period in which a licensee may request a
hearing, if the examination reveals that the licensee is operating in
violation of any law, this Code or rules and regulations promulgated
thereunder, or prior order, the Director in the written order may require
the licensee to take any action the Director considers necessary or
appropriate in accordance with the report or examination hearing. The
order is subject to review under the Administrative Review Law.
(f) Any licensee who violates or aids and abets any violation of a
written order issued under this Section shall be guilty of a business
offense, and his license may be revoked or suspended under Section 513a7,
and he may be fined not less than $501 nor more than $5,000.
(Source: P.A. 87-811.)
215 ILCS 5/513a9
(215 ILCS 5/513a9)
(from Ch. 73, par. 1065.60a9)
Premium finance agreement.
(a) A premium finance
agreement must be dated and signed by or on behalf of the named
insured, and the printed
portion shall be in at least 8-point type. The following items must be set
forth on the first page of the accepted finance agreement:
(1) the total amount of the premiums;
(2) the amount of the down payment;
(3) the principal balance (the difference between
(4) the amount of the finance charges expressed in
dollars and as an annual percentage rate;
(5) the balance payable by the insured (sum of items
(6) the number of installments, the due dates
thereof, and the amount of each installment expressed in dollars; and
(7) the policy numbers or binder numbers.
(b) The premium finance company is required to
furnish full and complete
disclosure of the terms and conditions of the premium finance
agreement including, but not limited to, the specific insurance coverages
financed to the named insured no later than the date that the first
premium payment notice is sent to the insured.
(c) As to policies written primarily for personal, family, or household
use, the premium finance company must:
(1) deliver or mail the premium check or checks in
the amount of the principal balance directly to the insurer or insurers unless the insurer or insurers have given written authority to the premium finance company to deliver the checks to the producer;
(2) issue the premium check or checks payable to the
insurer, insurers, or, if the insurer gives written authority to the premium finance company, to the producer; and
(3) properly identify the premium check or checks by
policy number or binder number when the premium is paid to the insurer or insurers.
(d) As to all other policies the premium finance company may:
(1) deliver or mail the premium check or checks in
the amount of the principal balance directly to the producer; and
(2) issue the premium check or checks payable to the
(e) A premium finance company that pays the financed premium to the
producer pursuant to subsection (d) establishes the producer as the agent of
the premium finance company for payment of the premium and for receipt of any
(Source: P.A. 89-265, eff. 1-1-96; 90-381, eff. 8-14-97.)
215 ILCS 5/513a10
(215 ILCS 5/513a10)
(from Ch. 73, par. 1065.60a10)
Maximum service charge.
(a) No service charge shall be made for financing premiums other than as
permitted by this Article.
(b) The service charge is to be computed on the principal balance from
the effective date of the insurance coverage for which the premiums are
being advanced to and including the date when the final installment of the
premium finance agreement is payable.
(c) The service charge shall be a maximum of $10 per $100 per year plus
an allowable charge as follows:
Amount of Principal
Per Finance Agreement
$0 to $499
$500 to $999
$1000 or more
(d) The service charge or any other charge made by the licensee does not
have to be refunded upon cancellation or prepayment. The allowable charge
is considered to be part of the service charge.
(e) A premium finance agreement may provide for a delinquency charge of
not less than $1 nor more than 5% of any installment in default for more
than 5 days.
(f) Any other charges shall be disclosed in the premium finance agreement.
(Source: P.A. 87-811.)
215 ILCS 5/513a11
(215 ILCS 5/513a11)
(from Ch. 73, par. 1065.60a11)
Cancellation requirements upon default.
(a) When a premium finance agreement contains a power of attorney
enabling the premium finance company to cancel any insurance contract or
contracts listed in the premium finance agreement, the insurance contract
or contracts shall not be cancelled by the premium finance company unless
the request for cancellation is effectuated under this Section.
(b) Not less than 10 days written notice shall be mailed to the named
insured of the intent of the premium finance company to cancel the
insurance contract unless the default is cured within the 10 day period.
(c) After expiration of the 10 day period, the premium finance company
may request, in the name of the named insured, cancellation of the insurance
contract or contracts by mailing or hand delivering to the insurer a
request for cancellation, and the insurance contract shall be cancelled as
if the request for cancellation had been submitted by the named insured,
but without requiring the return of the insurance contract or contracts.
The premium finance company shall also mail a copy of the request for
cancellation to the named insured at his last known address.
(d) All statutory, regulatory, and contractual restrictions providing
that the insurance contract may not be cancelled unless notice is given to
a governmental agency, mortgagee, or other third party shall apply where
cancellation is effected under provisions of this Section. The insurer
shall give the notice to any governmental agency, mortgagee, or other
third party on or before the fifth business day after it receives the
notice of cancellation from the premium finance company. For purposes of this Section, any governmental agency, mortgagee, or other third party may opt to receive notices electronically.
(e) In the event that the collection of return premiums for the account of
the named insured results in a surplus over the amount due from the named
insured, the premium finance company shall refund the excess to the named
insured; however, no refund is required if it amounts to less than $5.
(f) All cancellation provisions required of the premium finance company
and insurer are applicable to any policy to which Section 143.11 applies.
(Source: P.A. 93-713, eff. 1-1-05.)
215 ILCS 5/513a12
(215 ILCS 5/513a12)
(from Ch. 73, par. 1065.60a12)
Books and records.
(a) Until payment in full and 3 years thereafter every licensee shall
maintain each premium finance agreement or duplicate originals thereof and
all original documents relating thereto (except those papers returned to
the insured) so as to be readily available for examination by the Director.
(b) Every licensee shall maintain a register, ledger, or combination of
records for each premium finance agreement that can readily show:
(1) the date of acquisition;
(2) the name of the insured;
(3) the identifying number;
(4) the principal balance;
(5) the amount of all charges assessed;
(6) the balance; and
(7) a distribution of proceeds showing the dates,
amounts, and names of the persons to whom any part of the proceeds were distributed.
(Source: P.A. 87-811.)
215 ILCS 5/Art. XXXIII
(215 ILCS 5/Art. XXXIII heading)
215 ILCS 5/522
(215 ILCS 5/522)
(from Ch. 73, par. 1065.69)
This article is to make basic property insurance increasingly available
to the citizens of this State, and to deter the insurance industry from
geographically redlining urban areas of this State by requiring the restructuring
of the Industry Placement Facility and administering the FAIR Plan (Fair
Access to Insurance Requirements) to deliver residential property insurance
to all citizens of this State on a reasonable access and marketing basis
by offering homeowners insurance, by requiring immediate binding of eligible
risks, by making use of premium installment payment plans, and by further
establishing reasonable service standards in its plan of operation subject
to the approval and review of the Director; and, to establish a central
operation facility for the equitable distribution of losses and expenses
in the writing of the basic property insurance and homeowners insurance in this State.
(Source: P.A. 80-1365.)
215 ILCS 5/523
(215 ILCS 5/523)
(from Ch. 73, par. 1065.70)
Definitions.) (1) "Basic Property Insurance" means the
coverage against direct loss to real or tangible personal property at a
fixed location provided in the Standard Fire Policy and Extended
Coverage Endorsement and such vandalism and malicious mischief or such
other classes of insurance as may be added with respect to the property
by the Industry Placement Facility with the approval of the Director, except
insurance on automobile, farm and manufacturing
risks and it shall include homeowners insurance.
(2) "Homeowners Insurance" means the personal multi-peril property
coverages commonly known as Homeowners Insurance.
(3) "Inspection Bureau(s)" means the organization or organizations
designated by the Industry Placement Facility with the approval of the
Director to make inspections to determine the condition of the
properties for which basic property insurance is sought and to perform
such other duties as may be authorized by the Industry Placement
(4) "Industry Placement Facility" or "Facility" means the
organization formed by insurers licensed to write and engaged in writing
basic property insurance (including multi-peril policies)
within the State of Illinois to assist applicants in urban areas in
securing basic property insurance and to formulate and administer a
program for the equitable apportionment among such insurers of such
basic property insurance.
(5) "Urban Area" means any community having a blighted, deteriorated
or deteriorating area which the Facility has designated with the
approval of the Director, or which the Secretary of the U.S. Department
of Housing and Urban Development has approved for an urban renewal
project after a local public agency has been formed in the community to
avail itself of a U.S. Housing and Urban Renewal Program, or which the
Director of Insurance has designated.
(6) "Premiums Written" means the gross direct premiums charged with
respect to property in this State on all policies of basic property
insurance and the basic property insurance premium components of all
multi-peril policies less return premiums, dividends paid or credited to
policyholders, or the unused or unabsorbed portions of premium deposits.
(Source: P.A. 80-1365.)
215 ILCS 5/524
(215 ILCS 5/524)
(from Ch. 73, par. 1065.71)
FAIR Plan Procedure.
(1) Any person having an insurable
interest in real or tangible personal property at a fixed location in an
urban area who, after diligent effort has been unable to obtain basic
property insurance, as evidenced by 3 attempts to procure such insurance,
is entitled upon application to the Facility to an
inspection and evaluation of the property by representatives of the
(2) Any person who is an owner-resident of a one to four family
dwelling unit at a fixed location in an urban area and whose residential
real property insurance coverage has been nonrenewed through the
voluntary insurance market shall be entitled to submit a binding
application of coverage to the Facility for such period of time as is
required by the Facility to conduct a reasonable inspection of the
residential real property.
(3) The manner and scope of the inspection and evaluation report
for nonresidential property shall be prescribed by the Facility with
the approval of the Director. The
inspection must include, but need not be limited to, pertinent
structural and occupancy features as well as the general condition of
the building and surrounding structures. A representative photograph of
the property may be taken as part of the inspection.
(4) Promptly after the request for inspection is received an
inspection must be made and an inspection report filed with the company
or companies designated by the Facility. A copy of the completed
inspection and evaluation report must be sent to the Facility and made
available to the
applicant and to insurers in the voluntary insurance market upon request.
(5) If the Inspection Bureau finds that the residential property meets
the reasonable underwriting standards established under Section 525, the
applicant shall be so informed in writing. If the residential property does
not meet the criteria, the applicant shall be informed, in writing, of the
reasons for the failure of the residential property to meet the criteria.
(6) If, at any time, the applicant makes improvements in the residential
property or its condition which he or she believes are sufficient to make
the residential property meet the criteria, a representative of the Inspection
Bureau shall reinspect the residential property upon request. In any case,
the applicant for residential property insurance shall be eligible for one
reinspection any time
beginning 60 days after his or
her initial Fair plan inspection. If upon reinspection the residential property
meets the reasonable underwriting standards established under Section 525,
the applicant shall be so informed in writing.
(Source: P.A. 81-1430.)
215 ILCS 5/525
(215 ILCS 5/525)
(from Ch. 73, par. 1065.72)
Industry Placement Program.)
(1) Within 30 days after the
effective date of this Article, all insurers engaged in writing in this
State, on a direct basis, basic property insurance or any property
insurance component in multi-peril policies, other than local district,
county and township mutual companies, must establish an Industry
Placement Facility to formulate and administer a Program for the
equitable apportionment among such insurers of basic property insurance
which may be afforded applicants in urban areas whose property is
insurable in accordance with reasonable underwriting standards, but
who, after diligent efforts, are unable to procure such insurance through
normal channels, as evidenced by 3 attempts to procure such insurance.
The Program may also provide, with the approval of the
Director, for the use of deductibles, percentage participation clauses
and other underwriting devices and for assessment of all members in
amounts sufficient to operate the Facility, and may establish maximum
limits of liability to be placed through the Program,
commissions to be paid to the license producer designated by the
applicant and for relieving any company from accepting referrals under
the FAIR Plan, in whole or in part, for reasonable cause. The Program
may also provide that the Facility issue policies in its own name. The
Program shall establish reasonable underwriting standards for determining
insurability of a risk, subject to the approval of the Director.
(2) The Industry Placement Program, through its plan of operation,
shall provide reasonable access and marketing procedures for (a)
immediate binding of eligible risks; (b) premium installment payment
plans; and, (c) establishing adequate marketing and service facilities
in all designated urban areas of this State.
(3) Homeowners insurance coverage shall become part of the Industry
Placement Program of basic property insurance. The Facility shall
develop, with the consultation of the Director, a homeowners insurance
contract(s) for urban areas. Such Program of homeowners insurance will
be implemented through a plan of operation specifically entitling owner
residents who have been nonrenewed through normal insurance channels of
immediate binding coverage pending a reasonable period of time for the
Facility to conduct an inspection of the premises to determine whether
the premises comply with underwriting requirements set out in the Program.
(4) Each insurer, as a condition of its authority to transact such
kinds of insurance in this State, must participate in the Industry
Placement Program in accordance with this Article and such a plan of
operation as may be established by a Governing Committee of 6 insurers
elected annually in a manner provided in a membership agreement to be
executed by each participating insurer, 4 members who are not
employees of or otherwise affiliated with the
insurance industry appointed by the Director to represent the
interest of insurance consumers, and one member who is an Illinois licensed
insurance producer appointed by the Director, who shall serve
for terms consistent with the terms served by
their counterparts from the insurance industry.
(Source: P.A. 88-667, eff. 9-16-94.)
215 ILCS 5/525.1
(215 ILCS 5/525.1)
(from Ch. 73, par. 1065.72-1)
Centralized Operations Authorized.) (1) The Industry
Placement Facility is authorized, for FAIR Plan purposes only, to issue
policies of insurance and endorsements thereto in its own name or a
trade name duly adopted for that purpose, and to act on behalf of all
participating insurers in connection with said policies and otherwise in
any manner necessary to accomplish the purposes of this Article,
including but not limited to collection of premiums, issuance of
cancellations, and payment of commissions, losses, judgments and
(2) The participating insurers shall be liable to the Facility as
provided in this Article, the Program and any related Articles of
Agreement for the expenses and liabilities so incurred by the Facility,
and the Governing Committee shall make assessments against the
participating insurers as required to meet such expenses and
liabilities. In connection with any policy issued by the Facility: (a)
the name and percentage participation of each participating insurer
shall be made available to the insured upon request to the Facility;
(b) service of any notice, proof of loss, legal process or other
communication with respect to the policy may and shall be made upon the
Facility; and (c) any action by the insured constituting a claim under
the policy shall be brought only against the Facility, and the Facility
shall be the proper party for all purposes in any action brought under
or in connection with any such policy. The foregoing requirements shall
be set forth in any policy issued by the Facility and the form and
content of any such policy shall be subject to the approval of the
Director of Insurance.
(3) The Facility is authorized to assume and cede reinsurance in
conformity with the Program.
(4) (a) Each insurer must participate in the writings, expenses,
profits and losses of the Facility in the proportion that its premiums written,
with respect to each fund, bear to the aggregate premiums written by all
insurers, with respect to each said fund, excluding that portion of the
premiums written attributable to the operation of the Facility except
as otherwise provided in this Section.
(b) The Director of Insurance shall by rule establish procedures for
determining the net level of participation required of each insurer, which
shall include the following elements:
(i) The designation of one or more contiguous ZIP CODE areas within
this State wherein the insurers writing new policies upon risks which they
do not insure prior to the effective date of this amendatory Act may receive
their obligation for FAIR Plan risks;
(ii) The minimum level of participation required of all insurers regardless of
the amount of credit allowed but which in no case shall be less than 50%
of that level of participation that would be required as defined in paragraph
(iii) A designation of the type of risks for which credit may be allowed,
provided that credit shall not apply to commercial risks where the annual
premium for the policy exceeds $2,000 for each fixed location;
(iv) The maximum level of participation required of all insurers regardless
of the amount of credit allowed.
(c) The procedures for determining levels of participation and all designations,
formulas, minima and maxima required by this Section shall be reasonably
designed to effect the intent of this Article without exempting any insurer
from the participation requirement.
(5) Voting on administrative questions of the Facility shall be
weighted in accordance with each insurers' premium written during the
second preceding calendar year as disclosed in the reports filed by the
insurer with the Director.
(6) The Facility may on its own initiative or at the request of the
Director, amend its rules or Program, subject to approval by the
(Source: P.A. 81-1426.)
215 ILCS 5/525.2
(215 ILCS 5/525.2)
(from Ch. 73, par. 1065.72-2)
In the event the Industry Placement Facility accepts premium payments
from licensed premium financing companies and whenever a financed FAIR Plan
insurance contract is cancelled in accordance with Section 521 of the
Illinois Insurance Code, the insurer or Industry Placement Facility shall
return whatever gross unearned premium is due under the insurance contract
to the premium finance company effecting the cancellation for the account
of the insured or insureds less the proportionate amount of the commissions
paid by it to the producers of such FAIR Plan risk, prorated as to the
unearned portion of the premium, which amount such producers shall return
to the premium finance company. In the event of cancellation as set forth
above the Industry Placement Facility may deduct and retain from the return
premium a reasonable amount as a service charge.
(Source: P.A. 77-1561.)
215 ILCS 5/525.3
(215 ILCS 5/525.3)
(from Ch. 73, par. 1065.72-3)
Approval of Rates.
In the event that the Industry Placement
Facility proposes to issue policies of insurance or endorsements thereto
pursuant to subsection (1) of Section 525.1, the Facility shall file for
approval with the Director the proposed rates and supplemental rate information
to be used in connection with the issuance of such policies or endorsements.
Within 60 days of the filing of the proposed rates, the Director shall enter
an order either approving or disapproving, in whole or in part, the rate
plan filed. The Director may, upon notice to the Industry Placement Facility,
extend the period for entering an order under this Section an additional
30 days. No such policies or endorsements shall be issued until such time
as the Director approves the rates to be applied to the policy or endorsement.
An order disapproving a rate shall state the grounds for the disapproval
and the findings in support thereof.
(Source: P.A. 81-1426.)
215 ILCS 5/525.4
(215 ILCS 5/525.4)
(from Ch. 73, par. 1965.72-4)
Application for Coverage of Risks by the Facility.
(1) In the
event that the Industry Placement Facility proposes to issue policies of
insurance or endorsements thereto pursuant to subsection (1) of Section
525.1, the Facility shall require a written application for such
policies or endorsements. All applications shall be incorporated into the
policy or endorsement for which application was made.
(2) Applications for coverage of risks on property which is held in a
land trust, except applications for policies described in subsection (b)
of Section 143.13, shall disclose all beneficial interests in the property
in accordance with "An Act to require disclosure, under certification of
perjury, of all beneficial interests in real property held in a land trust,
in certain cases", approved September 21, 1973, as amended. Changes, which
result in an aggregate of 25%, in beneficial interest in the property subsequent
to the verification made in the application shall be reported by the
applicant or policy holder to the Facility no later than 10 days after the
change in beneficial interest occurs.
This shall not apply to transfer of beneficial interest to members of the
immediate family including spouse, children and grandchildren and their
spouses, parents, sisters and brothers. Changes in beneficial interest
which result in an aggregate of less than 25% shall be reported at the time
of renewal of the policy. Disclosure of the beneficial interests in such
property is deemed material
to the application for new coverage or the continuation of existing coverage
and failure to disclose all beneficial interests, including any changes
therein, renders the contract of insurance voidable at the option of the
Facility. Upon being notified of any change in beneficial interest, the
Facility shall reevaluate its risk of loss as if the risk were a new application
for coverage. When a policy subject to this Section is issued or applied
for, the Facility shall give written notice as to the requirements of this Section
to the named insured or applicant and all beneficiaries disclosed in the application.
(3) Applications for policies or endorsements covering real property,
except applications for policies described in subsection (b) of Section
143.13, shall include the following information:
(a) name and address of the applicant;
(b) name and address of all parties with any financial interest in the
property to be insured and the nature and extent of such interest, including mortgages;
(c) all purchases and sales of the property to be insured during the last
five years, including all parties involved in such transactions, with their
names and addresses;
(d) the value the insured claims for the insurable interest and the method
utilized to derive that value;
(e) all income from the property to be insured during the current year
and the last calendar and tax years, if known;
(f) occupancy and use during the preceding two years, including percentage
of occupancy if a nonowner occupied dwelling, if known;
(g) prior loss history of the applicant and the property to be insured;
(h) all tax liens and other legal encumbrances affecting the property
to be insured; and
(i) all violations of building construction and maintenance ordinances
concerning the property to be insured which have been cited in a legal notice
from an ordinance enforcement authority and which violations have not been
certified as remedied by the enforcement authority, and for which an enforcement
action is pending.
(4) Within 60 days of receipt of an application submitted pursuant to
subsection (3), the Facility shall conduct an on-site inspection of the
property to be insured so as to determine the nature of the risk presented
and the availability of coverage by the Facility. Any policy or endorsement
issued on an application submitted pursuant to subsection (3) may be cancelled
by the Facility within 60 days of the issuance thereof.
(Source: P.A. 81-1426.)
215 ILCS 5/527
(215 ILCS 5/527)
(from Ch. 73, par. 1065.74)
(1) Any applicant or affected insurer has the right of appeal to the
Governing Committee. A decision of the Committee may be appealed to the
Director within 30 days after such decision.
(2) All orders or decisions of the Director made pursuant to this
Article are subject to judicial review
in accordance with the
Administrative Review Law.
(Source: P.A. 82-783.)
215 ILCS 5/528
(215 ILCS 5/528)
(from Ch. 73, par. 1065.75)
There is no liability on the part of, and no cause of action against
insurers, the Inspection Bureau, the Facility, the Association, the
Governing Committee, their agents or employees, or the Director or his
authorized representatives, with respect to any inspections required to be
undertaken by this Article or for any acts or omissions in connection
therewith, or for any statements made in any report and communication
concerning the insurability of the property, or in the findings required by
the provisions of this Article, or at the hearings conducted in connection
with such inspections. The reports and communications of the Inspection
Bureau, the Facility, the Association, and the records of the Governing
Committee are not considered public documents.
(Source: Laws 1968, p. 15.)
215 ILCS 5/529
(215 ILCS 5/529)
(from Ch. 73, par. 1065.76)
Illinois Insurance Development Fund.
(a) A trust fund is created to be known as the "Illinois Insurance
Development Fund" to be administered by the State Treasurer as a special
trust fund. The purpose is to provide financial back-up for the Facility
and the Association in order to enable companies to qualify for riot and
civil disorder reinsurance under the National Insurance Development
Corporation Act of 1968 or any other act of the United States which will
similarly provide reinsurance or financial back-up to accomplish the
purpose of this Article.
(b) The Fund shall consist of all payments made to the Fund by companies
in accordance with the provisions of this Article, any securities acquired
by and through use of monies belonging to the Fund, any monies appropriated
to the Fund, and any interest and accretions earned on assets of the Fund.
The State Treasurer shall have the same power to enforce the collection of
the assessments provided hereunder as any other obligation due the State.
(Source: P.A. 76-714.)
215 ILCS 5/529.1
(215 ILCS 5/529.1)
(from Ch. 73, par. 1065.76-1)
Reimbursement of the Secretary.
The Fund shall reimburse the Secretary of the Department of Housing and
Urban Development (hereinafter referred to as "the Secretary") under the
provisions of Section 1223(a) (1) of the Urban Property Protection and
Reinsurance Act of 1968 (hereinafter referred to as "the Act") for losses
reinsured by the Secretary and occurring in this State on or after August
1, 1968, provided that the total amount of reimbursement in any one year
shall not, in the aggregate, exceed 5% of the aggregate property insurance
premiums earned in this State during the preceding calendar year on those
lines of insurance reinsured by the Secretary in this State during the
(Source: P.A. 76-714.)
215 ILCS 5/529.2
(215 ILCS 5/529.2)
(from Ch. 73, par. 1065.76-2)
Making of Assessments.
Whenever the Secretary shall, in accordance with the Act, present to the
State a request for reimbursement under the Act, the Fund shall immediately
assess all companies which, during the calendar year with respect to which
reimbursement is requested by the Secretary, are engaged in writing
property insurance in this State. The amount of each such company's
assessment shall be calculated by multiplying the amount of the
reimbursement requested by the Secretary by a fraction the numerator of
which is the company's direct property insurance premiums earned in this
State and the denominator of which is the aggregate of such premiums for
all companies. Within 30 days following the end of each full calendar
quarter, each company shall pay to the Fund an amount equal to one-twelfth
of the company's assessment.
(Source: P.A. 76-714.)
215 ILCS 5/529.3
(215 ILCS 5/529.3)
(from Ch. 73, par. 1065.76-3)
In the event any company fails, by reason of insolvency, to pay any
assessment, the Fund shall cause the reimbursement ratios, computed
under Section 529.2, to be immediately recalculated, excluding therefrom the
amount of the insolvent company's assessment determined by the Director
of Insurance to be uncollectible, so that such uncollectible amount is,
in effect, assumed and redistributed among the remaining companies.
(Source: P.A. 81-1509.)
215 ILCS 5/529.4
(215 ILCS 5/529.4)
(from Ch. 73, par. 1065.76-4)
Whenever the fund shall assess insurers in accordance with this Section,
each insurer may charge an additional premium on every property insurance
policy issued by it insuring property in this state, the effective date of
which policy is within the 3 year period commencing 90 days after the date
of assessment by the Fund. The amount of the additional premium shall be
calculated on the basis of a uniform percentage of the premium on such
policies equal to 1/3 of the ratio of the amount of an insurer's assessment
to the amount of its direct earned premiums for the calendar year
immediately preceding the year in which the assessment is made, such that
over the period of 3 years the aggregate of all such additional premium
charges by an insurer shall be equal to the amount of the assessment of
such insurer. The minimum additional premium charged on a policy may be
$1.00 and any other additional premium charged may be rounded to the
(Source: P.A. 76-714.)
215 ILCS 5/529.5
(215 ILCS 5/529.5)
(from Ch. 73, par. 1065.76-5)
The Industry Placement Facility shall compile an annual
operating report, and publish such report in at least 2 newspapers having
widespread circulation in the State, which report shall include:
(1) a description of the origin and purpose of the Illinois Fair Plan
and its relationship to the property and casualty insurance industry in
(2) a financial statement specifying the amount of profit or loss incurred
by the Facility for its financial year; and
(3) a disclosure as to the amount of subsidization per type of policy
written by the Facility, which is provided by the property and casualty
insurance companies operating in Illinois, if any.
This annual report shall be a matter of public record to be made available
to any person requesting a copy from the Facility at a fee not to exceed
$10 per copy. A copy shall be available for inspection at the
Department of Insurance.
(Source: P.A. 93-32, eff. 7-1-03.)
215 ILCS 5/530
(215 ILCS 5/530)
(from Ch. 73, par. 1065.77)
Powers of the Director.) In addition to any powers
conferred upon him by this or any other law, the Director is charged
with the authority to supervise the Inspection Bureau, the Facility and
the Association. In addition the Director or any person designated by
him has the power:
(1) to examine the operation of the Facility and Association through
free access to all the books, records, files, papers and documents
relating to their operation and may summon, qualify and examine as
witnesses all persons having knowledge of such operations including
officers, agents or employees thereof;
(2) to do all things necessary to enable the State of Illinois and
any insurer participating in any Program approved by the Director to
fully participate in any federal program of reinsurance which may be
enacted for purposes similar to the purposes of this Article;
(3) to require such reports from insurers concerning risks insured
under any Program approved pursuant to this Article as he may deem
(4) to approve a homeowners policy form(s) for the Industry Placement Program.
(5) To require the Insurance Placement Program to develop marketing programs
which will deter urban redlining and other unfairly discriminatory geographic
underwriting programs by making readily available basic property insurance.
(6) to permit modification of the Standard Fire Policy issued by the
facility for non owner-occupied residences exceeding four units, after the
director has conducted a public hearing which establishes that such modifications:
1) will provide for equitable settlements of loss;
2) will discourage arson for profit; and
3) will encourage neighborhood revitalization, while maintaining the interests
of the insured and the facility. The Director shall confer with the facility
to establish criteria by which it can be determined whether such modification
of the Standard Fire Policy is accomplishing its objectives. The Director
shall conduct, within two years of any modification of the Standard Fire
Policy, a public hearing to determine whether such modification has accomplished
the three preceding objectives. In the event that such public hearing does
not establish that such objectives are being accomplished, then the Director
shall rescind the modification of the Standard Fire Policy, or further modify
such policy to accomplish the objectives.
(Source: P.A. 82-499.)
215 ILCS 5/530a
(215 ILCS 5/530a)
(from Ch. 73, par. 1065.77a)
The Director of Insurance shall form a task force to review
the policy forms and endorsements issued by the Industry Placement Facility
on residential property of 5 or more dwelling units. The task force shall
consider the coverage, perils and settlement provisions and make their recommendations
to the Director by January 15, 1981, on proposed policy forms and endorsements
which will provide for equitable settlement of loss, discourage arson for
profit and encourage neighborhood revitalization. Any recommendation of
the task force shall consider the impact on the continuous goal of depopulation
of the Facility.
The Task force shall be comprised of members of the insurance industry,
general public and 4 members of the General Assembly, 2 to be appointed
by the President of the Senate and 2 by the Speaker of the House with equal
representation from the majority and minority parties.
The Director shall hold public hearings on the task force recommendations
and promulgate a rule to adopt such policy forms and endorsements as minimum
standards for the Industry Placement Facility.
(Source: P.A. 81-1432.)
215 ILCS 5/Art. XXXIII.5
(215 ILCS 5/Art. XXXIII.5 heading)
ARTICLE XXXIII 1/2.
LIFE AND HEALTH
INSURANCE GUARANTY ASSOCIATION
215 ILCS 5/531.01
(215 ILCS 5/531.01)
(from Ch. 73, par. 1065.80-1)
Title.) This Article is known and may be
cited as the Illinois Life and Health Insurance Guaranty Association
(Source: P.A. 81-899.)
215 ILCS 5/531.01a
(215 ILCS 5/531.01a)
(from Ch. 73, par. 1065.80-1a)
Any liabilities of the
Association for any member company
which was an insolvent insurer as defined by this Article prior to January
1, 1986 shall be
determined under the law which was in effect at the time the member company
became an insolvent insurer
as if there had been no amendment to that law. Any liabilities of the
Association for a member company which became an insolvent insurer on or after
January 1, 1986, shall be
determined under the law in effect at the time when the member became an
insolvent insurer, notwithstanding any prior law.
On or after January 1, 1986, any assessments made against other member
companies to meet Association liabilities shall be made based on
the law which was in effect when the member company was an impaired or
insolvent insurer as defined by this Article. If different assessment
methods are used in any one year, those assessments shall be aggregated for
purposes of calculating the
aggregate assessment under Sections 531.09 and 531.13.
(Source: P.A. 84-1035.)
215 ILCS 5/531.02
(215 ILCS 5/531.02)
(from Ch. 73, par. 1065.80-2)
The purpose of this Article is to protect,
subject to certain limitations, the persons specified in paragraph (1) of
Section 531.03 against failure
in the performance of contractual obligations, under life or health
insurance policies, annuity contracts and health or medical care service
contracts specified in paragraph (2) of Section 531.03, due to the
impairment or insolvency of the
insurer issuing such policies or contracts. To provide this protection,
(1) an association of insurers is created to enable the guaranty of payment
of benefits and of continuation of coverages, (2) members of the Association
are subject to assessment to provide funds to carry out the purpose of this
Article, and (3) the Association is authorized to assist the Director, in
the prescribed manner, in the detection and prevention of insurer impairments
(Source: P.A. 86-753.)
215 ILCS 5/531.03
(215 ILCS 5/531.03)
(from Ch. 73, par. 1065.80-3)
Coverage and limitations.
(1) This Article shall provide
coverage for the policies and contracts specified in paragraph (2) of this
(a) to persons who, regardless of where they reside
(except for non-resident certificate holders under group policies or contracts), are the beneficiaries, assignees or payees of the persons covered under subparagraph (1)(b), and
(b) to persons who are owners of or certificate
holders under the policies or contracts (other than unallocated annuity contracts and structured settlement annuities) and in each case who:
(i) are residents; or
(ii) are not residents, but only under all of the
(A) the insurer that issued the policies or
contracts is domiciled in this State;
(B) the states in which the persons reside
have associations similar to the Association created by this Article;
(C) the persons are not eligible for coverage
by an association in any other state due to the fact that the insurer was not licensed in that state at the time specified in that state's guaranty association law.
(c) For unallocated annuity contracts specified in
subsection (2), paragraphs (a) and (b) of this subsection (1) shall not apply and this Article shall (except as provided in paragraphs (e) and (f) of this subsection) provide coverage to:
(i) persons who are the owners of the unallocated
annuity contracts if the contracts are issued to or in connection with a specific benefit plan whose plan sponsor has its principal place of business in this State; and
(ii) persons who are owners of unallocated
annuity contracts issued to or in connection with government lotteries if the owners are residents.
(d) For structured settlement annuities specified in
subsection (2), paragraphs (a) and (b) of this subsection (1) shall not apply and this Article shall (except as provided in paragraphs (e) and (f) of this subsection) provide coverage to a person who is a payee under a structured settlement annuity (or beneficiary of a payee if the payee is deceased), if the payee:
(i) is a resident, regardless of where the
contract owner resides; or
(ii) is not a resident, but only under both of
the following conditions:
(A) with regard to residency:
(I) the contract owner of the structured
settlement annuity is a resident; or
(II) the contract owner of the structured
settlement annuity is not a resident but the insurer that issued the structured settlement annuity is domiciled in this State and the state in which the contract owner resides has an association similar to the Association created by this Article; and
(B) neither the payee or beneficiary nor
the contract owner is eligible for coverage by the association of the state in which the payee or contract owner resides.
(e) This Article shall not provide coverage to:
(i) a person who is a payee or beneficiary of a
contract owner resident of this State if the payee or beneficiary is afforded any coverage by the association of another state; or
(ii) a person covered under paragraph (c) of this
subsection (1), if any coverage is provided by the association of another state to that person.
(f) This Article is intended to provide coverage to
a person who is a resident of this State and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under this Article is provided coverage under the laws of any other state, then the person shall not be provided coverage under this Article. In determining the application of the provisions of this paragraph in situations where a person could be covered by the association of more than one state, whether as an owner, payee, beneficiary, or assignee, this Article shall be construed in conjunction with other state laws to result in coverage by only one association.
(2)(a) This Article shall provide coverage to the persons
specified in paragraph (l) of this Section for direct, (i)
nongroup life, health, annuity and
supplemental policies, or contracts, (ii) for
certificates under direct group policies or contracts, (iii) for unallocated
annuity contracts and (iv) for contracts to furnish
health care services and subscription certificates for medical or health
care services issued by persons licensed to transact insurance business
in this State under the Illinois Insurance Code.
Annuity contracts and certificates under group annuity contracts include
but are not limited to guaranteed investment contracts, deposit
administration contracts, unallocated funding agreements, allocated funding
agreements, structured settlement agreements, lottery contracts
and any immediate or deferred annuity contracts.
(b) This Article shall not provide coverage for:
(i) that portion of a policy or contract not
guaranteed by the insurer, or under which the risk is borne by the policy or contract owner;
(ii) any such policy or contract or part thereof
assumed by the impaired or insolvent insurer under a contract of reinsurance, other than reinsurance for which assumption certificates have been issued;
(iii) any portion of a policy or contract to the
extent that the rate of interest on which it is based or the interest rate, crediting rate, or similar factor is determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value:
(A) averaged over the period of 4 years prior to
the date on which the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier, exceeds the rate of interest determined by subtracting 2 percentage points from Moody's Corporate Bond Yield Average averaged for that same 4-year period or for such lesser period if the policy or contract was issued less than 4 years before the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier; and
(B) on and after the date on which the member
insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier, exceeds the rate of interest determined by subtracting 3 percentage points from Moody's Corporate Bond Yield Average as most recently available;
(iv) any unallocated annuity contract issued to or in
connection with a benefit plan protected under the federal Pension Benefit Guaranty Corporation, regardless of whether the federal Pension Benefit Guaranty Corporation has yet become liable to make any payments with respect to the benefit plan;
(v) any portion of any unallocated annuity contract
which is not issued to or in connection with a specific employee, union or association of natural persons benefit plan or a government lottery;
(vi) an obligation that does not arise under the
express written terms of the policy or contract issued by the insurer to the contract owner or policy owner, including without limitation:
(A) a claim based on marketing materials;
(B) a claim based on side letters, riders, or
other documents that were issued by the insurer without meeting applicable policy form filing or approval requirements;
(C) a misrepresentation of or regarding policy
(D) an extra-contractual claim; or
(E) a claim for penalties or consequential or
(vii) any stop-loss insurance, as defined in clause
(b) of Class 1 or clause (a) of Class 2 of Section 4, and further defined in subsection (d) of Section 352;
(viii) any policy or contract providing any hospital,
medical, prescription drug, or other health care benefits pursuant to Part C or Part D of Subchapter XVIII, Chapter 7 of Title 42 of the United States Code (commonly known as Medicare Part C & D) or any regulations issued pursuant thereto;
(ix) any portion of a policy or contract to the
extent that the assessments required by Section 531.09 of this Code with respect to the policy or contract are preempted or otherwise not permitted by federal or State law;
(x) any portion of a policy or contract issued to a
plan or program of an employer, association, or other person to provide life, health, or annuity benefits to its employees, members, or others to the extent that the plan or program is self-funded or uninsured, including, but not limited to, benefits payable by an employer, association, or other person under:
(A) a multiple employer welfare arrangement as
defined in 29 U.S.C. Section 1144;
(B) a minimum premium group insurance plan;
(C) a stop-loss group insurance plan; or
(D) an administrative services only contract;
(xi) any portion of a policy or contract to the
extent that it provides for:
(A) dividends or experience rating credits;
(B) voting rights; or
(C) payment of any fees or allowances to any
person, including the policy or contract owner, in connection with the service to or administration of the policy or contract;
(xii) any policy or contract issued in this State by
a member insurer at a time when it was not licensed or did not have a certificate of authority to issue the policy or contract in this State;
(xiii) any contractual agreement that establishes the
member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer;
(xiv) any portion of a policy or contract to the
extent that it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract, or as to which the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this Code, whichever is earlier. If a policy's or contract's interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this Section, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture; or
(xv) that portion or part of a variable life
insurance or variable annuity contract not guaranteed by an insurer.
(3) The benefits for which the Association may become liable shall in
no event exceed the lesser of:
(a) the contractual obligations for which the insurer
is liable or would have been liable if it were not an impaired or insolvent insurer, or
(b)(i) with respect to any one life, regardless of
the number of policies or contracts:
(A) $300,000 in life insurance death benefits,
but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance;
(B) in health insurance benefits:
(I) $100,000 for coverages not defined as
disability insurance or basic hospital, medical, and surgical insurance or major medical insurance or long-term care insurance, including any net cash surrender and net cash withdrawal values;
(II) $300,000 for disability insurance and
$300,000 for long-term care insurance as defined in Section 351A-1 of this Code; and
(III) $500,000 for basic hospital medical
and surgical insurance or major medical insurance;
(C) $250,000 in the present value of annuity
benefits, including net cash surrender and net cash withdrawal values;
(ii) with respect to each individual participating in
a governmental retirement benefit plan established under Sections 401, 403(b), or 457 of the U.S. Internal Revenue Code covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, $250,000 in present value annuity benefits, including net cash surrender and net cash withdrawal values;
(iii) with respect to each payee of a structured
settlement annuity or beneficiary or beneficiaries of the payee if deceased, $250,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any; or
(iv) with respect to either (1) one contract owner
provided coverage under subparagraph (ii) of paragraph (c) of subsection (1) of this Section or (2) one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in subparagraph (ii) of paragraph (b) of this subsection, $5,000,000 in benefits, irrespective of the number of contracts with respect to the contract owner or plan sponsor. However, in the case where one or more unallocated annuity contracts are covered contracts under this Article and are owned by a trust or other entity for the benefit of 2 or more plan sponsors, coverage shall be afforded by the Association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in this State. In no event shall the Association be obligated to cover more than $5,000,000 in benefits with respect to all these unallocated contracts.
In no event shall the Association be obligated to cover more than (1) an aggregate of $300,000 in benefits with respect to any one life under subparagraphs (i), (ii), and (iii) of this paragraph (b) except with respect to benefits for basic hospital, medical, and surgical insurance and major medical insurance under item (B) of subparagraph (i) of this paragraph (b), in which case the aggregate liability of the Association shall not exceed $500,000 with respect to any one individual or (2) with respect to one owner of multiple nongroup policies of life insurance, whether the policy owner is an individual, firm, corporation, or other person and whether the persons insured are officers, managers, employees, or other persons, $5,000,000 in benefits, regardless of the number of policies and contracts held by the owner.
The limitations set forth in this subsection are limitations on the benefits for which the Association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the Association's obligations under this Article may be met by the use of assets attributable to covered policies or reimbursed to the Association pursuant to its subrogation and assignment rights.
(4) In performing its obligations to provide coverage under Section 531.08 of this Code, the Association shall not be required to guarantee, assume, reinsure, or perform or cause to be guaranteed, assumed, reinsured, or performed the contractual obligations of the insolvent or impaired insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract.
(Source: P.A. 96-1450, eff. 8-20-10.)
215 ILCS 5/531.04
(215 ILCS 5/531.04)
(from Ch. 73, par. 1065.80-4)
This Article shall be construed to
effect the purpose under Section 531.02.
(Source: P.A. 96-1450, eff. 8-20-10.)
215 ILCS 5/531.05
(215 ILCS 5/531.05)
(from Ch. 73, par. 1065.80-5)
As used in this Act:
"Account" means either of the 3 accounts created under Section
"Association" means the Illinois Life and Health Insurance
Guaranty Association created under Section 531.06.
"Authorized assessment" or the term "authorized" when used in the context of assessments means a resolution by the Board of Directors has been passed whereby an assessment shall be called immediately or in the future from member insurers for a specified amount. An assessment is authorized when the resolution is passed.
"Benefit plan" means a specific employee, union, or association of natural persons benefit plan.
"Called assessment" or the term "called" when used in the context of assessments means that a notice has been issued by the Association to member insurers requiring that an authorized assessment be paid within the time frame set forth within the notice. An authorized assessment becomes a called assessment when notice is mailed by the Association to member insurers.
"Director" means the Director of Insurance of this State.
"Contractual obligation" means any obligation under a policy or
contract or certificate under a group policy or contract, or portion
thereof for which coverage is provided under Section 531.03.
"Covered person" means any person who is entitled to the
protection of the Association as described in Section 531.02.
"Covered policy" means any policy or contract within the scope
of this Article under Section 531.03.
"Extra-contractual claims" shall include claims relating to bad faith in the payment of claims, punitive or exemplary damages, or attorneys' fees and costs.
"Impaired insurer" means (A) a member insurer which, after the effective date of this amendatory Act of the 96th General Assembly, is not an insolvent insurer, and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction or (B) a member insurer deemed by the Director after the effective date of this amendatory Act of the 96th General Assembly to be potentially unable to fulfill its contractual obligations and not an insolvent insurer.
"Insolvent insurer" means a member insurer that, after the effective date of this amendatory Act of the 96th General Assembly, is placed under a final order of liquidation by a court of competent jurisdiction with a finding of insolvency.
"Member insurer" means an insurer licensed or holding a certificate of authority to transact in this State any kind of insurance for which coverage is provided under Section 531.03 of this Code and includes an insurer whose license or certificate of authority in this State may have been suspended, revoked, not renewed, or voluntarily withdrawn or whose certificate of authority may have been suspended pursuant to Section 119 of this Code, but does not include:
(1) a hospital or medical service organization,
whether profit or nonprofit;
(2) a health maintenance organization;
(3) any burial society organized under Article
XIX of this Code, any fraternal benefit society organized under Article XVII of this Code, any mutual benefit association organized under Article XVIII of this Code, and any foreign fraternal benefit society licensed under Article VI of this Code or a fraternal benefit society;
(4) a mandatory State pooling plan;
(5) a mutual assessment company or other person that
operates on an assessment basis;
(6) an insurance exchange;
(7) an organization that is permitted to issue
charitable gift annuities pursuant to Section 121-2.10 of this Code;
(8) any health services plan corporation
established pursuant to the Voluntary Health Services Plans Act;
(9) any dental service plan corporation
established pursuant to the Dental Service Plan Act; or
(10) an entity similar to any of the above.
"Moody's Corporate Bond Yield Average" means the Monthly Average
Corporates as published by Moody's Investors Service, Inc., or any successor
"Owner" of a policy or contract and "policy owner" and "contract owner" mean the person who is identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract and properly recorded as the owner on the books of the insurer. The terms owner, contract owner, and policy owner do not include persons with a mere beneficial interest in a policy or contract.
"Person" means an individual, corporation, limited liability company, partnership, association, governmental body or entity, or voluntary organization.
"Plan sponsor" means:
(1) the employer in the case of a benefit plan
established or maintained by a single employer;
(2) the employee organization in the case of a
benefit plan established or maintained by an employee organization; or
(3) in a case of a benefit plan established or
maintained by 2 or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan.
"Premiums" mean amounts or considerations, by whatever name called, received on covered policies or contracts less returned premiums, considerations, and deposits and less dividends and experience credits.
"Premiums" does not include:
(A) amounts or considerations received for policies
or contracts or for the portions of policies or contracts for which coverage is not provided under Section 531.03 of this Code except that assessable premium shall not be reduced on account of the provisions of subparagraph (iii) of paragraph (b) of subsection (a) of Section 531.03 of this Code relating to interest limitations and the provisions of paragraph (b) of subsection (3) of Section 531.03 relating to limitations with respect to one individual, one participant, and one contract owner;
(B) premiums in excess of $5,000,000 on an
unallocated annuity contract not issued under a governmental retirement benefit plan (or its trustee) established under Section 401, 403(b) or 457 of the United States Internal Revenue Code; or
(C) with respect to multiple nongroup policies of
life insurance owned by one owner, whether the policy owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, premiums in excess of $5,000,000 with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.
"Principal place of business" of a plan sponsor or a person other than a natural person means the single state in which the natural persons who establish policy for the direction, control, and coordination of the operations of the entity as a whole primarily exercise that function, determined by the Association in its reasonable judgment by considering the following factors:
(A) the state in which the primary executive and
administrative headquarters of the entity is located;
(B) the state in which the principal office of the
chief executive officer of the entity is located;
(C) the state in which the board of directors (or
similar governing person or persons) of the entity conducts the majority of its meetings;
(D) the state in which the executive or management
committee of the board of directors (or similar governing person or persons) of the entity conducts the majority of its meetings;
(E) the state from which the management of the
overall operations of the entity is directed; and
(F) in the case of a benefit plan sponsored by
affiliated companies comprising a consolidated corporation, the state in which the holding company or controlling affiliate has its principal place of business as determined using the above factors. However, in the case of a plan sponsor, if more than 50% of the participants in the benefit plan are employed in a single state, that state shall be deemed to be the principal place of business of the plan sponsor.
The principal place of business of a plan sponsor of a benefit plan described in this Section shall be deemed to be the principal place of business of the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan that, in lieu of a specific or clear designation of a principal place of business, shall be deemed to be the principal place of business of the employer or employee organization that has the largest investment in the benefit plan in question.
"Receivership court" means the court in the insolvent or impaired insurer's state having jurisdiction over the conservation, rehabilitation, or liquidation of the insurer.
"Resident" means a person to whom a contractual obligation is owed and who resides in this State on the date of entry of a court order that determines a member insurer to be an impaired insurer or a court order that determines a member insurer to be an insolvent insurer. A person may be a resident of only one state, which in the case of a person other than a natural person shall be its principal place of business. Citizens of the United States that are either (i) residents of foreign countries or (ii) residents of United States possessions, territories, or protectorates that do not have an association similar to the Association created by this Article, shall be deemed residents of the state of domicile of the insurer that issued the policies or contracts.
"Structured settlement annuity" means an annuity purchased in order to fund periodic payments for a plaintiff or other claimant in payment for or with respect to personal injury suffered by the plaintiff or other claimant.
"State" means a state, the District of Columbia, Puerto Rico, and a United States possession, territory, or protectorate.
"Supplemental contract" means a written agreement entered into for the distribution of proceeds under a life, health, or annuity policy or a life, health, or annuity contract.
"Unallocated annuity contract" means any annuity contract or group
annuity certificate which is not issued to and owned by an individual,
except to the extent of any annuity benefits guaranteed to an individual by
an insurer under such contract or certificate.
(Source: P.A. 96-1450, eff. 8-20-10.)
215 ILCS 5/531.06
(215 ILCS 5/531.06)
(from Ch. 73, par. 1065.80-6)
Creation of the Association.
There is created a
non-profit legal entity to be known as the Illinois Life and Health
Insurance Guaranty Association. All member insurers are and must remain
members of the Association as a condition of their authority to transact
insurance in this State. The Association must perform its functions under
the plan of operation established and approved under Section 531.10 and must
exercise its powers through a board of directors established under
Section 531.07. For purposes of administration and assessment, the Association
must maintain 2 accounts:
(1) The life insurance and annuity account, which
includes the following subaccounts:
(a) Life Insurance Account;
(b) Annuity account, which shall include annuity
contracts owned by a governmental retirement plan (or its trustee) established under Section 401, 403(b), or 457 of the United States Internal Revenue Code, but shall otherwise exclude unallocated annuities; and
(c) Unallocated annuity account, which shall
exclude contracts owned by a governmental retirement benefit plan (or its trustee) established under Section 401, 403(b), or 457 of the United States Internal Revenue Code.
(2) The health insurance account.
The Association shall be supervised by the Director
and is subject to the applicable provisions of the Illinois Insurance
Code. Meetings or records of the Association may be opened to the public upon majority vote of the board of directors of the Association.
(Source: P.A. 95-331, eff. 8-21-07; 96-1450, eff. 8-20-10.)
215 ILCS 5/531.07
(215 ILCS 5/531.07)
(from Ch. 73, par. 1065.80-7)
Board of Directors.)
The board of directors of the
Association consists of not less than 7 nor more than 11 members serving
terms as established in the plan of operation. The insurers of the board
are to be selected by member insurers subject to the approval of the
Director. In addition, 2 persons who must be public representatives may be appointed by the Director to the board of directors. A public representative may not be an officer, director, or employee of an insurance company or any person engaged in the business of insurance. Vacancies on the board must be filled for the remaining period
of the term in the manner described in the plan of operation.
In approving selections or in appointing members to the board, the
Director must consider, whether all member insurers are
Members of the board may be reimbursed from the assets of the Association
for expenses incurred by them as members of the board of directors but
members of the board may not otherwise be compensated by the Association for
(Source: P.A. 96-1450, eff. 8-20-10.)
215 ILCS 5/531.08
(215 ILCS 5/531.08)
(from Ch. 73, par. 1065.80-8)
Powers and duties of the Association.
(a) In addition to
the powers and duties enumerated in other Sections of this Article:
(1) If a member insurer is an impaired insurer, then
the Association may, in its discretion and subject to any conditions imposed by the Association that do not impair the contractual obligations of the impaired insurer and that are approved by the Director:
(A) guarantee, assume, or reinsure or cause to be
guaranteed, assumed, or reinsured, any or all of the policies or contracts of the impaired insurer; or
(B) provide such money, pledges, loans, notes,
guarantees, or other means as are proper to effectuate paragraph (A) and assure payment of the contractual obligations of the impaired insurer pending action under paragraph (A).
(2) If a member insurer is an insolvent insurer,
then the Association shall, in its discretion, either:
(A) guaranty, assume, or reinsure or cause to be
guaranteed, assumed, or reinsured the policies or contracts of the insolvent insurer or assure payment of the contractual obligations of the insolvent insurer and provide money, pledges, loans, notes, guarantees, or other means reasonably necessary to discharge the Association's duties; or
(B) provide benefits and coverages in accordance
with the following provisions:
(i) with respect to life and health insurance
policies and annuities, ensure payment of benefits for premiums identical to the premiums and benefits (except for terms of conversion and renewability) that would have been payable under the policies or contracts of the insolvent insurer for claims incurred:
(a) with respect to group policies and
contracts, not later than the earlier of the next renewal date under those policies or contracts or 45 days, but in no event less than 30 days, after the date on which the Association becomes obligated with respect to the policies and contracts;
(b) with respect to nongroup policies,
contracts, and annuities not later than the earlier of the next renewal date (if any) under the policies or contracts or one year, but in no event less than 30 days, from the date on which the Association becomes obligated with respect to the policies or contracts;
(ii) make diligent efforts to provide all
known insureds or annuitants (for nongroup policies and contracts), or group policy owners with respect to group policies and contracts, 30 days notice of the termination (pursuant to subparagraph (i) of this paragraph (B)) of the benefits provided;
(iii) with respect to nongroup life and
health insurance policies and annuities covered by the Association, make available to each known insured or annuitant, or owner if other than the insured or annuitant, and with respect to an individual formerly insured or formerly an annuitant under a group policy who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of paragraph (3), if the insureds or annuitants had a right under law or the terminated policy or annuity to convert coverage to individual coverage or to continue an individual policy or annuity in force until a specified age or for a specified time, during which the insurer had no right unilaterally to make changes in any provision of the policy or annuity or had a right only to make changes in premium by class.
(b) In providing the substitute coverage required under subparagraph (iii) of paragraph (B) of item (2) of subsection (a)
of this Section, the Association may offer either to reissue the
terminated coverage or to issue an alternative policy.
Alternative or reissued policies shall be offered without requiring
evidence of insurability, and shall not provide for any waiting period or
exclusion that would not have applied under the terminated policy.
The Association may reinsure any alternative or reissued policy.
Alternative policies adopted by the Association shall be subject
to the approval of the Director. The Association may adopt alternative
policies of various types for future insurance without regard to any
particular impairment or insolvency.
Alternative policies shall contain at least the minimum statutory
provisions required in this State and provide benefits that shall not be
unreasonable in relation to the premium charged. The
Association shall set the premium in accordance with a table of rates which
it shall adopt. The premium shall reflect the amount of insurance to be
provided and the age and class of risk of each insured, but shall not
reflect any changes in the health of the insured after the original policy
was last underwritten.
Any alternative policy issued by the Association shall provide
coverage of a type similar to that of the policy issued by the impaired or
insolvent insurer, as determined by the Association.
(c) If the Association elects to reissue terminated coverage at a
premium rate different from that charged under the terminated policy, the
premium shall be set by the Association in accordance with the amount of
insurance provided and the age and class of risk, subject to approval of
the Director or by a court of competent jurisdiction.
(d) The Association's obligations with respect to coverage under any
policy of the impaired or insolvent insurer or under any reissued or
alternative policy shall cease on the date such coverage or policy is
replaced by another similar policy by the policyholder, the insured, or the
(e) When proceeding under this Section with
respect to any policy or contract carrying guaranteed minimum interest
rates, the Association shall assure the payment or crediting of a rate of
interest consistent with subparagraph (2)(b)(iii)(B) of Section 531.03.
(f) Nonpayment of premiums thirty-one days after the date required under
the terms of any guaranteed, assumed, alternative or reissued policy or
contract or substitute coverage shall terminate the Association's
obligations under such policy or coverage under this Act with respect to
such policy or coverage, except with respect to any claims incurred or any
net cash surrender value which may be due in accordance with the provisions of
(g) Premiums due for coverage after entry of an order of liquidation of
an insolvent insurer shall belong to and be payable at the direction of the
and the Association shall be liable for unearned premiums due to policy or
contract owners arising after the entry of such order.
(h) In carrying out its duties under paragraph (2) of subsection (a) of this Section, the Association may:
(1) subject to approval by a court in this State,
impose permanent policy or contract liens in connection with a guarantee, assumption, or reinsurance agreement if the Association finds that the amounts which can be assessed under this Article are less than the amounts needed to assure full and prompt performance of the Association's duties under this Article or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of such permanent policy or contract liens to be in the public interest; or
(2) subject to approval by a court in this State,
impose temporary moratoriums or liens on payments of cash values and policy loans or any other right to withdraw funds held in conjunction with policies or contracts in addition to any contractual provisions for deferral of cash or policy loan value. In addition, in the event of a temporary moratorium or moratorium charge imposed by the receivership court on payment of cash values or policy loans or on any other right to withdraw funds held in conjunction with policies or contracts, out of the assets of the impaired or insolvent insurer, the Association may defer the payment of cash values, policy loans, or other rights by the Association for the period of the moratorium or moratorium charge imposed by the receivership court, except for claims covered by the Association to be paid in accordance with a hardship procedure established by the liquidator or rehabilitator and approved by the receivership court.
(i) There shall be no liability on the part of and no cause of action
shall arise against the Association or against any transferee from the
Association in connection with the transfer by reinsurance or otherwise of
all or any part of an impaired or insolvent insurer's business by reason of
any action taken or any failure to take any action by the impaired or
insolvent insurer at any time.
(j) If the Association fails to act within a reasonable period of
time as provided in subsection (2) of this Section with respect to an
insolvent insurer, the
Director shall have the powers and duties of the Association under this
Act with regard to such insolvent insurers.
(k) The Association or its designated representatives
may render assistance and advice to the
Director, upon his request, concerning rehabilitation, payment of
claims, continuations of coverage, or the performance of other
contractual obligations of any impaired or insolvent insurer.
(l) The Association shall have standing to appear or intervene before a court or agency in this State with jurisdiction over an impaired or insolvent insurer concerning which the Association is or may become obligated under this Article or with jurisdiction over any person or property against which the Association may have rights through subrogation or otherwise. Standing shall extend to all matters germane to the powers and duties of the Association, including, but not limited to, proposals for reinsuring, modifying, or guaranteeing the policies or contracts of the impaired or insolvent insurer and the determination of the policies or contracts and contractual obligations. The Association shall also have the right to appear or intervene before a court or agency in another state with jurisdiction over an impaired or insolvent insurer for which the Association is or may become obligated or with jurisdiction over any person or property against whom the Association may have rights through subrogation or otherwise.
(m)(1) A person receiving benefits under this Article shall be deemed to have assigned the rights under and any causes of action against any person for losses arising under, resulting from, or otherwise relating to the covered policy or contract to the Association to the extent of the benefits received because of this Article, whether the benefits are payments of or on account of contractual obligations, continuation of coverage, or provision of substitute or alternative coverages. The Association may require an assignment to it of such rights and cause of action by any payee, policy, or contract owner, beneficiary, insured, or annuitant as a condition precedent to the receipt of any right or benefits conferred by this Article upon the person.
(2) The subrogation rights of the Association under this subsection
have the same priority against the assets of the impaired or insolvent insurer as
that possessed by the person entitled to receive benefits under this
(3) In addition to paragraphs (1) and (2), the Association shall have all common law rights of subrogation and any other equitable or legal remedy that would have been available to the impaired or insolvent insurer or owner, beneficiary, or payee of a policy or contract with respect to the policy or contracts, including without limitation, in the case of a structured settlement annuity, any rights of the owner, beneficiary, or payee of the annuity to the extent of benefits received pursuant to this Article, against a person originally or by succession responsible for the losses arising from the personal injury relating to the annuity or payment therefor, excepting any such person responsible solely by reason of serving as an assignee in respect of a qualified assignment under Internal Revenue Code Section 130.
(4) If the preceding provisions of this subsection (l) are invalid or ineffective with respect to any person or claim for any reason, then the amount payable by the Association with respect to the related covered obligations shall be reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies, or portion thereof, covered by the Association.
(5) If the Association has provided benefits with respect to a covered obligation and a person recovers amounts as to which the Association has rights as described in the preceding paragraphs of this subsection (10), then the person shall pay to the Association the portion of the recovery attributable to the policies, or portion thereof, covered by the Association.
(n) The Association may:
(1) Enter into such contracts as are necessary or
proper to carry out the provisions and purposes of this Article.
(2) Sue or be sued, including taking any legal
actions necessary or proper for recovery of any unpaid assessments under Section 531.09. The Association shall not be liable for punitive or exemplary damages.
(3) Borrow money to effect the purposes of this
Article. Any notes or other evidence of indebtedness of the Association not in default are legal investments for domestic insurers and may be carried as admitted assets.
(4) Employ or retain such persons as are necessary to
handle the financial transactions of the Association, and to perform such other functions as become necessary or proper under this Article.
(5) Negotiate and contract with any liquidator,
rehabilitator, conservator, or ancillary receiver to carry out the powers and duties of the Association.
(6) Take such legal action as may be necessary to
avoid payment of improper claims.
(7) Exercise, for the purposes of this Article and to
the extent approved by the Director, the powers of a domestic life or health insurer, but in no case may the Association issue insurance policies or annuity contracts other than those issued to perform the contractual obligations of the impaired or insolvent insurer.
(8) Exercise all the rights of the Director under
Section 193(4) of this Code with respect to covered policies after the association becomes obligated by statute.
(9) Request information from a person seeking
coverage from the Association in order to aid the Association in determining its obligations under this Article with respect to the person, and the person shall promptly comply with the request.
(10) Take other necessary or appropriate action to
discharge its duties and obligations under this Article or to exercise its powers under this Article.
(o) With respect to covered policies for which the Association becomes
obligated after an entry of an order of liquidation or rehabilitation,
the Association may
elect to succeed to the rights of the insolvent insurer arising after the
date of the order of liquidation or rehabilitation under any contract
of reinsurance to which
the insolvent insurer was a party, to the extent that such contract
provides coverage for losses occurring after the date of the order of
liquidation or rehabilitation. As a condition to making this election,
the Association must pay all unpaid premiums due under the contract for
coverage relating to periods before and after the date of the order of
liquidation or rehabilitation.
(p) A deposit in this State, held pursuant to law or required by the Director for the benefit of creditors, including policy owners, not turned over to the domiciliary liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of an insurer domiciled in this State or in a reciprocal state, pursuant to Article XIII 1/2 of this Code, shall be promptly paid to the Association. The Association shall be entitled to retain a portion of any amount so paid to it equal to the percentage determined by dividing the aggregate amount of policy owners' claims related to that insolvency for which the Association has provided statutory benefits by the aggregate amount of all policy owners' claims in this State related to that insolvency and shall remit to the domiciliary receiver the amount so paid to the Association less the amount retained pursuant to this subsection (13). Any amount so paid to the Association and retained by it shall be treated as a distribution of estate assets pursuant to applicable State receivership law dealing with early access disbursements.
(q) The Board of Directors of the Association shall have discretion and may exercise reasonable business judgment to determine the means by which the Association is to provide the benefits of this Article in an economical and efficient manner.
(r) Where the Association has arranged or offered to provide the benefits of this Article to a covered person under a plan or arrangement that fulfills the Association's obligations under this Article, the person shall not be entitled to benefits from the Association in addition to or other than those provided under the plan or arrangement.
(s) Venue in a suit against the Association arising under the Article shall be in Cook County. The Association shall not be required to give any appeal bond in an appeal that relates to a cause of action arising under this Article.
(t) The Association may join an organization of one or more other State associations of similar purposes to further the purposes and administer the powers and duties of the Association.
(u) In carrying out its duties in connection with guaranteeing, assuming, or reinsuring policies or contracts under subsections (1) or (2), the Association may, subject to approval of the receivership court, issue substitute coverage for a policy or contract that provides an interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value by issuing an alternative policy or contract in accordance with the following provisions:
(1) in lieu of the index or other external reference
provided for in the original policy or contract, the alternative policy or contract provides for (i) a fixed interest rate, or (ii) payment of dividends with minimum guarantees, or (iii) a different method for calculating interest or changes in value;
(2) there is no requirement for evidence of
insurability, waiting period, or other exclusion that would not have applied under the replaced policy or contract; and
(3) the alternative policy or contract is
substantially similar to the replaced policy or contract in all other material terms.
(Source: P.A. 96-1450, eff. 8-20-10; 97-333, eff. 8-12-11.)
215 ILCS 5/531.09
(215 ILCS 5/531.09)
(from Ch. 73, par. 1065.80-9)
(1) For the purpose of providing the funds
necessary to carry out the powers and duties of the Association, the board
of directors shall assess the member insurers, separately for each account, at such
times and for such amounts as the board finds necessary. Assessments shall
be due not less than 30 days after written notice to the member insurers
and shall accrue interest from the due date at such adjusted rate as is
established under Section 6621 of Chapter 26 of the United States Code and
such interest shall be compounded daily.
(2) There shall be 2 classes of assessments, as follows:
(a) Class A assessments shall be made for the purpose
of meeting administrative costs and other general expenses and examinations conducted under the authority of the Director under subsection (5) of Section 531.12.
(b) Class B assessments shall be made to the extent
necessary to carry out the powers and duties of the Association under Section 531.08 with regard to an impaired or insolvent domestic insurer or insolvent foreign or alien insurers.
(3)(a) The amount of any Class A assessment shall be determined at the discretion of the board of directors and such assessments shall be authorized and called on a non-pro rata basis. The amount of any Class B
assessment shall be allocated for assessment
purposes among the accounts
and subaccounts pursuant to an allocation formula which may be based on
the premiums or reserves of the impaired or insolvent insurer or any other
standard deemed by the board in its sole discretion as being fair and
reasonable under the circumstances.
(b) Class B assessments against member insurers for each account and
be in the proportion that the premiums received on business in this State
by each assessed member insurer on policies or contracts covered by
each account or subaccount for the three most recent calendar years
for which information is available preceding the year in which the insurer
became impaired or insolvent, as the case may be, bears to such premiums
received on business in this State for such calendar years by all assessed
(c) Assessments for funds to meet the requirements of the Association
with respect to an impaired or insolvent insurer shall not be made until
necessary to implement the purposes of this Article. Classification
under subsection (2) and computations of assessments under this subsection
shall be made with a reasonable degree of accuracy, recognizing that exact
determinations may not always be possible.
(4) The Association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. In the event an assessment against a member insurer is abated or deferred in whole or in part the amount by which the assessment is abated or deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this Section. Once the conditions that caused a deferral have been removed or rectified, the member insurer shall pay all assessments that were deferred pursuant to a repayment plan approved by the Association.
(5) (a) Subject to the provisions of subparagraph (ii) of this paragraph, the total of all assessments authorized by the Association with respect to a member insurer for each subaccount of the life insurance and annuity account and for the health account shall not in one calendar year exceed 2% of that member insurer's average annual premiums received in this State on the policies and contracts covered by the subaccount or account during the 3 calendar years preceding the year in which the insurer became an impaired or insolvent insurer.
If 2 or more assessments are authorized in one calendar year with respect to insurers that become impaired or insolvent in different calendar years, the average annual premiums for purposes of the aggregate assessment percentage limitation referenced in subparagraph (a) of this paragraph shall be equal and limited to the higher of the 3-year average annual premiums for the applicable subaccount or account as calculated pursuant to this Section.
If the maximum assessment, together with the other assets of the Association in an account, does not provide in one year in either account an amount sufficient to carry out the responsibilities of the Association, the necessary additional funds shall be assessed as soon thereafter as permitted by this Article.
(b) The board may provide in the plan of operation a method of allocating funds among claims, whether relating to one or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims.
(c) If the maximum assessment for a subaccount of the life and annuity account in one year does not provide an amount sufficient to carry out the responsibilities of the Association, then pursuant to paragraph (b) of subsection (3), the board shall assess the other subaccounts of the life and annuity account for the necessary additional amount, subject to the maximum stated in paragraph (a) of this subsection.
(6) The board may, by an equitable method as established in the
plan of operation, refund to member insurers, in proportion to the contribution
of each insurer to that account, the amount by which the assets of the account
exceed the amount the board finds is necessary to carry out during the coming
year the obligations of the Association with regard to that account, including
assets accruing from net realized gains and income from investments. A
reasonable amount may be retained in any account to provide funds for the
continuing expenses of the Association and for future losses.
(7) An assessment is deemed to occur on the date upon which the board
votes such assessment. The board may defer calling the payment of the
assessment or may call for payment in one or more installments.
(8) It is proper for any member insurer, in determining its premium
rates and policyowner dividends as to any kind of insurance within the scope of
this Article, to consider the amount reasonably necessary to meet its assessment
obligations under this Article.
(9) The Association must issue to each insurer paying a
Class B assessment
under this Article a certificate of contribution,
in a form acceptable to the
Director, for the amount of the assessment so paid. All outstanding certificates
are of equal
dignity and priority without reference to amounts or dates of issue. A certificate
of contribution may be shown by the insurer in its financial statement as an asset
in such form and for such amount, if any, and period of time as the Director
may approve, provided the insurer shall in any event at its option have
the right to show a certificate of contribution as an admitted asset at
percentages of the original face amount for calendar years as follows:
100% for the calendar year after the year of issuance;
80% for the second calendar year after the year of issuance;
60% for the third calendar year after the year of issuance;
40% for the fourth calendar year after the year of issuance;
20% for the fifth calendar year after the year of issuance.
(10) The Association may request information of member insurers in order to aid in the exercise of its power under this Section and member insurers shall promptly comply with a request.
(Source: P.A. 95-86, eff. 9-25-07 (changed from 1-1-08 by P.A. 95-632); 96-1450, eff. 8-20-10.)
215 ILCS 5/531.10
(215 ILCS 5/531.10)
(from Ch. 73, par. 1065.80-10)
Plan of Operation.)
(1)(a) The Association must
submit to the Director a plan of operation and any amendments thereto necessary
or suitable to assure the fair, reasonable, and equitable administration of the
Association. The plan of operation and any amendments thereto become effective
upon approval in writing by the Director.
(b) If the Association fails to submit a suitable plan of operation
within 180 days following the effective date of this Article or if at any time
thereafter the Association fails to submit suitable amendments to the plan, the
Director may, after notice and hearing, adopt and promulgate such reasonable
rules as are necessary or advisable to effectuate the provisions of this Article.
Such rules are in force until modified by the Director or superseded by a plan
submitted by the Association and approved by the Director.
(2) All member insurers must comply with the plan of operation.
(3) The plan of operation must, in addition to requirements enumerated
elsewhere in this Article:
(a) Establish procedures for handling the assets of
(b) Establish the amount and method of reimbursing
members of the board of directors under Section 531.07;
(c) Establish regular places and times for meetings
of the board of directors;
(d) Establish procedures for records to be kept of
all financial transactions of the Association, its agents, and the board of directors;
(e) Establish the procedures whereby selections for
the board of directors will be made and submitted to the Director;
(f) Establish any additional procedures for
assessments under Section 531.09; and
(g) Contain additional provisions necessary or proper
for the execution of the powers and duties of the Association.
(4) The plan of operation shall establish a procedure for protest by
any member insurer of assessments made by the Association pursuant to
Section 531.09. Such procedures shall require that:
(a) a member insurer that wishes to protest all or
part of an assessment shall pay when due the full amount of the assessment as set forth in the notice provided by the Association. The payment shall be available to meet Association obligations during the pendency of the protest or any subsequent appeal. Payment shall be accompanied by a statement in writing that the payment is made under protest and setting forth a brief statement of the grounds for the protest;
(b) within 30 days following the payment of an
assessment under protest by any protesting member insurer, the Association must notify the member insurer in writing of its determination with respect to the protest unless the Association notifies the member that additional time is required to resolve the issues raised by the protest;
(c) in the event the Association determines that the
protesting member insurer is entitled to a refund, such refund shall be made within 30 days following the date upon which the Association makes its determination;
(d) the decision of the Association with respect to a
protest may be appealed to the Director pursuant to Section 531.11(3);
(e) in the alternative to rendering a decision with
respect to any protest based on a question regarding the assessment base, the Association may refer such protests to the Director for final decision, with or without a recommendation from the Association; and
(f) interest on any refund due a protesting member
insurer shall be paid at the rate actually earned by the Association.
(5) The plan of operation may provide that any or all powers and duties
of the Association, except those under paragraph (c) of subsection (10)
of Section 531.08 and Section 531.09 are delegated to a corporation,
association or other organization which performs or will perform functions
similar to those of this Association, or its equivalent, in 2 or more states.
Such a corporation, association or organization shall be reimbursed for any
payments made on behalf of the Association and shall be paid for its
performance of any function of the Association. A delegation under this
subsection shall take effect only with the approval of both the Board of
Directors and the Director, and may be made only to a corporation, association
or organization which extends protection not substantially less favorable and
effective than that provided by this Act.
(Source: P.A. 96-1450, eff. 8-20-10.)
215 ILCS 5/531.11
(215 ILCS 5/531.11)
(from Ch. 73, par. 1065.80-11)
Duties and powers of the Director.
In addition to
the duties and powers enumerated elsewhere in this Article:
(1) The Director must do all of the following:
(a) Upon request of the board of directors, provide
the Association with a statement of the premiums in the appropriate accounts for each member insurer.
(b) Notify the board of directors of the existence of
an impaired or insolvent insurer not later than 3 days after a determination of impairment or insolvency is made or when the Director receives notice of impairment or insolvency.
(c) Give notice to an impaired insurer as required by
Sections 34 or 60. Notice to the impaired insurer shall constitute notice to its shareholders, if any.
(d) In any liquidation or rehabilitation proceeding
involving a domestic insurer, be appointed as the liquidator or rehabilitator. If a foreign or alien member insurer is subject to a liquidation proceeding in its domiciliary jurisdiction or state of entry, the Director shall be appointed conservator.
(2) The Director may suspend or revoke, after notice and hearing,
the certificate of authority to transact insurance in this State of any member
insurer which fails to pay an assessment when due or fails to comply with the
of operation. As an alternative the Director may levy a forfeiture on any
insurer which fails to pay an assessment when due. Such forfeiture may not
5% of the unpaid assessment per month, but no forfeiture may be less than
$100 per month.
(3) Any action of the board of directors or the Association may be
appealed to the Director by any member insurer or any other person
adversely affected by such action if such appeal is taken within 30
days of the action being appealed. Any final action or order of the Director
is subject to judicial review in a court of competent jurisdiction.
(4) The liquidator, rehabilitator, or conservator of any impaired insurer
may notify all interested persons of the effect of this Article.
(Source: P.A. 96-1450, eff. 8-20-10.)
215 ILCS 5/531.12
(215 ILCS 5/531.12)
(from Ch. 73, par. 1065.80-12)
Prevention of Insolvencies.
To aid in the detection and
prevention of insurer insolvencies or impairments:
(1) It shall be the duty of the Director:
(a) To notify the Commissioners of all other states,
territories of the United States, and the District of Columbia when he takes any of the following actions against a member insurer:
(i) revocation of license;
(ii) suspension of license;
(iii) makes any formal order except for an order
issued pursuant to Article XII 1/2 of this Code that such company restrict its premium writing, obtain additional contributions to surplus, withdraw from the State, reinsure all or any part of its business, or increase capital, surplus or any other account for the security of policyholders or creditors.
Such notice shall be transmitted to all commissioners
within 30 days following the action taken or the date on which the action occurs.
(b) To report to the board of directors when he has
taken any of the actions set forth in subparagraph (a) of this paragraph or has received a report from any other commissioner indicating that any such action has been taken in another state. Such report to the board of directors shall contain all significant details of the action taken or the report received from another commissioner.
(c) To report to the board of directors when the
Director has reasonable cause to believe from an examination, whether completed or in process, of any member insurer that the insurer may be an impaired or insolvent insurer.
(d) To furnish to the board of directors the
National Association of Insurance Commissioners Insurance Regulatory Information System ratios and listings of companies not included in the ratios developed by the National Association of Insurance Commissioners. The board may use the information contained therein in carrying out its duties and responsibilities under this Section. The report and the information contained therein shall be kept confidential by the board of directors until such time as made public by the Director or other lawful authority.
(2) The Director may seek the advice and recommendations of the board
of directors concerning any matter affecting his duties and responsibilities
regarding the financial condition of member companies and companies seeking admission
to transact insurance business in this State.
(3) The board of directors may, upon majority vote, make reports and recommendations
to the Director upon any matter germane to the liquidation, rehabilitation
or conservation of any member insurer. Such reports
and recommendations shall not be considered public documents.
(4) The board of directors may, upon majority vote, make recommendations
to the Director for the detection and prevention of insurer insolvencies.
(5) The board of directors shall, at the conclusion of any
in which the Association was obligated to pay covered claims prepare a report
to the Director containing such information as it may have in its possession
bearing on the history and causes of such insolvency. The board shall cooperate
with the boards of directors of guaranty associations in other states in
preparing a report on the history and causes for insolvency of a particular
insurer, and may adopt by reference any report prepared by such other
(Source: P.A. 96-1450, eff. 8-20-10.)
215 ILCS 5/531.13
(215 ILCS 5/531.13)
(from Ch. 73, par. 1065.80-13)
In the event the aggregate Class A, B and C
assessments for all member insurers do not exceed $3,000,000 in any one
calendar year, no member insurer shall receive a tax offset. However, for
any one calendar year before 1998 in which the
total of such assessments exceeds $3,000,000,
the amount in excess of $3,000,000 shall be subject to a tax offset to the
extent of 20% of the amount of such assessment for each of the 5
years following the year in which such assessment was paid, and ending prior
to January 1, 2003, and each member
insurer may offset the proportionate amount of such excess paid by the insurer
against its liabilities for the tax imposed by subsections (a) and (b)
of Section 201 of the Illinois
Income Tax Act. The provisions of this Section shall expire and be given no
effect for any tax period commencing on and after January 1, 2003.
(Source: P.A. 93-29, eff. 6-20-03.)
215 ILCS 5/531.14
(215 ILCS 5/531.14)
(from Ch. 73, par. 1065.80-14)
(1) Nothing in this
Article may be construed to reduce the liability for unpaid assessments of the insured
of an impaired or insolvent insurer operating under a plan with assessment liability.
(2) Records must be kept of all negotiations and meetings in which
the Association or its representatives are involved to discuss the activities of the
Association in carrying out its powers and duties under Section 531.08. Records of such
negotiations or meetings may be made public only upon the termination of a
liquidation, rehabilitation, or conservation proceeding involving the impaired
or insolvent insurer, upon the termination of the impairment or insolvency
of the insurer, or upon the order
of a court of competent jurisdiction. Nothing in this paragraph (2) limits the
duty of the Association to render a report of its activities under Section
(3) For the purpose of carrying out its obligations under this Article,
the Association is deemed to be a creditor of the impaired or insolvent
insurer to the extent of assets attributable to covered policies reduced by any
amounts to which the Association is entitled as subrogee (under paragraph (8)
of Section 531.08). All assets of the impaired or insolvent insurer
attributable to covered policies must be used to continue all covered policies
and pay all contractual obligations of the impaired insurer as required by this
Article. "Assets attributable to covered policies", as used in this paragraph
(3), is that proportion of the
assets which the reserves that should have been established
for such policies bear to the reserve that should have been
established for all policies of
insurance written by the impaired or insolvent insurer.
(4) (a) Prior to the termination of any liquidation, rehabilitation,
or conservation proceeding, the court may take into consideration the contributions
of the respective parties, including the Association, the shareholders and
policyowners of the impaired or insolvent insurer, and any other party with
a bona fide interest,
in making an equitable distribution of the ownership rights of such impaired
insurer. In such a determination, consideration must be given to the welfare of the
policyholders of the continuing or successor insurer.
(b) No distribution to stockholders, if any, of an impaired or insolvent insurer
may be made until and unless the total
amount of valid claims of the Association for funds expended in carrying
out its powers and duties under Section 531.08, with respect to such insurer
have been fully recovered by the Association.
(5) (a) If an order for liquidation or rehabilitation of
domiciled in this State has been entered, the receiver appointed under such
order has a right to recover on behalf of the insurer, from any affiliate that
controlled it, the amount of distributions, other than stock dividends paid by
the insurer on its capital stock, made at any time during the 5 years preceding
the petition for liquidation or rehabilitation subject to the limitations of
paragraphs (b) to (d).
(b) No such dividend is recoverable if the insurer shows that when
paid the distribution was lawful and reasonable, and that the insurer did not
know and could not reasonably have known that the distribution might adversely affect
the ability of the insurer to fulfill its contractual obligations.
(c) Any person who as an affiliate that controlled the insurer at
the time the distributions were paid is liable up to the amount of distributions
he received. Any person who was an affiliate that controlled the insurer at the
time the distributions were declared, is liable up to the amount of distributions
he would have received if they had been paid immediately. If 2 persons are
liable with respect to the same distributions, they are jointly and severally liable.
(d) The maximum amount recoverable under subsection (5) of this Section is
the amount needed in excess of all other available assets of the insolvent insurer
to pay the contractual obligations of the insolvent insurer.
(e) If any person liable under paragraph (c) of subsection (5) of this
Section is insolvent, all its
affiliates that controlled it at the time the dividend was paid are jointly and
severally liable for any resulting deficiency in the amount recovered from
the insolvent affiliate.
(6) As a creditor of the impaired or insolvent insurer as established in subsection (3) of this Section and consistent with subsection (2) of Section 205 of this Code, the Association and other similar associations shall be entitled to receive a disbursement of assets out of the marshaled assets, from time to time as the assets become available to reimburse it, as a credit against contractual obligations under this Article. If the liquidator has not, within 120 days after a final determination of insolvency of an insurer by the receivership court, made an application to the court for the approval of a proposal to disburse assets out of marshaled assets to guaranty associations having obligations because of the insolvency, then the Association shall be entitled to make application to the receivership court for approval of its own proposal to disburse these assets.
(Source: P.A. 96-1450, eff. 8-20-10.)
215 ILCS 5/531.15
(215 ILCS 5/531.15)
(from Ch. 73, par. 1065.80-15)
Examination of the Association - Annual Report.
Association shall be subject to examination and regulation by the Director.
The board of directors must submit to the Director, not later than the
first day of the fifth month following the end of the Association's fiscal
year, a financial report for such fiscal year in a
form acceptable to the Director and a report of its
activities during such fiscal year.
(Source: P.A. 86-753.)
215 ILCS 5/531.16
(215 ILCS 5/531.16)
(from Ch. 73, par. 1065.80-16)
Tax Exemptions.) The Association is exempt from payment of
all fees and all taxes levied by this State or any of its subdivisions, except taxes
levied on real property.
(Source: P.A. 81-899.)
215 ILCS 5/531.17
(215 ILCS 5/531.17)
(from Ch. 73, par. 1065.80-17)
Immunity.) There is no liability on the part of and
no cause of action of any nature may arise against any member insurer or its agents
or employees, the Association or its agents or employees, members of the board of
directors, or the Director or his representatives, for any action taken by them
in the performance of their powers and duties under this Article.
(Source: P.A. 81-899.)
215 ILCS 5/531.18
(215 ILCS 5/531.18)
(from Ch. 73, par. 1065.80-18)
Stay of Proceedings - Reopening Default Judgments.)
All proceedings in which the insolvent insurer is a party in any court in this
State shall be stayed 180 days from the date an order of liquidation,
rehabilitation, or conservation is final to permit proper legal action by the
Association on any matters germane to its powers or duties. As to a judgment under
any decision, order, verdict, or finding based on default the Association may apply
to have such judgment set aside by the same court that made such judgment and must
be permitted to defend against such suit on the merits.
(Source: P.A. 96-1450, eff. 8-20-10.)
215 ILCS 5/531.19
(215 ILCS 5/531.19)
(from Ch. 73, par. 1065.80-19)
Prohibited advertisement of action of the Insurance Guaranty
Association in sale of insurance.
(a) No person, including an insurer,
or affiliate of an insurer shall make, publish, disseminate, circulate,
or place before the public, or cause directly or indirectly, to be made,
published, disseminated, circulated or placed before the public, in any
newspaper, magazine or other publication, or in the form of a notice, circular,
pamphlet, letter or poster, or over any radio station or television station,
or in any other way, any advertisement, announcement or statement, written or
uses the existence of the Insurance Guaranty Association of this State for
the purpose of sales, solicitation or inducement to purchase any form of
insurance covered by this Article; provided, however, that this Section
shall not apply to the Illinois Life and Health Guaranty Association or
any other entity which does not sell or solicit insurance.
(b) Within 180 days of August 16,
1993, the Association shall prepare a summary document describing the general
purposes and current limitations of this Article and complying with subsection
(c). This document shall be submitted to the Director for approval. Sixty
days after receiving approval, no insurer may deliver a policy or contract
described in subparagraph (a) of paragraph (2) of Section 531.03 and not
excluded under subparagraph (b) of that Section to a policy or
contract holder unless the document is delivered to the policy or contract
holder prior to or at the time of delivery of the policy or contract. The document should also be available upon request
a policyholder. The distribution, delivery, or contents or interpretation of
this document shall not mean that either the policy or the contract or the
holder thereof would be covered in the event of the impairment or insolvency of
a member insurer. The description document shall be revised by the Association
as amendments to this Article may require. Failure to receive this document
does not give the policyholder, contract holder, certificate holder, or insured
any greater rights than those stated in this Article.
(c) The document prepared under subsection (b) shall contain a clear and
conspicuous disclaimer on its face. The Director shall promulgate a rule
establishing the form and content of the disclaimer. The disclaimer shall:
(1) State the name and address of the Life and Health
Insurance Guaranty Association and of the Department.
(2) Prominently warn the policy or contract holder
that the Life and Health Insurance Guaranty Association may not cover the policy or, if coverage is available, it will be subject to substantial limitations and exclusions and conditioned on continued residence in the State.
(3) State that the insurer and its agents are
prohibited by law from using the existence of the Life and Health Insurance Guaranty Association for the purpose of sales, solicitation, or inducement to purchase any form of insurance.
(4) Emphasize that the policy or contract holder
should not rely on coverage under the Life and Health Insurance Guaranty Association when selecting an insurer.
(5) Provide other information as directed by the
(Source: P.A. 88-364; 88-627, eff. 9-9-94; 89-97, eff. 7-7-95.)
215 ILCS 5/Art. XXXIV
(215 ILCS 5/Art. XXXIV heading)
ILLINOIS INSURANCE GUARANTY FUND
215 ILCS 5/532
(215 ILCS 5/532)
(from Ch. 73, par. 1065.82)
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, to avoid financial loss to claimants or policyholders
because of the entry of an Order of Liquidation against an insolvent
company, and to provide a Fund to assess the cost of such protection among
(Source: P.A. 85-576.)
215 ILCS 5/533
(215 ILCS 5/533)
(from Ch. 73, par. 1065.83)
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 as they appear and are defined in those
clauses as of January 1, 1985, 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. 89-97, eff. 7-7-95.)
215 ILCS 5/534
(215 ILCS 5/534)
(from Ch. 73, par. 1065.84)
For the purposes of this Article, unless the
context requires otherwise, the words and phrases defined in Sections 534.1
through 534.8 have the meanings set forth in those Sections.
(Source: P.A. 85-576.)
215 ILCS 5/534.1
(215 ILCS 5/534.1)
(from Ch. 73, par. 1065.84-1)
"Fund" means the Illinois Insurance Guaranty Fund created by this
(Source: P.A. 77-305.)
215 ILCS 5/534.2
(215 ILCS 5/534.2)
(from Ch. 73, par. 1065.84-2)
"Director" means the Director of Insurance of the State of Illinois.
(Source: P.A. 77-305.)
215 ILCS 5/534.3
(215 ILCS 5/534.3)
(from Ch. 73, par. 1065.84-3)
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
suffering injury or damage for which a person insured under such policy
is legally liable, and for unearned premium, if:
(i) The company issuing 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; 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. 89-97, eff. 7-7-95; 90-499, eff. 8-19-97.)
215 ILCS 5/534.4
(215 ILCS 5/534.4)
(from Ch. 73, par. 1065.84-4)
"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
such policy obligation through merger, 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. 90-499, eff. 8-19-97.)
215 ILCS 5/534.5
(215 ILCS 5/534.5)
(from Ch. 73, par. 1065.84-5)
"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
(215 ILCS 5/534.6)
(from Ch. 73, par. 1065.84-6)
"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.)