Public Act 098-0978
 
SB3324 EnrolledLRB098 18518 RPM 53655 b


  
    AN ACT concerning regulation.
  
 
    Be it enacted by the People of the State of Illinois,
 
represented in the General Assembly:
  
 
 
    Section 5. The Illinois Insurance Code is amended  by 
changing Sections 121-2.08, 412, 445, 445.1, and 445.4 as 
follows:
 



    (215 ILCS 5/121-2.08)  (from Ch. 73, par. 733-2.08)



    Sec. 121-2.08. 
Transactions in this State involving 
contracts of
insurance independently procured directly from an 
unauthorized insurer by issued to one or more industrial 
insureds.
    (a) As used in this Section:
    "Exempt commercial purchaser" means exempt commercial 
purchaser as the term is defined in subsection (1) of Section 
445 of this Code. 
    "Home state" means home state as the term is defined in 
subsection (1) of Section 445 of this Code.  
    "Industrial For purposes of this
Section "industrial 
insured" means is an insured:

        (i) that (a) which procures the insurance of any risk 
    or risks of the kinds specified in Classes 2 and 3 of 
    Section 4 of this Code other than life
and annuity 
    contracts by use of the services of a full-time full time 
    employee who is a qualified risk manager acting
as an 
    insurance manager or buyer or the services of a regularly 
    and
continuously retained qualified insurance consultant 
    who is a qualified risk manager;

        (ii) that procures the insurance directly from an 
    unauthorized insurer without the services of an 
    intermediary insurance producer (b) whose aggregate annual 
    premiums for insurance on all risks, except for
life and 
    accident and health insurance, total at
least $100,000; and

        (iii) that is an exempt commercial purchaser whose home 
    state is Illinois (c) which either (i) has at least 25 full 
    time employees, (ii) has
gross assets in excess of 
    $3,000,000, or (iii) has annual gross revenues in
excess of 
    $5,000,000.

    "Insurance producer" means insurance producer as the term 
is defined in Section 500-10 of this Code.
    "Qualified risk manager" means qualified risk manager as 
the term is defined in subsection (1) of Section 445 of this 
Code.
    "Unauthorized insurer" means unauthorized insurer as the 
term is defined in subsection (1) of Section 445 of this Code.
    (b) For contracts of insurance effective January 1, 2015 or 
later, within 90 days after the effective date of each contract 
of insurance issued under this Section, the insured shall file 
a report with the Director by submitting the report to the 
Surplus Line Association of Illinois in writing or in a 
computer readable format and provide information as designated 
by the Surplus Line Association of Illinois. The information in 
the report shall be substantially similar to that required for 
surplus line submissions as described in subsection (5) of 
Section 445 of this Code.  Where applicable, the report shall 
satisfy, with respect to the subject insurance, the reporting 
requirement of Section 12 of the Fire Investigation Act.
    (c) For contracts of insurance effective January 1, 2015 or 
later, within 30 days after filing the report, the insured 
shall pay to the Director for the use and benefit of the State 
a sum equal to the gross premium of the contract of insurance 
multiplied by the surplus line tax rate, as described in 
paragraph (3) of subsection (a) of Section 445 of this Code, 
and shall pay the fire marshal tax that would otherwise be due 
annually in March for insurance subject to tax under Section 12 
of the Fire Investigation Act. For contracts of insurance 
effective January 1, 2015 or later, within 30 days after filing 
the report, the insured shall pay to the Surplus Line 
Association of Illinois a countersigning fee that shall be 
assessed at the same rate charged to members pursuant to 
subsection (4) of Section 445.1 of this Code.
    (d) For contracts of insurance effective January 1, 2015 or 
later, the insured shall withhold the amount of the taxes and 
countersignature fee from the amount of premium charged by and 
otherwise payable to the insurer for the insurance. If the 
insured fails to withhold the tax and countersignature fee from 
the premium, then the insured shall be liable for the amounts 
thereof and shall pay the amounts as prescribed in subsection 
(c) of this Section. 
(Source: P.A. 90-794, eff. 8-14-98.)

 



    (215 ILCS 5/412)  (from Ch. 73, par. 1024)



    Sec. 412. Refunds; penalties; collection. 


    (1)(a) Whenever it appears to
the satisfaction of the 
Director that because of some mistake of fact,
error in 
calculation, or erroneous interpretation of a statute of this

or any other state, any authorized company, surplus line 
producer, or industrial insured has paid to him, pursuant to

any provision of law, taxes, fees, or other charges
in excess 
of the
amount legally chargeable against it, during the 6 year 
period
immediately preceding the discovery of such 
overpayment, he shall have
power to refund to such company, 
surplus line producer, or industrial insured the amount of the 
excess or excesses by
applying the amount or amounts thereof 
toward
the payment of taxes, fees, or other charges already 
due, or which may
thereafter become due from that company until 
such excess or excesses have been
fully
refunded, or upon a 
written request from the authorized company, surplus line 
producer, or industrial insured, the
Director shall provide a 
cash refund within
120 days after receipt of the written 
request if all necessary information has
been filed with the 
Department in order for it to perform an audit of the
tax 
report for the transaction or period or annual return for the 
year in which the overpayment occurred or within 120 days
after 
the date the Department receives all the necessary information 
to perform
such audit.  The Director shall not provide a cash 
refund if there are
insufficient funds in the Insurance Premium 
Tax Refund Fund to provide a cash
refund, if the amount of the 
overpayment is less than $100, or if the amount of
the 
overpayment can be fully offset against the taxpayer's 
estimated liability
for the year following the year of the cash 
refund request.  Any cash refund
shall be paid from the 
Insurance Premium Tax Refund Fund, a special fund hereby

created in the
State treasury. 


    (b) Beginning January 1, 2000 and thereafter, the 
Department shall deposit
a percentage of the amounts collected 
under Sections 409, 444, and 444.1 of
this
Code into the 
Insurance Premium Tax Refund Fund.  The percentage deposited 
into
the Insurance Premium Tax Refund Fund shall be the annual 
percentage.  The
annual
percentage shall be calculated as a 
fraction, the numerator of which shall be
the amount of cash 
refunds approved by the Director for payment and paid during

the preceding calendar year as a result of overpayment of tax 
liability under
Sections 121-2.08, 409, 444, and 444.1, and 445 
of this Code and the denominator of which shall
be the amounts 
collected pursuant to Sections 121-2.08, 409, 444, and 444.1, 
and 445 of this Code
during the preceding calendar year.  
However, if there were no cash refunds
paid in a preceding 
calendar year, the Department shall deposit 5% of the
amount 
collected in that preceding calendar year pursuant to Sections 
121-2.08, 409, 444,
and 444.1, and 445 of this Code into the 
Insurance Premium Tax Refund Fund instead of an
amount 
calculated by using the annual percentage.


    (c) Beginning July 1, 1999, moneys in the Insurance Premium 
Tax Refund
Fund
shall be expended exclusively for the purpose 
of paying cash refunds resulting
from overpayment of tax 
liability under Sections 121-2.08, 409, 444, and 444.1, and 445 
of this
Code
as
determined by the Director pursuant to 
subsection 1(a) of this Section.  Cash
refunds made in 
accordance with this Section may be made from the Insurance

Premium Tax Refund Fund only to the extent that amounts have 
been deposited and
retained in the Insurance Premium Tax Refund 
Fund.


    (d) This Section shall constitute an irrevocable and 
continuing
appropriation from the Insurance Premium Tax Refund 
Fund for the purpose of
paying cash refunds pursuant to the 
provisions of this Section.

    (2)(a) When any insurance company or any surplus line 
producer fails to
file any tax return required under Sections 
408.1, 409, 444, and 444.1 and 445 of
this Code or Section 12 
of the Fire Investigation Act  on the date
prescribed, including 
any extensions, there shall be added as a penalty
$400 or 10% 
of the amount of such tax, whichever is
greater, for each month

or part of a month of failure to file, the entire penalty not 
to exceed
$2,000 or 50% of the tax due, whichever is greater.

    (b) When any industrial insured or surplus line producer 
fails to file any tax return or report required under Sections 
121-2.08 and 445 of this Code or Section 12 of the Fire 
Investigation Act on the date prescribed, including any 
extensions, there shall be added:
        (i) as a late fee, if the return or report is received 
    at least one day but not more than 7 days after the 
    prescribed due date, $400 or 10% of the tax due, whichever 
    is greater, the entire fee not to exceed $1,000;
        (ii) as a late fee, if the return or report is received 
    at least 8 days but not more than 14 days after the 
    prescribed due date, $400 or 10% of the tax due, whichever 
    is greater, the entire fee not to exceed $1,500;
        (iii) as a late fee, if the return or report is 
    received at least 15 days but not more than 21 days after 
    the prescribed due date, $400 or 10% of the tax due, 
    whichever is greater, the entire fee not to exceed $2,000; 
    or
        (iv) as a penalty, if the return or report is received 
    more than 21 days after the prescribed due date, $400 or 
    10% of the tax due, whichever is greater, for each month or 
    part of a month of failure to file, the entire penalty not 
    to exceed $2,000 or 50% of the tax due, whichever is 
    greater.
    A tax return or report shall be deemed received as of the 
date mailed as evidenced by a postmark, proof of mailing on a 
recognized United States Postal Service form or a form 
acceptable to the United States Postal Service or other 
commercial mail delivery service, or other evidence acceptable 
to the Director. 

    (3)(a) When any insurance company or any surplus line 
producer
fails to pay the full amount due under the provisions 
of this Section,
Sections 408.1, 409, 444, or 444.1 or 445 of 
this Code, or Section 12 of the
Fire Investigation Act, there 
shall be added to the amount due as a penalty
an amount equal 
to 10% of the deficiency.

    (a-5) When any industrial insured or surplus line producer 
fails to pay the full amount due under the provisions of this 
Section, Sections 121-2.08 or 445 of this Code, or Section 12 
of the Fire Investigation Act on the date prescribed, there 
shall be added:
        (i) as a late fee, if the payment is received at least 
    one day but not more than 7 days after the prescribed due 
    date, 10% of the tax due, the entire fee not to exceed 
    $1,000;
        (ii) as a late fee, if the payment is received at least 
    8 days but not more than 14 days after the prescribed due 
    date, 10% of the tax due, the entire fee not to exceed 
    $1,500;
        (iii) as a late fee, if the payment is received at 
    least 15 days but not more than 21 days after the 
    prescribed due date, 10% of the tax due, the entire fee not 
    to exceed $2,000; or
        (iv) as a penalty, if the return or report is received 
    more than 21 days after the prescribed due date, 10% of the 
    tax due.
    A tax payment shall be deemed received as of the date 
mailed as evidenced by a postmark, proof of mailing on a 
recognized United States Postal Service form or a form 
acceptable to the United States Postal Service or other 
commercial mail delivery service, or other evidence acceptable 
to the Director. 

    (b) If such failure to pay is determined by the Director to 
be wilful,
after a hearing under Sections 402 and 403, there 
shall be added to the tax
as a penalty an amount equal to the 
greater of 50% of the
deficiency or 10%
of the amount due and 
unpaid for each month or part of a month that the
deficiency 
remains unpaid commencing with the date that the amount becomes

due. Such amount shall be in lieu of any determined under 
paragraph (a) or (a-5).

    (4) Any insurance company, industrial insured, or any 
surplus line producer that which
fails to pay the full amount 
due under this Section or Sections 121-2.08, 408.1, 409,
444, 
444.1, or 445 of this Code, or Section 12 of the Fire 
Investigation
Act  is liable, in addition to the tax and any 
late fees and penalties, for interest
on such deficiency at the 
rate of 12% per annum, or at such higher adjusted
rates as are 
or may be established under subsection (b) of Section 6621
of 
the Internal Revenue Code, from the date that payment of any 
such tax
was due, determined without regard to any extensions, 
to the date of payment
of such amount.

    (5) The Director, through the Attorney
General, may 
institute an action in the name of the People of the State
of 
Illinois, in any court of competent jurisdiction, for the 
recovery of
the amount of such taxes, fees, and penalties due, 
and prosecute the same to
final judgment, and take such steps 
as are necessary to collect the same.

    (6) In the event that the certificate of authority of a 
foreign or
alien company is revoked for any cause or the 
company withdraws from
this State prior to the renewal date of 
the certificate of authority as
provided in Section 114, the 
company may recover the amount of any such
tax paid in advance. 
Except as provided in this subsection, no
revocation or 
withdrawal excuses payment of or constitutes grounds for
the 
recovery of any taxes or penalties imposed by this Code.

    (7) When an insurance company or domestic affiliated group 
fails to pay
the full amount of any fee of $200 or more due 
under
Section 408 of this Code, there shall be added to the 
amount due as
a penalty the greater of $100 or an amount equal 
to 10%
of the deficiency for
each month or part of
a month that 
the deficiency remains unpaid.

    (8) The Department shall have a lien for the taxes, fees, 
charges, fines, penalties,  interest, other charges, or any 
portion thereof, imposed or assessed pursuant to this Code, 
upon all the real and personal property of any company or 
person to whom the assessment or final order has been issued or 
whenever a tax return is filed without payment of the tax or 
penalty shown therein to be due, including all such property of 
the  company or person acquired after receipt of the assessment, 
issuance of the order, or filing of the return. The company or 
person is liable for the filing fee incurred by the Department 
for filing the lien and the filing fee incurred by the 
Department to file the release of that lien. The filing fees 
shall be paid to the Department in addition to payment of the 
tax, fee, charge, fine, penalty, interest, other charges, or 
any portion thereof, included in the amount of the lien. 
However, where the lien arises because of the issuance of a 
final order of the Director or tax assessment by the 
Department, the lien shall not attach and the notice referred 
to in this Section shall not be filed until all administrative 
proceedings or proceedings in court for review of the final 
order or assessment have terminated or the time for the taking 
thereof has expired without such proceedings being instituted.
    Upon the granting of Department review after a lien has 
attached, the lien shall remain in full force except to the 
extent to which the final assessment may be reduced by a 
revised final assessment following the rehearing or review. The 
lien created by the issuance of a final assessment shall 
terminate, unless a notice of lien is filed, within 3 years 
after the date all proceedings in court for the review of the 
final assessment have terminated or the time for the taking 
thereof has expired without such proceedings being instituted, 
or (in the case of a revised final assessment issued pursuant 
to a rehearing or  review by the Department) within 3 years 
after the date all proceedings in court for the review of such 
revised final assessment have terminated or the time for the 
taking thereof has expired without such proceedings being 
instituted. Where the lien results from the filing of a tax 
return without payment of the tax or penalty shown therein to 
be due, the lien shall terminate, unless a notice of lien is 
filed, within 3 years after the date when the return is filed 
with the Department.
    The time limitation period on the Department's right to 
file a notice of lien shall not run during any period of time 
in which the order of any court has the effect of enjoining or 
restraining the Department from filing such notice of lien. If 
the Department finds that a  company or person is about to 
depart from the State, to conceal himself or his property, or 
to do any other act tending to prejudice or to render wholly or 
partly ineffectual proceedings to collect the amount due and 
owing to the Department unless such proceedings are brought 
without delay, or if the Department finds that the collection 
of the amount due from any company or person will be 
jeopardized by delay, the Department shall give the company or 
person notice of such findings and shall make demand for 
immediate return and payment of the amount, whereupon the 
amount shall become immediately due and payable. If the company 
or person, within 5 days after the notice (or within such 
extension of time as the Department may grant), does not comply 
with the notice or show to the Department that the findings in 
the notice are erroneous, the Department may file a notice of 
jeopardy assessment lien in the office of the recorder of the 
county in which any property of the company or person may be 
located and shall notify the company or person of the filing. 
The jeopardy assessment lien shall have the same scope and 
effect as the statutory lien provided for in this Section. If 
the company or person believes that the company or person does 
not owe some or all of the tax for which the jeopardy 
assessment lien against the company or person has been filed, 
or that no jeopardy to the revenue in fact exists, the company 
or person may protest within 20 days after being notified by 
the Department of the filing of the jeopardy assessment lien 
and request a hearing, whereupon the Department shall hold a 
hearing in conformity with the provisions of this Code and, 
pursuant thereto, shall notify the company or person of its 
findings as to whether or not the jeopardy assessment lien will 
be released. If not, and if the company or person is aggrieved 
by this decision, the company or person may file an action for 
judicial review of the final determination of the Department in 
accordance with the Administrative Review Law. If, pursuant to 
such hearing (or after an independent determination of the 
facts by the Department without a hearing), the Department 
determines that some or all of the amount due covered by the 
jeopardy assessment lien is not owed by the company or person, 
or that no jeopardy to the revenue exists, or if on judicial 
review the final judgment of the court is that the company or 
person does not owe some or all of the amount due covered by 
the jeopardy assessment lien against them, or that no jeopardy 
to the revenue exists, the Department shall release its 
jeopardy assessment lien to the extent of such finding of 
nonliability for the amount, or to the extent of such finding 
of no jeopardy to the revenue. The Department shall also 
release its jeopardy assessment lien against the company or 
person whenever the amount due and owing covered by the lien, 
plus any interest which may be due, are paid and the company or 
person has paid the Department in cash or by guaranteed 
remittance an amount representing the filing fee for the lien 
and the filing fee for the release of that lien. The Department 
shall file that release of lien with the recorder of the county 
where that lien was filed.
    Nothing in this Section shall be construed to give the 
Department a preference over the rights of any bona fide 
purchaser, holder of a security interest, mechanics 
lienholder, mortgagee, or judgment lien creditor arising prior 
to the filing of a regular notice of lien or a notice of 
jeopardy assessment lien in the office of the recorder in the 
county in which the property subject to the lien is located. 
For purposes of this Section, "bona fide" shall not include any 
mortgage of real or personal property or any other credit 
transaction that results in the mortgagee or the holder of the 
security acting as trustee for unsecured creditors of the 
company or person mentioned in the notice of lien who executed 
such chattel or real property mortgage or the document 
evidencing such credit transaction. The lien shall be inferior 
to the lien of general taxes, special assessments, and special 
taxes levied by any political subdivision of this State. In 
case title to land to be affected by the notice of lien or 
notice of jeopardy assessment lien is registered under the 
provisions of the Registered Titles (Torrens) Act, such notice 
shall be filed in the office of the Registrar of Titles of the 
county within which the property subject to the lien is 
situated and shall be entered upon the register of titles as a 
memorial or charge upon each folium of the register of titles 
affected by such notice, and the Department shall not have a 
preference over the rights of any bona fide purchaser, 
mortgagee, judgment creditor, or other lienholder arising 
prior to the registration of such notice. The regular lien or 
jeopardy assessment lien shall not be effective against any 
purchaser with respect to any item in a retailer's stock in 
trade purchased from the retailer in the usual course of the 
retailer's business.
(Source: P.A. 98-158, eff. 8-2-13.)

 



    (215 ILCS 5/445)  (from Ch. 73, par. 1057)


    Sec. 445. Surplus line. 

    (1) Definitions. For the purposes of this Section:

    "Affiliate" means, with respect to an insured, any entity 
that controls, is controlled by, or is under common control 
with the insured. For the purpose of this definition, an entity 
has control over another entity if: 
        (A) the entity directly or indirectly or acting through 
    one or more other persons owns, controls, or has the power 
    to vote 25% or more of any class of voting securities of 
    the other entity; or
        (B) the entity controls in any manner the election of a 
    majority of the directors or trustees of the other entity.
    "Affiliated group" means any group of entities that are all 
affiliated. 
    "Authorized insurer" means an insurer that holds a 
certificate of
authority
issued by the Director but, for the 
purposes of this Section, does not
include a
domestic surplus 
line insurer as defined in Section 445a or any
residual market

mechanism.
    "Exempt commercial purchaser" means any person purchasing 
commercial insurance that, at the time of placement, meets the 
following requirements:
        (A) The person employs or retains a qualified risk 
    manager to negotiate insurance coverage.
        (B) The person has paid aggregate nationwide 
    commercial property and casualty insurance premiums in 
    excess of $100,000 in the immediately preceding 12 months.
        (C) The person meets at least one of the following 
    criteria:
            (I) The person possesses a net worth in excess of 
        $20,000,000, as such amount is adjusted pursuant to the 
        provision in this definition concerning percentage 
        change.
            (II) The person generates annual revenues in 
        excess of $50,000,000, as such amount is adjusted 
        pursuant to the provision in this definition 
        concerning percentage change.
            (III) The person employs more than 500 full-time or 
        full-time equivalent employees per individual insured 
        or is a member of an affiliated group employing more 
        than 1,000 employees in the aggregate.
            (IV) The person is a not-for-profit organization 
        or public entity generating annual budgeted 
        expenditures of at least $30,000,000, as such amount is 
        adjusted pursuant to the provision in this definition 
        concerning percentage change.
            (V) The person is a municipality with a population 
        in excess of 50,000 persons. 
    Effective on January 1, 2015 and each fifth January 1 
occurring thereafter, the amounts in subitems (I), (II), and 
(IV) of item (C) of this definition shall be adjusted to 
reflect the percentage change for such 5-year period in the 
Consumer Price Index for All Urban Consumers published by the 
Bureau of Labor Statistics of the Department of Labor. 
    "Home state" means the following: 
        (A)  With respect to an insured, except as provided in 
    item (B) of this definition:
            (I) the state in which an insured maintains its 
        principal place of business or, in the case of an 
        individual, the individual's principal residence; or
            (II) if 100% of the insured risk is located out of 
        the state referred to in subitem (I), the state to 
        which the greatest percentage of the insured's taxable 
        premium for that insurance contract is allocated. 
        (B) If more than one insured from an affiliated group 
    are named insureds on a single surplus line insurance 
    contract, then "home state" means the home state, as 
    determined pursuant to item (A) of this definition, of the 
    member of the affiliated group that has the largest 
    percentage of premium attributed to it under such insurance 
    contract.
        If more than one insured from a group that is not 
    affiliated are named insureds on a single surplus line 
    insurance contract, then:
            (I) if individual group members pay 100% of the 
        premium for the insurance from their own funds, "home 
        state" means the home state, as determined pursuant to 
        item (A) of this definition, of each individual group 
        member; each individual group member's coverage under 
        the surplus line insurance contract shall be treated as 
        a separate surplus line contract for the purposes of 
        this Section;
            (II) otherwise, "home state" means the home state, 
        as determined pursuant to item (A) of this definition, 
        of the group. 
    Nothing in this definition shall be construed to alter the 
terms of the surplus line insurance contract. 
    "Multi-State risk" means a risk with insured exposures in 
more than one State.
    "NAIC" means the National Association of Insurance 
Commissioners or any successor entity.
    "Qualified risk manager" means, with respect to a 
policyholder of commercial insurance, a person who meets all of 
the following requirements:
        (A) The person is an employee of, or third-party 
    consultant retained by, the commercial policyholder.
        (B) The person provides skilled services in loss 
    prevention, loss reduction, or risk and insurance coverage 
    analysis, and purchase of insurance.
        (C) With regard to the person:
            (I) the person has: 
                (a) a bachelor's degree or higher from an 
            accredited college or university in risk 
            management, business administration, finance, 
            economics, or any other field determined by the 
            Director or his designee to demonstrate minimum 
            competence in risk management; and
                (b) the following:
                    (i) three years of experience in risk 
                financing, claims administration, loss 
                prevention, risk and insurance analysis, or 
                purchasing commercial lines of insurance; or
                    (ii) alternatively has: 
                        (AA) a designation as a Chartered 
                    Property and Casualty Underwriter (in this 
                    subparagraph (ii) referred to as "CPCU") 
                    issued by the American Institute for 
                    CPCU/Insurance Institute of America;
                        (BB) a designation as an Associate in 
                    Risk Management (ARM) issued by the 
                    American Institute for CPCU/Insurance 
                    Institute of America;
                        (CC) a designation as Certified Risk 
                    Manager (CRM) issued by the National 
                    Alliance for Insurance Education & 
                    Research;
                        (DD) a designation as a RIMS Fellow 
                    (RF) issued by the Global Risk Management 
                    Institute; or
                        (EE) any other designation, 
                    certification, or license determined by 
                    the Director or his designee to 
                    demonstrate minimum competency in risk 
                    management;
            (II) the person has:
                (a) at least 7 years of experience in risk 
            financing, claims administration, loss prevention, 
            risk and insurance coverage analysis, or 
            purchasing commercial lines of insurance; and
                (b) has any one of the designations specified 
            in subparagraph (ii) of paragraph (b);
            (III) the person has at least 10 years of 
        experience in risk financing, claims administration, 
        loss prevention, risk and insurance coverage analysis, 
        or purchasing commercial lines of insurance; or
            (IV) the person has a graduate degree from an 
        accredited college or university in risk management, 
        business administration, finance, economics, or any 
        other field determined by the Director or his or her 
        designee to demonstrate minimum competence in risk 
        management. 
    "Residual market mechanism" means an association, 
organization, or other
entity described in Article XXXIII of 
this Code or Section 7-501 of the
Illinois Vehicle Code or any 
similar association, organization, or other
entity.
    "State" means any state of the United States, the District 
of Columbia, the Commonwealth of Puerto Rico, Guam, the 
Northern Mariana Islands, the Virgin Islands, and American 
Samoa.
    "Surplus line insurance" means insurance on a risk:
        (A) of the kinds specified in Classes 2 and 3 of 
    Section 4 of this Code; and
        (B) that is procured from an unauthorized insurer after 
    the insurance producer representing the insured or the 
    surplus line producer is unable, after diligent effort, to 
    procure the insurance from authorized insurers; and
        (C) where Illinois is the home state of the insured, 
    for policies effective, renewed or extended on July 21, 
    2011 or later and for multiyear policies upon the policy 
    anniversary that falls on or after July 21, 2011; and
        (D) that is located in Illinois, for policies effective 
    prior to July 21, 2011. 
    "Unauthorized insurer" means an insurer that does not hold 
a valid
certificate of authority issued by the Director but, 
for the purposes of this
Section, shall also include a domestic 
surplus line insurer as defined in
Section 445a.

    (1.5) Procuring surplus line insurance; surplus line 
insurer requirements. 
        (a) Insurance producers may procure surplus line 
    insurance only if licensed
as a surplus line producer under 
    this Section.
        (b) Licensed surplus line producers may procure 
    surplus line
insurance from an unauthorized insurer 
    domiciled in the United States only if the insurer:

            (i)  is permitted in its domiciliary jurisdiction 
        to write the type of insurance involved; and 
        
    (ii) has, based upon information available to the 
        surplus
line producer,
 a policyholders surplus of not 
        less than $15,000,000
determined in
accordance with 
        the laws of its domiciliary jurisdiction;
and

        
    (iii) has standards of solvency and management 
        that are adequate
for the protection of policyholders.

    
    Where an unauthorized insurer does not meet the

    standards set forth
in (ii) and (iii) above, a surplus line 
    producer may, if necessary, procure
insurance from that 
    insurer only if prior written warning of
such fact or

    condition is given to the insured by the insurance producer 
    or surplus line
producer.

        (c) Licensed surplus line producers may procure 
    surplus line insurance from an unauthorized insurer 
    domiciled outside of the United States only if the insurer 
    meets the standards for unauthorized insurers domiciled in 
    the United States in paragraph (b) of this subsection (1.5) 
    or is listed on the Quarterly Listing of Alien Insurers 
    maintained by the International Insurers Department of the 
    NAIC. The Director shall make the Quarterly Listing of 
    Alien Insurers available to surplus line producers without 
    charge. 
        (d) Insurance producers shall not procure from an

    unauthorized insurer an insurance policy:
            (i) that is designed to satisfy the
proof of 
        financial responsibility and insurance requirements in 
        any
Illinois law where the law requires that the proof 
        of
insurance is issued by an authorized insurer or 
        residual market
mechanism;
            (ii) that covers the risk of accidental injury to 
        employees arising
out of and in the course of 
        employment according to the provisions of the
Workers' 
        Compensation Act; or
            (iii) that insures any Illinois personal lines 
        risk, as defined in
subsection (a), (b), or (c) of 
        Section 143.13 of this Code, that is eligible
for 
        residual market mechanism coverage, unless the insured 
        or prospective
insured requests limits of liability 
        greater than the limits provided by the
residual market 
        mechanism.  In the course of making a diligent effort to

        procure insurance from authorized insurers, an 
        insurance producer shall not be
required to submit a 
        risk to a residual market mechanism when the risk is 
        not
eligible for coverage or exceeds the limits 
        available in the residual market
mechanism.
        Where there is an insurance policy issued by an

    authorized insurer or residual market mechanism
insuring a 
    risk described in item (i), (ii), or (iii)
above, nothing 
    in this paragraph shall be construed
to prohibit a surplus 
    line producer from procuring
from an unauthorized insurer a 
    policy insuring the
risk on an excess or umbrella basis 
    where the excess
or umbrella policy is written over one or 
    more
underlying policies.

        (e) Licensed surplus line producers may procure 
    surplus line insurance from an unauthorized insurer for an 
    exempt commercial purchaser without making the required 
    diligent effort to procure the insurance from authorized 
    insurers if:
            (i) the producer has disclosed to the exempt 
        commercial purchaser that such insurance may or may not 
        be available from authorized insurers that may provide 
        greater protection with more regulatory oversight; and
            (ii) the exempt commercial purchaser has 
        subsequently in writing requested the producer to 
        procure such insurance from an unauthorized insurer. 
    (2) Surplus line producer; license.  Any licensed producer 
who is a
resident of this State, or any nonresident who 
qualifies under Section
500-40, may be licensed as a surplus 
line producer upon payment of an annual license fee of $400.

    A surplus line producer so licensed shall keep a separate

account of
the business transacted thereunder for 7 years from 
the policy effective date which shall be open at all times to 
the
inspection of the Director or his representative.

    No later than July 21, 2012, the State of Illinois shall 
participate in the national insurance producer database of the 
NAIC, or any other equivalent uniform national database, for 
the licensure of surplus line producers and the renewal of such 
licenses. 

    (3) Taxes and reports.


        (a) Surplus line tax and penalty for late payment. The 
    surplus line tax rate for a surplus line insurance policy 
    or contract is determined as follows:
            (i) 3% for policies or contracts with an effective 
        date prior to July 1, 2003;
            (ii) 3.5% for policies or contracts with an 
        effective date of July 1, 2003 or later. 

        A surplus line producer shall file with the Director on 
    or
before
February 1 and August 1 of each year a report in 
    the form prescribed by the
Director on all surplus line 
    insurance procured from unauthorized insurers and 
    submitted to the Surplus Line Association of Illinois

    during the preceding
6 month period ending December 31 or 
    June 30
respectively, and on the filing of such report 
    shall pay to the Director
for the use and benefit of the 
    State a sum equal to the surplus line tax rate multiplied 
    by the
gross
premiums less returned premiums upon all 
    surplus line insurance submitted to the Surplus Line 
    Association of Illinois during the preceding 6 months.


        Any surplus line producer who fails to pay the full 
    amount due under this
subsection is liable, in addition to 
    the amount due, for such late fee,
penalty, and interest 
    charges as are provided for under Section 412 of
this Code.  
    The Director, through the
Attorney General, may
institute 
    an action in the name of the People of the State of 
    Illinois, in
any court of competent jurisdiction, for the 
    recovery of the amount of such
taxes, late fees, interest, 
    and penalties due, and prosecute the same to final 
    judgment, and take
such steps as are necessary to collect 
    the same.


        (b) Fire Marshal Tax.
Each surplus line producer shall 
    file with the Director on or before
March 31 of each year a 
    report in the form prescribed by the Director on all
fire 
    insurance procured from unauthorized insurers and 
    submitted to the Surplus Line Association of Illinois 
    subject to tax under
Section 12 of the Fire Investigation

    Act
and shall pay to the Director the fire marshal tax 
    required thereunder.


        (c) Taxes and fees charged to insured.  The taxes 
    imposed under this
subsection and the countersigning fees 
    charged by the Surplus Line
Association of Illinois may be 
    charged to and collected from surplus line
insureds.

    (4) (Blank).

    (5) Submission of documents to Surplus Line Association of 
Illinois.
A surplus line producer shall submit every insurance 
contract
issued
under his or her license to the Surplus Line 
Association of Illinois for
recording and countersignature.  
The submission and countersignature may be
effected through 
electronic means.  The submission shall set
forth:


        (a) the name of the insured;


        (b) the description and location of the insured 
    property or
risk;


        (c) the amount insured;


        (d) the gross premiums charged or returned;


        (e) the name of the unauthorized insurer from whom 
    coverage has been procured;


        (f) the kind or kinds of insurance procured; and


        (g) amount of premium subject to tax required by 
    Section 12 of the Fire
Investigation Act.


    Proposals, endorsements, and other documents which are

incidental to the insurance but which do not affect the premium

charged
are exempted from filing and countersignature.


    The submission of insuring contracts
to the Surplus Line 
Association of
Illinois constitutes a certification by the 
surplus line producer or by the
insurance producer who 
presented the risk to the surplus line producer for
placement 
as a surplus line risk that
after diligent effort the required 
insurance could not be procured from
authorized insurers and 
that
such procurement was otherwise in accordance with the 
surplus line law.

    (6) Countersignature required.  It shall be unlawful for an 
insurance
producer to deliver any unauthorized insurer

contract unless such
insurance contract is countersigned by the 
Surplus Line Association of
Illinois.

    (7) Inspection of records.  A surplus line producer shall

maintain
separate records of the business transacted under his 
or her license for 7 years from the policy effective date,

including complete copies of surplus line insurance contracts 
maintained on
paper or by electronic means, which
records shall 
be open at all times for inspection by the Director and by
the 
Surplus Line Association of Illinois.

    (8) Violations and penalties.  The Director may suspend or 
revoke or
refuse to renew a surplus line producer license for 
any violation of this Code.
In addition to or in lieu of 
suspension or revocation, the Director may
subject a surplus 
line producer
to a civil penalty of up to $2,000 for each cause 
for suspension
or
revocation.  Such penalty is enforceable under 
subsection (5) of Section
403A of this Code.

    (9) Director may declare insurer ineligible.  If the

Director determines
that the further assumption of risks might 
be hazardous to the
policyholders of an unauthorized insurer, 
the Director may
order the
Surplus Line Association of
Illinois 
not to countersign insurance contracts evidencing insurance in

such insurer and order surplus line producers to cease

procuring insurance
from such insurer.

    (10) Service of process upon Director.  Insurance contracts

delivered under this Section from unauthorized insurers, other 
than domestic
surplus line insurers as defined in Section 445a,

shall contain a
provision designating the
Director and his 
successors in office the true and lawful attorney of the

insurer upon whom may be served all lawful process in any

action, suit or
proceeding arising out of such insurance.

Service of process made upon the Director to be valid hereunder 
must state
the name of the insured, the name of the 
unauthorized insurer
and identify
the contract of insurance.  
The Director at his option is authorized to
forward a copy of 
the process to the Surplus Line Association of Illinois
for 
delivery to the unauthorized insurer or the Director may 
deliver the process to the
unauthorized insurer by other means 
which he considers to be
reasonably
prompt and certain.

    (10.5) Insurance contracts delivered under this Section 
from unauthorized insurers, other than domestic surplus line 
insurers as defined in Section 445a, shall have stamped or 
imprinted on the first page thereof in not less than 12-pt. 
bold face type the following legend: "Notice to Policyholder: 
This contract is issued, pursuant to Section 445 of the 
Illinois Insurance Code, by a company not authorized and 
licensed to transact business in Illinois and as such is not 
covered by the Illinois Insurance Guaranty Fund." Insurance 
contracts delivered under this Section from domestic surplus 
line insurers as defined in Section 445a shall have stamped or 
imprinted on the first page thereof in not less than 12-pt. 
bold face type the following legend: "Notice to Policyholder: 
This contract is issued by a domestic surplus line insurer, as 
defined in Section 445a of the Illinois Insurance Code, 
pursuant to Section 445, and as such is not covered by the 
Illinois Insurance Guaranty Fund."

    (11) The Illinois Surplus Line law does not apply to 
insurance of
property and operations of railroads or aircraft 
engaged in interstate or
foreign commerce, insurance of 
vessels, crafts or hulls, cargoes, marine
builder's risks, 
marine protection and indemnity, or other risks including

strikes and war risks insured under ocean or wet marine forms 
of policies.

    (12) Surplus line insurance procured under this Section, 
including
insurance procured from a domestic surplus line 
insurer, is not subject
to the provisions of the Illinois 
Insurance Code other than Sections 123,
123.1, 401, 401.1, 402, 
403, 403A, 408, 412, 445, 445.1, 445.2, 445.3,
445.4, and all 
of the provisions of Article XXXI to the extent that the

provisions of Article XXXI are not inconsistent with the terms 
of this Act.

(Source: P.A. 97-955, eff. 8-14-12.)

 



    (215 ILCS 5/445.1)  (from Ch. 73, par. 1057.1)



    Sec. 445.1. Surplus Line Association of Illinois. There is 
hereby created a
non-profit association to be known as the 
Surplus Line Association of
Illinois.  All surplus line 
producers shall be and must remain individual
members of the 
Association as a condition of their holding a license as a

surplus line producer in this State.  The Association must 
perform its
functions under the plan of operation established 
and approved under
Section 445.3 and must exercise its powers 
through a board of directors
established under Section 445.2 of 
this Code.  The Association shall be
supervised by the Director 
and is subject to the applicable provisions of
the Illinois 
Insurance Code.  The Association shall be authorized and have 
the
duty to:

    (1) receive, record and countersign all surplus line 
insurance
contracts which surplus line producers are required 
to file with the
Association under subsection (5) of Section 
445;

    (2) prepare monthly reports for the Director on surplus 
line insurance
procured by its members during the preceding 
month in such form and
providing such information as the 
Director may prescribe;

    (3) prepare and deliver to the Director and, at the 
discretion of the Director, to each licensee and to the 
Director the reports
of surplus line business prescribed in 
subsection (3) of Section 445;

    (4) assess its members for costs of operations in 
accordance with a
schedule adopted by the Board of Directors of 
the Association and
approved by the Director;

    (5) employ and retain such persons as are necessary to 
carry out the
duties of the Association;

    (6) borrow money as necessary to effect the purposes of the 
Association;

    (7) enter contracts as necessary to effect the purposes of 
the Association;

    (8) perform such other acts as will facilitate and 
encourage compliance
by its members with the surplus line law 
of this State and rules
promulgated thereunder; and

    (9) provide such other services to its members as are 
incidental or
related to the purposes of the Association.  
Nothing in this Act shall be
construed as giving the 
Association any discretionary authority to enforce
this Act or 
to withhold countersignature of insurance contracts which meet

the requirements of subsection (5) of Section 445.

(Source: P.A. 83-1300.)

 



    (215 ILCS 5/445.4)  (from Ch. 73, par. 1057.4)



    Sec. 445.4. Examination. The Director shall, at such times 
as he deems
necessary, make or cause to be made an examination 
of the Association.
The reasonable cost of any such examination 
shall be paid by the Association
upon presentation to it by the 
Director of a detailed account of such cost.
During the course 
of such examination, the  directors, officers, members, agents 
and
employees of the Association may be examined under oath 
regarding the operation
of the Association and shall make 
available all books, records, accounts,
documents and 
agreements pertaining thereto.  The Director shall furnish
a 
copy of the examination report to the Association.  Within 20 
days after
receipt of the report, the Association may request a 
hearing on the report
or any facts or recommendations therein.  
If the Director finds the Association
or any of its members to 
be in violation of this Act, he may issue an order
requiring 
discontinuance of such violation. The Association shall 
annually provide for an independent financial audit of the 
books and records of the Association by a certified public 
accountant and shall provide a copy of the audit report to the 
Director. 

(Source: P.A. 83-1300.)