093_SB0318enr

 
SB318 Enrolled                       LRB093 02126 JLS 02133 b

 1        AN ACT concerning insurance.

 2        Be  it  enacted  by  the People of the State of Illinois,
 3    represented in the General Assembly:

 4        Section 5.  The Illinois Insurance  Code  is  amended  by
 5    changing Section 445 as follows:

 6        (215 ILCS 5/445) (from Ch. 73, par. 1057)
 7        Sec. 445.  Surplus line.
 8        (1)  Surplus   line   defined;   surplus   line   insurer
 9    requirements.  "Surplus line insurance" means is insurance on
10    an Illinois risk of the kinds specified in Classes 2 and 3 of
11    Section  4 of this Code procured from an unauthorized insurer
12    or a domestic surplus line insurer as defined in Section 445a
13    after the insurance producer representing the insured or  the
14    surplus  line  producer  is unable, after diligent effort, to
15    procure said insurance from  authorized  insurers  which  are
16    authorized  to  transact  business  in  this State other than
17    domestic surplus line insurers as defined in Section 445a.
18        "Authorized  insurer"  means  an  insurer  that  holds  a
19    certificate of authority issued by the Director but, for  the
20    purposes of this Section, does not include a domestic surplus
21    line  insurer  as  defined  in  Section  445a or any residual
22    market mechanism.
23        "Residual  market  mechanism"   means   an   association,
24    organization,  or other entity described in Article XXXIII of
25    this Code or Section 7-501 of the Illinois  Vehicle  Code  or
26    any similar association, organization, or other entity.
27        "Unauthorized  insurer"  means  an  insurer that does not
28    hold a valid certificate of authority issued by the  Director
29    but,  for  the purposes of this Section, shall also include a
30    domestic surplus line insurer as defined in Section 445a.
31        Insurance producers may procure  surplus  line  insurance
 
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 1    only  if  licensed  as  a  surplus  line  producer under this
 2    Section  and  may  procure  that  insurance  only   from   an
 3    unauthorized  insurer or from a domestic surplus line insurer
 4    as defined in Section 445a:
 5             (a)  that based upon information  available  to  the
 6        surplus  line producer has a policyholders surplus of not
 7        less  than  $15,000,000  determined  in  accordance  with
 8        accounting  rules  that  are  applicable  to   authorized
 9        insurers; and
10             (b)  that  has  standards of solvency and management
11        that are adequate for the  protection  of  policyholders;
12        and
13             (c)  where an unauthorized insurer does not meet the
14        standards  set forth in (a) and (b) above, a surplus line
15        producer may, if necessary, procure insurance  from  that
16        insurer  only  if  prior  written warning of such fact or
17        condition is  given  to  the  insured  by  the  insurance
18        producer or surplus line producer.
19        Insurance   producers   shall   not   procure   from   an
20    unauthorized insurer an insurance policy:
21             (i)  that  is  designed  to  satisfy  the  proof  of
22        financial  responsibility  and  insurance requirements in
23        any Illinois statute where the statute requires that  the
24        proof  of insurance is issued by an authorized insurer or
25        residual market mechanism;
26             (ii)  that covers the risk of accidental  injury  to
27        employees  arising out of and in the course of employment
28        according to the provisions of the Workers'  Compensation
29        Act; or
30             (iii)  that  insures  any  Illinois  personal  lines
31        risk,  as  defined  in  subsection  (a),  (b),  or (c) of
32        Section  143.13  of  this  Code,  that  is  eligible  for
33        residual market mechanism coverage, unless the insured or
34        prospective insured requests limits of liability  greater
 
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 1        than   the   limits   provided  by  the  residual  market
 2        mechanism.  In the course of making a diligent effort  to
 3        procure  insurance from authorized insurers, an insurance
 4        producer shall not be required to  submit  a  risk  to  a
 5        residual  market  mechanism when the risk is not eligible
 6        for coverage or  exceeds  the  limits  available  in  the
 7        residual market mechanism.
 8        Where   there   is  an  insurance  policy  issued  by  an
 9    authorized insurer or residual market  mechanism  insuring  a
10    risk  described  in item (i), (ii) or (iii) above, nothing in
11    this paragraph shall be construed to prohibit a surplus  line
12    producer from procuring from an unauthorized insurer a policy
13    insuring  the  risk  on an excess or umbrella basis where the
14    excess or  umbrella  policy  is  written  over  one  or  more
15    underlying policies.
16        (2)  Surplus   line   producer;  license.   Any  licensed
17    producer who is a resident of this State, or any  nonresident
18    who  qualifies  under  Section  500-40,  may be licensed as a
19    surplus line producer upon:
20             (a)  completing a prelicensing course of study.  The
21        course provided for by this Section  shall  be  conducted
22        under  rules  and regulations prescribed by the Director.
23        The Director  may  administer  the  course  or  may  make
24        arrangements,   including  contracting  with  an  outside
25        educational service, for  administering  the  course  and
26        collecting  the  non-refundable  application fee provided
27        for in this subsection.   Any  charges  assessed  by  the
28        Director or the educational service for administering the
29        course   shall   be   paid  directly  by  the  individual
30        applicants.  Each applicant required to take  the  course
31        shall  enclose  with the application a non-refundable $10
32        application fee payable to the Director plus  a  separate
33        course  administration  fee.    An applicant who fails to
34        appear for the course as scheduled, or appears but  fails
 
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 1        to  complete  the  course,  shall  not be entitled to any
 2        refund, and shall be required to submit a new request  to
 3        attend  the  course  together with all the requisite fees
 4        before being rescheduled for another course  at  a  later
 5        date; and
 6             (b)  payment of an annual license fee of $200; and
 7             (c)  procurement  of  the  surety  bond  required in
 8        subsection (4) of this Section.
 9        A surplus line producer so licensed shall keep a separate
10    account of the business transacted thereunder which shall  be
11    open  at  all  times to the inspection of the Director or his
12    representative.
13        The prelicensing course of study requirement in (a) above
14    shall not apply to  insurance  producers  who  were  licensed
15    under  the  Illinois surplus line law on or before January 1,
16    2002 the effective date of this amendatory Act  of  the  92nd
17    General Assembly.
18        (3)  Taxes and reports.
19             (a)  Surplus line tax and penalty for late payment.
20             A surplus line producer shall file with the Director
21        on  or  before  February  1  and  August 1 of each year a
22        report in the form prescribed  by  the  Director  on  all
23        surplus   line   insurance   procured  from  unauthorized
24        insurers during  the  preceding  6  month  period  ending
25        December 31 or June 30 respectively, and on the filing of
26        such  report  shall  pay  to the Director for the use and
27        benefit of the State a sum  equal  to  3%  of  the  gross
28        premiums  less  returned  premiums  upon all surplus line
29        insurance procured or cancelled during  the  preceding  6
30        months.
31             Any  surplus line producer who fails to pay the full
32        amount due under this subsection is liable,  in  addition
33        to  the amount due, for such penalty and interest charges
34        as are provided for under Section 412 of this Code.   The
 
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 1        Director,  through the Attorney General, may institute an
 2        action in  the  name  of  the  People  of  the  State  of
 3        Illinois, in any court of competent jurisdiction, for the
 4        recovery  of  the amount of such taxes and penalties due,
 5        and prosecute the same to final judgment, and  take  such
 6        steps as are necessary to collect the same.
 7             (b)  Fire Marshal Tax.
 8             Each  surplus  line  producer  shall  file  with the
 9        Director on or before March 31 of each year a  report  in
10        the form prescribed by the Director on all fire insurance
11        procured  from unauthorized insurers subject to tax under
12        Section 12 of the Fire Investigation Act and shall pay to
13        the Director the fire marshal tax required thereunder.
14             (c)  Taxes and fees charged to insured.   The  taxes
15        imposed under this subsection and the countersigning fees
16        charged  by  the Surplus Line Association of Illinois may
17        be charged to and collected from surplus line insureds.
18        (4)  Bond.  Each surplus line producer, as a condition to
19    receiving a surplus line producer's  license,  shall  execute
20    and  deliver  to  the Director a surety bond to the People of
21    the State in the penal sum of $20,000, with a surety which is
22    authorized to transact business in  this  State,  conditioned
23    that  the  surplus line producer will pay to the Director the
24    tax, interest and penalties levied under  subsection  (3)  of
25    this Section.
26        (5)  Submission  of documents to Surplus Line Association
27    of Illinois. A  surplus  line  producer  shall  submit  every
28    insurance  contract  issued  under  his or her license to the
29    Surplus  Line  Association  of  Illinois  for  recording  and
30    countersignature.  The submission and countersignature may be
31    effected through electronic means.  The submission shall  set
32    forth:
33             (a)  the name of the insured;
34             (b)  the  description  and  location  of the insured
 
SB318 Enrolled              -6-      LRB093 02126 JLS 02133 b
 1        property or risk;
 2             (c)  the amount insured;
 3             (d)  the gross premiums charged or returned;
 4             (e)  the  name  of  the  unauthorized   insurer   or
 5        domestic  surplus line insurer as defined in Section 445a
 6        from whom coverage has been procured;
 7             (f)  the kind or kinds of insurance procured; and
 8             (g)  amount of premium subject to  tax  required  by
 9        Section 12 of the Fire Investigation Act.
10             Proposals,  endorsements,  and other documents which
11        are incidental to the insurance but which do  not  affect
12        the   premium   charged  are  exempted  from  filing  and
13        countersignature.
14             The submission of insuring contracts to the  Surplus
15        Line  Association of Illinois constitutes a certification
16        by the surplus line producer or by the insurance producer
17        who presented the risk to the surplus line  producer  for
18        placement  as  a  surplus  line  risk that after diligent
19        effort the required insurance could not be procured  from
20        authorized  insurers  which  are  authorized  to transact
21        business in this State other than domestic  surplus  line
22        insurers  as  defined  in  Section  445a  and  that  such
23        procurement  was otherwise in accordance with the surplus
24        line law.
25        (6)  Countersignature required.  It shall be unlawful for
26    an insurance producer to  deliver  any  unauthorized  insurer
27    contract  or  domestic  surplus  line insurer contract unless
28    such insurance contract is countersigned by the Surplus  Line
29    Association of Illinois.
30        (7)  Inspection  of  records.   A  surplus  line producer
31    shall maintain separate records of  the  business  transacted
32    under  his  or  her  license,  including  complete  copies of
33    surplus line insurance contracts maintained on  paper  or  by
34    electronic  means,  which  records shall be open at all times
 
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 1    for inspection by  the  Director  and  by  the  Surplus  Line
 2    Association of Illinois.
 3        (8)  Violations  and penalties.  The Director may suspend
 4    or revoke or refuse to renew a surplus line producer  license
 5    for  any violation of this Code. In addition to or in lieu of
 6    suspension or revocation, the Director may subject a  surplus
 7    line  producer  to  a  civil penalty of up to $1,000 for each
 8    cause  for  suspension  or  revocation.   Such   penalty   is
 9    enforceable  under  subsection  (5)  of  Section 403A of this
10    Code.
11        (9)  Director may declare  insurer  ineligible.   If  the
12    Director  determines  that  the  further  assumption of risks
13    might be hazardous to the policyholders  of  an  unauthorized
14    insurer,  the Director may order the Surplus Line Association
15    of Illinois not to countersign insurance contracts evidencing
16    insurance in such insurer and order surplus line producers to
17    cease procuring insurance from such insurer.
18        (10)  Service  of  process  upon   Director.    Insurance
19    contracts  delivered  under  this  Section  from unauthorized
20    insurers,  other  than  domestic  surplus  line  insurers  as
21    defined  in  Section  445a,   shall   contain   a   provision
22    designating  the  Director  and  his successors in office the
23    true and lawful attorney of the  insurer  upon  whom  may  be
24    served  all  lawful process in any action, suit or proceeding
25    arising out of such insurance. Service of process  made  upon
26    the Director to be valid hereunder must state the name of the
27    insured,  the  name  of the unauthorized insurer and identify
28    the contract of insurance.  The Director  at  his  option  is
29    authorized  to  forward  a copy of the process to the Surplus
30    Line Association of Illinois for delivery to the unauthorized
31    insurer or the  Director  may  deliver  the  process  to  the
32    unauthorized  insurer by other means which he considers to be
33    reasonably prompt and certain.
34        (11)  The Illinois Surplus Line law  does  not  apply  to
 
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 1    insurance of property and operations of railroads or aircraft
 2    engaged  in  interstate  or  foreign  commerce,  insurance of
 3    vessels, crafts or hulls, cargoes,  marine  builder's  risks,
 4    marine  protection  and  indemnity,  or other risks including
 5    strikes and war risks insured under ocean or wet marine forms
 6    of policies.
 7        (12)  Surplus line insurance procured under this Section,
 8    including insurance procured from  a  domestic  surplus  line
 9    insurer,  is  not  subject  to the provisions of the Illinois
10    Insurance Code other than Sections 123,  123.1,  401,  401.1,
11    402,  403,  403A,  408, 412, 445, 445.1, 445.2, 445.3, 445.4,
12    and all of the provisions of Article XXXI to the extent  that
13    the  provisions of Article XXXI are not inconsistent with the
14    terms of this Act.
15    (Source: P.A. 92-386, eff. 1-1-02.)

16        Section 99.  Effective date.  This Act takes effect  upon
17    becoming law.