HB0316 Enrolled LRB094 06684 LJB 36778 b

1     AN ACT in relation to 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 Sections 205.1 and 500-77 as follows:
 
6     (215 ILCS 5/205.1)
7     Sec. 205.1. Policyholder collateral, deductible
8 reimbursements, and other policyholder obligations.
9     (a) Any collateral held by, for the benefit of, or assigned
10 to the insurer or the Director as rehabilitator or liquidator
11 to secure the obligations of a policyholder under a deductible
12 agreement shall not be considered an asset of the estate and
13 shall be maintained and administered by the Director as
14 rehabilitator or liquidator as provided in this Section and
15 notwithstanding any other provision of law or contract to the
16 contrary.
17     (b) If the collateral is being held by, for the benefit of,
18 or assigned to the insurer or subsequently the Director as
19 rehabilitator or liquidator to secure obligations under a
20 deductible agreement with a policyholder, subject to the
21 provisions of this Section, the collateral shall be used to
22 secure the policyholder's obligation to fund or reimburse
23 claims payment within the agreed deductible amount.
24     (c) If a claim that is subject to a deductible agreement
25 and secured by collateral is not covered by any guaranty
26 association or the Illinois Insurance Guaranty Fund and the
27 policyholder is unwilling or unable to take over the handling
28 and payment of the non-covered claims, the Director as
29 rehabilitator or liquidator shall adjust and pay the
30 non-covered claims utilizing the collateral but only to the
31 extent the available collateral after allocation under
32 subsection (d), is sufficient to pay all outstanding and

 

 

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1 anticipated claims. If the collateral is exhausted and the
2 insured is not able to provide funds to pay the remaining
3 claims within the deductible after all reasonable means of
4 collection against the insured have been exhausted, the
5 Director's obligation to pay such claims from the collateral as
6 the rehabilitator or liquidator terminates, and the remaining
7 claims shall be claims against the insurer's estate subject to
8 complying with other provisions in this Article for the filing
9 and allowance of such claims. When the liquidator determines
10 that the collateral is insufficient to pay all additional and
11 anticipated claims, the liquidator may file a plan for
12 equitably allocating the collateral among claimants, subject
13 to court approval.
14     (d) To the extent that the Director as rehabilitator or
15 liquidator is holding collateral provided by a policyholder
16 that was obtained to secure a deductible agreement and to
17 secure other obligations of the policyholder to pay the
18 insurer, directly or indirectly, amounts that become assets of
19 the estate, such as reinsurance obligations under a captive
20 reinsurance program or adjustable premium obligations under a
21 retrospectively rated insurance policy where the premium due is
22 subject to adjustment based upon actual loss experience, the
23 Director as rehabilitator or liquidator shall equitably
24 allocate the collateral among such obligations and administer
25 the collateral allocated to the deductible agreement pursuant
26 to this Section. With respect to the collateral allocated to
27 obligations under the deductible agreement, if the collateral
28 secured reimbursement obligations under more than one line of
29 insurance, then the collateral shall be equitably allocated
30 among the various lines based upon the estimated ultimate
31 exposure within the deductible amount for each line. The
32 Director as rehabilitator or liquidator shall inform the
33 guaranty association or the Illinois Insurance Guaranty Fund
34 that is or may be obligated for claims against the insurer of
35 the method and details of all the foregoing allocations.
36     (e) Regardless of whether there is collateral, if the

 

 

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1 insurer has contractually agreed to allow the policyholder to
2 fund its own claims within the deductible amount pursuant to a
3 deductible agreement, either through the policyholder's own
4 administration of its claims or through the policyholder
5 providing funds directly to a third party administrator who
6 administers the claims, the Director as rehabilitator or
7 liquidator shall allow such funding arrangement to continue
8 and, where applicable, will enforce such arrangements to the
9 fullest extent possible. The funding of such claims by the
10 policyholder within the deductible amount will act as a bar to
11 any claim for such amount in the liquidation proceeding,
12 including but not limited to any such claim by the policyholder
13 or the third party claimant. The funding will extinguish both
14 the obligation, if any, of any guaranty association or the
15 Illinois Insurance Guaranty Fund to pay such claims within the
16 deductible amount, as well as the obligations, if any, of the
17 policyholder or third party administrator to reimburse the
18 guaranty association or the Illinois Insurance Guaranty Fund.
19 No charge of any kind shall be made by the Director as
20 rehabilitator or liquidator against any guaranty association
21 or the Illinois Insurance Guaranty Fund on the basis of the
22 policyholder funding of claims payment made pursuant to the
23 mechanism set forth in this subsection.
24     (f) If the insurer has not contractually agreed to allow
25 the policyholder to fund its own claims within the deductible
26 amount, to the extent a guaranty association or the Illinois
27 Insurance Guaranty Fund is required by applicable state law to
28 pay any claims for which the insurer would be or would have
29 been entitled to reimbursement from the policyholder under the
30 terms of the deductible agreement and to the extent the claims
31 have not been paid by a policyholder or third party, the
32 Director as rehabilitator or liquidator shall promptly bill the
33 policyholder for such reimbursement and the policyholder will
34 be obligated to pay such amount to the Director as
35 rehabilitator or liquidator for the benefit of the guaranty
36 association or the Illinois Insurance Guaranty Fund that paid

 

 

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1 such claims. Neither the insolvency of the insurer, nor its
2 inability to perform any of its obligations under the
3 deductible agreement, shall be a defense to the policyholder's
4 reimbursement obligation under the deductible agreement. When
5 the policyholder reimbursements are collected, the Director as
6 rehabilitator or liquidator shall promptly reimburse the
7 guaranty association or the Illinois Insurance Guaranty Fund
8 for claims paid that were subject to the deductible. If the
9 policyholder fails to pay the amounts due within 60 days after
10 such bill for such reimbursements is due, the Director as
11 rehabilitator or liquidator shall use the collateral to the
12 extent necessary to reimburse the guaranty association or the
13 Illinois Insurance Guaranty Fund, and, at the same time, may
14 pursue other collections efforts against the policyholder. If
15 more than one guaranty association or the Illinois Insurance
16 Guaranty Fund has a claim against the same collateral and the
17 available collateral (after allocation under subsection (d)),
18 along with billing and collection efforts, are together
19 insufficient to pay each guaranty association or the Illinois
20 Insurance Guaranty Fund in full, then the Director as
21 rehabilitator or liquidator will pro-rate payments to each
22 guaranty association or the Illinois Insurance Guaranty Fund
23 based upon the relationship the amount of claims each guaranty
24 association or the Illinois Insurance Guaranty Fund has paid
25 bears to the total of all claims paid by such guaranty
26 association or the Illinois Insurance Guaranty Fund.
27     (g) Director's duties and powers as rehabilitator or
28 liquidator.
29         (1) The Director as rehabilitator or liquidator is
30     entitled to deduct from reimbursements owed to guaranty
31     associations or the Illinois Insurance Guaranty Fund or
32     collateral to be returned to a policyholder reasonable
33     actual expenses incurred in fulfilling the
34     responsibilities under this provision, not to exceed 3% of
35     the collateral or the total deductible reimbursements
36     actually collected by the Director as rehabilitator or

 

 

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1     liquidator.
2         (2) With respect to claim payments made by any guaranty
3     association or the Illinois Insurance Guaranty Fund, the
4     Director as rehabilitator or liquidator shall promptly
5     provide the court, with a copy to of the guaranty
6     associations or the Illinois Insurance Guaranty Fund, with
7     a complete report of the Director's deductible billing and
8     collection activities as rehabilitator or liquidator
9     including copies of the policyholder billings when
10     rendered, the reimbursements collected, the available
11     amounts and use of collateral for each policyholder, and
12     any pro-ration of payments when it occurs. If the Director
13     as rehabilitator or liquidator fails to make a good faith
14     effort within 120 days of receipt of claims payment reports
15     to collect reimbursements due from a policyholder under a
16     deductible agreement based on claim payments made by one or
17     more guaranty associations or the Illinois Insurance
18     Guaranty Fund, then after such 120 day period such guaranty
19     associations or the Illinois Insurance Guaranty Fund may
20     pursue collection from the policyholders directly on the
21     same basis as the Director as rehabilitator or liquidator,
22     and with the same rights and remedies, and will report any
23     amounts so collected from each policyholder to the Director
24     as rehabilitator or , liquidator, or conservator. To the
25     extent that guaranty associations or the Illinois
26     Insurance Guaranty Fund pay claims within the deductible
27     amount, but are not reimbursed by either the Director as
28     rehabilitator, liquidator, or conservator under this
29     Section or by policyholder payments from the guaranty
30     associations' or the Illinois Insurance Guaranty Fund's
31     own collection efforts, the guaranty association or the
32     Illinois Insurance Guaranty Fund shall have a claim in the
33     insolvent insurer's estate for such un-reimbursed claims
34     payments.
35         (3) The Director as rehabilitator or liquidator shall
36     periodically adjust the collateral being held as the claims

 

 

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1     subject to the deductible agreement are run-off, provided
2     that adequate collateral is maintained to secure the entire
3     estimated ultimate obligation of the policyholder plus a
4     reasonable safety factor, and the Director as
5     rehabilitator or liquidator shall not be required to adjust
6     the collateral more than once a year. The guaranty
7     associations or the Illinois Insurance Guaranty Fund shall
8     be informed of all such collateral reviews, including but
9     not limited to the basis for the adjustment. Once all
10     claims covered by the collateral have been paid and the
11     Director as rehabilitator or liquidator is satisfied that
12     no new claims can be presented, the Director as
13     rehabilitator or liquidator will release any remaining
14     collateral to the policyholder.
15     (h) The Illinois Circuit Court having jurisdiction over the
16 liquidation proceedings shall have jurisdiction to resolve
17 disputes arising under this provision.
18     (i) Nothing in this Section is intended to limit or
19 adversely affect any right the guaranty associations or the
20 Illinois Insurance Guaranty Fund may have under applicable
21 state law to obtain reimbursement from certain classes of
22 policyholders for claims payments made by such guaranty
23 associations or the Illinois Insurance Guaranty Fund under
24 policies of the insolvent insurer, or for related expenses the
25 guaranty associations or the Illinois Insurance Guaranty Fund
26 incur.
27     (j) This Section applies to all receivership proceedings
28 under Article XIII that either (1) commence on or after the
29 effective date of this amendatory Act of the 93rd General
30 Assembly or (2) are on file or open on the effective date of
31 this amendatory Act of the 93rd General Assembly and in which
32 an Order of Liquidation is entered on or after May 1, 2004.
33 However, this Section applies to rehabilitation proceedings
34 only to the extent that guaranty associations are required to
35 pay claims and does not apply to receivership proceedings in
36 which only an order of conservation has been entered.

 

 

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1     (k) For purposes of this Section, a "deductible agreement"
2 is any combination of one or more policies, endorsements,
3 contracts, or security agreements, which provide for the
4 policyholder to bear the risk of loss within a specified amount
5 per claim or occurrence covered under a policy of insurance,
6 and may be subject to the aggregate limit of policyholder
7 reimbursement obligations. This Section shall not apply to
8 first party claims, or to claims funded by a guaranty
9 association or the Illinois Insurance Guaranty Fund in excess
10 of the deductible unless subsection (e) above applies. The term
11 "non-covered claim" shall mean a claim that is subject to a
12 deductible agreement and is not covered by a guaranty
13 association or the Illinois Insurance Guaranty Fund.
14 (Source: P.A. 93-1028, eff. 8-25-04.)
 
15     (215 ILCS 5/500-77)
16     Sec. 500-77. Policyholder information and exclusive
17 ownership of expirations.
18     (a) As used in this Section, "expirations" means all
19 information relative to an insurance policy including, but not
20 limited to, the name and address of the insured, the location
21 and description of the property insured, the value of the
22 insurance policy, the inception date, the renewal date, and the
23 expiration date of the insurance policy, the premiums, the
24 limits and a description of the terms and coverage of the
25 insurance policy, and any other personal and privileged
26 information, as defined by Section 1003 of this Code, compiled
27 by a business entity registered firm or furnished by the
28 insured to the insurer or any agent, contractor, or
29 representative of the insurer.
30     For purposes of this Section only, a business entity
31 registered firm also includes a sole proprietorship that
32 transacts the business of insurance as an insurance agency.
33     (b) All "expirations" as defined in subsection (a) of this
34 Section shall be mutually and exclusively owned by the insured
35 and the business entity registered firm. The limitations on the

 

 

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1 use of expirations as provided in subsections (c) and (d) of
2 this Section shall be for mutual benefit of the insured and the
3 business entity registered firm.
4     (c) Except as otherwise provided in this Section, for
5 purposes of soliciting, selling, or negotiating the renewal or
6 sale of insurance coverage, insurance products, or insurance
7 services or for any other marketing purpose, a business entity
8 registered firm shall own and have the exclusive use of
9 expirations, records, and other written or electronically
10 stored information directly related to an insurance
11 application submitted by, or an insurance policy written
12 through, the business entity registered firm. No insurance
13 company, managing general agent, surplus lines insurance
14 broker, wholesale broker, group self-insurance fund,
15 third-party administrator, or any other entity, other than a
16 financial institution as defined in Section 1402 of this Code,
17 shall use such expirations, records, or other written or
18 electronically stored information to solicit, sell, or
19 negotiate the renewal or sale of insurance coverage, insurance
20 products, or insurance services to the insured or for any other
21 marketing purposes, either directly or by providing such
22 information to others, without, separate from the general
23 agency contract, the written consent of the business entity
24 registered firm. However, such expirations, records, or other
25 written or electronically stored information may be used for
26 any purpose necessary for placing such business through the
27 insurance producer including reviewing an application and
28 issuing or renewing a policy and for loss control services.
29     (d) With respect to a business entity registered firm, this
30 Section shall not apply:
31         (1) when the insured requests either orally or in
32     writing that another business entity registered firm
33     obtain quotes for insurance from another insurance company
34     or when the insured requests in writing individually or
35     through another business entity registered firm, that the
36     insurance company renew the policy;

 

 

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1         (2) to policies in the Illinois Fair Plan, the Illinois
2     Automobile Insurance Plan, or the Illinois Assigned Risk
3     Plan for coverage under the Workers' Compensation Act and
4     the Workers' Occupational Diseases Act;
5         (3) when the insurance producer is employed by or has
6     agreed to act exclusively or primarily for one company or
7     group of affiliated insurance companies or to a producer
8     who submits to the company or group of affiliated companies
9     that are organized to transact business in this State as a
10     reciprocal company, as defined in Article IV of this Code,
11     every request or application for insurance for the classes
12     and lines underwritten by the company or group of
13     affiliated companies;
14         (4) to policies providing life and accident and health
15     insurance;
16         (5) when the business entity registered firm is in
17     default for nonpayment of premiums under the contract with
18     the insurer or is guilty of conversion of the insured's or
19     insurer's premiums or its license is revoked by or
20     surrendered to the Department;
21         (6) to any insurance company's obligations under
22     Sections 143.17 and 143.17a of this Code; or
23         (7) to any insurer that, separate from a producer or
24     business entity registered firm, creates, develops,
25     compiles, and assembles its own, identifiable expirations
26     as defined in subsection (a).
27     For purposes of this Section, an insurance producer shall
28 be deemed to have agreed to act primarily for one company or a
29 group of affiliated insurance companies if the producer (i)
30 receives 75% or more of his or her insurance related
31 commissions from one company or a group of affiliated companies
32 or (ii) places 75% or more of his or her policies with one
33 company or a group of affiliated companies.
34     Nothing in this Section prohibits an insurance company,
35 with respect to any items herein, from conveying to the insured
36 or the business entity registered firm any additional benefits

 

 

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1 or ownership rights including, but not limited to, the
2 ownership of expirations on any policy issued or the imposition
3 of further restrictions on the insurance company's use of the
4 insured's personal information.
5     (e) Nothing in this Section prevents a financial
6 institution, as defined in Section 1402 of this Code, from
7 obtaining from the insured, the insurer, or the business entity
8 registered firm the expiration dates of an insurance policy
9 placed on collateral or otherwise used as security in
10 connection with a loan made or serviced by the financial
11 institution when the financial institution requires the
12 expiration dates for evidence of insurance.
13     (f) For purposes of this Section, "financial institution"
14 does not include an insurance company, business entity
15 registered firm, managing general agent, surplus lines broker,
16 wholesale broker, group self-funded insurance fund, or
17 third-party administrator.
18     (g) The Director may adopt rules in accordance with Section
19 401 of this Code for the enforcement of this Section.
20     (h) This Section applies to the expirations relative to all
21 policies of insurance bound, applied for, sold, renewed, or
22 otherwise taking effect on or after June 1, 2001 the effective
23 date of this amendatory Act of the 92nd General Assembly.
24 (Source: P.A. 92-5, eff. 6-1-01; 92-651, eff. 7-11-02.)
 
25     Section 99. Effective date. This Act takes effect upon
26 becoming law.