Illinois General Assembly - Full Text of SB2402
Illinois General Assembly

Previous General Assemblies

Full Text of SB2402  97th General Assembly




State of Illinois
2011 and 2012


Introduced 2/15/2011, by Sen. Kwame Raoul


215 ILCS 5/155.18  from Ch. 73, par. 767.18
215 ILCS 5/155.18a
215 ILCS 5/155.19  from Ch. 73, par. 767.19
215 ILCS 5/1204  from Ch. 73, par. 1065.904

    Amends the Illinois Insurance Code to re-enact certain provisions of Public Act 94-677, which was declared to be unconstitutional. Includes explanatory, validation, and severability provisions. Includes revisory changes. Effective immediately.

LRB097 10185 RPM 50375 b






SB2402LRB097 10185 RPM 50375 b

1    AN ACT concerning insurance.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 1. Findings; purpose; revisory changes;
6    (a) The Illinois Supreme Court, in Lebron v. Gottlieb
7Memorial Hospital, found that the limitations on noneconomic
8damages in medical malpractice actions that were created in
9Public Act 94-677, contained in Section 2-1706.5 of the Code of
10Civil Procedure, violate the separation of powers clause of the
11Illinois Constitution. Because Public Act 94-677 contained an
12inseverability provision, the Court held the Act to be void in
13its entirety. The Court emphasized, however, that "because the
14other provisions contained in Public Act 94-677 are deemed
15invalid solely on inseverability grounds, the legislature
16remains free to reenact any provisions it deems appropriate".
17    (b) It is the purpose of this Act to reenact the provisions
18of Public Act 94-677 that amended the Illinois Insurance Code,
19and to validate certain actions taken in reliance on those
21    (c) Public Act 94-677 amended existing Sections 155.18,
22155.19, and 1204 of the Illinois Insurance Code and added a new
23Section 155.18a. Section 1204 was subsequently amended by
24Public Act 95-331, which was a revisory bill that combined the



SB2402- 2 -LRB097 10185 RPM 50375 b

1changes made by Public Act 94-277 with those made by Public Act
294-677. Sections 155.18, 155.18a, and 155.19 have not been
3amended since the enactment of Public Act 94-677.
4    Executive Order No. 2004-6 changed the Department of
5Insurance into the Division of Insurance within the Department
6of Financial and Professional Regulation. In conformance with
7that executive order, Public Act 94-677 changed certain
8references in the affected Sections from the Director of
9Insurance to the Secretary of Financial and Professional
10Regulation. Public Act 96-811 superseded the executive order
11and re-established the Department of Insurance as a separate
12department, once again under the supervision of the Director of
13Insurance. Therefore, in reenacting these Sections, revisory
14changes have been included that conform the text to Public Act
1596-811 by changing references to the Secretary back to the
16Director. A revisory change is also made in a reference to the
17effective date of Public Act 94-677, which is replaced by the
18actual date.
19    In this Act, the text of the reenacted Sections is set
20forth as it existed at the time of the Supreme Court's
21decision, including the amendment by Public Act 95-331.
22Striking and underscoring is used only to show the revisory
23changes being made to that text.
24    (d) All otherwise lawful actions taken in reasonable
25reliance on or pursuant to the Sections re-enacted by this Act,
26as set forth in Public Act 94-677 or subsequently amended, by



SB2402- 3 -LRB097 10185 RPM 50375 b

1any officer, employee, agency, or unit of State or local
2government or by any other person or entity, are hereby
4    With respect to actions taken in relation to matters
5arising under the Sections re-enacted by this Act, a person is
6rebuttably presumed to have acted in reasonable reliance on and
7pursuant to the provisions of Public Act 94-677, as those
8provisions had been amended at the time the action was taken.
9     With respect to its administration of matters arising
10under the Sections re-enacted by this Act, the Department of
11Insurance shall continue to apply the provisions of Public Act
1294-677, as those provisions had been amended at the relevant
14    Section 5. The Illinois Insurance Code is amended by
15reenacting and changing Sections 155.18, 155.18a, 155.19, and
161204 as follows:
17    (215 ILCS 5/155.18)  (from Ch. 73, par. 767.18)
18    Sec. 155.18. (a) This Section shall apply to insurance on
19risks based upon negligence by a physician, hospital or other
20health care provider, referred to herein as medical liability
21insurance. This Section shall not apply to contracts of
22reinsurance, nor to any farm, county, district or township
23mutual insurance company transacting business under an Act
24entitled "An Act relating to local mutual district, county and



SB2402- 4 -LRB097 10185 RPM 50375 b

1township insurance companies", approved March 13, 1936, as now
2or hereafter amended, nor to any such company operating under a
3special charter.
4    (b) The following standards shall apply to the making and
5use of rates pertaining to all classes of medical liability
7        (1) Rates shall not be excessive or inadequate nor
8    shall they be unfairly discriminatory.
9        (2) Consideration shall be given, to the extent
10    applicable, to past and prospective loss experience within
11    and outside this State, to a reasonable margin for
12    underwriting profit and contingencies, to past and
13    prospective expenses both countrywide and those especially
14    applicable to this State, and to all other factors,
15    including judgment factors, deemed relevant within and
16    outside this State.
17        Consideration may also be given in the making and use
18    of rates to dividends, savings or unabsorbed premium
19    deposits allowed or returned by companies to their
20    policyholders, members or subscribers.
21        (3) The systems of expense provisions included in the
22    rates for use by any company or group of companies may
23    differ from those of other companies or groups of companies
24    to reflect the operating methods of any such company or
25    group with respect to any kind of insurance, or with
26    respect to any subdivision or combination thereof.



SB2402- 5 -LRB097 10185 RPM 50375 b

1        (4) Risks may be grouped by classifications for the
2    establishment of rates and minimum premiums.
3    Classification rates may be modified to produce rates for
4    individual risks in accordance with rating plans which
5    establish standards for measuring variations in hazards or
6    expense provisions, or both. Such standards may measure any
7    difference among risks that have a probable effect upon
8    losses or expenses. Such classifications or modifications
9    of classifications of risks may be established based upon
10    size, expense, management, individual experience, location
11    or dispersion of hazard, or any other reasonable
12    considerations and shall apply to all risks under the same
13    or substantially the same circumstances or conditions. The
14    rate for an established classification should be related
15    generally to the anticipated loss and expense factors of
16    the class.
17    (c) (1) Every company writing medical liability insurance
18shall file with the Director of Insurance Secretary of
19Financial and Professional Regulation the rates and rating
20schedules it uses for medical liability insurance. A rate shall
21go into effect upon filing, except as otherwise provided in
22this Section.
23    (2) If (i) 1% of a company's insureds within a specialty or
2425 of the company's insureds (whichever is greater) request a
25public hearing, (ii) the Director Secretary at his or her
26discretion decides to convene a public hearing, or (iii) the



SB2402- 6 -LRB097 10185 RPM 50375 b

1percentage increase in a company's rate is greater than 6%,
2then the Director Secretary shall convene a public hearing in
3accordance with this paragraph (2). The Director Secretary
4shall notify the public of any application by an insurer for a
5rate increase to which this paragraph (2) applies. A public
6hearing under this paragraph (2) must be concluded within 90
7days after the request, decision, or increase that gave rise to
8the hearing. The Director Secretary may, by order, adjust a
9rate or take any other appropriate action at the conclusion of
10the hearing.
11    (3) A rate filing shall occur upon a company's commencement
12of medical liability insurance business in this State and
13thereafter as often as the rates are changed or amended.
14    (4) For the purposes of this Section, any change in premium
15to the company's insureds as a result of a change in the
16company's base rates or a change in its increased limits
17factors shall constitute a change in rates and shall require a
18filing with the Director Secretary.
19    (5) It shall be certified in such filing by an officer of
20the company and a qualified actuary that the company's rates
21are based on sound actuarial principles and are not
22inconsistent with the company's experience. The Director
23Secretary may request any additional statistical data and other
24pertinent information necessary to determine the manner the
25company used to set the filed rates and the reasonableness of
26those rates. This data and information shall be made available,



SB2402- 7 -LRB097 10185 RPM 50375 b

1on a company-by-company basis, to the general public.
2    (d) If after a public hearing the Director Secretary finds:
3        (1) that any rate, rating plan or rating system
4    violates the provisions of this Section applicable to it,
5    he shall issue an order to the company which has been the
6    subject of the hearing specifying in what respects such
7    violation exists and, in that order, may adjust the rate;
8        (2) that the violation of any of the provisions of this
9    Section by any company which has been the subject of the
10    hearing was wilful or that any company has repeatedly
11    violated any provision of this Section, he may take either
12    or both of the following actions:
13            (A) Suspend or revoke, in whole or in part, the
14        certificate of authority of such company with respect
15        to the class of insurance which has been the subject of
16        the hearing.
17            (B) Impose a penalty of up to $1,000 against the
18        company for each violation. Each day during which a
19        violation occurs constitutes a separate violation.
20    The burden is on the company to justify the rate or
21proposed rate at the public hearing.
22    (e) Every company writing medical liability insurance in
23this State shall offer to each of its medical liability
24insureds the option to make premium payments in quarterly
25installments as prescribed by and filed with the Director
26Secretary. This offer shall be included in the initial offer or



SB2402- 8 -LRB097 10185 RPM 50375 b

1in the first policy renewal occurring after August 25, 2005 the
2effective date of this amendatory Act of the 94th General
3Assembly, but no earlier than January 1, 2006.
4    (f) Every company writing medical liability insurance is
5encouraged, but not required, to offer the opportunity for
6participation in a plan offering deductibles to its medical
7liability insureds. Any plan to offer deductibles shall be
8filed with the Department.
9    (g) Every company writing medical liability insurance is
10encouraged, but not required, to offer their medical liability
11insureds a plan providing premium discounts for participation
12in risk management activities. Any such plan shall be reported
13to the Department.
14    (h) A company writing medical liability insurance in
15Illinois must give 180 days' notice before the company
16discontinues the writing of medical liability insurance in
18(Source: P.A. 94-677, eff. 8-25-05.)
19    (215 ILCS 5/155.18a)
20    Sec. 155.18a. Professional Liability Insurance Resource
21Center. The Director of Insurance Secretary of Financial and
22Professional Regulation shall establish a Professional
23Liability Insurance Resource Center on the Department's
24Internet website containing the name, telephone number, and
25base rates of each licensed company providing medical liability



SB2402- 9 -LRB097 10185 RPM 50375 b

1insurance and the name, address, and telephone number of each
2producer who sells medical liability insurance and the name of
3each licensed company for which the producer sells medical
4liability insurance. Each company and producer shall submit the
5information to the Department on or before September 30 of each
6year in order to be listed on the website. Hyperlinks to
7company websites shall be included, if available. The
8publication of the information on the Department's website
9shall commence on January 1, 2006. The Department shall update
10the information on the Professional Liability Insurance
11Resource Center at least annually.
12(Source: P.A. 94-677, eff. 8-25-05.)
13    (215 ILCS 5/155.19)  (from Ch. 73, par. 767.19)
14    Sec. 155.19. All claims filed after December 31, 1976 with
15any insurer and all suits filed after December 31, 1976 in any
16court in this State, alleging liability on the part of any
17physician, hospital or other health care provider for medically
18related injuries, shall be reported to the Director of
19Insurance Secretary of Financial and Professional Regulation
20in such form and under such terms and conditions as may be
21prescribed by the Director Secretary. In addition, and
22notwithstanding any other provision of law to the contrary, any
23insurer, stop loss insurer, captive insurer, risk retention
24group, county risk retention trust, religious or charitable
25risk pooling trust, surplus line insurer, or other entity



SB2402- 10 -LRB097 10185 RPM 50375 b

1authorized or permitted by law to provide medical liability
2insurance in this State shall report to the Director Secretary,
3in such form and under such terms and conditions as may be
4prescribed by the Director Secretary, all claims filed after
5December 31, 2005 and all suits filed after December 31, 2005
6in any court in this State alleging liability on the part of
7any physician, hospital, or health care provider for medically
8related injuries. Each clerk of the circuit court shall provide
9to the Director Secretary such information as the Director
10Secretary may deem necessary to verify the accuracy and
11completeness of reports made to the Director Secretary under
12this Section. The Director Secretary shall maintain complete
13and accurate records of all claims and suits including their
14nature, amount, disposition (categorized by verdict,
15settlement, dismissal, or otherwise and including disposition
16of any post-trial motions and types of damages awarded, if any,
17including but not limited to economic damages and non-economic
18damages) and other information as he may deem useful or
19desirable in observing and reporting on health care provider
20liability trends in this State. Records received by the
21Director Secretary under this Section shall be available to the
22general public; however, the records made available to the
23general public shall not include the names or addresses of the
24parties to any claims or suits. The Director Secretary shall
25release to appropriate disciplinary and licensing agencies any
26such data or information which may assist such agencies in



SB2402- 11 -LRB097 10185 RPM 50375 b

1improving the quality of health care or which may be useful to
2such agencies for the purpose of professional discipline.
3    With due regard for appropriate maintenance of the
4confidentiality thereof, the Director Secretary shall release,
5on an annual basis, to the Governor, the General Assembly and
6the general public statistical reports based on such data and
8    If the Director Secretary finds that any entity required to
9report information in its possession under this Section has
10violated any provision of this Section by filing late,
11incomplete, or inaccurate reports, the Director Secretary may
12fine the entity up to $1,000 for each offense. Each day during
13which a violation occurs constitutes a separate offense.
14    The Director Secretary may promulgate such rules and
15regulations as may be necessary to carry out the provisions of
16this Section.
17(Source: P.A. 94-677, eff. 8-25-05.)
18    (215 ILCS 5/1204)  (from Ch. 73, par. 1065.904)
19    Sec. 1204. (A) The Director Secretary shall promulgate
20rules and regulations which shall require each insurer licensed
21to write property or casualty insurance in the State and each
22syndicate doing business on the Illinois Insurance Exchange to
23record and report its loss and expense experience and other
24data as may be necessary to assess the relationship of
25insurance premiums and related income as compared to insurance



SB2402- 12 -LRB097 10185 RPM 50375 b

1costs and expenses. The Director Secretary may designate one or
2more rate service organizations or advisory organizations to
3gather and compile such experience and data. The Director
4Secretary shall require each insurer licensed to write property
5or casualty insurance in this State and each syndicate doing
6business on the Illinois Insurance Exchange to submit a report,
7on a form furnished by the Director Secretary, showing its
8direct writings in this State and companywide.
9    (B) Such report required by subsection (A) of this Section
10may include, but not be limited to, the following specific
11types of insurance written by such insurer:
12        (1) Political subdivision liability insurance reported
13    separately in the following categories:
14            (a) municipalities;
15            (b) school districts;
16            (c) other political subdivisions;
17        (2) Public official liability insurance;
18        (3) Dram shop liability insurance;
19        (4) Day care center liability insurance;
20        (5) Labor, fraternal or religious organizations
21    liability insurance;
22        (6) Errors and omissions liability insurance;
23        (7) Officers and directors liability insurance
24    reported separately as follows:
25            (a) non-profit entities;
26            (b) for-profit entities;



SB2402- 13 -LRB097 10185 RPM 50375 b

1        (8) Products liability insurance;
2        (9) Medical malpractice insurance;
3        (10) Attorney malpractice insurance;
4        (11) Architects and engineers malpractice insurance;
5    and
6        (12) Motor vehicle insurance reported separately for
7    commercial and private passenger vehicles as follows:
8            (a) motor vehicle physical damage insurance;
9            (b) motor vehicle liability insurance.
10    (C) Such report may include, but need not be limited to the
11following data, both specific to this State and companywide, in
12the aggregate or by type of insurance for the previous year on
13a calendar year basis:
14        (1) Direct premiums written;
15        (2) Direct premiums earned;
16        (3) Number of policies;
17        (4) Net investment income, using appropriate estimates
18    where necessary;
19        (5) Losses paid;
20        (6) Losses incurred;
21        (7) Loss reserves:
22            (a) Losses unpaid on reported claims;
23            (b) Losses unpaid on incurred but not reported
24        claims;
25        (8) Number of claims:
26            (a) Paid claims;



SB2402- 14 -LRB097 10185 RPM 50375 b

1            (b) Arising claims;
2        (9) Loss adjustment expenses:
3            (a) Allocated loss adjustment expenses;
4            (b) Unallocated loss adjustment expenses;
5        (10) Net underwriting gain or loss;
6        (11) Net operation gain or loss, including net
7    investment income;
8        (12) Any other information requested by the Director
9    Secretary.
10    (C-3) Additional information by an advisory organization
11as defined in Section 463 of this Code.
12        (1) An advisory organization as defined in Section 463
13    of this Code shall report annually the following
14    information in such format as may be prescribed by the
15    Director Secretary:
16            (a) paid and incurred losses for each of the past
17        10 years;
18            (b) medical payments and medical charges, if
19        collected, for each of the past 10 years;
20            (c) the following indemnity payment information:
21        cumulative payments by accident year by calendar year
22        of development. This array will show payments made and
23        frequency of claims in the following categories:
24        medical only, permanent partial disability (PPD),
25        permanent total disability (PTD), temporary total
26        disability (TTD), and fatalities;



SB2402- 15 -LRB097 10185 RPM 50375 b

1            (d) injuries by frequency and severity;
2            (e) by class of employee.
3        (2) The report filed with the Director Secretary of
4    Financial and Professional Regulation under paragraph (1)
5    of this subsection (C-3) shall be made available, on an
6    aggregate basis, to the General Assembly and to the general
7    public. The identity of the petitioner, the respondent, the
8    attorneys, and the insurers shall not be disclosed.
9        (3) Reports required under this subsection (C-3) shall
10    be filed with the Director Secretary no later than
11    September 1 in 2006 and no later than September 1 of each
12    year thereafter.
13    (C-5) Additional information required from medical
14malpractice insurers.
15        (1) In addition to the other requirements of this
16    Section, the following information shall be included in the
17    report required by subsection (A) of this Section in such
18    form and under such terms and conditions as may be
19    prescribed by the Director Secretary:
20            (a) paid and incurred losses by county for each of
21        the past 10 policy years;
22            (b) earned exposures by ISO code, policy type, and
23        policy year by county for each of the past 10 years;
24        and
25            (c) the following actuarial information:
26                (i) Base class and territory equivalent



SB2402- 16 -LRB097 10185 RPM 50375 b

1            exposures by report year by relative accident
2            year.
3                (ii) Cumulative loss array by accident year by
4            calendar year of development. This array will show
5            frequency of claims in the following categories:
6            open, closed with indemnity (CWI), closed with
7            expense (CWE), and closed no pay (CNP); paid
8            severity in the following categories: indemnity
9            and allocated loss adjustment expenses (ALAE) on
10            closed claims; and indemnity and expense reserves
11            on pending claims.
12                (iii) Cumulative loss array by report year by
13            calendar year of development. This array will show
14            frequency of claims in the following categories:
15            open, closed with indemnity (CWI), closed with
16            expense (CWE), and closed no pay (CNP); paid
17            severity in the following categories: indemnity
18            and allocated loss adjustment expenses (ALAE) on
19            closed claims; and indemnity and expense reserves
20            on pending claims.
21                (iv) Maturity year and tail factors.
22                (v) Any expense, contingency ddr (death,
23            disability, and retirement), commission, tax,
24            and/or off-balance factors.
25        (2) The following information must also be annually
26    provided to the Department:



SB2402- 17 -LRB097 10185 RPM 50375 b

1            (a) copies of the company's reserve and surplus
2        studies; and
3            (b) consulting actuarial report and data
4        supporting the company's rate filing.
5        (3) All information collected by the Director
6    Secretary under paragraphs (1) and (2) shall be made
7    available, on a company-by-company basis, to the General
8    Assembly and the general public. This provision shall
9    supersede any other provision of State law that may
10    otherwise protect such information from public disclosure
11    as confidential.
12    (D) In addition to the information which may be requested
13under subsection (C), the Director Secretary may also request
14on a companywide, aggregate basis, Federal Income Tax
15recoverable, net realized capital gain or loss, net unrealized
16capital gain or loss, and all other expenses not requested in
17subsection (C) above.
18    (E) Violations - Suspensions - Revocations.
19        (1) Any company or person subject to this Article, who
20    willfully or repeatedly fails to observe or who otherwise
21    violates any of the provisions of this Article or any rule
22    or regulation promulgated by the Director Secretary under
23    authority of this Article or any final order of the
24    Director Secretary entered under the authority of this
25    Article shall by civil penalty forfeit to the State of
26    Illinois a sum not to exceed $2,000. Each day during which



SB2402- 18 -LRB097 10185 RPM 50375 b

1    a violation occurs constitutes a separate offense.
2        (2) No forfeiture liability under paragraph (1) of this
3    subsection may attach unless a written notice of apparent
4    liability has been issued by the Director Secretary and
5    received by the respondent, or the Director Secretary sends
6    written notice of apparent liability by registered or
7    certified mail, return receipt requested, to the last known
8    address of the respondent. Any respondent so notified must
9    be granted an opportunity to request a hearing within 10
10    days from receipt of notice, or to show in writing, why he
11    should not be held liable. A notice issued under this
12    Section must set forth the date, facts and nature of the
13    act or omission with which the respondent is charged and
14    must specifically identify the particular provision of
15    this Article, rule, regulation or order of which a
16    violation is charged.
17        (3) No forfeiture liability under paragraph (1) of this
18    subsection may attach for any violation occurring more than
19    2 years prior to the date of issuance of the notice of
20    apparent liability and in no event may the total civil
21    penalty forfeiture imposed for the acts or omissions set
22    forth in any one notice of apparent liability exceed
23    $100,000.
24        (4) All administrative hearings conducted pursuant to
25    this Article are subject to 50 Ill. Adm. Code 2402 and all
26    administrative hearings are subject to the Administrative



SB2402- 19 -LRB097 10185 RPM 50375 b

1    Review Law.
2        (5) The civil penalty forfeitures provided for in this
3    Section are payable to the General Revenue Fund of the
4    State of Illinois, and may be recovered in a civil suit in
5    the name of the State of Illinois brought in the Circuit
6    Court in Sangamon County or in the Circuit Court of the
7    county where the respondent is domiciled or has its
8    principal operating office.
9        (6) In any case where the Director Secretary issues a
10    notice of apparent liability looking toward the imposition
11    of a civil penalty forfeiture under this Section that fact
12    may not be used in any other proceeding before the Director
13    Secretary to the prejudice of the respondent to whom the
14    notice was issued, unless (a) the civil penalty forfeiture
15    has been paid, or (b) a court has ordered payment of the
16    civil penalty forfeiture and that order has become final.
17        (7) When any person or company has a license or
18    certificate of authority under this Code and knowingly
19    fails or refuses to comply with a lawful order of the
20    Director Secretary requiring compliance with this Article,
21    entered after notice and hearing, within the period of time
22    specified in the order, the Director Secretary may, in
23    addition to any other penalty or authority provided, revoke
24    or refuse to renew the license or certificate of authority
25    of such person or company, or may suspend the license or
26    certificate of authority of such person or company until



SB2402- 20 -LRB097 10185 RPM 50375 b

1    compliance with such order has been obtained.
2        (8) When any person or company has a license or
3    certificate of authority under this Code and knowingly
4    fails or refuses to comply with any provisions of this
5    Article, the Director Secretary may, after notice and
6    hearing, in addition to any other penalty provided, revoke
7    or refuse to renew the license or certificate of authority
8    of such person or company, or may suspend the license or
9    certificate of authority of such person or company, until
10    compliance with such provision of this Article has been
11    obtained.
12        (9) No suspension or revocation under this Section may
13    become effective until 5 days from the date that the notice
14    of suspension or revocation has been personally delivered
15    or delivered by registered or certified mail to the company
16    or person. A suspension or revocation under this Section is
17    stayed upon the filing, by the company or person, of a
18    petition for judicial review under the Administrative
19    Review Law.
20(Source: P.A. 94-277, eff. 7-20-05; 94-677, eff. 8-25-05;
2195-331, eff. 8-21-07.)
22    Section 97. Severability. The provisions of this Act are
23severable under Section 1.31 of the Statute on Statutes.
24    Section 99. Effective date. This Act takes effect upon
25becoming law.