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Full Text of HB6302  98th General Assembly

HB6302 98TH GENERAL ASSEMBLY

  
  

 


 
98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB6302

 

Introduced , by Rep. Jim Durkin, John D. Anthony, Patricia R. Bellock, Dan Brady, Rich Brauer, et al.

 

SYNOPSIS AS INTRODUCED:
 
215 ILCS 5/121-2.08  from Ch. 73, par. 733-2.08
215 ILCS 5/412  from Ch. 73, par. 1024
215 ILCS 5/445  from Ch. 73, par. 1057

    Amends the Illinois Insurance Code. In the provision concerning transactions in the State involving industrial insureds' contracts of insurance, restores the language that was deleted by Public Act 98-978 and deletes the language that was added by Public Act 98-978. Deletes the references to the provision concerning transactions in the State involving industrial insureds' contracts of insurance that were added by Public Act 98-978. Deletes language in the definition of "home state" that was added by Public Act 98-978. Contains a nonacceleration provision. Effective January 1, 2015.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Insurance Code is amended by
5changing Sections 121-2.08, 412, and 445 as follows:
 
6    (215 ILCS 5/121-2.08)  (from Ch. 73, par. 733-2.08)
7    (Text of Section before amendment by P.A. 98-978)
8    Sec. 121-2.08. Transactions in this State involving
9contracts of insurance issued to one or more industrial
10insureds. For purposes of this Section "industrial insured" is
11an insured:
12    (a) which procures the insurance of any risk or risks other
13than life and annuity contracts by use of the services of a
14full time employee acting as an insurance manager or buyer or
15the services of a regularly and continuously retained qualified
16insurance consultant;
17    (b) whose aggregate annual premiums for insurance on all
18risks, except for life and accident and health insurance, total
19at least $100,000; and
20    (c) which either (i) has at least 25 full time employees,
21(ii) has gross assets in excess of $3,000,000, or (iii) has
22annual gross revenues in excess of $5,000,000.
23(Source: P.A. 90-794, eff. 8-14-98.)
 

 

 

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1    (Text of Section after amendment by P.A. 98-978)
2    Sec. 121-2.08. Transactions in this State involving
3contracts of insurance issued to one or more independently
4procured directly from an unauthorized insurer by industrial
5insureds. For the purposes of this Section, "industrial
6insured" is an insured:
7    (a) which procures the insurance of any risk or risks other
8than life and annuity contracts by use of the services of a
9full-time employee acting as an insurance manager or buyer or
10the services of a regularly and continuously retained qualified
11insurance consultant;
12    (b) whose aggregate annual premiums for insurance on all
13risks, except for life and accident and health insurance, total
14at least $100,000; and
15    (c) which either (i) has at least 25 full-time employees,
16(ii) has gross assets in excess of $3,000,000, or (iii) has
17annual gross revenues in excess of $5,000,000.
18    (a) As used in this Section:
19    "Exempt commercial purchaser" means exempt commercial
20purchaser as the term is defined in subsection (1) of Section
21445 of this Code.
22    "Home state" means home state as the term is defined in
23subsection (1) of Section 445 of this Code.
24    "Industrial insured" means an insured:
25        (i) that procures the insurance of any risk or risks of

 

 

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1    the kinds specified in Classes 2 and 3 of Section 4 of this
2    Code by use of the services of a full-time employee who is
3    a qualified risk manager or the services of a regularly and
4    continuously retained consultant who is a qualified risk
5    manager;
6        (ii) that procures the insurance directly from an
7    unauthorized insurer without the services of an
8    intermediary insurance producer; and
9        (iii) that is an exempt commercial purchaser whose home
10    state is Illinois.
11    "Insurance producer" means insurance producer as the term
12is defined in Section 500-10 of this Code.
13    "Qualified risk manager" means qualified risk manager as
14the term is defined in subsection (1) of Section 445 of this
15Code.
16    "Unauthorized insurer" means unauthorized insurer as the
17term is defined in subsection (1) of Section 445 of this Code.
18    (b) For contracts of insurance effective January 1, 2015 or
19later, within 90 days after the effective date of each contract
20of insurance issued under this Section, the insured shall file
21a report with the Director by submitting the report to the
22Surplus Line Association of Illinois in writing or in a
23computer readable format and provide information as designated
24by the Surplus Line Association of Illinois. The information in
25the report shall be substantially similar to that required for
26surplus line submissions as described in subsection (5) of

 

 

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1Section 445 of this Code. Where applicable, the report shall
2satisfy, with respect to the subject insurance, the reporting
3requirement of Section 12 of the Fire Investigation Act.
4    (c) For contracts of insurance effective January 1, 2015 or
5later, within 30 days after filing the report, the insured
6shall pay to the Director for the use and benefit of the State
7a sum equal to the gross premium of the contract of insurance
8multiplied by the surplus line tax rate, as described in
9paragraph (3) of subsection (a) of Section 445 of this Code,
10and shall pay the fire marshal tax that would otherwise be due
11annually in March for insurance subject to tax under Section 12
12of the Fire Investigation Act. For contracts of insurance
13effective January 1, 2015 or later, within 30 days after filing
14the report, the insured shall pay to the Surplus Line
15Association of Illinois a countersigning fee that shall be
16assessed at the same rate charged to members pursuant to
17subsection (4) of Section 445.1 of this Code.
18    (d) For contracts of insurance effective January 1, 2015 or
19later, the insured shall withhold the amount of the taxes and
20countersignature fee from the amount of premium charged by and
21otherwise payable to the insurer for the insurance. If the
22insured fails to withhold the tax and countersignature fee from
23the premium, then the insured shall be liable for the amounts
24thereof and shall pay the amounts as prescribed in subsection
25(c) of this Section.
26(Source: P.A. 98-978, eff. 1-1-15.)
 

 

 

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1    (215 ILCS 5/412)  (from Ch. 73, par. 1024)
2    (Text of Section before amendment by P.A. 98-978)
3    Sec. 412. Refunds; penalties; collection.
4    (1)(a) Whenever it appears to the satisfaction of the
5Director that because of some mistake of fact, error in
6calculation, or erroneous interpretation of a statute of this
7or any other state, any authorized company has paid to him,
8pursuant to any provision of law, taxes, fees, or other charges
9in excess of the amount legally chargeable against it, during
10the 6 year period immediately preceding the discovery of such
11overpayment, he shall have power to refund to such company the
12amount of the excess or excesses by applying the amount or
13amounts thereof toward the payment of taxes, fees, or other
14charges already due, or which may thereafter become due from
15that company until such excess or excesses have been fully
16refunded, or upon a written request from the authorized
17company, the Director shall provide a cash refund within 120
18days after receipt of the written request if all necessary
19information has been filed with the Department in order for it
20to perform an audit of the annual return for the year in which
21the overpayment occurred or within 120 days after the date the
22Department receives all the necessary information to perform
23such audit. The Director shall not provide a cash refund if
24there are insufficient funds in the Insurance Premium Tax
25Refund Fund to provide a cash refund, if the amount of the

 

 

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1overpayment is less than $100, or if the amount of the
2overpayment can be fully offset against the taxpayer's
3estimated liability for the year following the year of the cash
4refund request. Any cash refund shall be paid from the
5Insurance Premium Tax Refund Fund, a special fund hereby
6created in the State treasury.
7    (b) Beginning January 1, 2000 and thereafter, the
8Department shall deposit a percentage of the amounts collected
9under Sections 409, 444, and 444.1 of this Code into the
10Insurance Premium Tax Refund Fund. The percentage deposited
11into the Insurance Premium Tax Refund Fund shall be the annual
12percentage. The annual percentage shall be calculated as a
13fraction, the numerator of which shall be the amount of cash
14refunds approved by the Director for payment and paid during
15the preceding calendar year as a result of overpayment of tax
16liability under Sections 409, 444, and 444.1 of this Code and
17the denominator of which shall be the amounts collected
18pursuant to Sections 409, 444, and 444.1 of this Code during
19the preceding calendar year. However, if there were no cash
20refunds paid in a preceding calendar year, the Department shall
21deposit 5% of the amount collected in that preceding calendar
22year pursuant to Sections 409, 444, and 444.1 of this Code into
23the Insurance Premium Tax Refund Fund instead of an amount
24calculated by using the annual percentage.
25    (c) Beginning July 1, 1999, moneys in the Insurance Premium
26Tax Refund Fund shall be expended exclusively for the purpose

 

 

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1of paying cash refunds resulting from overpayment of tax
2liability under Sections 409, 444, and 444.1 of this Code as
3determined by the Director pursuant to subsection 1(a) of this
4Section. Cash refunds made in accordance with this Section may
5be made from the Insurance Premium Tax Refund Fund only to the
6extent that amounts have been deposited and retained in the
7Insurance Premium Tax Refund Fund.
8    (d) This Section shall constitute an irrevocable and
9continuing appropriation from the Insurance Premium Tax Refund
10Fund for the purpose of paying cash refunds pursuant to the
11provisions of this Section.
12    (2) When any insurance company or any surplus line producer
13fails to file any tax return required under Sections 408.1,
14409, 444, 444.1 and 445 of this Code or Section 12 of the Fire
15Investigation Act on the date prescribed, including any
16extensions, there shall be added as a penalty $400 or 10% of
17the amount of such tax, whichever is greater, for each month or
18part of a month of failure to file, the entire penalty not to
19exceed $2,000 or 50% of the tax due, whichever is greater.
20    (3)(a) When any insurance company or any surplus line
21producer fails to pay the full amount due under the provisions
22of this Section, Sections 408.1, 409, 444, 444.1 or 445 of this
23Code, or Section 12 of the Fire Investigation Act, there shall
24be added to the amount due as a penalty an amount equal to 10%
25of the deficiency.
26    (b) If such failure to pay is determined by the Director to

 

 

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1be wilful, after a hearing under Sections 402 and 403, there
2shall be added to the tax as a penalty an amount equal to the
3greater of 50% of the deficiency or 10% of the amount due and
4unpaid for each month or part of a month that the deficiency
5remains unpaid commencing with the date that the amount becomes
6due. Such amount shall be in lieu of any determined under
7paragraph (a).
8    (4) Any insurance company or any surplus line producer
9which fails to pay the full amount due under this Section or
10Sections 408.1, 409, 444, 444.1 or 445 of this Code, or Section
1112 of the Fire Investigation Act is liable, in addition to the
12tax and any penalties, for interest on such deficiency at the
13rate of 12% per annum, or at such higher adjusted rates as are
14or may be established under subsection (b) of Section 6621 of
15the Internal Revenue Code, from the date that payment of any
16such tax was due, determined without regard to any extensions,
17to the date of payment of such amount.
18    (5) The Director, through the Attorney General, may
19institute an action in the name of the People of the State of
20Illinois, in any court of competent jurisdiction, for the
21recovery of the amount of such taxes, fees, and penalties due,
22and prosecute the same to final judgment, and take such steps
23as are necessary to collect the same.
24    (6) In the event that the certificate of authority of a
25foreign or alien company is revoked for any cause or the
26company withdraws from this State prior to the renewal date of

 

 

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1the certificate of authority as provided in Section 114, the
2company may recover the amount of any such tax paid in advance.
3Except as provided in this subsection, no revocation or
4withdrawal excuses payment of or constitutes grounds for the
5recovery of any taxes or penalties imposed by this Code.
6    (7) When an insurance company or domestic affiliated group
7fails to pay the full amount of any fee of $200 or more due
8under Section 408 of this Code, there shall be added to the
9amount due as a penalty the greater of $100 or an amount equal
10to 10% of the deficiency for each month or part of a month that
11the deficiency remains unpaid.
12    (8) The Department shall have a lien for the taxes, fees,
13charges, fines, penalties, interest, other charges, or any
14portion thereof, imposed or assessed pursuant to this Code,
15upon all the real and personal property of any company or
16person to whom the assessment or final order has been issued or
17whenever a tax return is filed without payment of the tax or
18penalty shown therein to be due, including all such property of
19the company or person acquired after receipt of the assessment,
20issuance of the order, or filing of the return. The company or
21person is liable for the filing fee incurred by the Department
22for filing the lien and the filing fee incurred by the
23Department to file the release of that lien. The filing fees
24shall be paid to the Department in addition to payment of the
25tax, fee, charge, fine, penalty, interest, other charges, or
26any portion thereof, included in the amount of the lien.

 

 

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1However, where the lien arises because of the issuance of a
2final order of the Director or tax assessment by the
3Department, the lien shall not attach and the notice referred
4to in this Section shall not be filed until all administrative
5proceedings or proceedings in court for review of the final
6order or assessment have terminated or the time for the taking
7thereof has expired without such proceedings being instituted.
8    Upon the granting of Department review after a lien has
9attached, the lien shall remain in full force except to the
10extent to which the final assessment may be reduced by a
11revised final assessment following the rehearing or review. The
12lien created by the issuance of a final assessment shall
13terminate, unless a notice of lien is filed, within 3 years
14after the date all proceedings in court for the review of the
15final assessment have terminated or the time for the taking
16thereof has expired without such proceedings being instituted,
17or (in the case of a revised final assessment issued pursuant
18to a rehearing or review by the Department) within 3 years
19after the date all proceedings in court for the review of such
20revised final assessment have terminated or the time for the
21taking thereof has expired without such proceedings being
22instituted. Where the lien results from the filing of a tax
23return without payment of the tax or penalty shown therein to
24be due, the lien shall terminate, unless a notice of lien is
25filed, within 3 years after the date when the return is filed
26with the Department.

 

 

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1    The time limitation period on the Department's right to
2file a notice of lien shall not run during any period of time
3in which the order of any court has the effect of enjoining or
4restraining the Department from filing such notice of lien. If
5the Department finds that a company or person is about to
6depart from the State, to conceal himself or his property, or
7to do any other act tending to prejudice or to render wholly or
8partly ineffectual proceedings to collect the amount due and
9owing to the Department unless such proceedings are brought
10without delay, or if the Department finds that the collection
11of the amount due from any company or person will be
12jeopardized by delay, the Department shall give the company or
13person notice of such findings and shall make demand for
14immediate return and payment of the amount, whereupon the
15amount shall become immediately due and payable. If the company
16or person, within 5 days after the notice (or within such
17extension of time as the Department may grant), does not comply
18with the notice or show to the Department that the findings in
19the notice are erroneous, the Department may file a notice of
20jeopardy assessment lien in the office of the recorder of the
21county in which any property of the company or person may be
22located and shall notify the company or person of the filing.
23The jeopardy assessment lien shall have the same scope and
24effect as the statutory lien provided for in this Section. If
25the company or person believes that the company or person does
26not owe some or all of the tax for which the jeopardy

 

 

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1assessment lien against the company or person has been filed,
2or that no jeopardy to the revenue in fact exists, the company
3or person may protest within 20 days after being notified by
4the Department of the filing of the jeopardy assessment lien
5and request a hearing, whereupon the Department shall hold a
6hearing in conformity with the provisions of this Code and,
7pursuant thereto, shall notify the company or person of its
8findings as to whether or not the jeopardy assessment lien will
9be released. If not, and if the company or person is aggrieved
10by this decision, the company or person may file an action for
11judicial review of the final determination of the Department in
12accordance with the Administrative Review Law. If, pursuant to
13such hearing (or after an independent determination of the
14facts by the Department without a hearing), the Department
15determines that some or all of the amount due covered by the
16jeopardy assessment lien is not owed by the company or person,
17or that no jeopardy to the revenue exists, or if on judicial
18review the final judgment of the court is that the company or
19person does not owe some or all of the amount due covered by
20the jeopardy assessment lien against them, or that no jeopardy
21to the revenue exists, the Department shall release its
22jeopardy assessment lien to the extent of such finding of
23nonliability for the amount, or to the extent of such finding
24of no jeopardy to the revenue. The Department shall also
25release its jeopardy assessment lien against the company or
26person whenever the amount due and owing covered by the lien,

 

 

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1plus any interest which may be due, are paid and the company or
2person has paid the Department in cash or by guaranteed
3remittance an amount representing the filing fee for the lien
4and the filing fee for the release of that lien. The Department
5shall file that release of lien with the recorder of the county
6where that lien was filed.
7    Nothing in this Section shall be construed to give the
8Department a preference over the rights of any bona fide
9purchaser, holder of a security interest, mechanics
10lienholder, mortgagee, or judgment lien creditor arising prior
11to the filing of a regular notice of lien or a notice of
12jeopardy assessment lien in the office of the recorder in the
13county in which the property subject to the lien is located.
14For purposes of this Section, "bona fide" shall not include any
15mortgage of real or personal property or any other credit
16transaction that results in the mortgagee or the holder of the
17security acting as trustee for unsecured creditors of the
18company or person mentioned in the notice of lien who executed
19such chattel or real property mortgage or the document
20evidencing such credit transaction. The lien shall be inferior
21to the lien of general taxes, special assessments, and special
22taxes levied by any political subdivision of this State. In
23case title to land to be affected by the notice of lien or
24notice of jeopardy assessment lien is registered under the
25provisions of the Registered Titles (Torrens) Act, such notice
26shall be filed in the office of the Registrar of Titles of the

 

 

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1county within which the property subject to the lien is
2situated and shall be entered upon the register of titles as a
3memorial or charge upon each folium of the register of titles
4affected by such notice, and the Department shall not have a
5preference over the rights of any bona fide purchaser,
6mortgagee, judgment creditor, or other lienholder arising
7prior to the registration of such notice. The regular lien or
8jeopardy assessment lien shall not be effective against any
9purchaser with respect to any item in a retailer's stock in
10trade purchased from the retailer in the usual course of the
11retailer's business.
12(Source: P.A. 98-158, eff. 8-2-13.)
 
13    (Text of Section after amendment by P.A. 98-978)
14    Sec. 412. Refunds; penalties; collection.
15    (1)(a) Whenever it appears to the satisfaction of the
16Director that because of some mistake of fact, error in
17calculation, or erroneous interpretation of a statute of this
18or any other state, any authorized company or , surplus line
19producer, or industrial insured has paid to him, pursuant to
20any provision of law, taxes, fees, or other charges in excess
21of the amount legally chargeable against it, during the 6 year
22period immediately preceding the discovery of such
23overpayment, he shall have power to refund to such company or ,
24surplus line producer, or industrial insured the amount of the
25excess or excesses by applying the amount or amounts thereof

 

 

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1toward the payment of taxes, fees, or other charges already
2due, or which may thereafter become due from that company until
3such excess or excesses have been fully refunded, or upon a
4written request from the authorized company or , surplus line
5producer, or industrial insured, the Director shall provide a
6cash refund within 120 days after receipt of the written
7request if all necessary information has been filed with the
8Department in order for it to perform an audit of the tax
9report for the transaction or period or annual return for the
10year in which the overpayment occurred or within 120 days after
11the date the Department receives all the necessary information
12to perform such audit. The Director shall not provide a cash
13refund if there are insufficient funds in the Insurance Premium
14Tax Refund Fund to provide a cash refund, if the amount of the
15overpayment is less than $100, or if the amount of the
16overpayment can be fully offset against the taxpayer's
17estimated liability for the year following the year of the cash
18refund request. Any cash refund shall be paid from the
19Insurance Premium Tax Refund Fund, a special fund hereby
20created in the State treasury.
21    (b) Beginning January 1, 2000 and thereafter, the
22Department shall deposit a percentage of the amounts collected
23under Sections 409, 444, and 444.1 of this Code into the
24Insurance Premium Tax Refund Fund. The percentage deposited
25into the Insurance Premium Tax Refund Fund shall be the annual
26percentage. The annual percentage shall be calculated as a

 

 

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1fraction, the numerator of which shall be the amount of cash
2refunds approved by the Director for payment and paid during
3the preceding calendar year as a result of overpayment of tax
4liability under Sections 121-2.08, 409, 444, 444.1, and 445 of
5this Code and the denominator of which shall be the amounts
6collected pursuant to Sections 121-2.08, 409, 444, 444.1, and
7445 of this Code during the preceding calendar year. However,
8if there were no cash refunds paid in a preceding calendar
9year, the Department shall deposit 5% of the amount collected
10in that preceding calendar year pursuant to Sections 121-2.08,
11409, 444, 444.1, and 445 of this Code into the Insurance
12Premium Tax Refund Fund instead of an amount calculated by
13using the annual percentage.
14    (c) Beginning July 1, 1999, moneys in the Insurance Premium
15Tax Refund Fund shall be expended exclusively for the purpose
16of paying cash refunds resulting from overpayment of tax
17liability under Sections 121-2.08, 409, 444, 444.1, and 445 of
18this Code as determined by the Director pursuant to subsection
191(a) of this Section. Cash refunds made in accordance with this
20Section may be made from the Insurance Premium Tax Refund Fund
21only to the extent that amounts have been deposited and
22retained in the Insurance Premium Tax Refund Fund.
23    (d) This Section shall constitute an irrevocable and
24continuing appropriation from the Insurance Premium Tax Refund
25Fund for the purpose of paying cash refunds pursuant to the
26provisions of this Section.

 

 

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1    (2)(a) When any insurance company fails to file any tax
2return required under Sections 408.1, 409, 444, and 444.1 of
3this Code or Section 12 of the Fire Investigation Act on the
4date prescribed, including any extensions, there shall be added
5as a penalty $400 or 10% of the amount of such tax, whichever
6is greater, for each month or part of a month of failure to
7file, the entire penalty not to exceed $2,000 or 50% of the tax
8due, whichever is greater.
9    (b) When any industrial insured or surplus line producer
10fails to file any tax return or report required under Section
11Sections 121-2.08 and 445 of this Code or Section 12 of the
12Fire Investigation Act on the date prescribed, including any
13extensions, there shall be added:
14        (i) as a late fee, if the return or report is received
15    at least one day but not more than 7 days after the
16    prescribed due date, $400 or 10% of the tax due, whichever
17    is greater, the entire fee not to exceed $1,000;
18        (ii) as a late fee, if the return or report is received
19    at least 8 days but not more than 14 days after the
20    prescribed due date, $400 or 10% of the tax due, whichever
21    is greater, the entire fee not to exceed $1,500;
22        (iii) as a late fee, if the return or report is
23    received at least 15 days but not more than 21 days after
24    the prescribed due date, $400 or 10% of the tax due,
25    whichever is greater, the entire fee not to exceed $2,000;
26    or

 

 

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1        (iv) as a penalty, if the return or report is received
2    more than 21 days after the prescribed due date, $400 or
3    10% of the tax due, whichever is greater, for each month or
4    part of a month of failure to file, the entire penalty not
5    to exceed $2,000 or 50% of the tax due, whichever is
6    greater.
7    A tax return or report shall be deemed received as of the
8date mailed as evidenced by a postmark, proof of mailing on a
9recognized United States Postal Service form or a form
10acceptable to the United States Postal Service or other
11commercial mail delivery service, or other evidence acceptable
12to the Director.
13    (3)(a) When any insurance company fails to pay the full
14amount due under the provisions of this Section, Sections
15408.1, 409, 444, or 444.1 of this Code, or Section 12 of the
16Fire Investigation Act, there shall be added to the amount due
17as a penalty an amount equal to 10% of the deficiency.
18    (a-5) When any industrial insured or surplus line producer
19fails to pay the full amount due under the provisions of this
20Section, Sections 121-2.08 or Section 445 of this Code, or
21Section 12 of the Fire Investigation Act on the date
22prescribed, there shall be added:
23        (i) as a late fee, if the payment is received at least
24    one day but not more than 7 days after the prescribed due
25    date, 10% of the tax due, the entire fee not to exceed
26    $1,000;

 

 

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1        (ii) as a late fee, if the payment is received at least
2    8 days but not more than 14 days after the prescribed due
3    date, 10% of the tax due, the entire fee not to exceed
4    $1,500;
5        (iii) as a late fee, if the payment is received at
6    least 15 days but not more than 21 days after the
7    prescribed due date, 10% of the tax due, the entire fee not
8    to exceed $2,000; or
9        (iv) as a penalty, if the return or report is received
10    more than 21 days after the prescribed due date, 10% of the
11    tax due.
12    A tax payment shall be deemed received as of the date
13mailed as evidenced by a postmark, proof of mailing on a
14recognized United States Postal Service form or a form
15acceptable to the United States Postal Service or other
16commercial mail delivery service, or other evidence acceptable
17to the Director.
18    (b) If such failure to pay is determined by the Director to
19be wilful, after a hearing under Sections 402 and 403, there
20shall be added to the tax as a penalty an amount equal to the
21greater of 50% of the deficiency or 10% of the amount due and
22unpaid for each month or part of a month that the deficiency
23remains unpaid commencing with the date that the amount becomes
24due. Such amount shall be in lieu of any determined under
25paragraph (a) or (a-5).
26    (4) Any insurance company, industrial insured, or surplus

 

 

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1line producer that fails to pay the full amount due under this
2Section or Sections 121-2.08, 408.1, 409, 444, 444.1, or 445 of
3this Code, or Section 12 of the Fire Investigation Act is
4liable, in addition to the tax and any late fees and penalties,
5for interest on such deficiency at the rate of 12% per annum,
6or at such higher adjusted rates as are or may be established
7under subsection (b) of Section 6621 of the Internal Revenue
8Code, from the date that payment of any such tax was due,
9determined without regard to any extensions, to the date of
10payment of such amount.
11    (5) The Director, through the Attorney General, may
12institute an action in the name of the People of the State of
13Illinois, in any court of competent jurisdiction, for the
14recovery of the amount of such taxes, fees, and penalties due,
15and prosecute the same to final judgment, and take such steps
16as are necessary to collect the same.
17    (6) In the event that the certificate of authority of a
18foreign or alien company is revoked for any cause or the
19company withdraws from this State prior to the renewal date of
20the certificate of authority as provided in Section 114, the
21company may recover the amount of any such tax paid in advance.
22Except as provided in this subsection, no revocation or
23withdrawal excuses payment of or constitutes grounds for the
24recovery of any taxes or penalties imposed by this Code.
25    (7) When an insurance company or domestic affiliated group
26fails to pay the full amount of any fee of $200 or more due

 

 

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1under Section 408 of this Code, there shall be added to the
2amount due as a penalty the greater of $100 or an amount equal
3to 10% of the deficiency for each month or part of a month that
4the deficiency remains unpaid.
5    (8) The Department shall have a lien for the taxes, fees,
6charges, fines, penalties, interest, other charges, or any
7portion thereof, imposed or assessed pursuant to this Code,
8upon all the real and personal property of any company or
9person to whom the assessment or final order has been issued or
10whenever a tax return is filed without payment of the tax or
11penalty shown therein to be due, including all such property of
12the company or person acquired after receipt of the assessment,
13issuance of the order, or filing of the return. The company or
14person is liable for the filing fee incurred by the Department
15for filing the lien and the filing fee incurred by the
16Department to file the release of that lien. The filing fees
17shall be paid to the Department in addition to payment of the
18tax, fee, charge, fine, penalty, interest, other charges, or
19any portion thereof, included in the amount of the lien.
20However, where the lien arises because of the issuance of a
21final order of the Director or tax assessment by the
22Department, the lien shall not attach and the notice referred
23to in this Section shall not be filed until all administrative
24proceedings or proceedings in court for review of the final
25order or assessment have terminated or the time for the taking
26thereof has expired without such proceedings being instituted.

 

 

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1    Upon the granting of Department review after a lien has
2attached, the lien shall remain in full force except to the
3extent to which the final assessment may be reduced by a
4revised final assessment following the rehearing or review. The
5lien created by the issuance of a final assessment shall
6terminate, unless a notice of lien is filed, within 3 years
7after the date all proceedings in court for the review of the
8final assessment have terminated or the time for the taking
9thereof has expired without such proceedings being instituted,
10or (in the case of a revised final assessment issued pursuant
11to a rehearing or review by the Department) within 3 years
12after the date all proceedings in court for the review of such
13revised final assessment have terminated or the time for the
14taking thereof has expired without such proceedings being
15instituted. Where the lien results from the filing of a tax
16return without payment of the tax or penalty shown therein to
17be due, the lien shall terminate, unless a notice of lien is
18filed, within 3 years after the date when the return is filed
19with the Department.
20    The time limitation period on the Department's right to
21file a notice of lien shall not run during any period of time
22in which the order of any court has the effect of enjoining or
23restraining the Department from filing such notice of lien. If
24the Department finds that a company or person is about to
25depart from the State, to conceal himself or his property, or
26to do any other act tending to prejudice or to render wholly or

 

 

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1partly ineffectual proceedings to collect the amount due and
2owing to the Department unless such proceedings are brought
3without delay, or if the Department finds that the collection
4of the amount due from any company or person will be
5jeopardized by delay, the Department shall give the company or
6person notice of such findings and shall make demand for
7immediate return and payment of the amount, whereupon the
8amount shall become immediately due and payable. If the company
9or person, within 5 days after the notice (or within such
10extension of time as the Department may grant), does not comply
11with the notice or show to the Department that the findings in
12the notice are erroneous, the Department may file a notice of
13jeopardy assessment lien in the office of the recorder of the
14county in which any property of the company or person may be
15located and shall notify the company or person of the filing.
16The jeopardy assessment lien shall have the same scope and
17effect as the statutory lien provided for in this Section. If
18the company or person believes that the company or person does
19not owe some or all of the tax for which the jeopardy
20assessment lien against the company or person has been filed,
21or that no jeopardy to the revenue in fact exists, the company
22or person may protest within 20 days after being notified by
23the Department of the filing of the jeopardy assessment lien
24and request a hearing, whereupon the Department shall hold a
25hearing in conformity with the provisions of this Code and,
26pursuant thereto, shall notify the company or person of its

 

 

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1findings as to whether or not the jeopardy assessment lien will
2be released. If not, and if the company or person is aggrieved
3by this decision, the company or person may file an action for
4judicial review of the final determination of the Department in
5accordance with the Administrative Review Law. If, pursuant to
6such hearing (or after an independent determination of the
7facts by the Department without a hearing), the Department
8determines that some or all of the amount due covered by the
9jeopardy assessment lien is not owed by the company or person,
10or that no jeopardy to the revenue exists, or if on judicial
11review the final judgment of the court is that the company or
12person does not owe some or all of the amount due covered by
13the jeopardy assessment lien against them, or that no jeopardy
14to the revenue exists, the Department shall release its
15jeopardy assessment lien to the extent of such finding of
16nonliability for the amount, or to the extent of such finding
17of no jeopardy to the revenue. The Department shall also
18release its jeopardy assessment lien against the company or
19person whenever the amount due and owing covered by the lien,
20plus any interest which may be due, are paid and the company or
21person has paid the Department in cash or by guaranteed
22remittance an amount representing the filing fee for the lien
23and the filing fee for the release of that lien. The Department
24shall file that release of lien with the recorder of the county
25where that lien was filed.
26    Nothing in this Section shall be construed to give the

 

 

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1Department a preference over the rights of any bona fide
2purchaser, holder of a security interest, mechanics
3lienholder, mortgagee, or judgment lien creditor arising prior
4to the filing of a regular notice of lien or a notice of
5jeopardy assessment lien in the office of the recorder in the
6county in which the property subject to the lien is located.
7For purposes of this Section, "bona fide" shall not include any
8mortgage of real or personal property or any other credit
9transaction that results in the mortgagee or the holder of the
10security acting as trustee for unsecured creditors of the
11company or person mentioned in the notice of lien who executed
12such chattel or real property mortgage or the document
13evidencing such credit transaction. The lien shall be inferior
14to the lien of general taxes, special assessments, and special
15taxes levied by any political subdivision of this State. In
16case title to land to be affected by the notice of lien or
17notice of jeopardy assessment lien is registered under the
18provisions of the Registered Titles (Torrens) Act, such notice
19shall be filed in the office of the Registrar of Titles of the
20county within which the property subject to the lien is
21situated and shall be entered upon the register of titles as a
22memorial or charge upon each folium of the register of titles
23affected by such notice, and the Department shall not have a
24preference over the rights of any bona fide purchaser,
25mortgagee, judgment creditor, or other lienholder arising
26prior to the registration of such notice. The regular lien or

 

 

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1jeopardy assessment lien shall not be effective against any
2purchaser with respect to any item in a retailer's stock in
3trade purchased from the retailer in the usual course of the
4retailer's business.
5(Source: P.A. 98-158, eff. 8-2-13; 98-978, eff. 1-1-15.)
 
6    (215 ILCS 5/445)  (from Ch. 73, par. 1057)
7    (Text of Section before amendment by P.A. 98-978)
8    Sec. 445. Surplus line.
9    (1) Definitions. For the purposes of this Section:
10    "Affiliate" means, with respect to an insured, any entity
11that controls, is controlled by, or is under common control
12with the insured. For the purpose of this definition, an entity
13has control over another entity if:
14        (A) the entity directly or indirectly or acting through
15    one or more other persons owns, controls, or has the power
16    to vote 25% or more of any class of voting securities of
17    the other entity; or
18        (B) the entity controls in any manner the election of a
19    majority of the directors or trustees of the other entity.
20    "Affiliated group" means any group of entities that are all
21affiliated.
22    "Authorized insurer" means an insurer that holds a
23certificate of authority issued by the Director but, for the
24purposes of this Section, does not include a domestic surplus
25line insurer as defined in Section 445a or any residual market

 

 

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1mechanism.
2    "Exempt commercial purchaser" means any person purchasing
3commercial insurance that, at the time of placement, meets the
4following requirements:
5        (A) The person employs or retains a qualified risk
6    manager to negotiate insurance coverage.
7        (B) The person has paid aggregate nationwide
8    commercial property and casualty insurance premiums in
9    excess of $100,000 in the immediately preceding 12 months.
10        (C) The person meets at least one of the following
11    criteria:
12            (I) The person possesses a net worth in excess of
13        $20,000,000, as such amount is adjusted pursuant to the
14        provision in this definition concerning percentage
15        change.
16            (II) The person generates annual revenues in
17        excess of $50,000,000, as such amount is adjusted
18        pursuant to the provision in this definition
19        concerning percentage change.
20            (III) The person employs more than 500 full-time or
21        full-time equivalent employees per individual insured
22        or is a member of an affiliated group employing more
23        than 1,000 employees in the aggregate.
24            (IV) The person is a not-for-profit organization
25        or public entity generating annual budgeted
26        expenditures of at least $30,000,000, as such amount is

 

 

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1        adjusted pursuant to the provision in this definition
2        concerning percentage change.
3            (V) The person is a municipality with a population
4        in excess of 50,000 persons.
5    Effective on January 1, 2015 and each fifth January 1
6occurring thereafter, the amounts in subitems (I), (II), and
7(IV) of item (C) of this definition shall be adjusted to
8reflect the percentage change for such 5-year period in the
9Consumer Price Index for All Urban Consumers published by the
10Bureau of Labor Statistics of the Department of Labor.
11    "Home state" means the following:
12        (A) With respect to an insured, except as provided in
13    item (B) of this definition:
14            (I) the state in which an insured maintains its
15        principal place of business or, in the case of an
16        individual, the individual's principal residence; or
17            (II) if 100% of the insured risk is located out of
18        the state referred to in subitem (I), the state to
19        which the greatest percentage of the insured's taxable
20        premium for that insurance contract is allocated.
21        (B) If more than one insured from an affiliated group
22    are named insureds on a single surplus line insurance
23    contract, then "home state" means the home state, as
24    determined pursuant to item (A) of this definition, of the
25    member of the affiliated group that has the largest
26    percentage of premium attributed to it under such insurance

 

 

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1    contract.
2    "Multi-State risk" means a risk with insured exposures in
3more than one State.
4    "NAIC" means the National Association of Insurance
5Commissioners or any successor entity.
6    "Qualified risk manager" means, with respect to a
7policyholder of commercial insurance, a person who meets all of
8the following requirements:
9        (A) The person is an employee of, or third-party
10    consultant retained by, the commercial policyholder.
11        (B) The person provides skilled services in loss
12    prevention, loss reduction, or risk and insurance coverage
13    analysis, and purchase of insurance.
14        (C) With regard to the person:
15            (I) the person has:
16                (a) a bachelor's degree or higher from an
17            accredited college or university in risk
18            management, business administration, finance,
19            economics, or any other field determined by the
20            Director or his designee to demonstrate minimum
21            competence in risk management; and
22                (b) the following:
23                    (i) three years of experience in risk
24                financing, claims administration, loss
25                prevention, risk and insurance analysis, or
26                purchasing commercial lines of insurance; or

 

 

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1                    (ii) alternatively has:
2                        (AA) a designation as a Chartered
3                    Property and Casualty Underwriter (in this
4                    subparagraph (ii) referred to as "CPCU")
5                    issued by the American Institute for
6                    CPCU/Insurance Institute of America;
7                        (BB) a designation as an Associate in
8                    Risk Management (ARM) issued by the
9                    American Institute for CPCU/Insurance
10                    Institute of America;
11                        (CC) a designation as Certified Risk
12                    Manager (CRM) issued by the National
13                    Alliance for Insurance Education &
14                    Research;
15                        (DD) a designation as a RIMS Fellow
16                    (RF) issued by the Global Risk Management
17                    Institute; or
18                        (EE) any other designation,
19                    certification, or license determined by
20                    the Director or his designee to
21                    demonstrate minimum competency in risk
22                    management;
23            (II) the person has:
24                (a) at least 7 years of experience in risk
25            financing, claims administration, loss prevention,
26            risk and insurance coverage analysis, or

 

 

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1            purchasing commercial lines of insurance; and
2                (b) has any one of the designations specified
3            in subparagraph (ii) of paragraph (b);
4            (III) the person has at least 10 years of
5        experience in risk financing, claims administration,
6        loss prevention, risk and insurance coverage analysis,
7        or purchasing commercial lines of insurance; or
8            (IV) the person has a graduate degree from an
9        accredited college or university in risk management,
10        business administration, finance, economics, or any
11        other field determined by the Director or his or her
12        designee to demonstrate minimum competence in risk
13        management.
14    "Residual market mechanism" means an association,
15organization, or other entity described in Article XXXIII of
16this Code or Section 7-501 of the Illinois Vehicle Code or any
17similar association, organization, or other entity.
18    "State" means any state of the United States, the District
19of Columbia, the Commonwealth of Puerto Rico, Guam, the
20Northern Mariana Islands, the Virgin Islands, and American
21Samoa.
22    "Surplus line insurance" means insurance on a risk:
23        (A) of the kinds specified in Classes 2 and 3 of
24    Section 4 of this Code; and
25        (B) that is procured from an unauthorized insurer after
26    the insurance producer representing the insured or the

 

 

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1    surplus line producer is unable, after diligent effort, to
2    procure the insurance from authorized insurers; and
3        (C) where Illinois is the home state of the insured,
4    for policies effective, renewed or extended on July 21,
5    2011 or later and for multiyear policies upon the policy
6    anniversary that falls on or after July 21, 2011; and
7        (D) that is located in Illinois, for policies effective
8    prior to July 21, 2011.
9    "Unauthorized insurer" means an insurer that does not hold
10a valid certificate of authority issued by the Director but,
11for the purposes of this Section, shall also include a domestic
12surplus line insurer as defined in Section 445a.
13    (1.5) Procuring surplus line insurance; surplus line
14insurer requirements.
15        (a) Insurance producers may procure surplus line
16    insurance only if licensed as a surplus line producer under
17    this Section.
18        (b) Licensed surplus line producers may procure
19    surplus line insurance from an unauthorized insurer
20    domiciled in the United States only if the insurer:
21            (i) is permitted in its domiciliary jurisdiction
22        to write the type of insurance involved; and
23             (ii) has, based upon information available to the
24        surplus line producer, a policyholders surplus of not
25        less than $15,000,000 determined in accordance with
26        the laws of its domiciliary jurisdiction; and

 

 

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1             (iii) has standards of solvency and management
2        that are adequate for the protection of policyholders.
3         Where an unauthorized insurer does not meet the
4    standards set forth in (ii) and (iii) above, a surplus line
5    producer may, if necessary, procure insurance from that
6    insurer only if prior written warning of such fact or
7    condition is given to the insured by the insurance producer
8    or surplus line producer.
9        (c) Licensed surplus line producers may procure
10    surplus line insurance from an unauthorized insurer
11    domiciled outside of the United States only if the insurer
12    is listed on the Quarterly Listing of Alien Insurers
13    maintained by the International Insurers Department of the
14    NAIC. The Director shall make the Quarterly Listing of
15    Alien Insurers available to surplus line producers without
16    charge.
17        (d) Insurance producers shall not procure from an
18    unauthorized insurer an insurance policy:
19            (i) that is designed to satisfy the proof of
20        financial responsibility and insurance requirements in
21        any Illinois law where the law requires that the proof
22        of insurance is issued by an authorized insurer or
23        residual market mechanism;
24            (ii) that covers the risk of accidental injury to
25        employees arising out of and in the course of
26        employment according to the provisions of the Workers'

 

 

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1        Compensation Act; or
2            (iii) that insures any Illinois personal lines
3        risk, as defined in subsection (a), (b), or (c) of
4        Section 143.13 of this Code, that is eligible for
5        residual market mechanism coverage, unless the insured
6        or prospective insured requests limits of liability
7        greater than the limits provided by the residual market
8        mechanism. In the course of making a diligent effort to
9        procure insurance from authorized insurers, an
10        insurance producer shall not be required to submit a
11        risk to a residual market mechanism when the risk is
12        not eligible for coverage or exceeds the limits
13        available in the residual market mechanism.
14        Where there is an insurance policy issued by an
15    authorized insurer or residual market mechanism insuring a
16    risk described in item (i), (ii), or (iii) above, nothing
17    in this paragraph shall be construed to prohibit a surplus
18    line producer from procuring from an unauthorized insurer a
19    policy insuring the risk on an excess or umbrella basis
20    where the excess or umbrella policy is written over one or
21    more underlying policies.
22        (e) Licensed surplus line producers may procure
23    surplus line insurance from an unauthorized insurer for an
24    exempt commercial purchaser without making the required
25    diligent effort to procure the insurance from authorized
26    insurers if:

 

 

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1            (i) the producer has disclosed to the exempt
2        commercial purchaser that such insurance may or may not
3        be available from authorized insurers that may provide
4        greater protection with more regulatory oversight; and
5            (ii) the exempt commercial purchaser has
6        subsequently in writing requested the producer to
7        procure such insurance from an unauthorized insurer.
8    (2) Surplus line producer; license. Any licensed producer
9who is a resident of this State, or any nonresident who
10qualifies under Section 500-40, may be licensed as a surplus
11line producer upon payment of an annual license fee of $400.
12    A surplus line producer so licensed shall keep a separate
13account of the business transacted thereunder which shall be
14open at all times to the inspection of the Director or his
15representative.
16    No later than July 21, 2012, the State of Illinois shall
17participate in the national insurance producer database of the
18NAIC, or any other equivalent uniform national database, for
19the licensure of surplus line producers and the renewal of such
20licenses.
21    (3) Taxes and reports.
22        (a) Surplus line tax and penalty for late payment. The
23    surplus line tax rate for a surplus line insurance policy
24    or contract is determined as follows:
25            (i) 3% for policies or contracts with an effective
26        date prior to July 1, 2003;

 

 

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1            (ii) 3.5% for policies or contracts with an
2        effective date of July 1, 2003 or later.
3        A surplus line producer shall file with the Director on
4    or before February 1 and August 1 of each year a report in
5    the form prescribed by the Director on all surplus line
6    insurance procured from unauthorized insurers during the
7    preceding 6 month period ending December 31 or June 30
8    respectively, and on the filing of such report shall pay to
9    the Director for the use and benefit of the State a sum
10    equal to the surplus line tax rate multiplied by the gross
11    premiums less returned premiums upon all surplus line
12    insurance submitted to the Surplus Line Association of
13    Illinois during the preceding 6 months.
14        Any surplus line producer who fails to pay the full
15    amount due under this subsection is liable, in addition to
16    the amount due, for such penalty and interest charges as
17    are provided for under Section 412 of this Code. The
18    Director, through the Attorney General, may institute an
19    action in the name of the People of the State of Illinois,
20    in any court of competent jurisdiction, for the recovery of
21    the amount of such taxes and penalties due, and prosecute
22    the same to final judgment, and take such steps as are
23    necessary to collect the same.
24        (b) Fire Marshal Tax. Each surplus line producer shall
25    file with the Director on or before March 31 of each year a
26    report in the form prescribed by the Director on all fire

 

 

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1    insurance procured from unauthorized insurers and
2    submitted to the Surplus Line Association of Illinois
3    subject to tax under Section 12 of the Fire Investigation
4    Act and shall pay to the Director the fire marshal tax
5    required thereunder.
6        (c) Taxes and fees charged to insured. The taxes
7    imposed under this subsection and the countersigning fees
8    charged by the Surplus Line Association of Illinois may be
9    charged to and collected from surplus line insureds.
10    (4) (Blank).
11    (5) Submission of documents to Surplus Line Association of
12Illinois. A surplus line producer shall submit every insurance
13contract issued under his or her license to the Surplus Line
14Association of Illinois for recording and countersignature.
15The submission and countersignature may be effected through
16electronic means. The submission shall set forth:
17        (a) the name of the insured;
18        (b) the description and location of the insured
19    property or risk;
20        (c) the amount insured;
21        (d) the gross premiums charged or returned;
22        (e) the name of the unauthorized insurer from whom
23    coverage has been procured;
24        (f) the kind or kinds of insurance procured; and
25        (g) amount of premium subject to tax required by
26    Section 12 of the Fire Investigation Act.

 

 

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1    Proposals, endorsements, and other documents which are
2incidental to the insurance but which do not affect the premium
3charged are exempted from filing and countersignature.
4    The submission of insuring contracts to the Surplus Line
5Association of Illinois constitutes a certification by the
6surplus line producer or by the insurance producer who
7presented the risk to the surplus line producer for placement
8as a surplus line risk that after diligent effort the required
9insurance could not be procured from authorized insurers and
10that such procurement was otherwise in accordance with the
11surplus line law.
12    (6) Countersignature required. It shall be unlawful for an
13insurance producer to deliver any unauthorized insurer
14contract unless such insurance contract is countersigned by the
15Surplus Line Association of Illinois.
16    (7) Inspection of records. A surplus line producer shall
17maintain separate records of the business transacted under his
18or her license, including complete copies of surplus line
19insurance contracts maintained on paper or by electronic means,
20which records shall be open at all times for inspection by the
21Director and by the Surplus Line Association of Illinois.
22    (8) Violations and penalties. The Director may suspend or
23revoke or refuse to renew a surplus line producer license for
24any violation of this Code. In addition to or in lieu of
25suspension or revocation, the Director may subject a surplus
26line producer to a civil penalty of up to $2,000 for each cause

 

 

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1for suspension or revocation. Such penalty is enforceable under
2subsection (5) of Section 403A of this Code.
3    (9) Director may declare insurer ineligible. If the
4Director determines that the further assumption of risks might
5be hazardous to the policyholders of an unauthorized insurer,
6the Director may order the Surplus Line Association of Illinois
7not to countersign insurance contracts evidencing insurance in
8such insurer and order surplus line producers to cease
9procuring insurance from such insurer.
10    (10) Service of process upon Director. Insurance contracts
11delivered under this Section from unauthorized insurers, other
12than domestic surplus line insurers as defined in Section 445a,
13shall contain a provision designating the Director and his
14successors in office the true and lawful attorney of the
15insurer upon whom may be served all lawful process in any
16action, suit or proceeding arising out of such insurance.
17Service of process made upon the Director to be valid hereunder
18must state the name of the insured, the name of the
19unauthorized insurer and identify the contract of insurance.
20The Director at his option is authorized to forward a copy of
21the process to the Surplus Line Association of Illinois for
22delivery to the unauthorized insurer or the Director may
23deliver the process to the unauthorized insurer by other means
24which he considers to be reasonably prompt and certain.
25    (10.5) Insurance contracts delivered under this Section
26from unauthorized insurers, other than domestic surplus line

 

 

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1insurers as defined in Section 445a, shall have stamped or
2imprinted on the first page thereof in not less than 12-pt.
3bold face type the following legend: "Notice to Policyholder:
4This contract is issued, pursuant to Section 445 of the
5Illinois Insurance Code, by a company not authorized and
6licensed to transact business in Illinois and as such is not
7covered by the Illinois Insurance Guaranty Fund." Insurance
8contracts delivered under this Section from domestic surplus
9line insurers as defined in Section 445a shall have stamped or
10imprinted on the first page thereof in not less than 12-pt.
11bold face type the following legend: "Notice to Policyholder:
12This contract is issued by a domestic surplus line insurer, as
13defined in Section 445a of the Illinois Insurance Code,
14pursuant to Section 445, and as such is not covered by the
15Illinois Insurance Guaranty Fund."
16    (11) The Illinois Surplus Line law does not apply to
17insurance of property and operations of railroads or aircraft
18engaged in interstate or foreign commerce, insurance of
19vessels, crafts or hulls, cargoes, marine builder's risks,
20marine protection and indemnity, or other risks including
21strikes and war risks insured under ocean or wet marine forms
22of policies.
23    (12) Surplus line insurance procured under this Section,
24including insurance procured from a domestic surplus line
25insurer, is not subject to the provisions of the Illinois
26Insurance Code other than Sections 123, 123.1, 401, 401.1, 402,

 

 

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1403, 403A, 408, 412, 445, 445.1, 445.2, 445.3, 445.4, and all
2of the provisions of Article XXXI to the extent that the
3provisions of Article XXXI are not inconsistent with the terms
4of this Act.
5(Source: P.A. 97-955, eff. 8-14-12.)
 
6    (Text of Section after amendment by P.A. 98-978)
7    Sec. 445. Surplus line.
8    (1) Definitions. For the purposes of this Section:
9    "Affiliate" means, with respect to an insured, any entity
10that controls, is controlled by, or is under common control
11with the insured. For the purpose of this definition, an entity
12has control over another entity if:
13        (A) the entity directly or indirectly or acting through
14    one or more other persons owns, controls, or has the power
15    to vote 25% or more of any class of voting securities of
16    the other entity; or
17        (B) the entity controls in any manner the election of a
18    majority of the directors or trustees of the other entity.
19    "Affiliated group" means any group of entities that are all
20affiliated.
21    "Authorized insurer" means an insurer that holds a
22certificate of authority issued by the Director but, for the
23purposes of this Section, does not include a domestic surplus
24line insurer as defined in Section 445a or any residual market
25mechanism.

 

 

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1    "Exempt commercial purchaser" means any person purchasing
2commercial insurance that, at the time of placement, meets the
3following requirements:
4        (A) The person employs or retains a qualified risk
5    manager to negotiate insurance coverage.
6        (B) The person has paid aggregate nationwide
7    commercial property and casualty insurance premiums in
8    excess of $100,000 in the immediately preceding 12 months.
9        (C) The person meets at least one of the following
10    criteria:
11            (I) The person possesses a net worth in excess of
12        $20,000,000, as such amount is adjusted pursuant to the
13        provision in this definition concerning percentage
14        change.
15            (II) The person generates annual revenues in
16        excess of $50,000,000, as such amount is adjusted
17        pursuant to the provision in this definition
18        concerning percentage change.
19            (III) The person employs more than 500 full-time or
20        full-time equivalent employees per individual insured
21        or is a member of an affiliated group employing more
22        than 1,000 employees in the aggregate.
23            (IV) The person is a not-for-profit organization
24        or public entity generating annual budgeted
25        expenditures of at least $30,000,000, as such amount is
26        adjusted pursuant to the provision in this definition

 

 

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1        concerning percentage change.
2            (V) The person is a municipality with a population
3        in excess of 50,000 persons.
4    Effective on January 1, 2015 and each fifth January 1
5occurring thereafter, the amounts in subitems (I), (II), and
6(IV) of item (C) of this definition shall be adjusted to
7reflect the percentage change for such 5-year period in the
8Consumer Price Index for All Urban Consumers published by the
9Bureau of Labor Statistics of the Department of Labor.
10    "Home state" means the following:
11        (A) With respect to an insured, except as provided in
12    item (B) of this definition:
13            (I) the state in which an insured maintains its
14        principal place of business or, in the case of an
15        individual, the individual's principal residence; or
16            (II) if 100% of the insured risk is located out of
17        the state referred to in subitem (I), the state to
18        which the greatest percentage of the insured's taxable
19        premium for that insurance contract is allocated.
20        (B) If more than one insured from an affiliated group
21    are named insureds on a single surplus line insurance
22    contract, then "home state" means the home state, as
23    determined pursuant to item (A) of this definition, of the
24    member of the affiliated group that has the largest
25    percentage of premium attributed to it under such insurance
26    contract.

 

 

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1        If more than one insured from a group that is not
2    affiliated are named insureds on a single surplus line
3    insurance contract, then:
4            (I) if individual group members pay 100% of the
5        premium for the insurance from their own funds, "home
6        state" means the home state, as determined pursuant to
7        item (A) of this definition, of each individual group
8        member; each individual group member's coverage under
9        the surplus line insurance contract shall be treated as
10        a separate surplus line contract for the purposes of
11        this Section;
12            (II) otherwise, "home state" means the home state,
13        as determined pursuant to item (A) of this definition,
14        of the group.
15    Nothing in this definition shall be construed to alter the
16terms of the surplus line insurance contract.
17    "Multi-State risk" means a risk with insured exposures in
18more than one State.
19    "NAIC" means the National Association of Insurance
20Commissioners or any successor entity.
21    "Qualified risk manager" means, with respect to a
22policyholder of commercial insurance, a person who meets all of
23the following requirements:
24        (A) The person is an employee of, or third-party
25    consultant retained by, the commercial policyholder.
26        (B) The person provides skilled services in loss

 

 

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1    prevention, loss reduction, or risk and insurance coverage
2    analysis, and purchase of insurance.
3        (C) With regard to the person:
4            (I) the person has:
5                (a) a bachelor's degree or higher from an
6            accredited college or university in risk
7            management, business administration, finance,
8            economics, or any other field determined by the
9            Director or his designee to demonstrate minimum
10            competence in risk management; and
11                (b) the following:
12                    (i) three years of experience in risk
13                financing, claims administration, loss
14                prevention, risk and insurance analysis, or
15                purchasing commercial lines of insurance; or
16                    (ii) alternatively has:
17                        (AA) a designation as a Chartered
18                    Property and Casualty Underwriter (in this
19                    subparagraph (ii) referred to as "CPCU")
20                    issued by the American Institute for
21                    CPCU/Insurance Institute of America;
22                        (BB) a designation as an Associate in
23                    Risk Management (ARM) issued by the
24                    American Institute for CPCU/Insurance
25                    Institute of America;
26                        (CC) a designation as Certified Risk

 

 

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1                    Manager (CRM) issued by the National
2                    Alliance for Insurance Education &
3                    Research;
4                        (DD) a designation as a RIMS Fellow
5                    (RF) issued by the Global Risk Management
6                    Institute; or
7                        (EE) any other designation,
8                    certification, or license determined by
9                    the Director or his designee to
10                    demonstrate minimum competency in risk
11                    management;
12            (II) the person has:
13                (a) at least 7 years of experience in risk
14            financing, claims administration, loss prevention,
15            risk and insurance coverage analysis, or
16            purchasing commercial lines of insurance; and
17                (b) has any one of the designations specified
18            in subparagraph (ii) of paragraph (b);
19            (III) the person has at least 10 years of
20        experience in risk financing, claims administration,
21        loss prevention, risk and insurance coverage analysis,
22        or purchasing commercial lines of insurance; or
23            (IV) the person has a graduate degree from an
24        accredited college or university in risk management,
25        business administration, finance, economics, or any
26        other field determined by the Director or his or her

 

 

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1        designee to demonstrate minimum competence in risk
2        management.
3    "Residual market mechanism" means an association,
4organization, or other entity described in Article XXXIII of
5this Code or Section 7-501 of the Illinois Vehicle Code or any
6similar association, organization, or other entity.
7    "State" means any state of the United States, the District
8of Columbia, the Commonwealth of Puerto Rico, Guam, the
9Northern Mariana Islands, the Virgin Islands, and American
10Samoa.
11    "Surplus line insurance" means insurance on a risk:
12        (A) of the kinds specified in Classes 2 and 3 of
13    Section 4 of this Code; and
14        (B) that is procured from an unauthorized insurer after
15    the insurance producer representing the insured or the
16    surplus line producer is unable, after diligent effort, to
17    procure the insurance from authorized insurers; and
18        (C) where Illinois is the home state of the insured,
19    for policies effective, renewed or extended on July 21,
20    2011 or later and for multiyear policies upon the policy
21    anniversary that falls on or after July 21, 2011; and
22        (D) that is located in Illinois, for policies effective
23    prior to July 21, 2011.
24    "Unauthorized insurer" means an insurer that does not hold
25a valid certificate of authority issued by the Director but,
26for the purposes of this Section, shall also include a domestic

 

 

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1surplus line insurer as defined in Section 445a.
2    (1.5) Procuring surplus line insurance; surplus line
3insurer requirements.
4        (a) Insurance producers may procure surplus line
5    insurance only if licensed as a surplus line producer under
6    this Section.
7        (b) Licensed surplus line producers may procure
8    surplus line insurance from an unauthorized insurer
9    domiciled in the United States only if the insurer:
10            (i) is permitted in its domiciliary jurisdiction
11        to write the type of insurance involved; and
12             (ii) has, based upon information available to the
13        surplus line producer, a policyholders surplus of not
14        less than $15,000,000 determined in accordance with
15        the laws of its domiciliary jurisdiction; and
16             (iii) has standards of solvency and management
17        that are adequate for the protection of policyholders.
18         Where an unauthorized insurer does not meet the
19    standards set forth in (ii) and (iii) above, a surplus line
20    producer may, if necessary, procure insurance from that
21    insurer only if prior written warning of such fact or
22    condition is given to the insured by the insurance producer
23    or surplus line producer.
24        (c) Licensed surplus line producers may procure
25    surplus line insurance from an unauthorized insurer
26    domiciled outside of the United States only if the insurer

 

 

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1    meets the standards for unauthorized insurers domiciled in
2    the United States in paragraph (b) of this subsection (1.5)
3    or is listed on the Quarterly Listing of Alien Insurers
4    maintained by the International Insurers Department of the
5    NAIC. The Director shall make the Quarterly Listing of
6    Alien Insurers available to surplus line producers without
7    charge.
8        (d) Insurance producers shall not procure from an
9    unauthorized insurer an insurance policy:
10            (i) that is designed to satisfy the proof of
11        financial responsibility and insurance requirements in
12        any Illinois law where the law requires that the proof
13        of insurance is issued by an authorized insurer or
14        residual market mechanism;
15            (ii) that covers the risk of accidental injury to
16        employees arising out of and in the course of
17        employment according to the provisions of the Workers'
18        Compensation Act; or
19            (iii) that insures any Illinois personal lines
20        risk, as defined in subsection (a), (b), or (c) of
21        Section 143.13 of this Code, that is eligible for
22        residual market mechanism coverage, unless the insured
23        or prospective insured requests limits of liability
24        greater than the limits provided by the residual market
25        mechanism. In the course of making a diligent effort to
26        procure insurance from authorized insurers, an

 

 

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1        insurance producer shall not be required to submit a
2        risk to a residual market mechanism when the risk is
3        not eligible for coverage or exceeds the limits
4        available in the residual market mechanism.
5        Where there is an insurance policy issued by an
6    authorized insurer or residual market mechanism insuring a
7    risk described in item (i), (ii), or (iii) above, nothing
8    in this paragraph shall be construed to prohibit a surplus
9    line producer from procuring from an unauthorized insurer a
10    policy insuring the risk on an excess or umbrella basis
11    where the excess or umbrella policy is written over one or
12    more underlying policies.
13        (e) Licensed surplus line producers may procure
14    surplus line insurance from an unauthorized insurer for an
15    exempt commercial purchaser without making the required
16    diligent effort to procure the insurance from authorized
17    insurers if:
18            (i) the producer has disclosed to the exempt
19        commercial purchaser that such insurance may or may not
20        be available from authorized insurers that may provide
21        greater protection with more regulatory oversight; and
22            (ii) the exempt commercial purchaser has
23        subsequently in writing requested the producer to
24        procure such insurance from an unauthorized insurer.
25    (2) Surplus line producer; license. Any licensed producer
26who is a resident of this State, or any nonresident who

 

 

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1qualifies under Section 500-40, may be licensed as a surplus
2line producer upon payment of an annual license fee of $400.
3    A surplus line producer so licensed shall keep a separate
4account of the business transacted thereunder for 7 years from
5the policy effective date which shall be open at all times to
6the inspection of the Director or his representative.
7    No later than July 21, 2012, the State of Illinois shall
8participate in the national insurance producer database of the
9NAIC, or any other equivalent uniform national database, for
10the licensure of surplus line producers and the renewal of such
11licenses.
12    (3) Taxes and reports.
13        (a) Surplus line tax and penalty for late payment. The
14    surplus line tax rate for a surplus line insurance policy
15    or contract is determined as follows:
16            (i) 3% for policies or contracts with an effective
17        date prior to July 1, 2003;
18            (ii) 3.5% for policies or contracts with an
19        effective date of July 1, 2003 or later.
20        A surplus line producer shall file with the Director on
21    or before February 1 and August 1 of each year a report in
22    the form prescribed by the Director on all surplus line
23    insurance procured from unauthorized insurers and
24    submitted to the Surplus Line Association of Illinois
25    during the preceding 6 month period ending December 31 or
26    June 30 respectively, and on the filing of such report

 

 

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1    shall pay to the Director for the use and benefit of the
2    State a sum equal to the surplus line tax rate multiplied
3    by the gross premiums less returned premiums upon all
4    surplus line insurance submitted to the Surplus Line
5    Association of Illinois during the preceding 6 months.
6        Any surplus line producer who fails to pay the full
7    amount due under this subsection is liable, in addition to
8    the amount due, for such late fee, penalty, and interest
9    charges as are provided for under Section 412 of this Code.
10    The Director, through the Attorney General, may institute
11    an action in the name of the People of the State of
12    Illinois, in any court of competent jurisdiction, for the
13    recovery of the amount of such taxes, late fees, interest,
14    and penalties due, and prosecute the same to final
15    judgment, and take such steps as are necessary to collect
16    the same.
17        (b) Fire Marshal Tax. Each surplus line producer shall
18    file with the Director on or before March 31 of each year a
19    report in the form prescribed by the Director on all fire
20    insurance procured from unauthorized insurers and
21    submitted to the Surplus Line Association of Illinois
22    subject to tax under Section 12 of the Fire Investigation
23    Act and shall pay to the Director the fire marshal tax
24    required thereunder.
25        (c) Taxes and fees charged to insured. The taxes
26    imposed under this subsection and the countersigning fees

 

 

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1    charged by the Surplus Line Association of Illinois may be
2    charged to and collected from surplus line insureds.
3    (4) (Blank).
4    (5) Submission of documents to Surplus Line Association of
5Illinois. A surplus line producer shall submit every insurance
6contract issued under his or her license to the Surplus Line
7Association of Illinois for recording and countersignature.
8The submission and countersignature may be effected through
9electronic means. The submission shall set forth:
10        (a) the name of the insured;
11        (b) the description and location of the insured
12    property or risk;
13        (c) the amount insured;
14        (d) the gross premiums charged or returned;
15        (e) the name of the unauthorized insurer from whom
16    coverage has been procured;
17        (f) the kind or kinds of insurance procured; and
18        (g) amount of premium subject to tax required by
19    Section 12 of the Fire Investigation Act.
20    Proposals, endorsements, and other documents which are
21incidental to the insurance but which do not affect the premium
22charged are exempted from filing and countersignature.
23    The submission of insuring contracts to the Surplus Line
24Association of Illinois constitutes a certification by the
25surplus line producer or by the insurance producer who
26presented the risk to the surplus line producer for placement

 

 

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1as a surplus line risk that after diligent effort the required
2insurance could not be procured from authorized insurers and
3that such procurement was otherwise in accordance with the
4surplus line law.
5    (6) Countersignature required. It shall be unlawful for an
6insurance producer to deliver any unauthorized insurer
7contract unless such insurance contract is countersigned by the
8Surplus Line Association of Illinois.
9    (7) Inspection of records. A surplus line producer shall
10maintain separate records of the business transacted under his
11or her license for 7 years from the policy effective date,
12including complete copies of surplus line insurance contracts
13maintained on paper or by electronic means, which records shall
14be open at all times for inspection by the Director and by the
15Surplus Line Association of Illinois.
16    (8) Violations and penalties. The Director may suspend or
17revoke or refuse to renew a surplus line producer license for
18any violation of this Code. In addition to or in lieu of
19suspension or revocation, the Director may subject a surplus
20line producer to a civil penalty of up to $2,000 for each cause
21for suspension or revocation. Such penalty is enforceable under
22subsection (5) of Section 403A of this Code.
23    (9) Director may declare insurer ineligible. If the
24Director determines that the further assumption of risks might
25be hazardous to the policyholders of an unauthorized insurer,
26the Director may order the Surplus Line Association of Illinois

 

 

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1not to countersign insurance contracts evidencing insurance in
2such insurer and order surplus line producers to cease
3procuring insurance from such insurer.
4    (10) Service of process upon Director. Insurance contracts
5delivered under this Section from unauthorized insurers, other
6than domestic surplus line insurers as defined in Section 445a,
7shall contain a provision designating the Director and his
8successors in office the true and lawful attorney of the
9insurer upon whom may be served all lawful process in any
10action, suit or proceeding arising out of such insurance.
11Service of process made upon the Director to be valid hereunder
12must state the name of the insured, the name of the
13unauthorized insurer and identify the contract of insurance.
14The Director at his option is authorized to forward a copy of
15the process to the Surplus Line Association of Illinois for
16delivery to the unauthorized insurer or the Director may
17deliver the process to the unauthorized insurer by other means
18which he considers to be reasonably prompt and certain.
19    (10.5) Insurance contracts delivered under this Section
20from unauthorized insurers, other than domestic surplus line
21insurers as defined in Section 445a, shall have stamped or
22imprinted on the first page thereof in not less than 12-pt.
23bold face type the following legend: "Notice to Policyholder:
24This contract is issued, pursuant to Section 445 of the
25Illinois Insurance Code, by a company not authorized and
26licensed to transact business in Illinois and as such is not

 

 

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1covered by the Illinois Insurance Guaranty Fund." Insurance
2contracts delivered under this Section from domestic surplus
3line insurers as defined in Section 445a shall have stamped or
4imprinted on the first page thereof in not less than 12-pt.
5bold face type the following legend: "Notice to Policyholder:
6This contract is issued by a domestic surplus line insurer, as
7defined in Section 445a of the Illinois Insurance Code,
8pursuant to Section 445, and as such is not covered by the
9Illinois Insurance Guaranty Fund."
10    (11) The Illinois Surplus Line law does not apply to
11insurance of property and operations of railroads or aircraft
12engaged in interstate or foreign commerce, insurance of
13vessels, crafts or hulls, cargoes, marine builder's risks,
14marine protection and indemnity, or other risks including
15strikes and war risks insured under ocean or wet marine forms
16of policies.
17    (12) Surplus line insurance procured under this Section,
18including insurance procured from a domestic surplus line
19insurer, is not subject to the provisions of the Illinois
20Insurance Code other than Sections 123, 123.1, 401, 401.1, 402,
21403, 403A, 408, 412, 445, 445.1, 445.2, 445.3, 445.4, and all
22of the provisions of Article XXXI to the extent that the
23provisions of Article XXXI are not inconsistent with the terms
24of this Act.
25(Source: P.A. 97-955, eff. 8-14-12; 98-978, eff. 1-1-15.)
 

 

 

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1    Section 95. No acceleration or delay. Where this Act makes
2changes in a statute that is represented in this Act by text
3that is not yet or no longer in effect (for example, a Section
4represented by multiple versions), the use of that text does
5not accelerate or delay the taking effect of (i) the changes
6made by this Act or (ii) provisions derived from any other
7Public Act.
 
8    Section 99. Effective date. This Act takes effect January
91, 2015.