Illinois General Assembly - Full Text of SB1104
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Full Text of SB1104  93rd General Assembly

SB1104eng 93rd General Assembly


SB1104 Engrossed                     LRB093 03656 LRD 03685 b

 1        AN ACT in relation to insurance.

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

 4        Section 5.  The Illinois Insurance  Code  is  amended  by
 5    changing Section 531.08 as follows:

 6        (215 ILCS 5/531.08) (from Ch. 73, par. 1065.80-8)
 7        Sec.  531.08.   Powers  and duties of the Association. In
 8    addition  to  the  powers  and  duties  enumerated  in  other
 9    Sections of this Article:
10        (1)  If a domestic insurer is an  impaired  insurer,  the
11    Association  may,  subject  to  any conditions imposed by the
12    Association other than those  which  impair  the  contractual
13    obligations  of  the  impaired  insurer,  and approved by the
14    impaired insurer and the Director:
15        (a)  Guarantee or reinsure, or cause  to  be  guaranteed,
16    assumed  or  reinsured, any or all of the covered policies of
17    covered persons of the impaired insurer;
18        (b)  Provide such monies, pledges, notes, guarantees,  or
19    other  means  as  are proper to effectuate paragraph (a), and
20    assure payment of the contractual obligations of the impaired
21    insurer pending action under paragraph (a);
22        (c)  Loan money to the impaired insurer;
23        (2)  If a domestic,  foreign,  or  alien  insurer  is  an
24    insolvent  insurer,  the  Association  shall,  subject to the
25    approval of the Director;
26        (a)(i)  Guarantee, assume or  reinsure  or  cause  to  be
27    guaranteed,  assumed,  or  reinsured  the covered policies of
28    covered persons of the insolvent insurer;
29        (ii)  Assure payment of the  contractual  obligations  of
30    the insolvent insurer to covered persons;
31        (iii)  Provide  such  monies, pledges, notes, guaranties,
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 1    or other means as are reasonably necessary to discharge  such
 2    duties; or
 3        (b)  with  respect  to  only  life  and  health insurance
 4    policies, provide benefits and coverages in  accordance  with
 5    Section 531.08(3).
 6        (c)  Provided  however that this subsection (2) shall not
 7    apply when the Director has determined that  the  foreign  or
 8    alien  insurers  domiciliary  jurisdiction  or state of entry
 9    provides, by statute,  protection  substantially  similar  to
10    that provided by this Article for residents of this State and
11    such protection will be provided in a timely manner.
12        (3)  When  proceeding  under  subparagraph (2)(b) of this
13    Section the Association shall, with respect to only life  and
14    health insurance policies:
15        (a)  assure payment of benefits for premiums identical to
16    the premiums and benefits (except for terms of conversion and
17    renewability) that would have been payable under the policies
18    of the insolvent insurer, for claims incurred:
19        (i)  with  respect  to group policies, not later than the
20    earlier of the next  renewal  date  under  such  policies  or
21    contracts  or  sixty  days,  but in no event less than thirty
22    days,  after  the  date  on  which  the  Association  becomes
23    obligated with respect to such policies;
24        (ii)  with respect to non-group policies, not later  than
25    the  earlier  of  the  next  renewal date (if any) under such
26    policies or one year, but in no event less than thirty  days,
27    from the date on which the Association becomes obligated with
28    respect to such policies;
29        (b)  make  diligent efforts to provide all known insureds
30    or group policyholders with respect to group policies  thirty
31    days notice of the termination of the benefits provided; and
32        (c)  with  respect  to non-group policies, make available
33    to each known insured, or owner if other  than  the  insured,
34    and  with  respect  to an individual formerly insured under a
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 1    group policy  who  is  not  eligible  for  replacement  group
 2    coverage, make available substitute coverage on an individual
 3    basis  in  accordance  with  the  provisions  of subparagraph
 4    (3)(d) of this Section, if the insureds had a right under law
 5    or the terminated policy to convert  coverage  to  individual
 6    coverage  or  to continue a non-group policy in force until a
 7    specified age or for  a  specified  time,  during  which  the
 8    insurer  has  no  right  unilaterally  to make changes in any
 9    provision of the policy or had a right only to  make  changes
10    in premium by class.
11        (d)(i)  In  providing  the  substitute  coverage required
12    under subparagraph (3)(c) of this  Section,  the  Association
13    may  offer  either  to  reissue the terminated coverage or to
14    issue an alternative policy.
15        (ii)  Alternative or reissued policies shall  be  offered
16    without  requiring  evidence  of  insurability, and shall not
17    provide for any waiting period or exclusion  that  would  not
18    have applied under the terminated policy.
19        (iii)  The  Association  may  reinsure any alternative or
20    reissued policy.
21        (e)(i)  Alternative policies adopted by  the  Association
22    shall  be  subject  to  the  approval  of  the Director.  The
23    Association may adopt alternative policies of  various  types
24    for   future  insurance  without  regard  to  any  particular
25    impairment or insolvency.
26        (ii)  Alternative policies shall  contain  at  least  the
27    minimum  statutory  provisions  required  in  this  State and
28    provide benefits that shall not be unreasonable  in  relation
29    to  the  premium  charged.   The  Association  shall  set the
30    premium in accordance with a table of rates  which  it  shall
31    adopt.   The premium shall reflect the amount of insurance to
32    be provided and the age and class of risk  of  each  insured,
33    but  shall  not  reflect  any  changes  in  the health of the
34    insured after the original policy was last underwritten.
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 1        (iii)  Any alternative policy issued by  the  Association
 2    shall  provide  coverage  of  a  type  similar to that of the
 3    policy issued  by  the  impaired  or  insolvent  insurer,  as
 4    determined by the Association.
 5        (f)  If  the  Association  elects  to  reissue terminated
 6    coverage at a premium rate different from that charged  under
 7    the  terminated  policy,  the  premium  shall  be  set by the
 8    Association  in  accordance  with  the  amount  of  insurance
 9    provided and the age and class of risk, subject  to  approval
10    of the Director or by a court of competent jurisdiction.
11        (g)  The   Association's   obligations  with  respect  to
12    coverage under  any  policy  of  the  impaired  or  insolvent
13    insurer  or  under  any  reissued or alternative policy shall
14    cease on the date such coverage  or  policy  is  replaced  by
15    another  similar  policy by the policyholder, the insured, or
16    the Association.
17        (4)  When proceeding under subparagraph  (2)(b)  of  this
18    Section  with  respect  to  any  policy  or contract carrying
19    guaranteed minimum  interest  rates,  the  Association  shall
20    assure  the  payment  or  crediting  of  a  rate  of interest
21    consistent  with  subparagraph  (2)(b)(iii)(B)   of   Section
22    531.03.
23        (5)  Nonpayment  of  premiums  thirty-one  days after the
24    date required under the terms  of  any  guaranteed,  assumed,
25    alternative  or  reissued  policy  or  contract or substitute
26    coverage shall terminate the Association's obligations  under
27    such  policy  or coverage under this Act with respect to such
28    policy  or  coverage,  except  with  respect  to  any  claims
29    incurred or any net cash surrender value which may be due  in
30    accordance with the provisions of this Act.
31        (6)  Premiums due for coverage after entry of an order of
32    liquidation  of  an  insolvent insurer shall belong to and be
33    payable  at  the  direction  of  the  Association,  and   the
34    Association  shall  be  liable  for  unearned premiums due to
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 1    policy or contract owners arising after  the  entry  of  such
 2    order.
 3        (7) (a)  In carrying out its duties under subsection (2),
 4    permanent  policy liens, or contract liens, may be imposed in
 5    connection with  any  guarantee,  assumption  or  reinsurance
 6    agreement, if the court:
 7        (i)  Finds  that  the amounts which can be assessed under
 8    this Act are less than the amounts needed to assure full  and
 9    prompt  performance  of  the  insolvent insurer's contractual
10    obligations, or that the economic or financial conditions  as
11    they  affect  member  insurers  are  sufficiently  adverse to
12    render the imposition of policy or contract liens, to  be  in
13    the public interest; and
14        (ii)  Approves  the  specific  policy  liens  or contract
15    liens to be used.
16        (b)  Before being  obligated  under  subsection  (2)  the
17    Association  may  request  that  there  be  imposed temporary
18    moratoriums or liens on payments of cash  values  and  policy
19    loans  in addition to any contractual provisions for deferral
20    of cash or policy loan values, and such temporary moratoriums
21    and liens may be imposed if they are approved by the court.
22        (8)  There shall be no liability on the part  of  and  no
23    cause  of  action  shall  arise  against  the  Association or
24    against any transferee from  the  Association  in  connection
25    with  the  transfer by reinsurance or otherwise of all or any
26    part of an impaired or insolvent insurer's business by reason
27    of any action taken or any failure to take any action by  the
28    impaired or insolvent insurer at any time.
29        (9)  If  the Association fails to act within a reasonable
30    period of time as provided in subsection (2) of this  Section
31    with respect to an insolvent insurer, the Director shall have
32    the  powers and duties of the Association under this Act with
33    regard to such insolvent insurers.
34        (10)  The Association or its  designated  representatives
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 1    may  render  assistance  and advice to the Director, upon his
 2    request,  concerning  rehabilitation,  payment   of   claims,
 3    continuations  of  coverage,  or  the  performance  of  other
 4    contractual obligations of any impaired or insolvent insurer.
 5        (11)  The  Association  has standing to appear before any
 6    court concerning all matters germane to the powers and duties
 7    of the Association, including, but not limited to,  proposals
 8    for  reinsuring  or  guaranteeing the covered policies of the
 9    impaired or insolvent insurer and the  determination  of  the
10    covered policies and contractual obligations.
11        (12) (a)  Any   person   receiving  benefits  under  this
12    Article is deemed to  have  assigned  the  rights  under  the
13    covered  policy  to  the  Association  to  the  extent of the
14    benefits  received  because  of  this  Article  whether   the
15    benefits   are   payments   of   contractual  obligations  or
16    continuation of coverage.  The  Association  may  require  an
17    assignment  to  it  of  such  rights  by any payee, policy or
18    contract owner, beneficiary, insured, certificate  holder  or
19    annuitant  as  a  condition  precedent  to the receipt of any
20    rights or  benefits  conferred  by  this  Article  upon  such
21    person.   The  Association  is  subrogated  to  these  rights
22    against the assets of any insolvent insurer.
23        (b)  The subrogation rights of the Association under this
24    subsection  have  the same priority against the assets of the
25    insolvent insurer as that possessed by the person entitled to
26    receive benefits under this Article.
27        (13)  The Association may:
28        (a)  Enter into such contracts as are necessary or proper
29    to carry out the provisions and purposes of this Article;
30        (b)  Sue or be sued, including taking any  legal  actions
31    necessary  or  proper  for recovery of any unpaid assessments
32    under Section 531.09.  The Association shall  not  be  liable
33    for punitive or exemplary damages;
34        (c)  Borrow money to effect the purposes of this Article.
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 1    Any   notes   or   other  evidence  of  indebtedness  of  the
 2    Association not in default are legal investments for domestic
 3    insurers and may be carried as admitted assets.
 4        (d)  Employ or retain such persons as  are  necessary  to
 5    handle  the financial transactions of the Association, and to
 6    perform such other functions as become  necessary  or  proper
 7    under this Article.
 8        (e)  Negotiate   and   contract   with   any  liquidator,
 9    rehabilitator, conservator, or ancillary  receiver  to  carry
10    out the powers and duties of the Association.
11        (f)  Take  such legal action as may be necessary to avoid
12    payment of improper claims.
13        (g)  Exercise, for the purposes of this  Article  and  to
14    the extent approved by the Director, the powers of a domestic
15    life  or  health  insurer, but in no case may the Association
16    issue insurance policies  or  annuity  contracts  other  than
17    those  issued  to  perform the contractual obligations of the
18    impaired or insolvent insurer.
19        (h)  Exercise  all  the  rights  of  the  Director  under
20    Section 193(4) of this Code with respect to covered  policies
21    after the association becomes obligated by statute.
22        (14)  With  respect  to  covered  policies  for which the
23    Association becomes obligated after an entry of an  order  of
24    liquidation  or  rehabilitation, the Association may elect to
25    succeed to the rights of the insolvent insurer arising  after
26    the  date of the order of liquidation or rehabilitation under
27    any contract of reinsurance to which  the  insolvent  insurer
28    was  a  party,  to  the  extent  that  such contract provides
29    coverage for losses occurring after the date of the order  of
30    liquidation or rehabilitation.  As a condition to making this
31    election,  the  Association  must pay all unpaid premiums due
32    under the contract for coverage relating  to  periods  before
33    and   after   the   date  of  the  order  of  liquidation  or
34    rehabilitation.
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 1    (Source: P.A. 86-753.)