Full Text of SB2560 93rd General Assembly
SB2560eng 93RD GENERAL ASSEMBLY
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LRB093 15798 SAS 41413 b |
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| AN ACT concerning insurance.
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| Be it enacted by the People of the State of Illinois, | 3 |
| represented in the General Assembly:
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| Section 5. The Illinois Insurance Code is amended by | 5 |
| changing Section 445 as
follows:
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| (215 ILCS 5/445) (from Ch. 73, par. 1057)
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| Sec. 445. Surplus line.
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| (1) Surplus line defined; surplus line insurer
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| requirements. " Surplus line insurance " means
is insurance on an | 10 |
| Illinois risk of
the kinds specified in Classes 2 and 3 of | 11 |
| Section 4 of this Code procured
from an unauthorized insurer or | 12 |
| a domestic surplus line insurer
as defined in
Section 445a
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| after the insurance producer representing the
insured or the | 14 |
| surplus line producer is unable, after diligent effort, to
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| procure said insurance from authorized insurers which are | 16 |
| authorized to
transact
business in this State other than | 17 |
| domestic surplus line insurers as defined
in Section 445a .
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| "Authorized insurer" means an insurer that holds a | 19 |
| certificate of
authority
issued by the Director but, for the | 20 |
| purposes of this Section, does not
include a
domestic surplus | 21 |
| line insurer as defined in Section 445a or any
residual market
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| mechanism. | 23 |
| "Residual market mechanism" means an association, | 24 |
| organization, or other
entity described in Article XXXIII of | 25 |
| this Code or Section 7-501 of the
Illinois Vehicle Code or any | 26 |
| similar association, organization, or other
entity. | 27 |
| "Unauthorized insurer" means an insurer that does not hold | 28 |
| a valid
certificate of authority issued by the Director but, | 29 |
| for the purposes of this
Section, shall also include a domestic | 30 |
| surplus line insurer as defined in
Section 445a.
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| Insurance producers may procure surplus line insurance | 32 |
| only if licensed
as a surplus line producer under this Section |
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| and may procure that
insurance only from an unauthorized | 2 |
| insurer or from a domestic
surplus line
insurer as defined in | 3 |
| Section 445a :
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| (a) that based upon information available to the | 5 |
| surplus
line producer
has a policyholders surplus of not | 6 |
| less than $15,000,000
determined in
accordance with | 7 |
| accounting rules that are applicable to
authorized | 8 |
| insurers;
and
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| (b) that has standards of solvency and management that | 10 |
| are adequate
for the protection of policyholders; and
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| (c) where an unauthorized insurer does not meet the
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| standards set forth
in (a) and (b) above, a surplus line | 13 |
| producer may, if necessary, procure
insurance from that | 14 |
| insurer only if prior written warning of
such fact or
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| condition is given to the insured by the insurance producer | 16 |
| or surplus line
producer.
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| Insurance producers shall not procure from an
unauthorized | 18 |
| insurer an insurance policy: | 19 |
| (i) that is designed to satisfy the
proof of financial | 20 |
| responsibility and insurance requirements in any
Illinois | 21 |
| law where the law requires that the proof of
insurance is | 22 |
| issued by an authorized insurer or residual market
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| mechanism; | 24 |
| (ii) that covers the risk of accidental injury to | 25 |
| employees arising
out of and in the course of employment | 26 |
| according to the provisions of the
Workers' Compensation | 27 |
| Act; or | 28 |
| (iii) that insures any Illinois personal lines risk, as | 29 |
| defined in
subsection (a), (b), or (c) of Section 143.13 of | 30 |
| this Code, that is eligible
for residual market mechanism | 31 |
| coverage, unless the insured or prospective
insured | 32 |
| requests limits of liability greater than the limits | 33 |
| provided by the
residual market mechanism. In the course of | 34 |
| making a diligent effort to
procure insurance from | 35 |
| authorized insurers, an insurance producer shall not be
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| required to submit a risk to a residual market mechanism |
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| when the risk is not
eligible for coverage or exceeds the | 2 |
| limits available in the residual market
mechanism. | 3 |
| Where there is an insurance policy issued by an
authorized | 4 |
| insurer or residual market mechanism
insuring a risk described | 5 |
| in item (i), (ii), or (iii)
above, nothing in this paragraph | 6 |
| shall be construed
to prohibit a surplus line producer from | 7 |
| procuring
from an unauthorized insurer a policy insuring the
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| risk on an excess or umbrella basis where the excess
or | 9 |
| umbrella policy is written over one or more
underlying | 10 |
| policies.
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| (2) Surplus line producer; license. Any licensed producer | 12 |
| who is a
resident of this State, or any nonresident who | 13 |
| qualifies under Section
500-40, may be licensed as a surplus | 14 |
| line producer upon:
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| (a) completing a prelicensing course of study. The
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| course provided for by this Section shall be conducted
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| under rules and
regulations prescribed by the Director. The | 18 |
| Director may administer the
course or may make | 19 |
| arrangements, including contracting with
an outside
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| educational service, for administering the course and
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| collecting the non-refundable application fee provided for | 22 |
| in this subsection.
Any
charges assessed
by the Director or | 23 |
| the educational service for administering
the course
shall | 24 |
| be paid directly by the individual applicants. Each | 25 |
| applicant
required to take the course shall enclose with | 26 |
| the application a non-refundable
$20
application
fee | 27 |
| payable to the Director plus a separate course
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| administration fee. An applicant who fails to appear for | 29 |
| the
course as scheduled, or appears but fails to complete | 30 |
| the
course, shall not be
entitled to any refund, and shall | 31 |
| be required to submit a new request to
attend the course | 32 |
| together with all the requisite fees before being | 33 |
| rescheduled
for another course at a later date; and
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| (b) payment of an annual license fee of $400; and
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| (c) procurement of the surety bond required in | 36 |
| subsection (4) of this
Section.
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| A surplus line producer so licensed shall keep a separate
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| account of
the business transacted thereunder which shall be | 3 |
| open at all times to the
inspection of the Director or his | 4 |
| representative.
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| The prelicensing course of study requirement in (a) above
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| shall not apply to insurance
producers who were licensed under | 7 |
| the Illinois surplus line law on or before
January 1, 2002
the | 8 |
| effective
date
of this amendatory Act of the 92nd General | 9 |
| Assembly .
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| (3) Taxes and reports.
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| (a) Surplus line tax and penalty for late payment.
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| A surplus line producer shall file with the Director on | 13 |
| or
before
February 1 and August 1 of each year a report in | 14 |
| the form prescribed by the
Director on all surplus line | 15 |
| insurance procured from unauthorized insurers
during the | 16 |
| preceding
6 month period ending December 31 or June 30
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| respectively, and on the filing of such report shall pay to | 18 |
| the Director
for the use and benefit of the State a sum | 19 |
| equal to 3.5% of the
gross
premiums less returned premiums | 20 |
| upon all surplus line insurance procured
or cancelled | 21 |
| during the preceding 6 months.
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| Any surplus line producer who fails to pay the full | 23 |
| amount due under this
subsection is liable, in addition to | 24 |
| the amount due, for such
penalty and interest charges as | 25 |
| are provided for under Section 412 of
this Code. The | 26 |
| Director, through the
Attorney General, may
institute an | 27 |
| action in the name of the People of the State of Illinois, | 28 |
| in
any court of competent jurisdiction, for the recovery of | 29 |
| the amount of such
taxes and penalties due, and prosecute | 30 |
| the same to final judgment, and take
such steps as are | 31 |
| necessary to collect the same.
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| (b) Fire Marshal Tax.
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| Each surplus line producer shall file with the Director | 34 |
| on or before
March 31 of each year a report in the form | 35 |
| prescribed by the Director on all
fire insurance procured | 36 |
| from unauthorized insurers subject to tax under
Section 12 |
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| of the Fire Investigation
Act
and shall pay to the Director | 2 |
| the fire marshal tax required thereunder.
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| (c) Taxes and fees charged to insured. The taxes | 4 |
| imposed under this
subsection and the countersigning fees | 5 |
| charged by the Surplus Line
Association of Illinois may be | 6 |
| charged to and collected from surplus line
insureds.
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| (4) Bond. Each surplus line producer, as a condition to | 8 |
| receiving a
surplus line producer's license, shall execute and | 9 |
| deliver to the Director
a surety bond to the People of the | 10 |
| State in the penal sum of $20,000, with
a surety which is | 11 |
| authorized to transact business in this State,
conditioned that | 12 |
| the surplus line producer will pay to the Director the tax,
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| interest and penalties levied under subsection (3) of this | 14 |
| Section.
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| (5) Submission of documents to Surplus Line Association of | 16 |
| Illinois.
A surplus line producer shall submit every insurance | 17 |
| contract
issued
under his or her license to the Surplus Line | 18 |
| Association of Illinois for
recording and countersignature. | 19 |
| The submission and countersignature may be
effected through | 20 |
| electronic means. The submission shall set
forth:
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| (a) the name of the insured;
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| (b) the description and location of the insured | 23 |
| property or
risk;
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| (c) the amount insured;
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| (d) the gross premiums charged or returned;
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| (e) the name of the unauthorized insurer or domestic | 27 |
| surplus line
insurer as defined in Section 445a from whom | 28 |
| coverage has been procured;
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| (f) the kind or kinds of insurance procured; and
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| (g) amount of premium subject to tax required by | 31 |
| Section 12 of the Fire
Investigation Act.
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| Proposals, endorsements, and other documents which are
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| incidental to the insurance but which do not affect the | 34 |
| premium
charged
are exempted from filing and | 35 |
| countersignature.
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| The submission of insuring contracts
to the Surplus |
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| Line Association of
Illinois constitutes a certification | 2 |
| by the surplus line producer or by the
insurance producer | 3 |
| who presented the risk to the surplus line producer for
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| placement as a surplus line risk that
after diligent effort | 5 |
| the required insurance could not be procured from
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| authorized insurers which are authorized to transact | 7 |
| business in this
State other than
domestic surplus line | 8 |
| insurers as defined in Section 445a and that
such | 9 |
| procurement was otherwise in accordance with the surplus | 10 |
| line law.
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| (6) Countersignature required. It shall be unlawful for an | 12 |
| insurance
producer to deliver any unauthorized insurer
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| contract or domestic
surplus line insurer contract unless such
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| insurance contract is countersigned by the Surplus Line | 15 |
| Association of
Illinois.
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| (7) Inspection of records. A surplus line producer shall
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| maintain
separate records of the business transacted under his | 18 |
| or her license,
including complete copies of surplus line | 19 |
| insurance contracts maintained on
paper or by electronic means, | 20 |
| which
records shall be open at all times for inspection by the | 21 |
| Director and by
the Surplus Line Association of Illinois.
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| (8) Violations and penalties. The Director may suspend or | 23 |
| revoke or
refuse to renew a surplus line producer license for | 24 |
| any violation of this Code.
In addition to or in lieu of | 25 |
| suspension or revocation, the Director may
subject a surplus | 26 |
| line producer
to a civil penalty of up to $2,000 for each cause | 27 |
| for suspension
or
revocation. Such penalty is enforceable under | 28 |
| subsection (5) of Section
403A of this Code.
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| (9) Director may declare insurer ineligible. If the
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| Director determines
that the further assumption of risks might | 31 |
| be hazardous to the
policyholders of an unauthorized insurer, | 32 |
| the Director may
order the
Surplus Line Association of
Illinois | 33 |
| not to countersign insurance contracts evidencing insurance in
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| such insurer and order surplus line producers to cease
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| procuring insurance
from such insurer.
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| (10) Service of process upon Director. Insurance contracts
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| delivered under this Section from unauthorized insurers , other | 2 |
| than domestic
surplus line insurers as defined in Section 445a,
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| shall contain a
provision designating the
Director and his | 4 |
| successors in office the true and lawful attorney of the
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| insurer upon whom may be served all lawful process in any
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| action, suit or
proceeding arising out of such insurance.
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| Service of process made upon the Director to be valid hereunder | 8 |
| must state
the name of the insured, the name of the | 9 |
| unauthorized insurer
and identify
the contract of insurance. | 10 |
| The Director at his option is authorized to
forward a copy of | 11 |
| the process to the Surplus Line Association of Illinois
for | 12 |
| delivery to the unauthorized insurer or the Director may | 13 |
| deliver the process to the
unauthorized insurer by other means | 14 |
| which he considers to be
reasonably
prompt and certain.
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| (10.5) Insurance contracts delivered under this Section | 16 |
| from unauthorized insurers, other than domestic surplus line | 17 |
| insurers as defined in Section 445a, shall have stamped or | 18 |
| imprinted on the first page thereof in not less than 12-pt. | 19 |
| bold face type the following legend: "Notice to Policyholder: | 20 |
| This contract is issued, pursuant to Section 445 of the | 21 |
| Illinois Insurance Code, by a company not authorized and | 22 |
| licensed to transact business in Illinois and as such is not | 23 |
| covered by the Illinois Insurance Guaranty Fund." Insurance | 24 |
| contracts delivered under this Section from domestic surplus | 25 |
| line insurers as defined in Section 445a shall have stamped or | 26 |
| imprinted on the first page thereof in not less than 12-pt. | 27 |
| bold face type the following legend: "Notice to Policyholder: | 28 |
| This contract is issued by a domestic surplus line insurer, as | 29 |
| defined in Section 445a of the Illinois Insurance Code, | 30 |
| pursuant to Section 445, and as such is not covered by the | 31 |
| Illinois Insurance Guaranty Fund."
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| (11) The Illinois Surplus Line law does not apply to | 33 |
| insurance of
property and operations of railroads or aircraft | 34 |
| engaged in interstate or
foreign commerce, insurance of | 35 |
| vessels, crafts or hulls, cargoes, marine
builder's risks, | 36 |
| marine protection and indemnity, or other risks including
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| strikes and war risks insured under ocean or wet marine forms | 2 |
| of policies.
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| (12) Surplus line insurance procured under this Section, | 4 |
| including
insurance procured from a domestic surplus line | 5 |
| insurer, is not subject
to the provisions of the Illinois | 6 |
| Insurance Code other than Sections 123,
123.1, 401, 401.1, 402, | 7 |
| 403, 403A, 408, 412, 445, 445.1, 445.2, 445.3,
445.4, and all | 8 |
| of the provisions of Article XXXI to the extent that the
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| provisions of Article XXXI are not inconsistent with the terms | 10 |
| of this Act.
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| (Source: P.A. 92-386, eff. 1-1-02; 93-29, eff. 6-20-03; 93-32, | 12 |
| eff.
7-1-03.)
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| Section 99. Effective date. This Act takes effect upon | 14 |
| becoming law. |
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