Full Text of HB3211 99th General Assembly
HB3211sam002 99TH GENERAL ASSEMBLY | Sen. William R. Haine Filed: 5/17/2016
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| 1 | | AMENDMENT TO HOUSE BILL 3211
| 2 | | AMENDMENT NO. ______. Amend House Bill 3211, AS AMENDED, by | 3 | | replacing everything after the enacting clause with the | 4 | | following:
| 5 | | "Section 5. The Illinois Insurance Code is amended by | 6 | | changing Sections 193, 531.03, 531.05, 531.07, 531.08, 531.09, | 7 | | 531.10, and 531.14 as follows:
| 8 | | (215 ILCS 5/193) (from Ch. 73, par. 805)
| 9 | | Sec. 193. Duties of
Director as liquidator; sales; | 10 | | reinsurance. | 11 | | (1) Upon the entry of an order directing liquidation, the | 12 | | Director shall
immediately proceed to liquidate the property, | 13 | | business, and affairs of the
company. The Director is hereby | 14 | | authorized to deal with the
property, business, and affairs of
| 15 | | the company in his name as Director, or, if the court shall so | 16 | | order, in
the name of the company.
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| 1 | | (2) The Director may, subject to the approval of the court, | 2 | | sell
or otherwise
dispose of the real and personal property, or | 3 | | any part thereof, and sell or
compromise all debts or claims | 4 | | owing to
the
company, except that
whenever the value of any | 5 | | real or personal property or the amount of any debt
owing to | 6 | | the
company does not exceed $25,000, the Director may sell, | 7 | | dispose
of,
compromise, or compound the
same upon such terms as | 8 | | the Director deems to
be in the best interest of the company
| 9 | | without obtaining approval of the court.
| 10 | | (3) The Director may bring any action, claim, suit, or | 11 | | proceeding
against any director or officer of the company or | 12 | | against any other person
with respect to that person's dealings | 13 | | with the company including, but not
limited to, prosecuting any | 14 | | action, claim, suit, or proceeding on behalf of the
creditors, | 15 | | members, policyholders, or shareholders of
the company. | 16 | | Nothing in this subsection shall be construed to affect the
| 17 | | standing of the Illinois Insurance Guaranty Fund, the Illinois | 18 | | Life and Health
Insurance Guaranty Association, or the Illinois | 19 | | Health Maintenance Organization
Guaranty Association to sue or | 20 | | be sued under applicable law.
| 21 | | (4) In order to preserve so far as possible the rights and | 22 | | interests of
the policyholders of the company whose contracts | 23 | | were cancelled by the
liquidation order and of such other | 24 | | creditors as may be possible, the
Director may solicit a | 25 | | contract or contracts whereby a solvent company or
companies | 26 | | will agree to assume in whole, or in part, or upon a modified
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| 1 | | basis, the liabilities owing to said former policyholders or | 2 | | creditors. The
Director may, subject to paragraph (h) of | 3 | | subsection (11) of Section 531.08 531.08(h) of this Code or | 4 | | Section 6-8 of
the Health Maintenance Organization Act, cede or | 5 | | reinsure
all or so much as may be necessary of the
in-force | 6 | | business to another company using assets of the liquidated | 7 | | company
to pay therefor in preference to satisfying other | 8 | | obligations or creditors.
The Director may assign any rights or | 9 | | interests of the company to receive
reinsurance proceeds for | 10 | | losses to the Illinois Life and Health Insurance
Guaranty | 11 | | Association, the Illinois Health Maintenance Organization | 12 | | Guaranty
Association or any similar organization in any other | 13 | | state. If,
after a full hearing upon a petition filed by the | 14 | | Director, the court
shall find that the Director endeavored to | 15 | | obtain the best contract for the
benefit of said parties in | 16 | | interest, and if the said Director shall report
to the court | 17 | | that he is ready and willing to enter into a contract and
| 18 | | submit a copy thereof to the court, the court shall examine the | 19 | | procedure
and acts of the Director, and if the court shall find | 20 | | that the best
possible contract in the interests of said | 21 | | parties has been obtained and
that it is best for the interests | 22 | | of said parties that said contract be
entered into, the court | 23 | | shall by written order approve the acts of the
Director and | 24 | | authorize him to execute said contract.
| 25 | | (5) In recognition of the rights of policyholders whose | 26 | | "claims
made" contracts were cancelled by the liquidation |
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| 1 | | order, he may, in his
discretion, permit such policyholders to | 2 | | purchase an extended discovery
period which is subject to the | 3 | | limitations in this Article. The
policyholder shall pay to the | 4 | | liquidator a premium which is appropriate for
the rights | 5 | | purchased as determined by the liquidator and approved by the
| 6 | | court. No extended discovery period purchased before or after | 7 | | the entry of
the liquidation order shall extend the time to | 8 | | file claims as set by the
court pursuant to Section 208 of this | 9 | | Code. Claims accruing by virtue of
such extended discovery | 10 | | period shall be treated as any other claim under
Article XXXIV | 11 | | of this Code, and shall be subject to the limitations,
| 12 | | exclusions and conditions in the Illinois Insurance Guaranty | 13 | | Fund Act and
in the laws governing similar organizations in | 14 | | other states.
| 15 | | (6) The Director is authorized to cancel policies, bonds, | 16 | | and contracts of
insurance subject to court approval.
| 17 | | (7) All persons, companies, and entities shall immediately | 18 | | turn over to
the Director all unearned premium that has been | 19 | | collected by or on behalf of
the company and all earned premium | 20 | | owing the company unless otherwise directed
in writing by the | 21 | | Director or by court order. Within 30 days of the date of a
| 22 | | written request of
the Director, those persons, companies, and | 23 | | entities shall
submit affidavits verifying amounts collected | 24 | | by, on behalf
of, or due and owing the company and further | 25 | | shall provide copies of all
premium fund trust account | 26 | | information and such other applicable documentation
as |
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| 1 | | requested by the Director. Nothing in this subsection shall be | 2 | | construed to
affect the rights of (i) the Illinois Life and | 3 | | Health Insurance Guaranty
Association to collect premium under | 4 | | subsection (4) item (6) of Section 531.08 of this Code or
(ii) | 5 | | the Illinois Health Maintenance Organization Guaranty | 6 | | Association to
collect premium under item (11) of Section 6-8 | 7 | | of the Health Maintenance
Organization Act.
| 8 | | (8) The amount recoverable by the Director from a reinsurer | 9 | | shall not be
reduced or diminished as a result of the entry of | 10 | | an order of liquidation
notwithstanding any provision in the | 11 | | reinsurance contract or other such
agreement. Payment made by a | 12 | | reinsurer to or on behalf of an insured of the
company shall | 13 | | not diminish the reinsurer's obligation to the company except
| 14 | | when the reinsurance agreement lawfully provides for payment to | 15 | | or on behalf of
the company's insured by the reinsurer. All | 16 | | reinsurance contracts to which the
company is a party, which do
| 17 | | not contain the provisions required with respect to the | 18 | | obligation of a
reinsurer in the event of insolvency of the | 19 | | reinsured to obtain credit for
reinsurance or pursuant to other | 20 | | applicable statutes, shall contain or be
construed to contain | 21 | | all of the following provisions:
| 22 | | (a) Upon the entry of an order of liquidation and | 23 | | notwithstanding the
Director's failure to pay all or a | 24 | | portion of a claim, the reinsurance
obligation shall be due | 25 | | and owing to the Director on the
basis of claims allowed in | 26 | | the liquidation proceeding. The reinsurer
shall submit the |
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| 1 | | amounts due and owing directly to the company as ceding
| 2 | | insurer or to the Director.
| 3 | | (b) The Director shall give written notice or arrange | 4 | | for the giving of
written notice to reinsurers or their | 5 | | agents of the pendency of a claim against
the
company | 6 | | indicating the policy or bond reinsured within a reasonable | 7 | | time after
the claim is filed. The reinsurer may interpose, | 8 | | at its own expense, in the
proceeding where the claim is to | 9 | | be adjudicated, any defenses that it may deem
available to | 10 | | the company or the Director.
| 11 | | (Source: P.A. 88-297; 89-206, eff. 7-21-95.)
| 12 | | (215 ILCS 5/531.03) (from Ch. 73, par. 1065.80-3)
| 13 | | Sec. 531.03. Coverage and limitations.
| 14 | | (1) This Article shall provide
coverage for the policies | 15 | | and contracts specified in paragraph (2) of this
Section:
| 16 | | (a) to persons who, regardless of where they reside | 17 | | (except for
non-resident certificate holders under group | 18 | | policies or contracts), are the
beneficiaries, assignees | 19 | | or payees of the persons covered under subparagraph
(1)(b), | 20 | | and
| 21 | | (b) to persons who are owners of or certificate holders | 22 | | under the policies or contracts (other than unallocated | 23 | | annuity contracts and structured settlement annuities) and | 24 | | in each case who: | 25 | | (i) are residents; or |
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| 1 | | (ii) are not residents, but only under all of the | 2 | | following conditions: | 3 | | (A) the insurer that issued the policies or | 4 | | contracts is domiciled in this State; | 5 | | (B) the states in which the persons reside have | 6 | | associations similar to the Association created by | 7 | | this Article; | 8 | | (C) the persons are not eligible for coverage | 9 | | by an association in any other state due to the | 10 | | fact that the insurer was not licensed in that | 11 | | state at the time specified in that state's | 12 | | guaranty association law. | 13 | | (c) For unallocated annuity contracts specified in | 14 | | subsection (2), paragraphs (a) and (b) of this subsection | 15 | | (1) shall not apply and this Article shall (except as | 16 | | provided in paragraphs (e) and (f) of this subsection) | 17 | | provide coverage to: | 18 | | (i) persons who are the owners of the unallocated | 19 | | annuity contracts if the contracts are issued to or in | 20 | | connection with a specific benefit plan whose plan | 21 | | sponsor has its principal place of business in this | 22 | | State; and | 23 | | (ii) persons who are owners of unallocated annuity | 24 | | contracts issued to or in connection with government | 25 | | lotteries if the owners are residents. | 26 | | (d) For structured settlement annuities specified in |
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| 1 | | subsection (2), paragraphs (a) and (b) of this subsection | 2 | | (1) shall not apply and this Article shall (except as | 3 | | provided in paragraphs (e) and (f) of this subsection) | 4 | | provide coverage to a person who is a payee under a | 5 | | structured settlement annuity (or beneficiary of a payee if | 6 | | the payee is deceased), if the payee: | 7 | | (i) is a resident, regardless of where the contract | 8 | | owner resides; or | 9 | | (ii) is not a resident, but only under both of the | 10 | | following conditions: | 11 | | (A) with regard to residency: | 12 | | (I) the contract owner of the structured | 13 | | settlement annuity is a resident; or | 14 | | (II) the contract owner of the structured | 15 | | settlement annuity is not a resident but the | 16 | | insurer that issued the structured settlement | 17 | | annuity is domiciled in this State and the | 18 | | state in which the contract owner resides has | 19 | | an association similar to the Association | 20 | | created by this Article; and | 21 | | (B) neither the payee or beneficiary nor the | 22 | | contract owner is eligible for coverage by the | 23 | | association of the state in which the payee or | 24 | | contract owner resides. | 25 | | (e) This Article shall not provide coverage to: | 26 | | (i) a person who is a payee or beneficiary of a |
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| 1 | | contract owner resident of this State if the payee or | 2 | | beneficiary is afforded any coverage by the | 3 | | association of another state; or | 4 | | (ii) a person covered under paragraph (c) of this | 5 | | subsection (1), if any coverage is provided by the | 6 | | association of another state to that person. | 7 | | (f) This Article is intended to provide coverage to a | 8 | | person who is a resident of this State and, in special | 9 | | circumstances, to a nonresident. In order to avoid | 10 | | duplicate coverage, if a person who would otherwise receive | 11 | | coverage under this Article is provided coverage under the | 12 | | laws of any other state, then the person shall not be | 13 | | provided coverage under this Article. In determining the | 14 | | application of the provisions of this paragraph in | 15 | | situations where a person could be covered by the | 16 | | association of more than one state, whether as an owner, | 17 | | payee, beneficiary, or assignee, this Article shall be | 18 | | construed in conjunction with other state laws to result in | 19 | | coverage by only one association.
| 20 | | (2)(a) This Article shall provide coverage to the persons
| 21 | | specified in paragraph (l) of this Section for direct, (i)
| 22 | | nongroup life, health, annuity and
supplemental policies, or | 23 | | contracts, (ii) for
certificates under direct group policies or | 24 | | contracts, (iii) for unallocated
annuity contracts and (iv) for | 25 | | contracts to furnish
health care services and subscription | 26 | | certificates for medical or health
care services issued by |
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| 1 | | persons licensed to transact insurance business
in this State | 2 | | under the Illinois Insurance Code.
Annuity contracts and | 3 | | certificates under group annuity contracts include
but are not | 4 | | limited to guaranteed investment contracts, deposit
| 5 | | administration contracts, unallocated funding agreements, | 6 | | allocated funding
agreements, structured settlement | 7 | | agreements, lottery contracts
and any immediate or deferred | 8 | | annuity contracts.
| 9 | | (b) This Article shall not provide coverage for:
| 10 | | (i) that portion of a policy or contract not guaranteed | 11 | | by the insurer, or under which the risk is borne by the | 12 | | policy or contract owner;
| 13 | | (ii) any such policy or contract or part thereof | 14 | | assumed by the impaired
or insolvent insurer under a | 15 | | contract of reinsurance, other than reinsurance
for which | 16 | | assumption certificates have been issued;
| 17 | | (iii) any portion of a policy or contract to the extent | 18 | | that the rate of interest on which it is based or the | 19 | | interest rate, crediting rate, or similar factor is | 20 | | determined by use of an index or other external reference | 21 | | stated in the policy or contract employed in calculating | 22 | | returns or changes in value:
| 23 | | (A) averaged over the period of 4 years prior to | 24 | | the date on which the member insurer becomes an | 25 | | impaired or insolvent insurer under this Article, | 26 | | whichever is earlier, exceeds the rate of interest |
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| 1 | | determined by subtracting 2 percentage points from | 2 | | Moody's Corporate Bond Yield Average averaged for that | 3 | | same 4-year period or for such lesser period if the | 4 | | policy or contract was issued less than 4 years before | 5 | | the member insurer becomes an impaired or insolvent | 6 | | insurer under this Article, whichever is earlier; and
| 7 | | (B) on and after the date on which the member | 8 | | insurer becomes an impaired or insolvent insurer under | 9 | | this Article, whichever is earlier, exceeds the rate of | 10 | | interest determined by subtracting 3 percentage points | 11 | | from Moody's Corporate Bond Yield Average as most | 12 | | recently available;
| 13 | | (iv) any unallocated annuity contract issued to or in | 14 | | connection with a benefit plan protected under the federal | 15 | | Pension Benefit Guaranty Corporation, regardless of | 16 | | whether the federal Pension Benefit Guaranty Corporation | 17 | | has yet become liable to make any payments with respect to | 18 | | the benefit plan;
| 19 | | (v) any portion of any unallocated annuity contract | 20 | | which is not issued
to or in connection with a specific | 21 | | employee, union or association of
natural persons benefit | 22 | | plan or a government lottery;
| 23 | | (vi) an obligation that does not arise under the | 24 | | express written terms of the policy or contract issued by | 25 | | the insurer to the contract owner or policy owner, | 26 | | including without limitation: |
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| 1 | | (A) a claim based on marketing materials; | 2 | | (B) a claim based on side letters, riders, or other | 3 | | documents that were issued by the insurer without | 4 | | meeting applicable policy form filing or approval | 5 | | requirements; | 6 | | (C) a misrepresentation of or regarding policy | 7 | | benefits; | 8 | | (D) an extra-contractual claim; or | 9 | | (E) a claim for penalties or consequential or | 10 | | incidental damages;
| 11 | | (vii) any stop-loss insurance, as defined in clause (b) | 12 | | of Class 1 or
clause (a) of Class 2 of Section 4, and | 13 | | further defined in subsection (d) of
Section 352;
| 14 | | (viii) any policy or contract providing any hospital, | 15 | | medical, prescription drug, or other health care benefits | 16 | | pursuant to Part C or Part D of Subchapter XVIII, Chapter 7 | 17 | | of Title 42 of the United States Code (commonly known as | 18 | | Medicare Part C & D) or any regulations issued pursuant | 19 | | thereto; | 20 | | (ix) any portion of a policy or contract to the extent | 21 | | that the assessments required by Section 531.09 of this | 22 | | Code with respect to the policy or contract are preempted | 23 | | or otherwise not permitted by federal or State law; | 24 | | (x) any portion of a policy or contract issued to a | 25 | | plan or program of an employer, association, or other | 26 | | person to provide life, health, or annuity benefits to its |
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| 1 | | employees, members, or others to the extent that the plan | 2 | | or program is self-funded or uninsured, including, but not | 3 | | limited to, benefits payable by an employer, association, | 4 | | or other person under: | 5 | | (A) a multiple employer welfare arrangement as | 6 | | defined in 29 U.S.C. Section 1002 29 U.S.C. Section | 7 | | 1144 ; | 8 | | (B) a minimum premium group insurance plan; | 9 | | (C) a stop-loss group insurance plan; or | 10 | | (D) an administrative services only contract; | 11 | | (xi) any portion of a policy or contract to the extent | 12 | | that it provides for: | 13 | | (A) dividends or experience rating credits; | 14 | | (B) voting rights; or | 15 | | (C) payment of any fees or allowances to any | 16 | | person, including the policy or contract owner, in | 17 | | connection with the service to or administration of the | 18 | | policy or contract; | 19 | | (xii) any policy or contract issued in this State by a | 20 | | member insurer at a time when it was not licensed or did | 21 | | not have a certificate of authority to issue the policy or | 22 | | contract in this State; | 23 | | (xiii) any contractual agreement that establishes the | 24 | | member insurer's obligations to provide a book value | 25 | | accounting guaranty for defined contribution benefit plan | 26 | | participants by reference to a portfolio of assets that is |
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| 1 | | owned by the benefit plan or its trustee, which in each | 2 | | case is not an affiliate of the member insurer; | 3 | | (xiv) any portion of a policy or contract to the extent | 4 | | that it provides for interest or other changes in value to | 5 | | be determined by the use of an index or other external | 6 | | reference stated in the policy or contract, but which have | 7 | | not been credited to the policy or contract, or as to which | 8 | | the policy or contract owner's rights are subject to | 9 | | forfeiture, as of the date the member insurer becomes an | 10 | | impaired or insolvent insurer under this Code, whichever is | 11 | | earlier. If a policy's or contract's interest or changes in | 12 | | value are credited less frequently than annually, then for | 13 | | purposes of determining the values that have been credited | 14 | | and are not subject to forfeiture under this Section, the | 15 | | interest or change in value determined by using the | 16 | | procedures defined in the policy or contract will be | 17 | | credited as if the contractual date of crediting interest | 18 | | or changing values was the date of impairment or | 19 | | insolvency, whichever is earlier, and will not be subject | 20 | | to forfeiture; or
| 21 | | (xv) that portion or part of a variable life insurance | 22 | | or
variable
annuity
contract not guaranteed by an insurer.
| 23 | | (3) The benefits for which the Association may become | 24 | | liable shall in
no event exceed the lesser of:
| 25 | | (a) the contractual obligations for which the insurer | 26 | | is liable or would
have been liable if it were not an |
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| 1 | | impaired or insolvent insurer, or
| 2 | | (b)(i) with respect to any one life, regardless of the | 3 | | number of policies
or
contracts:
| 4 | | (A) $300,000 in life insurance death benefits, but | 5 | | not more than
$100,000 in net cash surrender and net | 6 | | cash withdrawal values for life
insurance;
| 7 | | (B) in health insurance benefits: | 8 | | (I) $100,000 for coverages not defined as | 9 | | disability insurance or basic hospital, medical, | 10 | | and surgical insurance or major medical insurance | 11 | | or long-term care insurance, including any net | 12 | | cash surrender and net cash withdrawal values; | 13 | | (II) $300,000 for disability insurance and | 14 | | $300,000 for long-term care insurance as defined | 15 | | in Section 351A-1 of this Code ; and | 16 | | (III) $500,000 for basic hospital medical and | 17 | | surgical insurance or major medical insurance;
| 18 | | (C) $250,000 in the present value of annuity | 19 | | benefits, including net cash surrender and net cash | 20 | | withdrawal values; | 21 | | (ii) with respect to each individual participating in a | 22 | | governmental retirement benefit plan established under | 23 | | Sections 401, 403(b), or 457 of the U.S. Internal Revenue | 24 | | Code covered by an unallocated annuity contract or the | 25 | | beneficiaries of each such individual if deceased, in the | 26 | | aggregate, $250,000 in present value annuity benefits, |
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| 1 | | including net cash surrender and net cash withdrawal | 2 | | values; | 3 | | (iii) with respect to each payee of a structured | 4 | | settlement annuity or beneficiary or beneficiaries of the | 5 | | payee if deceased, $250,000 in present value annuity | 6 | | benefits, in the aggregate, including net cash surrender | 7 | | and net cash withdrawal values, if any; or | 8 | | (iv) with respect to either (1) one contract owner | 9 | | provided coverage under subparagraph (ii) of paragraph (c) | 10 | | of subsection (1) of this Section or (2) one plan sponsor | 11 | | whose plans own directly or in trust one or more | 12 | | unallocated annuity contracts not included in subparagraph | 13 | | (ii) of paragraph (b) of this subsection, $5,000,000 in | 14 | | benefits, irrespective of the number of contracts with | 15 | | respect to the contract owner or plan sponsor. However, in | 16 | | the case where one or more unallocated annuity contracts | 17 | | are covered contracts under this Article and are owned by a | 18 | | trust or other entity for the benefit of 2 or more plan | 19 | | sponsors, coverage shall be afforded by the Association if | 20 | | the largest interest in the trust or entity owning the | 21 | | contract or contracts is held by a plan sponsor whose | 22 | | principal place of business is in this State. In no event | 23 | | shall the Association be obligated to cover more than | 24 | | $5,000,000 in benefits with respect to all these | 25 | | unallocated contracts. | 26 | | (3.1) Notwithstanding the provisions of subsection (3), in |
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| 1 | | In no event shall the Association be obligated to cover more | 2 | | than (1) an aggregate of $300,000 in benefits with respect to | 3 | | any one life under subparagraphs (i), (ii), and (iii) of this | 4 | | paragraph (b) of subsection (3) except with respect to benefits | 5 | | for basic hospital, medical, and surgical insurance and major | 6 | | medical insurance under item (B) of subparagraph (i) of this | 7 | | paragraph (b) of subsection (3) , in which case the aggregate | 8 | | liability of the Association shall not exceed $500,000 with | 9 | | respect to any one individual or (2) with respect to one owner | 10 | | of multiple nongroup policies of life insurance, whether the | 11 | | policy owner is an individual, firm, corporation, or other | 12 | | person and whether the persons insured are officers, managers, | 13 | | employees, or other persons, $5,000,000 in benefits, | 14 | | regardless of the number of policies and contracts held by the | 15 | | owner. | 16 | | (3.2) The limitations set forth in subsections (3) and | 17 | | (3.1) this subsection are limitations on the benefits for which | 18 | | the Association is obligated before taking into account either | 19 | | its subrogation and assignment rights or the extent to which | 20 | | those benefits could be provided out of the assets of the | 21 | | impaired or insolvent insurer attributable to covered | 22 | | policies. The costs of the Association's obligations under this | 23 | | Article may be met by the use of assets attributable to covered | 24 | | policies or reimbursed to the Association pursuant to its | 25 | | subrogation and assignment rights.
| 26 | | (4) In performing its obligations to provide coverage under |
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| 1 | | Section 531.08 of this Code, the Association shall not be | 2 | | required to guarantee, assume, reinsure, or perform or cause to | 3 | | be guaranteed, assumed, reinsured, or performed the | 4 | | contractual obligations of the insolvent or impaired insurer | 5 | | under a covered policy or contract that do not materially | 6 | | affect the economic values or economic benefits of the covered | 7 | | policy or contract. | 8 | | (Source: P.A. 96-1450, eff. 8-20-10.)
| 9 | | (215 ILCS 5/531.05) (from Ch. 73, par. 1065.80-5)
| 10 | | Sec. 531.05. Definitions. As used in this Act:
| 11 | | "Account" means either of the 2 3 accounts created under | 12 | | Section
531.06.
| 13 | | "Association" means the Illinois Life and Health Insurance
| 14 | | Guaranty Association created under Section 531.06.
| 15 | | "Authorized assessment" or the term "authorized" when used | 16 | | in the context of assessments means a resolution by the Board | 17 | | of Directors has been passed whereby an assessment shall be | 18 | | called immediately or in the future from member insurers for a | 19 | | specified amount. An assessment is authorized when the | 20 | | resolution is passed. | 21 | | "Benefit plan" means a specific employee, union, or | 22 | | association of natural persons benefit plan. | 23 | | "Called assessment" or the term "called" when used in the | 24 | | context of assessments means that a notice has been issued by | 25 | | the Association to member insurers requiring that an authorized |
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| 1 | | assessment be paid within the time frame set forth within the | 2 | | notice. An authorized assessment becomes a called assessment | 3 | | when notice is mailed by the Association to member insurers. | 4 | | "Director" means the Director of Insurance of this State.
| 5 | | "Contractual obligation" means any obligation under a | 6 | | policy or
contract or certificate under a group policy or | 7 | | contract, or portion
thereof for which coverage is provided | 8 | | under Section 531.03.
| 9 | | "Covered person" means any person who is entitled to the
| 10 | | protection of the Association as described in Section 531.02.
| 11 | | "Covered policy" means any policy or contract within the | 12 | | scope
of this Article under Section 531.03.
| 13 | | "Extra-contractual claims" shall include , for example, | 14 | | claims relating to bad faith in the payment of claims, punitive | 15 | | or exemplary damages, or attorneys' fees and costs. | 16 | | "Impaired insurer" means (A) a member insurer which, after | 17 | | the effective date of this amendatory Act of the 96th General | 18 | | Assembly, is not an insolvent insurer, and is placed under an | 19 | | order of rehabilitation or conservation by a court of competent | 20 | | jurisdiction or (B) a member insurer deemed by the Director | 21 | | after the effective date of this amendatory Act of the 96th | 22 | | General Assembly to be potentially unable to fulfill its | 23 | | contractual obligations and not an insolvent insurer.
| 24 | | "Insolvent insurer" means a member insurer that, after the | 25 | | effective date of this amendatory Act of the 96th General | 26 | | Assembly, is placed under a final order of liquidation by a |
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| 1 | | court of competent jurisdiction with a finding of insolvency.
| 2 | | "Member insurer" means an insurer licensed or holding a | 3 | | certificate of authority to transact in this State any kind of | 4 | | insurance for which coverage is provided under Section 531.03 | 5 | | of this Code and includes an insurer whose license or | 6 | | certificate of authority in this State may have been suspended, | 7 | | revoked, not renewed, or voluntarily withdrawn or whose | 8 | | certificate of authority may have been suspended pursuant to | 9 | | Section 119 of this Code, but does not include: | 10 | | (1) a hospital or medical service organization, | 11 | | whether profit or nonprofit; | 12 | | (2) a health maintenance organization; | 13 | | (3) any burial society organized under Article XIX of | 14 | | this Code, any fraternal benefit society organized under | 15 | | Article XVII of this Code, any mutual benefit association | 16 | | organized under Article XVIII of this Code, and any foreign | 17 | | fraternal benefit society licensed under Article VI of this | 18 | | Code or
a fraternal benefit society ; | 19 | | (4) a mandatory State pooling plan; | 20 | | (5) a mutual assessment company or other person that | 21 | | operates on an assessment basis; | 22 | | (6) an insurance exchange; | 23 | | (7) an organization that is permitted to issue | 24 | | charitable gift annuities pursuant to Section 121-2.10 of | 25 | | this Code; | 26 | | (8) any health services plan corporation established |
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| 1 | | pursuant to the Voluntary Health Services Plans Act; | 2 | | (9) any dental service plan corporation established | 3 | | pursuant to the Dental Service Plan Act; or | 4 | | (10) an entity similar to any of the above.
| 5 | | "Moody's Corporate Bond Yield Average" means the Monthly | 6 | | Average
Corporates as published by Moody's Investors Service, | 7 | | Inc., or any successor
thereto. | 8 | | "Owner" of a policy or contract and "policy owner" and | 9 | | "contract owner" mean the person who is identified as the legal | 10 | | owner under the terms of the policy or contract or who is | 11 | | otherwise vested with legal title to the policy or contract | 12 | | through a valid assignment completed in accordance with the | 13 | | terms of the policy or contract and properly recorded as the | 14 | | owner on the books of the insurer. The terms owner, contract | 15 | | owner, and policy owner do not include persons with a mere | 16 | | beneficial interest in a policy or contract. | 17 | | "Person" means an individual, corporation, limited | 18 | | liability company, partnership, association, governmental body | 19 | | or entity, or voluntary organization. | 20 | | "Plan sponsor" means: | 21 | | (1) the employer in the case of a benefit plan | 22 | | established or maintained by a single employer; | 23 | | (2) the employee organization in the case of a benefit | 24 | | plan established or maintained by an employee | 25 | | organization; or | 26 | | (3) in a case of a benefit plan established or |
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| 1 | | maintained by 2 or more employers or jointly by one or more | 2 | | employers and one or more employee organizations, the | 3 | | association, committee, joint board of trustees, or other | 4 | | similar group of representatives of the parties who | 5 | | establish or maintain the benefit plan. | 6 | | "Premiums" mean amounts or considerations, by whatever | 7 | | name called, received on covered policies or contracts less | 8 | | returned premiums, considerations, and deposits and less | 9 | | dividends and experience credits. | 10 | | "Premiums" does not include: | 11 | | (A) amounts or considerations received for policies or | 12 | | contracts or for the portions of policies or contracts for | 13 | | which coverage is not provided under Section 531.03 of this | 14 | | Code except that assessable premium shall not be reduced on | 15 | | account of the provisions of subparagraph (iii) of | 16 | | paragraph (b) of subsection (2) (a) of Section 531.03 of | 17 | | this Code relating to interest limitations and the | 18 | | provisions of paragraph (b) of subsection (3) , subsection | 19 | | (3.1), or subsection (3.2) of Section 531.03 relating to | 20 | | limitations with respect to one individual, one | 21 | | participant, and one contract owner; | 22 | | (B) premiums in excess of $5,000,000 on an unallocated | 23 | | annuity contract not issued under a governmental | 24 | | retirement benefit plan (or its trustee) established under | 25 | | Section 401, 403(b) or 457 of the United States Internal | 26 | | Revenue Code; or |
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| 1 | | (C) with respect to multiple nongroup policies of life | 2 | | insurance owned by one owner, whether the policy owner is | 3 | | an individual, firm, corporation, or other person, and | 4 | | whether the persons insured are officers, managers, | 5 | | employees, or other persons, premiums in excess of | 6 | | $5,000,000 with respect to these policies or contracts, | 7 | | regardless of the number of policies or contracts held by | 8 | | the owner.
| 9 | | "Principal place of business" of a plan sponsor or a person | 10 | | other than a natural person means the single state in which the | 11 | | natural persons who establish policy for the direction, | 12 | | control, and coordination of the operations of the entity as a | 13 | | whole primarily exercise that function, determined by the | 14 | | Association in its reasonable judgment by considering the | 15 | | following factors: | 16 | | (A) the state in which the primary executive and | 17 | | administrative headquarters of the entity is located; | 18 | | (B) the state in which the principal office of the | 19 | | chief executive officer of the entity is located; | 20 | | (C) the state in which the board of directors (or | 21 | | similar governing person or persons) of the entity conducts | 22 | | the majority of its meetings; | 23 | | (D) the state in which the executive or management | 24 | | committee of the board of directors (or similar governing | 25 | | person or persons) of the entity conducts the majority of | 26 | | its meetings; |
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| 1 | | (E) the state from which the management of the overall | 2 | | operations of the entity is directed; and | 3 | | (F) in the case of a benefit plan sponsored by | 4 | | affiliated companies comprising a consolidated | 5 | | corporation, the state in which the holding company or | 6 | | controlling affiliate has its principal place of business | 7 | | as determined using the above factors. | 8 | | However, in the case of a plan sponsor, if more than 50% of | 9 | | the participants in the benefit plan are employed in a single | 10 | | state, that state shall be deemed to be the principal place of | 11 | | business of the plan sponsor. | 12 | | The principal place of business of a plan sponsor of a | 13 | | benefit plan described in paragraph (3) of the definition of | 14 | | "plan sponsor" this Section shall be deemed to be the principal | 15 | | place of business of the association, committee, joint board of | 16 | | trustees, or other similar group of representatives of the | 17 | | parties who establish or maintain the benefit plan that, in | 18 | | lieu of a specific or clear designation of a principal place of | 19 | | business, shall be deemed to be the principal place of business | 20 | | of the employer or employee organization that has the largest | 21 | | investment in the benefit plan in question. | 22 | | "Receivership court" means the court in the insolvent or | 23 | | impaired insurer's state having jurisdiction over the | 24 | | conservation, rehabilitation, or liquidation of the insurer. | 25 | | "Resident" means a person to whom a contractual obligation | 26 | | is owed and who resides in this State on the date of entry of a |
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| 1 | | court order that determines a member insurer to be an impaired | 2 | | insurer or a court order that determines a member insurer to be | 3 | | an insolvent insurer. A person may be a resident of only one | 4 | | state, which in the case of a person other than a natural | 5 | | person shall be its principal place of business. Citizens of | 6 | | the United States that are either (i) residents of foreign | 7 | | countries or (ii) residents of United States possessions, | 8 | | territories, or protectorates that do not have an association | 9 | | similar to the Association created by this Article, shall be | 10 | | deemed residents of the state of domicile of the insurer that | 11 | | issued the policies or contracts.
| 12 | | "Structured settlement annuity" means an annuity purchased | 13 | | in order to fund periodic payments for a plaintiff or other | 14 | | claimant in payment for or with respect to personal injury | 15 | | suffered by the plaintiff or other claimant. | 16 | | "State" means a state, the District of Columbia, Puerto | 17 | | Rico, and a United States possession, territory, or | 18 | | protectorate. | 19 | | "Supplemental contract" means a written agreement entered | 20 | | into for the distribution of proceeds under a life, health, or | 21 | | annuity policy or a life, health, or annuity contract.
| 22 | | "Unallocated annuity contract" means any annuity contract | 23 | | or group
annuity certificate which is not issued to and owned | 24 | | by an individual,
except to the extent of any annuity benefits | 25 | | guaranteed to an individual by
an insurer under such contract | 26 | | or certificate.
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| 1 | | (Source: P.A. 96-1450, eff. 8-20-10.)
| 2 | | (215 ILCS 5/531.07) (from Ch. 73, par. 1065.80-7)
| 3 | | Sec. 531.07. Board of Directors. ) The board of directors | 4 | | of the
Association consists of not less than 7 nor more than 11 | 5 | | members serving
terms as established in the plan of operation. | 6 | | The insurer members insurers of the board
are to be selected by | 7 | | member insurers subject to the approval of the
Director. In | 8 | | addition, 2 persons who must be public representatives may be | 9 | | appointed by the Director to the board of directors. A public | 10 | | representative may not be an officer, director, or employee of | 11 | | an insurance company or any person engaged in the business of | 12 | | insurance. Vacancies on the board must be filled for the | 13 | | remaining period
of the term in the manner described in the | 14 | | plan of operation.
| 15 | | In approving selections or in appointing members to the | 16 | | board, the
Director must consider, whether all member insurers | 17 | | are
fairly represented.
| 18 | | Members of the board may be reimbursed from the assets of | 19 | | the Association
for expenses incurred by them as members of the | 20 | | board of directors but
members of the board may not otherwise | 21 | | be compensated by the Association for
their services.
| 22 | | (Source: P.A. 96-1450, eff. 8-20-10.)
| 23 | | (215 ILCS 5/531.08) (from Ch. 73, par. 1065.80-8)
| 24 | | Sec. 531.08. Powers and duties of the Association. |
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| 1 | | (a) In addition to
the powers and duties enumerated in | 2 | | other Sections of this Article:
| 3 | | (1) If a member insurer is an impaired insurer, then | 4 | | the Association may, in its discretion and subject to any | 5 | | conditions imposed by the Association that do not impair | 6 | | the contractual obligations of the impaired insurer and | 7 | | that are approved by the Director: | 8 | | (a) (A) guarantee, assume, or reinsure or cause to | 9 | | be guaranteed, assumed, or reinsured, any or all of the | 10 | | policies or contracts of the impaired insurer; or | 11 | | (b) (B) provide such money, pledges, loans, notes, | 12 | | guarantees, or other means as are proper to effectuate | 13 | | paragraph (a) (A) and assure payment of the contractual | 14 | | obligations of the impaired insurer pending action | 15 | | under paragraph (a) (A) . | 16 | | (2) If a member insurer is an insolvent insurer, then | 17 | | the Association shall, in its discretion, either: | 18 | | (a) (A) guaranty, assume, or reinsure or cause to | 19 | | be guaranteed, assumed, or reinsured the policies or | 20 | | contracts of the insolvent insurer or assure payment of | 21 | | the contractual obligations of the insolvent insurer | 22 | | and provide money, pledges, loans, notes, guarantees, | 23 | | or other means reasonably necessary to discharge the | 24 | | Association's duties; or | 25 | | (b) (B) provide benefits and coverages in | 26 | | accordance with the following provisions: |
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| 1 | | (i) with respect to life and health insurance | 2 | | policies and annuities, ensure payment of benefits | 3 | | for premiums identical to the premiums and | 4 | | benefits (except for terms of conversion and | 5 | | renewability) that would have been payable under | 6 | | the policies or contracts of the insolvent insurer | 7 | | for claims incurred: | 8 | | (A) (a) with respect to group policies and | 9 | | contracts, not later than the earlier of the | 10 | | next renewal date under those policies or | 11 | | contracts or 45 days, but in no event less than | 12 | | 30 days, after the date on which the | 13 | | Association becomes obligated with respect to | 14 | | the policies and contracts; | 15 | | (B) (b) with respect to nongroup policies, | 16 | | contracts, and annuities not later than the | 17 | | earlier of the next renewal date (if any) under | 18 | | the policies or contracts or one year, but in | 19 | | no event less than 30 days, from the date on | 20 | | which the Association becomes obligated with | 21 | | respect to the policies or contracts; | 22 | | (ii) make diligent efforts to provide all | 23 | | known insureds or annuitants (for nongroup | 24 | | policies and contracts), or group policy owners | 25 | | with respect to group policies and contracts, 30 | 26 | | days notice of the termination (pursuant to |
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| 1 | | subparagraph (i) of this paragraph (b) (B) ) of the | 2 | | benefits provided; | 3 | | (iii) with respect to nongroup life and health | 4 | | insurance policies and annuities covered by the | 5 | | Association, make available to each known insured | 6 | | or annuitant, or owner if other than the insured or | 7 | | annuitant, and with respect to an individual | 8 | | formerly insured or formerly an annuitant under a | 9 | | group policy who is not eligible for replacement | 10 | | group coverage, make available substitute coverage | 11 | | on an individual basis in accordance with the | 12 | | provisions of subparagraph (iv) paragraph (3) , if | 13 | | the insureds or annuitants had a right under law or | 14 | | the terminated policy or annuity to convert | 15 | | coverage to individual coverage or to continue an | 16 | | individual policy or annuity in force until a | 17 | | specified age or for a specified time, during which | 18 | | the insurer had no right unilaterally to make | 19 | | changes in any provision of the policy or annuity | 20 | | or had a right only to make changes in premium by | 21 | | class.
| 22 | |
(iv) (b) In providing the substitute coverage | 23 | | required under subparagraph (iii) of this | 24 | | subsection (2), of paragraph (B) of item (2) of | 25 | | subsection (a)
of this Section, the Association | 26 | | may offer either to reissue the
terminated |
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| 1 | | coverage or to issue an alternative policy.
| 2 | |
Alternative or reissued policies shall be | 3 | | offered without requiring
evidence of | 4 | | insurability, and shall not provide for any | 5 | | waiting period or
exclusion that would not have | 6 | | applied under the terminated policy.
| 7 | |
The Association may reinsure any alternative | 8 | | or reissued policy.
| 9 | |
Alternative policies adopted by the | 10 | | Association shall be subject
to the approval of the | 11 | | Director. The Association may adopt alternative
| 12 | | policies of various types for future insurance | 13 | | without regard to any
particular impairment or | 14 | | insolvency.
| 15 | |
(v) Alternative policies shall contain at | 16 | | least the minimum statutory
provisions required in | 17 | | this State and provide benefits that shall not be
| 18 | | unreasonable in relation to the premium charged. | 19 | | The
Association shall set the premium in | 20 | | accordance with a table of rates which
it shall | 21 | | adopt. The premium shall reflect the amount of | 22 | | insurance to be
provided and the age and class of | 23 | | risk of each insured, but shall not
reflect any | 24 | | changes in the health of the insured after the | 25 | | original policy
was last underwritten.
| 26 | |
Any alternative policy issued by the |
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| 1 | | Association shall provide
coverage of a type | 2 | | similar to that of the policy issued by the | 3 | | impaired or
insolvent insurer, as determined by | 4 | | the Association.
| 5 | |
(vi) (c) If the Association elects to reissue | 6 | | terminated coverage at a
premium rate different | 7 | | from that charged under the terminated policy, the
| 8 | | premium shall be set by the Association in | 9 | | accordance with the amount of
insurance provided | 10 | | and the age and class of risk, subject to approval | 11 | | of
the Director or by a court of competent | 12 | | jurisdiction.
| 13 | |
(vii) (d) The Association's obligations with | 14 | | respect to coverage under any
policy of the | 15 | | impaired or insolvent insurer or under any | 16 | | reissued or
alternative policy shall cease on the | 17 | | date such coverage or policy is
replaced by another | 18 | | similar policy by the policyholder, the insured, | 19 | | or the
Association.
| 20 | |
(viii) (e) When proceeding under this Section | 21 | | with
respect to any policy or contract carrying | 22 | | guaranteed minimum interest
rates, the Association | 23 | | shall assure the payment or crediting of a rate of
| 24 | | interest consistent with subparagraph | 25 | | (2)(b)(iii) (B) of Section 531.03.
| 26 | |
(3) (f) Nonpayment of premiums thirty-one days after |
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| 1 | | the date required under
the terms of any guaranteed, | 2 | | assumed, alternative or reissued policy or
contract or | 3 | | substitute coverage shall terminate the Association's
| 4 | | obligations under such policy or coverage under this Act | 5 | | with respect to
such policy or coverage, except with | 6 | | respect to any claims incurred or any
net cash surrender | 7 | | value which may be due in accordance with the provisions of
| 8 | | this Act.
| 9 | |
(4) (g) Premiums due for coverage after entry of an | 10 | | order of liquidation of
an insolvent insurer shall belong | 11 | | to and be payable at the direction of the
Association,
and | 12 | | the Association shall be liable for unearned premiums due | 13 | | to policy or
contract owners arising after the entry of | 14 | | such order.
| 15 | | (5) (h) In carrying out its duties under subsection | 16 | | paragraph (2) of subsection (a) of this Section, the | 17 | | Association may: | 18 | | (a) (1) subject to approval by a court in this | 19 | | State , impose permanent policy or contract liens in | 20 | | connection with a guarantee, assumption, or | 21 | | reinsurance agreement if the Association finds that | 22 | | the amounts which can be assessed under this Article | 23 | | are less than the amounts needed to assure full and | 24 | | prompt performance of the Association's duties under | 25 | | this Article or that the economic or financial | 26 | | conditions as they affect member insurers are |
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| 1 | | sufficiently adverse to render the imposition of such | 2 | | permanent policy or contract liens to be in the public | 3 | | interest; or | 4 | | (b) (2) subject to approval by a court in this | 5 | | State , impose temporary moratoriums or liens on | 6 | | payments of cash values and policy loans or any other | 7 | | right to withdraw funds held in conjunction with | 8 | | policies or contracts in addition to any contractual | 9 | | provisions for deferral of cash or policy loan value. | 10 | | In addition, in the event of a temporary moratorium or | 11 | | moratorium charge imposed by the receivership court on | 12 | | payment of cash values or policy loans or on any other | 13 | | right to withdraw funds held in conjunction with | 14 | | policies or contracts, out of the assets of the | 15 | | impaired or insolvent insurer, the Association may | 16 | | defer the payment of cash values, policy loans, or | 17 | | other rights by the Association for the period of the | 18 | | moratorium or moratorium charge imposed by the | 19 | | receivership court, except for claims covered by the | 20 | | Association to be paid in accordance with a hardship | 21 | | procedure established by the liquidator or | 22 | | rehabilitator and approved by the receivership court.
| 23 | |
(6) (i) There shall be no liability on the part of and | 24 | | no cause of action
shall arise against the Association or | 25 | | against any transferee from the
Association in connection | 26 | | with the transfer by reinsurance or otherwise of
all or any |
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| 1 | | part of an impaired or insolvent insurer's business by | 2 | | reason of
any action taken or any failure to take any | 3 | | action by the impaired or
insolvent insurer at any time.
| 4 | |
(7) (j) If the Association fails to act within a | 5 | | reasonable period of
time as provided in subsection (2) of | 6 | | this Section with respect to an
insolvent insurer, the
| 7 | | Director shall have the powers and duties of the | 8 | | Association under this
Act with regard to such insolvent | 9 | | insurers.
| 10 | |
(8) (k) The Association or its designated | 11 | | representatives
may render assistance and advice to the
| 12 | | Director, upon his request, concerning rehabilitation, | 13 | | payment of
claims, continuations of coverage, or the | 14 | | performance of other
contractual obligations of any | 15 | | impaired or insolvent insurer.
| 16 | |
(9) (l) The Association shall have standing to appear | 17 | | or intervene before a court or agency in this State with | 18 | | jurisdiction over an impaired or insolvent insurer | 19 | | concerning which the Association is or may become obligated | 20 | | under this Article or with jurisdiction over any person or | 21 | | property against which the Association may have rights | 22 | | through subrogation or otherwise. Standing shall extend to | 23 | | all matters germane to the powers and duties of the | 24 | | Association, including, but not limited to, proposals for | 25 | | reinsuring, modifying, or guaranteeing the policies or | 26 | | contracts of the impaired or insolvent insurer and the |
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| 1 | | determination of the policies or contracts and contractual | 2 | | obligations. The Association shall also have the right to | 3 | | appear or intervene before a court or agency in another | 4 | | state with jurisdiction over an impaired or insolvent | 5 | | insurer for which the Association is or may become | 6 | | obligated or with jurisdiction over any person or property | 7 | | against whom the Association may have rights through | 8 | | subrogation or otherwise.
| 9 | |
(10)(a) (m)(1) A person receiving benefits under this | 10 | | Article shall be deemed to have assigned the rights under | 11 | | and any causes of action against any person for losses | 12 | | arising under, resulting from, or otherwise relating to the | 13 | | covered policy or contract to the Association to the extent | 14 | | of the benefits received because of this Article, whether | 15 | | the benefits are payments of or on account of contractual | 16 | | obligations, continuation of coverage, or provision of | 17 | | substitute or alternative coverages. The Association may | 18 | | require an assignment to it of such rights and cause of | 19 | | action by any payee, policy, or contract owner, | 20 | | beneficiary, insured, or annuitant as a condition | 21 | | precedent to the receipt of any right or benefits conferred | 22 | | by this Article upon the person.
| 23 | |
(b) (2) The subrogation rights of the Association | 24 | | under this subsection
have the same priority against the | 25 | | assets of the impaired or insolvent insurer as
that | 26 | | possessed by the person entitled to receive benefits under |
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| 1 | | this
Article. | 2 | | (c) (3) In addition to paragraphs (a) (1) and (b) (2) , | 3 | | the Association shall have all common law rights of | 4 | | subrogation and any other equitable or legal remedy that | 5 | | would have been available to the impaired or insolvent | 6 | | insurer or owner, beneficiary, or payee of a policy or | 7 | | contract with respect to the policy or contracts, including | 8 | | without limitation, in the case of a structured settlement | 9 | | annuity, any rights of the owner, beneficiary, or payee of | 10 | | the annuity to the extent of benefits received pursuant to | 11 | | this Article, against a person originally or by succession | 12 | | responsible for the losses arising from the personal injury | 13 | | relating to the annuity or payment therefor, excepting any | 14 | | such person responsible solely by reason of serving as an | 15 | | assignee in respect of a qualified assignment under | 16 | | Internal Revenue Code Section 130. | 17 | | (d) (4) If the preceding provisions of this subsection | 18 | | (10) (l) are invalid or ineffective with respect to any | 19 | | person or claim for any reason, then the amount payable by | 20 | | the Association with respect to the related covered | 21 | | obligations shall be reduced by the amount realized by any | 22 | | other person with respect to the person or claim that is | 23 | | attributable to the policies, or portion thereof, covered | 24 | | by the Association. | 25 | | (e) (5) If the Association has provided benefits with | 26 | | respect to a covered obligation and a person recovers |
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| 1 | | amounts as to which the Association has rights as described | 2 | | in the preceding paragraphs of this subsection (10), then | 3 | | the person shall pay to the Association the portion of the | 4 | | recovery attributable to the policies, or portion thereof, | 5 | | covered by the Association.
| 6 | |
(11) (n) The Association may:
| 7 | |
(a) (1) Enter into such contracts as are necessary | 8 | | or proper to carry
out the provisions and purposes of | 9 | | this Article.
| 10 | |
(b) (2) Sue or be sued, including taking any legal | 11 | | actions necessary or
proper for recovery of any unpaid | 12 | | assessments under Section 531.09. The
Association | 13 | | shall not be liable for punitive or exemplary damages.
| 14 | |
(c) (3) Borrow money to effect the purposes of | 15 | | this Article. Any notes
or other evidence of | 16 | | indebtedness of the Association not in default are
| 17 | | legal investments for domestic insurers and may be | 18 | | carried as admitted
assets.
| 19 | |
(d) (4) Employ or retain such persons as are | 20 | | necessary to handle the
financial transactions of the | 21 | | Association, and to perform such other
functions as | 22 | | become necessary or proper under this Article.
| 23 | |
(e) (5) Negotiate and contract with any | 24 | | liquidator, rehabilitator,
conservator, or ancillary | 25 | | receiver to carry out the powers and duties of
the | 26 | | Association.
|
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| 1 | |
(f) (6) Take such legal action as may be necessary | 2 | | to avoid payment of
improper claims.
| 3 | |
(g) (7) Exercise, for the purposes of this Article | 4 | | and to the extent
approved by the Director, the powers | 5 | | of a domestic life or health
insurer, but in no case | 6 | | may the Association issue insurance policies or
| 7 | | annuity contracts other than those issued to perform | 8 | | the contractual
obligations of the impaired or | 9 | | insolvent insurer.
| 10 | |
(h) (8) Exercise all the rights of the Director | 11 | | under Section 193(4) of
this Code with respect to | 12 | | covered policies after the association becomes
| 13 | | obligated by statute.
| 14 | | (i) (9) Request information from a person seeking | 15 | | coverage from the Association in order to aid the | 16 | | Association in determining its obligations under this | 17 | | Article with respect to the person, and the person | 18 | | shall promptly comply with the request. | 19 | | (j) (10) Take other necessary or appropriate | 20 | | action to discharge its duties and obligations under | 21 | | this Article or to exercise its powers under this | 22 | | Article. | 23 | |
(12) (o) With respect to covered policies for which | 24 | | the Association becomes
obligated after an entry of an | 25 | | order of liquidation or rehabilitation,
the Association | 26 | | may
elect to succeed to the rights of the insolvent insurer |
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| 1 | | arising after the
date of the order of liquidation or | 2 | | rehabilitation under any contract
of reinsurance to which
| 3 | | the insolvent insurer was a party, to the extent that such | 4 | | contract
provides coverage for losses occurring after the | 5 | | date of the order of
liquidation or rehabilitation. As a | 6 | | condition to making this election,
the Association must pay | 7 | | all unpaid premiums due under the contract for
coverage | 8 | | relating to periods before and after the date of the order | 9 | | of
liquidation or rehabilitation.
| 10 | | (13) (p) A deposit in this State, held pursuant to law | 11 | | or required by the Director for the benefit of creditors, | 12 | | including policy owners, not turned over to the domiciliary | 13 | | liquidator upon the entry of a final order of liquidation | 14 | | or order approving a rehabilitation plan of an insurer | 15 | | domiciled in this State or in a reciprocal state, pursuant | 16 | | to Article XIII 1/2 of this Code, shall be promptly paid to | 17 | | the Association. The Association shall be entitled to | 18 | | retain a portion of any amount so paid to it equal to the | 19 | | percentage determined by dividing the aggregate amount of | 20 | | policy owners' claims related to that insolvency for which | 21 | | the Association has provided statutory benefits by the | 22 | | aggregate amount of all policy owners' claims in this State | 23 | | related to that insolvency and shall remit to the | 24 | | domiciliary receiver the amount so paid to the Association | 25 | | less the amount retained pursuant to this subsection (13) . | 26 | | Any amount so paid to the Association and retained by it |
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| 1 | | shall be treated as a distribution of estate assets | 2 | | pursuant to applicable State receivership law dealing with | 3 | | early access disbursements. | 4 | | (14) (q) The Board of Directors of the Association | 5 | | shall have discretion and may exercise reasonable business | 6 | | judgment to determine the means by which the Association is | 7 | | to provide the benefits of this Article in an economical | 8 | | and efficient manner. | 9 | | (15) (r) Where the Association has arranged or offered | 10 | | to provide the benefits of this Article to a covered person | 11 | | under a plan or arrangement that fulfills the Association's | 12 | | obligations under this Article, the person shall not be | 13 | | entitled to benefits from the Association in addition to or | 14 | | other than those provided under the plan or arrangement. | 15 | | (16) (s) Venue in a suit against the Association | 16 | | arising under the Article shall be in Cook County. The | 17 | | Association shall not be required to give any appeal bond | 18 | | in an appeal that relates to a cause of action arising | 19 | | under this Article. | 20 | | (17) (t) The Association may join an organization of | 21 | | one or more other State associations of similar purposes to | 22 | | further the purposes and administer the powers and duties | 23 | | of the Association. | 24 | | (18) (u) In carrying out its duties in connection with | 25 | | guaranteeing, assuming, or reinsuring policies or | 26 | | contracts under subsections (1) or (2), the Association |
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| 1 | | may, subject to approval of the receivership court, issue | 2 | | substitute coverage for a policy or contract that provides | 3 | | an interest rate, crediting rate, or similar factor | 4 | | determined by use of an index or other external reference | 5 | | stated in the policy or contract employed in calculating | 6 | | returns or changes in value by issuing an alternative | 7 | | policy or contract in accordance with the following | 8 | | provisions: | 9 | | (a) (1) in lieu of the index or other external | 10 | | reference provided for in the original policy or | 11 | | contract, the alternative policy or contract provides | 12 | | for (i) a fixed interest rate, or (ii) payment of | 13 | | dividends with minimum guarantees, or (iii) a | 14 | | different method for calculating interest or changes | 15 | | in value; | 16 | | (b) (2) there is no requirement for evidence of | 17 | | insurability, waiting period, or other exclusion that | 18 | | would not have applied under the replaced policy or | 19 | | contract; and | 20 | | (c) (3) the alternative policy or contract is | 21 | | substantially similar to the replaced policy or | 22 | | contract in all other material terms. | 23 | | (Source: P.A. 96-1450, eff. 8-20-10; 97-333, eff. 8-12-11.)
| 24 | | (215 ILCS 5/531.09) (from Ch. 73, par. 1065.80-9)
| 25 | | Sec. 531.09. Assessments. |
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| 1 | | (1) For the purpose of providing the funds
necessary to | 2 | | carry out the powers and duties of the Association, the board
| 3 | | of directors shall assess the member insurers, separately for | 4 | | each account, at such
times and for such amounts as the board | 5 | | finds necessary. Assessments shall
be due not less than 30 days | 6 | | after written notice to the member insurers
and shall accrue | 7 | | interest from the due date at such adjusted rate as is
| 8 | | established under Section 6621 of Chapter 26 of the United | 9 | | States Code and
such interest shall be compounded daily.
| 10 | | (2) There shall be 2 classes of assessments, as follows:
| 11 | | (a) Class A assessments shall be made for the purpose | 12 | | of meeting administrative
costs and other general expenses | 13 | | and examinations conducted under the authority
of the | 14 | | Director under subsection (5) of Section 531.12.
| 15 | | (b) Class B assessments shall be made to the extent | 16 | | necessary to carry
out the powers and duties of the | 17 | | Association under Section 531.08 with regard
to an impaired | 18 | | or insolvent domestic insurer or insolvent foreign or alien | 19 | | insurers.
| 20 | | (3)(a) The amount of any Class A assessment shall be | 21 | | determined at the discretion of the board of directors and such | 22 | | assessments shall be authorized and called on a non-pro rata | 23 | | basis. The amount of any Class B
assessment shall be allocated | 24 | | for assessment
purposes among the accounts
and subaccounts | 25 | | pursuant to an allocation formula which may be based on
the | 26 | | premiums or reserves of the impaired or insolvent insurer or |
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| 1 | | any other
standard deemed by the board in its sole discretion | 2 | | as being fair and
reasonable under the circumstances.
| 3 | | (b) Class B assessments against member insurers for each | 4 | | account and
subaccount shall
be in the proportion that the | 5 | | premiums received on business in this State
by each assessed | 6 | | member insurer on policies or contracts covered by
each account | 7 | | or subaccount for the three most recent calendar years
for | 8 | | which information is available preceding the year in which the | 9 | | insurer
became impaired or insolvent, as the case may be, bears | 10 | | to such premiums
received on business in this State for such | 11 | | calendar years by all assessed
member insurers.
| 12 | | (c) Assessments for funds to meet the requirements of the | 13 | | Association
with respect to an impaired or insolvent insurer | 14 | | shall not be made until
necessary to implement the purposes of | 15 | | this Article. Classification
of assessments
under subsection | 16 | | (2) and computations of assessments under this subsection
shall | 17 | | be made with a reasonable degree of accuracy, recognizing that | 18 | | exact
determinations may not always be possible.
| 19 | | (4) The Association may abate or defer, in whole or in | 20 | | part, the assessment of a member insurer if, in the opinion of | 21 | | the board, payment of the assessment would endanger the ability | 22 | | of the member insurer to fulfill its contractual obligations. | 23 | | In the event an assessment against a member insurer is abated | 24 | | or deferred in whole or in part the amount by which the | 25 | | assessment is abated or deferred may be assessed against the | 26 | | other member insurers in a manner consistent with the basis for |
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| 1 | | assessments set forth in this Section. Once the conditions that | 2 | | caused a deferral have been removed or rectified, the member | 3 | | insurer shall pay all assessments that were deferred pursuant | 4 | | to a repayment plan approved by the Association. | 5 | | (5) (a) (i) Subject to the provisions of subparagraph (ii) | 6 | | of this paragraph, the total of all assessments authorized by | 7 | | the Association with respect to a member insurer for each | 8 | | subaccount of the life insurance and annuity account and for | 9 | | the health account shall not in one calendar year exceed 2% of | 10 | | that member insurer's average annual premiums received in this | 11 | | State on the policies and contracts covered by the subaccount | 12 | | or account during the 3 calendar years preceding the year in | 13 | | which the insurer became an impaired or insolvent insurer. | 14 | | (ii) If 2 or more assessments are authorized in one | 15 | | calendar year with respect to insurers that become impaired or | 16 | | insolvent in different calendar years, the average annual | 17 | | premiums for purposes of the aggregate assessment percentage | 18 | | limitation referenced in subparagraph (a) of this paragraph | 19 | | shall be equal and limited to the higher of the 3-year average | 20 | | annual premiums for the applicable subaccount or account as | 21 | | calculated pursuant to this Section. | 22 | | (iii) If the maximum assessment, together with the other | 23 | | assets of the Association in an account, does not provide in | 24 | | one year in either account an amount sufficient to carry out | 25 | | the responsibilities of the Association, the necessary | 26 | | additional funds shall be assessed as soon thereafter as |
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| 1 | | permitted by this Article. | 2 | | (b) The board may provide in the plan of operation a method | 3 | | of allocating funds among claims, whether relating to one or | 4 | | more impaired or insolvent insurers, when the maximum | 5 | | assessment will be insufficient to cover anticipated claims. | 6 | | (c) If the maximum assessment for a subaccount of the life | 7 | | insurance and annuity account in one year does not provide an | 8 | | amount sufficient to carry out the responsibilities of the | 9 | | Association, then pursuant to paragraph (b) of subsection (3), | 10 | | the board shall assess the other subaccounts of the life and | 11 | | annuity account for the necessary additional amount, subject to | 12 | | the maximum stated in paragraph (a) of this subsection.
| 13 | | (6) The board may, by an equitable method as established in | 14 | | the
plan of operation, refund to member insurers, in proportion | 15 | | to the contribution
of each insurer to that account, the amount | 16 | | by which the assets of the account
exceed the amount the board | 17 | | finds is necessary to carry out during the coming
year the | 18 | | obligations of the Association with regard to that account, | 19 | | including
assets accruing from net realized gains and income | 20 | | from investments. A
reasonable amount may be retained in any | 21 | | account to provide funds for the
continuing expenses of the | 22 | | Association and for future losses.
| 23 | | (7) An assessment is deemed to occur on the date upon which | 24 | | the board
votes such assessment. The board may defer calling | 25 | | the payment of the
assessment or may call for payment in one or | 26 | | more installments.
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| 1 | | (8) It is proper for any member insurer, in determining its | 2 | | premium
rates and policyowner dividends as to any kind of | 3 | | insurance within the scope of
this Article, to consider the | 4 | | amount reasonably necessary to meet its assessment
obligations | 5 | | under this Article.
| 6 | | (9) The Association must issue to each insurer paying a
| 7 | | Class B assessment
under this Article a certificate of | 8 | | contribution,
in a form acceptable to the
Director, for the | 9 | | amount of the assessment so paid. All outstanding certificates
| 10 | | are of equal
dignity and priority without reference to amounts | 11 | | or dates of issue. A certificate
of contribution may be shown | 12 | | by the insurer in its financial statement as an asset
in such | 13 | | form and for such amount, if any, and period of time as the | 14 | | Director
may approve, provided the insurer shall in any event | 15 | | at its option have
the right to show a certificate of | 16 | | contribution as an admitted asset at
percentages of the | 17 | | original face amount for calendar years as follows:
| 18 | | 100% for the calendar year after the year of issuance;
| 19 | | 80% for the second calendar year after the year of | 20 | | issuance;
| 21 | | 60% for the third calendar year after the year of issuance;
| 22 | | 40% for the fourth calendar year after the year of | 23 | | issuance;
| 24 | | 20% for the fifth calendar year after the year of issuance.
| 25 | | (10) The Association may request information of member | 26 | | insurers in order to aid in the exercise of its power under |
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| 1 | | this Section and member insurers shall promptly comply with a | 2 | | request. | 3 | | (Source: P.A. 95-86, eff. 9-25-07 (changed from 1-1-08 by P.A. | 4 | | 95-632); 96-1450, eff. 8-20-10.)
| 5 | | (215 ILCS 5/531.10) (from Ch. 73, par. 1065.80-10)
| 6 | | Sec. 531.10. Plan of Operation. ) | 7 | | (1)(a) The Association must
submit to the Director a plan | 8 | | of operation and any amendments thereto necessary
or suitable | 9 | | to assure the fair, reasonable, and equitable administration of | 10 | | the
Association. The plan of operation and any amendments | 11 | | thereto become effective
upon approval in writing by the | 12 | | Director.
| 13 | | (b) If the Association fails to submit a suitable plan of | 14 | | operation
within 180 days following the effective date of this | 15 | | Article or if at any time
thereafter the Association fails to | 16 | | submit suitable amendments to the plan, the
Director may, after | 17 | | notice and hearing, adopt and promulgate such reasonable
rules | 18 | | as are necessary or advisable to effectuate the provisions of | 19 | | this Article.
Such rules are in force until modified by the | 20 | | Director or superseded by a plan
submitted by the Association | 21 | | and approved by the Director.
| 22 | | (2) All member insurers must comply with the plan of | 23 | | operation.
| 24 | | (3) The plan of operation must, in addition to requirements | 25 | | enumerated
elsewhere in this Article:
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| 1 | | (a) Establish procedures for handling the assets of the | 2 | | Association;
| 3 | | (b) Establish the amount and method of reimbursing | 4 | | members of the
board of directors under Section 531.07;
| 5 | | (c) Establish regular places and times for meetings of | 6 | | the board
of directors;
| 7 | | (d) Establish procedures for records to be kept of all | 8 | | financial
transactions of the Association, its agents, and | 9 | | the board of directors;
| 10 | | (e) Establish the procedures whereby selections for | 11 | | the board
of directors will be made and submitted to the | 12 | | Director;
| 13 | | (f) Establish any additional procedures for | 14 | | assessments under
Section 531.09; and
| 15 | | (g) Contain additional provisions necessary or proper | 16 | | for the execution
of the powers and duties of the | 17 | | Association.
| 18 | | (4) The plan of operation shall establish a procedure for | 19 | | protest by
any member insurer of assessments made by the | 20 | | Association pursuant to
Section 531.09. Such procedures shall | 21 | | require that:
| 22 | | (a) a member insurer that wishes to protest all or part | 23 | | of an assessment shall pay when due the full amount of the | 24 | | assessment as set forth in the notice provided by the | 25 | | Association. The payment shall be available to meet | 26 | | Association obligations during the pendency of the protest |
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| 1 | | or any subsequent appeal. Payment shall be accompanied by a | 2 | | statement in writing that the payment is made under protest | 3 | | and setting forth a brief statement of the grounds for the | 4 | | protest;
| 5 | | (b) within 30 days following the payment of an | 6 | | assessment under
protest by any protesting member insurer, | 7 | | the Association must notify the
member insurer in writing | 8 | | of its determination with respect to the protest
unless the | 9 | | Association notifies the member that additional time is | 10 | | required
to resolve the issues raised by the protest;
| 11 | | (c) in the event the Association determines that the | 12 | | protesting member
insurer is entitled to a refund, such | 13 | | refund shall be made within 30
days following the date upon | 14 | | which the Association makes its determination;
| 15 | | (d) the decision of the Association with respect to a | 16 | | protest may be
appealed to the Director pursuant to Section | 17 | | 531.11(3);
| 18 | | (e) in the alternative to rendering a decision with | 19 | | respect to any
protest based on a question regarding the | 20 | | assessment base, the Association
may refer such protests to | 21 | | the Director for final decision, with or without
a | 22 | | recommendation from the Association; and
| 23 | | (f) interest on any refund due a protesting member | 24 | | insurer shall be paid
at the rate actually earned by the | 25 | | Association.
| 26 | | (5) The plan of operation may provide that any or all |
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| 1 | | powers and duties
of the Association, except those under | 2 | | paragraph (c) of subsection (11) (10)
of Section 531.08 and | 3 | | Section 531.09 are delegated to a corporation,
association or | 4 | | other organization which performs or will perform functions
| 5 | | similar to those of this Association, or its equivalent, in 2 | 6 | | or more states.
Such a corporation, association or organization | 7 | | shall be reimbursed for any
payments made on behalf of the | 8 | | Association and shall be paid for its
performance of any | 9 | | function of the Association. A delegation under this
subsection | 10 | | shall take effect only with the approval of both the Board of
| 11 | | Directors and the Director, and may be made only to a | 12 | | corporation, association
or organization which extends | 13 | | protection not substantially less favorable and
effective than | 14 | | that provided by this Act.
| 15 | | (Source: P.A. 96-1450, eff. 8-20-10.)
| 16 | | (215 ILCS 5/531.14) (from Ch. 73, par. 1065.80-14)
| 17 | | Sec. 531.14. Miscellaneous Provisions. | 18 | | (1) Nothing in this
Article may be construed to reduce the | 19 | | liability for unpaid assessments of the insured
of an impaired | 20 | | or insolvent insurer operating under a plan with assessment | 21 | | liability.
| 22 | | (2) Records must be kept of all negotiations and meetings | 23 | | in which
the Association or its representatives are involved to | 24 | | discuss the activities of the
Association in carrying out its | 25 | | powers and duties under Section 531.08. Records of such
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| 1 | | negotiations or meetings may be made public only upon the | 2 | | termination of a
liquidation, rehabilitation, or conservation | 3 | | proceeding involving the impaired
or insolvent insurer, upon | 4 | | the termination of the impairment or insolvency
of the insurer, | 5 | | or upon the order
of a court of competent jurisdiction. Nothing | 6 | | in this paragraph (2) limits the
duty of the Association to | 7 | | render a report of its activities under Section
531.15.
| 8 | | (3) For the purpose of carrying out its obligations under | 9 | | this Article,
the Association is deemed to be a creditor of the | 10 | | impaired or insolvent
insurer to the extent of assets | 11 | | attributable to covered policies reduced by any
amounts to | 12 | | which the Association is entitled as subrogee (under subsection | 13 | | (10) paragraph (8)
of Section 531.08). All assets of the | 14 | | impaired or insolvent insurer
attributable to covered policies | 15 | | must be used to continue all covered policies
and pay all | 16 | | contractual obligations of the impaired insurer as required by | 17 | | this
Article. "Assets attributable to covered policies", as | 18 | | used in this paragraph
(3), is that proportion of the
assets | 19 | | which the reserves that should have been established
for such | 20 | | policies bear to the reserve that should have been
established | 21 | | for all policies of
insurance written by the impaired or | 22 | | insolvent insurer.
| 23 | | (4) (a) Prior to the termination of any liquidation, | 24 | | rehabilitation,
or conservation proceeding, the court may take | 25 | | into consideration the contributions
of the respective | 26 | | parties, including the Association, the shareholders and
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| 1 | | policyowners of the impaired or insolvent insurer, and any | 2 | | other party with
a bona fide interest,
in making an equitable | 3 | | distribution of the ownership rights of such impaired
or | 4 | | insolvent
insurer. In such a determination, consideration must | 5 | | be given to the welfare of the
policyholders of the continuing | 6 | | or successor insurer.
| 7 | | (b) No distribution to stockholders, if any, of an impaired | 8 | | or insolvent insurer
may be made until and unless the total
| 9 | | amount of valid claims of the Association for funds expended | 10 | | with interest in carrying
out its powers and duties under | 11 | | Section 531.08, with respect to such insurer
have been fully | 12 | | recovered by the Association.
| 13 | | (5) (a) If an order for liquidation or rehabilitation of
an | 14 | | insurer
domiciled in this State has been entered, the receiver | 15 | | appointed under such
order has a right to recover on behalf of | 16 | | the insurer, from any affiliate that
controlled it, the amount | 17 | | of distributions, other than stock dividends paid by
the | 18 | | insurer on its capital stock, made at any time during the 5 | 19 | | years preceding
the petition for liquidation or rehabilitation | 20 | | subject to the limitations of
paragraphs (b) to (d).
| 21 | | (b) No such dividend is recoverable if the insurer shows | 22 | | that when
paid the distribution was lawful and reasonable, and | 23 | | that the insurer did not
know and could not reasonably have | 24 | | known that the distribution might adversely affect
the ability | 25 | | of the insurer to fulfill its contractual obligations.
| 26 | | (c) Any person who as an affiliate that controlled the |
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| 1 | | insurer at
the time the distributions were paid is liable up to | 2 | | the amount of distributions
he received. Any person who was an | 3 | | affiliate that controlled the insurer at the
time the | 4 | | distributions were declared, is liable up to the amount of | 5 | | distributions
he would have received if they had been paid | 6 | | immediately. If 2 persons are
liable with respect to the same | 7 | | distributions, they are jointly and severally liable.
| 8 | | (d) The maximum amount recoverable under subsection (5) of | 9 | | this Section is
the amount needed in excess of all other | 10 | | available assets of the insolvent insurer
to pay the | 11 | | contractual obligations of the insolvent insurer.
| 12 | | (e) If any person liable under paragraph (c) of subsection | 13 | | (5) of this
Section is insolvent, all its
affiliates that | 14 | | controlled it at the time the dividend was paid are jointly and
| 15 | | severally liable for any resulting deficiency in the amount | 16 | | recovered from
the insolvent affiliate.
| 17 | | (6) As a creditor of the impaired or insolvent insurer as | 18 | | established in subsection (3) of this Section and consistent | 19 | | with subsection (2) of Section 205 of this Code, the | 20 | | Association and other similar associations shall be entitled to | 21 | | receive a disbursement of assets out of the marshaled assets, | 22 | | from time to time as the assets become available to reimburse | 23 | | it, as a credit against contractual obligations under this | 24 | | Article. If the liquidator has not, within 120 days after a | 25 | | final determination of insolvency of an insurer by the | 26 | | receivership court, made an application to the court for the |
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| 1 | | approval of a proposal to disburse assets out of marshaled | 2 | | assets to guaranty associations having obligations because of | 3 | | the insolvency, then the Association shall be entitled to make | 4 | | application to the receivership court for approval of its own | 5 | | proposal to disburse these assets. | 6 | | (Source: P.A. 96-1450, eff. 8-20-10.)
| 7 | | Section 99. Effective date. This Act takes effect upon | 8 | | becoming law.".
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