Full Text of SB1377 101st General Assembly
SB1377eng 101ST GENERAL ASSEMBLY |
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| 1 | | AN ACT concerning regulation.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Illinois Insurance Code is amended by | 5 | | changing Sections 534.3, 537.6, 537.7, 538.3, 538.4, and 545 | 6 | | and by adding Section 538.9 as follows:
| 7 | | (215 ILCS 5/534.3) (from Ch. 73, par. 1065.84-3)
| 8 | | Sec. 534.3. Covered claim; unearned premium defined.
| 9 | | (a) "Covered claim" means an unpaid claim for a loss
| 10 | | arising out of and within the
coverage of an insurance policy | 11 | | to which this Article applies and which
is in force at the time | 12 | | of the occurrence giving rise to the unpaid
claim, including | 13 | | claims presented during any extended discovery period
which was | 14 | | purchased from the company before the entry of a liquidation
| 15 | | order or which is purchased or obtained from the liquidator | 16 | | after the entry
of a liquidation order, made by a person | 17 | | insured under such policy or by a
person
suffering injury or | 18 | | damage for which a person insured under such policy
is legally | 19 | | liable, and for unearned premium, if:
| 20 | | (i) The company issuing the policy becomes an insolvent
| 21 | | company as defined in Section 534.4
after the effective | 22 | | date of this Article; and
| 23 | | (ii) The claimant or insured is a resident of this |
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| 1 | | State at the time
of the insured occurrence, or the | 2 | | property from which a first party
claim for damage to | 3 | | property arises is
permanently located in this State or, in | 4 | | the case of an unearned premium
claim, the policyholder is | 5 | | a resident of this State at the time the policy
was issued; | 6 | | provided, that for entities other than an individual, the
| 7 | | residence of a claimant, insured, or policyholder is the | 8 | | state
in which its principal
place of business is located | 9 | | at the time of the insured event.
| 10 | | (b) "Covered claim" does not include:
| 11 | | (i) any amount in excess of the applicable limits of | 12 | | liability
provided by an insurance policy to which this | 13 | | Article applies; nor
| 14 | | (ii) any claim for punitive or exemplary damages or | 15 | | fines and penalties paid to government authorities ; nor
| 16 | | (iii) any first party claim by an insured who is an | 17 | | affiliate of the
insolvent company; nor
| 18 | | (iv) any first party or third party claim by or against | 19 | | an insured
whose net worth on December 31
of the year next | 20 | | preceding the date the insurer becomes an insolvent
insurer | 21 | | exceeds $25,000,000; provided that an insured's net
worth | 22 | | on such
date shall be deemed to include the aggregate net | 23 | | worth of the insured and
all of its affiliates as | 24 | | calculated on a consolidated basis. However, this
| 25 | | exclusion shall not apply to third party claims against the | 26 | | insured where the
insured has applied for or consented to |
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| 1 | | the appointment of a receiver, trustee,
or liquidator for | 2 | | all or a substantial part of its assets, filed a voluntary
| 3 | | petition in bankruptcy, filed a petition or an answer | 4 | | seeking a reorganization
or arrangement with creditors or | 5 | | to take advantage of any insolvency law, or
if an order, | 6 | | judgment, or decree is entered by a court of competent
| 7 | | jurisdiction, on the application of a creditor, | 8 | | adjudicating the insured
bankrupt or insolvent or | 9 | | approving a petition seeking reorganization of the
insured | 10 | | or of all or substantial part of its assets; nor
| 11 | | (v) any claim for any amount due any reinsurer, | 12 | | insurer,
insurance pool, or underwriting association as | 13 | | subrogated
recoveries, reinsurance recoverables, | 14 | | contribution, indemnification or
otherwise. No such claim | 15 | | held by a reinsurer,
insurer, insurance pool, or | 16 | | underwriting association may be asserted in any
legal | 17 | | action
against a person insured under a policy issued by an | 18 | | insolvent
company other than to the extent such claim | 19 | | exceeds the Fund
obligation limitations set forth in | 20 | | Section 537.2 of this Code.
| 21 | | (c) "Unearned Premium" means the premium for the unexpired | 22 | | period of a
policy which has been terminated prior to the | 23 | | expiration of the period for
which premium has been paid and | 24 | | does not mean premium which is returnable
to the insured for | 25 | | any other reason.
| 26 | | (Source: P.A. 89-97, eff. 7-7-95; 90-499, eff. 8-19-97.)
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| 1 | | (215 ILCS 5/537.6) (from Ch. 73, par. 1065.87-6)
| 2 | | Sec. 537.6. Allocation of claims; assessments. The Fund | 3 | | shall allocate
covered claims paid and expenses
incurred | 4 | | between the accounts established by Section 535 separately, and
| 5 | | assess member companies separately for each
account amounts | 6 | | necessary to pay the obligations of the Fund under
Section | 7 | | 537.2 subsequent to the entry of an Order of Liquidation | 8 | | against
an insolvent company, the expenses of handling
covered | 9 | | claims subsequent to such Order of Liquidation and other | 10 | | expenses
authorized by this
Article. The assessments of each | 11 | | member company shall be in the proportion that
the net direct | 12 | | written premiums of the member company for the calendar
year | 13 | | immediately preceding the year in which the assessment is | 14 | | levied on
the kinds of insurance in the account bears to the | 15 | | net direct written
premiums of all member companies for such | 16 | | preceding calendar year on the
kinds of insurance in the | 17 | | account. Each member company shall be notified
of the | 18 | | assessment not later than 30 days before it is due. Before | 19 | | January 1,
2002, no member
company may be assessed in any year | 20 | | on any account an amount greater
than 1% of that member | 21 | | company's net direct written premiums
on the kinds of insurance | 22 | | in the account for the calendar
year preceding the assessment. | 23 | | Beginning January 1, 2002, the amount a
member company may be | 24 | | assessed in any year on any account shall be a maximum of
2% of | 25 | | that member company's net direct written premium on the kinds |
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| 1 | | of
insurance in the account for the calendar year preceding the | 2 | | assessment. This
2% maximum shall apply regardless of the date | 3 | | of any insolvency that gives rise
to the need for the | 4 | | assessment. If the
maximum assessment, together with the other | 5 | | assets of the Fund in any
account, does not provide, in any one | 6 | | year, in any account, an amount
sufficient to make all | 7 | | necessary payments from that account, the funds
available shall | 8 | | be paid in the manner determined by the Fund and
approved by | 9 | | the Director and the unpaid portion shall be paid as
soon | 10 | | thereafter as funds become available. If requested by a member
| 11 | | company, the Director may exempt or defer the assessment of any | 12 | | member
company, if the assessment would cause the member | 13 | | company's financial
impairment.
| 14 | | In addition to the other assessment authority provided in | 15 | | this Section, the board of directors shall also have the | 16 | | assessment authority to pay off a loan as provided in Section | 17 | | 538.3. If a loan is projected to be outstanding for 3 years or | 18 | | more, then the board of directors shall have the authority to | 19 | | increase the assessment to 3% of the net direct written | 20 | | premiums for the previous year until the loan has been paid in | 21 | | full. | 22 | | (Source: P.A. 92-77, eff. 7-12-01.)
| 23 | | (215 ILCS 5/537.7) (from Ch. 73, par. 1065.87-7)
| 24 | | Sec. 537.7. Investigation of claims; disposition.
| 25 | | (a) The Fund shall investigate claims brought against the
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| 1 | | Fund and adjust, compromise, settle, and pay covered claims to | 2 | | the extent of
the Fund's
obligation and deny all other claims.
| 3 | | (b) The Fund shall not be bound by a settlement, release, | 4 | | compromise,
waiver, or final judgment executed or entered | 5 | | within 12 months prior to an
order of liquidation and shall | 6 | | have the right to assert all defenses available
to the Fund | 7 | | including, but not limited to, defenses applicable to | 8 | | determining
and enforcing its statutory rights and obligations | 9 | | to any claim. The Fund
shall be bound by a settlement, release, | 10 | | compromise, waiver, or final judgment
executed or entered more | 11 | | than 12 months prior to an order of liquidation,
but only | 12 | | however,
if the
claim is a covered claim and the settlement , | 13 | | release, compromise, waiver, or final judgment was not a result | 14 | | of
fraud, collusion, default, or failure to defend. In | 15 | | addition, with respect to
covered
claims arising from a | 16 | | judgment under a decision, verdict, or finding based on
the | 17 | | default of the insolvent insurer or its failure to defend, upon | 18 | | application
by the Fund, either on its own behalf or on behalf | 19 | | of an insured, the court
shall set aside the judgment, order, | 20 | | decision, verdict,
or finding, and the Fund shall be permitted | 21 | | to defend against the claim on the
merits. The same criteria | 22 | | determining whether the Fund will be bound, as specified in | 23 | | this subsection (b), shall apply to any settlement, release, | 24 | | compromise, waiver, or final judgment entered into by a high | 25 | | net worth insured before the date on which claims by or against | 26 | | that insured became non-exempt for reasons specified in |
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| 1 | | paragraph (iv) of subsection (b) of Section 534.3.
| 2 | | (c) The Fund shall have the right to appoint or
approve and | 3 | | to direct legal counsel
retained under liability insurance | 4 | | policies for the defense
of covered claims.
| 5 | | (Source: P.A. 92-77, eff. 7-12-01.)
| 6 | | (215 ILCS 5/538.3) (from Ch. 73, par. 1065.88-3)
| 7 | | Sec. 538.3.
The Fund may borrow an amount of money | 8 | | necessary to effect the purposes
of this Article in accord with | 9 | | the plan of operation. The board of directors shall have the | 10 | | authority to pledge all or an appropriate portion of future | 11 | | assessments as necessary to secure a loan that may be needed to | 12 | | pay covered claims. Until all loans secured by assessments are | 13 | | fully satisfied, the board of directors shall assess the | 14 | | maximum allowable under Section 537.6.
| 15 | | (Source: P.A. 77-305.)
| 16 | | (215 ILCS 5/538.4) (from Ch. 73, par. 1065.88-4)
| 17 | | Sec. 538.4. Legal actions by Fund. The Fund may sue or be | 18 | | sued, including , but not limited to, taking any legal actions | 19 | | necessary
or proper for recovery of : (i) any unpaid assessments | 20 | | under Section Sections 537.1 or 537.6 ; (ii) any amounts due to | 21 | | the Fund for salvage and subrogation under Section 537.4 or | 22 | | from insurers described in subsection (a) of Section 546; or | 23 | | (iii) any amounts due from an insured pursuant to subsections | 24 | | (a) and (d) of Section 545 .
The Fund's power to sue includes, |
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| 1 | | but is not limited to, the
power and right to
intervene as a | 2 | | party before any court that has jurisdiction over an insolvent
| 3 | | insurer when the Fund is a creditor or potential creditor of | 4 | | the insolvent
insurer.
| 5 | | (Source: P.A. 89-97, eff. 7-7-95; 90-499, eff. 8-19-97.)
| 6 | | (215 ILCS 5/538.9 new) | 7 | | Sec. 538.9. Action regarding insolvent company records. | 8 | | (a) In this Section, "claims information" includes files, | 9 | | records, and electronic data. | 10 | | (b) The Fund may bring an action against any third-party | 11 | | administrator, agent, attorney, or other representative of the | 12 | | insolvent insurer to obtain custody and control of all claims | 13 | | information related to an insolvent company that are | 14 | | appropriate or necessary for the Fund or a similar association | 15 | | in other states to carry out its duties under this Article. In | 16 | | such an action, the Fund shall have the absolute right through | 17 | | emergency equitable relief to obtain custody and control of | 18 | | such claims information in possession of such third-party | 19 | | administrator, agent, attorney or other representative of the | 20 | | insolvent insurer, regardless of where that claims information | 21 | | may be physically located. In bringing an action under this | 22 | | Section, the Fund shall not be subject to any defense, lien | 23 | | (possessory or otherwise), or other legal or equitable ground | 24 | | whatsoever for refusal to surrender such claims information | 25 | | that might be asserted against the liquidator of the insolvent |
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| 1 | | insurers. To the extent that litigation is required for the | 2 | | Fund to obtain custody and control of the claims information | 3 | | requested and it results in the relinquishment of claims | 4 | | information to the Fund after refusal to provide that | 5 | | information in response to a written demand, the court shall | 6 | | award the Fund its costs, expenses, and reasonable attorney's | 7 | | fees incurred in bringing the action. This Section shall have | 8 | | the same effect on the rights and remedies that the custodian | 9 | | of such claims information may have against the insolvent | 10 | | insurers, so long as these rights and remedies do not conflict | 11 | | with the rights of the Fund to custody and control of the | 12 | | claims information under this Article.
| 13 | | (215 ILCS 5/545) (from Ch. 73, par. 1065.95)
| 14 | | Sec. 545. Effect of paid claims.
| 15 | | (a) Every insured or claimant seeking the
protection of | 16 | | this Article shall cooperate with the Fund to the same
extent | 17 | | as such person would have been required to cooperate with the
| 18 | | insolvent company. The Fund shall have all the rights, duties | 19 | | and
obligations under the policy to the extent of the covered | 20 | | claim payment,
provided the Fund shall have no cause of action | 21 | | against the
insured of the insolvent company for any sums it | 22 | | has paid out except
such causes of action as the insolvent | 23 | | company would have had if such
sums had been paid by the | 24 | | insolvent company and except as provided in
subsection | 25 | | paragraph (d) of this Section. Any person recovering under this |
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| 1 | | Article and any insured whose liabilities are satisfied under | 2 | | this Article shall be deemed to have assigned the person's or | 3 | | insured's rights under the policy to the Fund to the extent of | 4 | | his or her recovery or satisfaction obtained from the Fund's | 5 | | payments.
| 6 | | (b) The Fund and any similar organization in another state | 7 | | shall be
recognized as claimants in the liquidation of an | 8 | | insolvent company for any
amounts paid by them on covered | 9 | | claims obligations as determined under this
Article or similar | 10 | | laws in other states and shall receive dividends at the
| 11 | | priority set forth in paragraph (d) of subsection (1) of | 12 | | Section
205 of this
Code; provided that if, at the time that | 13 | | the liquidator issues a cut-off notice to the Fund in | 14 | | anticipation of closing the estate, a reserve has been | 15 | | established by the Fund, or any similar organization in another | 16 | | state, for the amount of their future administrative expenses | 17 | | and loss development associated with unpaid reported pending | 18 | | claims, these reserves will be deemed to have been paid as of | 19 | | the date of the notice and payment shall be made accordingly.
| 20 | | The liquidator of an insolvent company shall be bound by
| 21 | | determinations of covered claim eligibility under the Act and | 22 | | by settlements
of claims made by
the Fund or a similar | 23 | | organization in
another state on the receipt of certification | 24 | | of such payments, to the extent
those
determinations or | 25 | | settlements satisfy obligations of the Fund, but the receiver
| 26 | | shall not be bound in any way by those determinations or |
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| 1 | | settlements to the
extent that there remains a claim in the | 2 | | estate for amounts in excess of the
payments by the Fund.
In | 3 | | submitting their claim for covered claim payments the Fund and | 4 | | any
similar organization in another state shall not be subject | 5 | | to the
requirements of Sections 208 and 209 of this Code and | 6 | | shall not be affected
by the failure of the person receiving a | 7 | | covered claim payment to file a proof
of claim.
| 8 | | (c) The expenses of the Fund and of any similar
| 9 | | organization in any other state, other than expenses incurred | 10 | | in the
performance of
duties under Section 547 or similar | 11 | | duties under the
statute governing a similar organization in | 12 | | another state, shall
be accorded priority over all claims
| 13 | | against the estate, except as provided for in paragraph (a) of | 14 | | subsection (1) of
Section 205 of this Code. The liquidator | 15 | | shall make prompt reimbursement
to the Fund and any similar | 16 | | organization for such expense payments.
| 17 | | (d) The Fund has the right to recover from the following | 18 | | persons the amount
of any covered claims (as determined without | 19 | | regard to the exemption in paragraph (iv) of subsection (b) of | 20 | | Section 534.3) and allocated claims expenses which the Fund | 21 | | paid or
incurred on behalf of such person in satisfaction, in | 22 | | whole or in part, of
liability obligations of such person to | 23 | | any other person:
| 24 | | (i) any insured whose net worth on December 31 of the | 25 | | year next
preceding the date the company becomes an | 26 | | insolvent company exceeds
$25,000,000; provided that an |
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| 1 | | insured's net worth on such date shall be deemed
to include | 2 | | the aggregate net worth of the insured and all of its | 3 | | affiliates
as calculated on a consolidated basis.
| 4 | | (ii) any insured who is an affiliate of the insolvent | 5 | | company.
| 6 | | The Fund may also, at its sole discretion and without | 7 | | assumption of any ongoing duty to do so, pay any workers | 8 | | compensation claims or any other third-party claims covered by | 9 | | a policy of an insolvent company on behalf of a high net worth | 10 | | insured as defined in paragraph (iv) of subsection (b) of | 11 | | Section 534.3. In that case, the Fund shall recover from the | 12 | | high net worth insured under this Section for all amounts paid | 13 | | on its behalf, all allocated claim adjusted expenses related to | 14 | | such claims, the Fund's attorney's fees, and all court costs in | 15 | | any action necessary to collect the full amount to the Fund's | 16 | | reimbursement under this Section. | 17 | | (Source: P.A. 100-410, eff. 8-25-17.)
| 18 | | Section 99. Effective date. This Act takes effect upon | 19 | | becoming law.
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