Illinois General Assembly - Full Text of SB0089
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Full Text of SB0089  103rd General Assembly




SB0089 EngrossedLRB103 05113 BMS 50127 b

1    AN ACT concerning regulation.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Illinois Insurance Code is amended by
5changing Sections 533, 534, 537.2, 537.7, 538.2, and 545 and
6by adding Section 534.9 as follows:
7    (215 ILCS 5/533)  (from Ch. 73, par. 1065.83)
8    Sec. 533. Scope. This Article applies to all of the kinds
9of insurance written on a direct basis which are included in
10Class 2 and Class 3 of Section 4 of this Code as they appear
11and are defined in those clauses as of January 1, 1985, except
12that it shall not apply to:
13    (a) accident and health insurance written under clause (a)
14of Class 2, or
15    (b) mortgage guaranty or other financial guaranty written
16as suretyship obligations or insurance under clause (g),
17clause (h) or clause (i) of Class 2 or otherwise, or
18    (c) fidelity or surety bonds, or any other bonding
19obligations other than employee fidelity bonds, or
20    (d) marine insurance other than inland marine insurance,
21written under clause (d) of Class 3, or
22    (e) insurance of warranties or service contracts,
23including insurance that provides for the repair, replacement,



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1or service of goods or property or indemnification for repair,
2replacement, or service for the operational or structural
3failure of the goods or property due to a defect in materials,
4workmanship, or normal wear and tear or provides reimbursement
5for the liability incurred by the issuer of agreements or
6service contracts that provide these benefits, or
7    (f) any claim servicing agreement or insurance policy
8which contains a retrospective rating or other premium
9adjustment agreement under which premiums are substantially
10equal to the losses and loss expenses covered under the policy
11or any policy providing retroactive insurance of known loss,
13    (g) any insurance which is provided, guaranteed or
14reinsured pursuant to the Federal Crop Insurance Program or
15the National Flood Insurance Program, including flood
16insurance written by National Flood Insurance Program Write
17Your Own Companies.
18(Source: P.A. 89-97, eff. 7-7-95.)
19    (215 ILCS 5/534)  (from Ch. 73, par. 1065.84)
20    Sec. 534. Definitions. For the purposes of this Article,
21unless the context requires otherwise, the words and phrases
22defined in Sections 534.1 through 534.9 534.8 have the
23meanings set forth in those Sections.
24(Source: P.A. 85-576.)



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1    (215 ILCS 5/534.9 new)
2    Sec. 534.9. Cybersecurity insurance. "Cybersecurity
3insurance" means a type of insurance under Class 2 of Section 4
4of this Code that involves first-party and third-party
5coverage, in a policy or endorsement, written on a direct,
6admitted basis to cover losses and loss mitigation arising out
7of or relating to data privacy breaches, unauthorized
8information network security intrusions, computer viruses,
9ransomware, cyber extortion, identity theft, and similar
11    (215 ILCS 5/537.2)  (from Ch. 73, par. 1065.87-2)
12    Sec. 537.2. Obligation of Fund. The Fund shall be
13obligated to the extent of the covered claims existing prior
14to the entry of an Order of Liquidation against an insolvent
15company and arising within 30 days after the entry of such
16Order, or before the policy expiration date if less than 30
17days after the entry of such Order, or before the insured
18replaces the policy or on request effects cancellation, if he
19does so within 30 days after the entry of such Order. If the
20entry of an Order of Liquidation occurs on or after October 1,
211975 and before October 1, 1977, such obligations shall not:
22(i) exceed $100,000, or (ii) include any obligation to refund
23the first $100 of any unearned premium claim; and if the entry
24of an Order of Liquidation occurs on or after October 1, 1977
25and before January 1, 1988, such obligations shall not: (i)



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1exceed $150,000, except that this limitation shall not apply
2to any workers compensation claims, or (ii) include any
3obligation to refund the first $100 of any unearned premium
4claim; and if the entry of an Order of Liquidation occurs on or
5after January 1, 1988 and before January 1, 2011, such
6obligations shall not: (i) exceed $300,000, except that this
7limitation shall not apply to any workers compensation claims,
8or (ii) include any obligation to refund the first $100 of any
9unearned premium claim or to refund any unearned premium over
10$10,000 under any one policy. If the entry of an Order of
11Liquidation occurs on or after January 1, 2011, then such
12obligations shall not: (i) exceed $500,000, except that this
13limitation shall not apply to any workers compensation claims
14or (ii) include any obligation to refund the first $100 of any
15unearned premium claim or refund any unearned premium over
16$10,000 under any one policy. If the entry of an Order of
17Liquidation occurs on or after January 1, 2023, then such
18obligations shall not: (i) exceed $500,000, except that this
19limitation shall not apply to any workers compensation claims,
20or (ii) exceed without any deduction $50,000 for any unearned
21premium claim or refund under any one policy. In no event shall
22the Fund be obligated to a policyholder or claimant in an
23amount in excess of the face amount of the policy from which
24the claim arises, including, but not limited to, any
25applicable specific or aggregate limits. For purposes of this
26Article Act, obligations arising under an insurance policy



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1written to indemnify a permissibly self-insured employer under
2subsection (a) of Section 4 of the Workers' Compensation Act
3for its liability to pay workers' compensation benefits in
4excess of a specific or aggregate retention shall be subject
5to the applicable per-claim limits set forth in this Section.
6    In no event shall the Fund be obligated to pay an amount in
7excess of $500,000 in the aggregate for all first-party and
8third-party claims under a policy or endorsement providing
9cybersecurity insurance as defined in Section 534.9 and
10arising out of or related to a single insured event,
11regardless of the number of claims made or number of
13    In no event shall the Fund be liable for any interest on
14any judgment entered against the insured or the insolvent
15company, or for any other interest claim against the insured
16or the insolvent company, regardless of whether the insolvent
17company would have been obligated to pay such interest under
18the terms of its policy. The Fund shall be liable for interest
19at the statutory rate on money judgments entered against the
20Fund until the judgment is satisfied.
21    Any obligation of the Fund to defend an insured shall
22cease upon the Fund's payment or tender of an amount equal to
23the lesser of the Fund's covered claim obligation limit or the
24applicable policy limit.
25(Source: P.A. 99-368, eff. 8-14-15.)



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1    (215 ILCS 5/537.7)  (from Ch. 73, par. 1065.87-7)
2    Sec. 537.7. Investigation of claims; disposition.
3    (a) The Fund shall investigate claims brought against the
4Fund and adjust, compromise, settle, and pay covered claims to
5the extent of the Fund's obligation and deny all other claims.
6    (b) The Fund shall not be bound by a settlement, release,
7compromise, waiver, or final judgment executed or entered
8within 12 months prior to an order of liquidation and shall
9have the right to assert all defenses available to the Fund
10including, but not limited to, defenses applicable to
11determining and enforcing its statutory rights and obligations
12to any claim. The Fund shall be bound by a settlement, release,
13compromise, waiver, or final judgment executed or entered more
14than 12 months prior to an order of liquidation, but only if
15the claim is a covered claim and the settlement, release,
16compromise, waiver, or final judgment was not a result of
17fraud, collusion, default, or failure to defend. In addition,
18with respect to covered claims arising from a judgment under a
19decision, verdict, or finding based on the default of the
20insolvent insurer or its failure to defend, upon application
21by the Fund, either on its own behalf or on behalf of an
22insured, the court shall set aside the judgment, order,
23decision, verdict, or finding, and the Fund shall be permitted
24to defend against the claim on the merits. The same criteria
25determining whether the Fund will be bound, as specified in
26this subsection (b), shall apply to any settlement, release,



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1compromise, waiver, or final judgment entered into by a high
2net worth insured before the date on which claims by or against
3that insured became non-exempt for reasons specified in
4paragraph (iv) of subsection (b) of Section 534.3.
5    (c) The Fund shall have the right to appoint or approve and
6to direct legal counsel retained under liability insurance
7policies for the defense of covered claims as well as the right
8to appoint or approve and to direct legal counsel and other
9service providers under any other insurance policies subject
10to this Article, regardless of any limitations in the policy.
11(Source: P.A. 101-60, eff. 7-12-19.)
12    (215 ILCS 5/538.2)  (from Ch. 73, par. 1065.88-2)
13    Sec. 538.2. The Fund may employ or retain such persons as
14are necessary to handle claims, provide policy benefits and
15services, and perform other duties of the Fund.
16(Source: P.A. 77-305.)
17    (215 ILCS 5/545)  (from Ch. 73, par. 1065.95)
18    Sec. 545. Effect of paid claims.
19    (a) Every insured or claimant seeking the protection of
20this Article shall cooperate with the Fund to the same extent
21as such person would have been required to cooperate with the
22insolvent company. The Fund shall have all the rights, duties
23and obligations under the policy to the extent of the covered
24claim payment, provided the Fund shall have no cause of action



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1against the insured of the insolvent company for any sums it
2has paid out except such causes of action as the insolvent
3company would have had if such sums had been paid by the
4insolvent company and except as provided in subsection (d) of
5this Section. Any person recovering under this Article and any
6insured whose liabilities are satisfied under this Article
7shall be deemed to have assigned the person's or insured's
8rights under the policy to the Fund to the extent of his or her
9recovery or satisfaction obtained from the Fund's payments.
10    (b) The Fund and any similar organization in another state
11shall be recognized as claimants in the liquidation of an
12insolvent company for any amounts paid by them on covered
13claims obligations as determined under this Article or similar
14laws in other states and shall receive dividends at the
15priority set forth in paragraph (d) of subsection (1) of
16Section 205 of this Code; provided that if, at the time that
17the liquidator issues a cut-off notice to the Fund in
18anticipation of closing the estate, a reserve has been
19established by the Fund, or any similar organization in
20another state, for the amount of their future administrative
21expenses and loss development associated with unpaid reported
22pending claims, these reserves will be deemed to have been
23paid as of the date of the notice and payment shall be made
24accordingly. The liquidator of an insolvent company shall be
25bound by determinations of covered claim eligibility under the
26Act and by settlements of claims made by the Fund or a similar



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1organization in another state on the receipt of certification
2of such payments, to the extent those determinations or
3settlements satisfy obligations of the Fund, but the receiver
4shall not be bound in any way by those determinations or
5settlements to the extent that there remains a claim in the
6estate for amounts in excess of the payments by the Fund. In
7submitting their claim for covered claim payments the Fund and
8any similar organization in another state shall not be subject
9to the requirements of Sections 208 and 209 of this Code and
10shall not be affected by the failure of the person receiving a
11covered claim payment to file a proof of claim.
12    (c) The expenses of the Fund and of any similar
13organization in any other state, other than expenses incurred
14in the performance of duties under Section 547 or similar
15duties under the statute governing a similar organization in
16another state, shall be accorded priority over all claims
17against the estate, except as provided for in paragraph (a) of
18subsection (1) of Section 205 of this Code. The liquidator
19shall make prompt reimbursement to the Fund and any similar
20organization for such expense payments.
21    (d) The Fund has the right to recover from the following
22persons the amount of any covered claims (as determined
23without regard to the exemption in paragraph (iv) of
24subsection (b) of Section 534.3) and allocated claims expenses
25which the Fund paid or incurred on behalf of such person in
26satisfaction, in whole or in part, of liability obligations of



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1such person to any other person:
2        (i) any insured whose net worth on December 31 of the
3    year next preceding the date the company becomes an
4    insolvent company exceeds $25,000,000; provided that an
5    insured's net worth on such date shall be deemed to
6    include the aggregate net worth of the insured and all of
7    its affiliates as calculated on a consolidated basis.
8        (ii) any insured who is an affiliate of the insolvent
9    company.
10    The Fund may also, at its sole discretion and without
11assumption of any ongoing duty to do so, pay any workers
12compensation claims or any other third-party claims or any
13cybersecurity insurance obligations covered by a policy of an
14insolvent company on behalf of a high net worth insured as
15defined in paragraph (iv) of subsection (b) of Section 534.3.
16In that case, the Fund shall recover from the high net worth
17insured under this Section for all amounts paid on its behalf,
18all allocated claim adjusted expenses related to such claims,
19the Fund's attorney's fees, and all court costs in any action
20necessary to collect the full amount to the Fund's
21reimbursement under this Section.
22(Source: P.A. 100-410, eff. 8-25-17; 101-60, eff. 7-12-19.)
23    Section 99. Effective date. This Act takes effect upon
24becoming law.