(215 ILCS 5/173.4) (from Ch. 73, par. 785.4)
Sec. 173.4.
Assuming company may defend claims for insolvent ceding company.
Such reinsurance agreement may provide that the liquidator or receiver
of an insolvent ceding company shall give written notice of the pendency of
a claim against the insolvent ceding company on the policy or bond
reinsured within a reasonable time after such claim is filed in the
insolvency proceeding and that during the pendency of such claim any
assuming company may investigate such claim and interpose, at its own
expense, in the proceeding where such claim is to be adjudicated any
defense or defenses which it considers available to the ceding company or
its liquidator or receiver. The expense thus incurred by the assuming
company is chargeable against the insolvent ceding company as a part of the
expense of liquidation to the extent of a proportionate share of the
benefit which accrues to the ceding company solely as a result of the
defense undertaken by the assuming company.
Where two or more assuming companies are involved in the same claim and
a majority in interest elect to interpose a defense to such claim, the
expense shall be apportioned in accordance with the terms of the
reinsurance agreement as though such expense had been incurred by the
ceding company.
(Source: Laws 1965, p. 1077.)
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