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90_HB1552
215 ILCS 5/534.3 from Ch. 73, par. 1065.84-3
215 ILCS 5/534.4 from Ch. 73, par. 1065.84-4
215 ILCS 5/538.4 from Ch. 73, par. 1065.88-4
215 ILCS 5/545 from Ch. 73, par. 1065.95
215 ILCS 5/546 from Ch. 73, par. 1065.96
Amends the Illinois Insurance Code. Provides that
covered claim does not include certain third party claims
against insurers. Repeals certain provisions concerning
exhaustion of claims. Provides that an insured or claimant
shall be required to first exhaust all coverage provided by
any other insurance policy if the claim arises from the same
facts, injury, or loss that gave rise to the covered claim
against the Fund. Provides that the Fund's obligation shall
be reduced by the amount recovered or recoverable, whichever
is greater, under the other insurance policy. Provides that
to the extent the Fund's obligation is reduced, the liability
of the person insured by the insolvent insurer's policy for
the claim shall be reduced in the same amount. Makes other
changes. Effective immediately.
LRB9004923LDdv
LRB9004923LDdv
1 AN ACT to amend the Illinois Insurance Code by changing
2 Sections 534.3, 534.4, 538.4, 545, and 546.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Insurance Code is amended by
6 changing Sections 534.3, 534.4, 538.4, 545, and 546 as
7 follows:
8 (215 ILCS 5/534.3) (from Ch. 73, par. 1065.84-3)
9 Sec. 534.3. Covered claim; unearned premium defined.
10 (a) "Covered claim" means an unpaid claim for a loss
11 arising out of and within the coverage of an insurance policy
12 to which this Article applies and which is in force at the
13 time of the occurrence giving rise to the unpaid claim,
14 including claims presented during any extended discovery
15 period which was purchased from the company before the entry
16 of a liquidation order or which is purchased or obtained from
17 the liquidator after the entry of a liquidation order, made
18 by a person insured under such policy or by a person
19 suffering injury or damage for which a person insured under
20 such policy is legally liable, and for unearned premium, if:
21 (i) The company issuing the policy becomes an
22 insolvent company as defined in Section 534.4 after the
23 effective date of this Article; and
24 (ii) The claimant or insured is a resident of this
25 State at the time of the insured occurrence, or the
26 property from which a first party claim for damage to
27 property arises is permanently located in this State or,
28 in the case of an unearned premium claim, the
29 policyholder is a resident of this State at the time the
30 policy was issued; provided, that for entities other than
31 an individual, the residence of a claimant, insured, or
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1 policyholder is the state in which its principal place of
2 business is located at the time of the insured event.
3 (b) "Covered claim" does not include:
4 (i) any amount in excess of the applicable limits
5 of liability provided by an insurance policy to which
6 this Article applies; nor
7 (ii) any claim for punitive or exemplary damages;
8 nor
9 (iii) any first party claim by an insured who is an
10 affiliate of the insolvent company; nor
11 (iv) any first party or third party claim by or
12 against an insured whose net worth on December 31 of the
13 year next preceding the date the insurer becomes an
14 insolvent insurer exceeds $25,000,000 $50 million;
15 provided that an insured's net worth on such date shall
16 be deemed to include the aggregate net worth of the
17 insured and all of its affiliates as calculated on a
18 consolidated basis. However, this exclusion shall not
19 apply to third party claims against the insured where the
20 insured has applied for or consented to the appointment
21 of a receiver, trustee, or liquidator for all or a
22 substantial part of its assets, filed a voluntary
23 petition in bankruptcy, filed a petition or an answer
24 seeking a reorganization or arrangement with creditors or
25 to take advantage of any insolvency law, or, if an order,
26 judgment, or decree is entered by a court of competent
27 jurisdiction, on the application of a creditor,
28 adjudicating the insured bankrupt or insolvent or
29 approving a petition seeking reorganization of the
30 insured or of all or substantial part of its assets; nor
31 (v) any claim for any amount due any reinsurer,
32 insurer, insurance pool, or underwriting association as
33 subrogated recoveries, reinsurance recoverables,
34 contribution, indemnification or otherwise. No such claim
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1 held by a reinsurer, insurer, insurance pool, or
2 underwriting association may be asserted in any legal
3 action against a person insured under a policy issued by
4 an insolvent company other than to the extent such claim
5 exceeds the Fund obligation limitations set forth in
6 Section 537.2 of this Code.
7 (c) "Unearned Premium" means the premium for the
8 unexpired period of a policy which has been terminated prior
9 to the expiration of the period for which premium has been
10 paid and does not mean premium which is returnable to the
11 insured for any other reason.
12 (Source: P.A. 89-97, eff. 7-7-95.)
13 (215 ILCS 5/534.4) (from Ch. 73, par. 1065.84-4)
14 Sec. 534.4. "Insolvent company" means a company
15 organized as a stock company, mutual company, reciprocal or
16 Lloyds (a) which holds a certificate of authority to transact
17 insurance in this State either at the time the policy was
18 issued or when the insured event occurred, or any company
19 which has assumed such policy obligation through merger,
20 consolidation or reinsurance, whether or not such assuming
21 company held a certificate of authority to transact insurance
22 in this State at the time such policy was issued or when the
23 insured event occurred; and (b) against which a final an
24 Order of Liquidation with a finding of insolvency to which
25 there is no further right of appeal has been entered by a
26 court of competent jurisdiction in the company's State of
27 domicile after the effective date of this Article, and which
28 Order of Liquidation has not been stayed or been the subject
29 of a writ or supersedeas or other comparable order.
30 (Source: P.A. 85-576.)
31 (215 ILCS 5/538.4) (from Ch. 73, par. 1065.88-4)
32 Sec. 538.4. Legal actions by Fund. The Fund may sue or
-4- LRB9004923LDdv
1 be sued, including taking any legal actions necessary or
2 proper for recovery of any unpaid assessments under Sections
3 537.1 or 537.6. The Fund's power and right to sue includes,
4 but is not limited to, the power to intervene as a party
5 before any court that has jurisdiction over an insolvent
6 insurer when the Fund is a creditor or potential creditor of
7 the insolvent insurer.
8 (Source: P.A. 89-97, eff. 7-7-95.)
9 (215 ILCS 5/545) (from Ch. 73, par. 1065.95)
10 Sec. 545. Effect of paid claims.
11 (a) Every insured or claimant seeking the protection of
12 this Article shall cooperate with the Fund to the same extent
13 as such person would have been required to cooperate with the
14 insolvent company. The Fund shall have all the rights, duties
15 and obligations under the policy to the extent of the covered
16 claim payment, provided the Fund shall have no cause of
17 action against the insured of the insolvent company for any
18 sums it has paid out except such causes of action as the
19 insolvent company would have had if such sums had been paid
20 by the insolvent company and except as provided in paragraph
21 (d) of this Section.
22 (b) The Fund and any similar organization in another
23 state shall be recognized as claimants in the liquidation of
24 an insolvent company for any amounts paid by them on covered
25 claims obligations as determined under this Article or
26 similar laws in other states and shall receive dividends at
27 the priority set forth in paragraph (d) of subsection (1) of
28 Section 205 of this Code. The liquidator of an insolvent
29 company shall be bound by determinations of covered claim
30 eligibility under the Act and by settlements of claims made
31 the amounts of covered claim payments by the Fund or a
32 similar organization in another state on the receipt of
33 certification of such payments. In submitting their claim for
-5- LRB9004923LDdv
1 covered claim payments the Fund and any similar organization
2 in another state shall not be subject to the requirements of
3 Sections 208 and 209 of this Code and shall not be affected
4 by the failure of the person receiving a covered claim
5 payment to file a proof of claim.
6 (c) The expenses of the Fund and of any similar
7 organization in any other state, other than expenses incurred
8 in the performance of duties under Section 547 or similar
9 duties under the statute governing a similar organization in
10 another state, shall be accorded the same priority as the
11 liquidator's expenses. The liquidator shall make prompt
12 reimbursement to the Fund and any similar organization for
13 such expense payments.
14 (d) The Fund has the right to recover from the following
15 persons the amount of any covered claims and allocated claims
16 expenses which the Fund paid or incurred on behalf of such
17 person in satisfaction, in whole or in part, of liability
18 obligations of such person to any other person:
19 (i) any insured whose net worth on December 31 of
20 the year next preceding the date the company becomes an
21 insolvent company exceeds $50 million; provided that an
22 insured's net worth on such date shall be deemed to
23 include the aggregate net worth of the insured and all of
24 its affiliates as calculated on a consolidated basis.
25 (ii) any insured who is an affiliate of the
26 insolvent company.
27 (Source: P.A. 89-206, eff. 7-21-95.)
28 (215 ILCS 5/546) (from Ch. 73, par. 1065.96)
29 Sec. 546. Other insurance. Non-duplication of recovery.
30 (a) An insured or claimant shall be required first to
31 exhaust all coverage provided by any other insurance policy,
32 regardless of whether or not such other insurance policy was
33 written by a member company, if the claim under such other
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1 policy arises from the same facts, injury, or loss that gave
2 rise to the covered claim against the Fund. The Fund's
3 obligation under Section 537.2 shall be reduced by the amount
4 recovered or recoverable, whichever is greater, under such
5 other insurance policy. Where such other insurance policy
6 provides uninsured or underinsured motorist coverage, the
7 amount recoverable shall be deemed to be the full applicable
8 limits of such coverage. To the extent that the Fund's
9 obligation under Section 537.2 is reduced by application of
10 this Section, the liability of the person insured by the
11 insolvent insurer's policy for the claim shall be reduced in
12 the same amount. Any insured or claimant having a covered
13 claim against the Fund shall be required first to exhaust his
14 rights under any provision in any other insurance policy
15 which may be applicable to the claim, whether or not the
16 insurance policy was written by a member company. Any amount
17 payable on a covered claim under this Article shall be
18 reduced by the amount of such recovery under such insurance
19 policy.
20 (b) Any insured or claimant having a claim which may be
21 recovered under more than one insurance guaranty fund or its
22 equivalent shall seek recovery first from the Fund of the
23 place of residence of the insured except that if it is a
24 first party claim for damage to property with a permanent
25 location, he shall first seek recovery from the Fund of the
26 location of the property; if it is a workers' compensation
27 claim, he shall first seek recovery from the Fund of the
28 residence of the claimant. Any recovery under this Article
29 shall be reduced by the amount of the recovery from any other
30 insurance guaranty fund or its equivalent.
31 (Source: P.A. 89-97, eff. 7-7-95.)
32 Section 99. Effective date. This Act takes effect upon
33 becoming law.