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92_HB2246 LRB9202777DJmg 1 AN ACT in relation to property. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Condominium Property Act is amended by 5 changing Sections 12 and 12.1 as follows: 6 (765 ILCS 605/12) 7 Sec. 12. Insurance. 8 (a) Required coverage. A condominium association must 9 maintain the following insurance coverage: 10 (1) Property insurance. Property insurance (i) on 11 the common elements and the units, including the limited 12 common elements and except as otherwise determined by the 13 board of managers, the bare walls, floors, and ceilings 14 of the unit, (ii) providing coverage for special form 15 causes of loss, and (iii) in a total amount of not less 16 than the full insurable replacement cost of the insured 17 property, less deductibles, but including coverage for 18 municipal building code requirements, at the time the 19 insurance is purchased and at each renewal date. 20 (2) General liability insurance. Commercial general 21 liability insurance against claims and liabilities 22 arising in connection with the ownership, existence, use, 23 or management of the property in a minimum amount of 24 $1,000,000, or a greater amount deemed sufficient in the 25 judgment of the board, insuring the board, the 26 association, the management agent, and their respective 27 employees and agents and all persons acting as agents. 28 The developer must be included as an additional insured 29 in its capacity as a unit owner, manager, board member, 30 or officer. The unit owners must be included as 31 additional insured parties but only for claims and -2- LRB9202777DJmg 1 liabilities arising in connection with the ownership, 2 existence, use, or management of the common elements. The 3 insurance must cover claims of one or more insured 4 parties against other insured parties. 5 (3) Fidelity bond; directors and officers coverage. 6 (A) An association with 6 or more dwelling 7 units must obtain and maintain a fidelity bond 8 covering persons, including the managing agent and 9 its employees who control or disburse funds of the 10 association, for the maximum amount of coverage 11 available to protect funds in the custody or control 12 of the association, plus the association reserve 13 fund. 14 (B) All management companies that are 15 responsible for the funds held or administered by 16 the association must be covered by a fidelity bond 17 for the maximum amount of coverage available to 18 protect those funds. The association has standing to 19 make a loss claim against the bond of the managing 20 agent as a party covered under the bond. 21 (C) For purposes of paragraphs (A) and (B), 22 the fidelity bond must be in the full amount of 23 association funds and reserves in the custody of the 24 association or the management company 25 (D) The board of directors must obtain 26 directors and officers liability coverage at a level 27 deemed reasonable by the board, if not otherwise 28 established by the declaration or bylaws. Directors 29 and officers liability coverage must extend to all 30 contracts and other actions taken by the board in 31 their official capacity as directors and officers, 32 but this coverage shall exclude actions for which 33 the directors are not entitled to indemnification 34 under the General Not For Profit Corporation Act of -3- LRB9202777DJmg 1 1986 or the declaration and by-laws of the 2 association. 3 (b) Contiguous units; improvements and betterments. The 4 insurance maintained under subdivision (a)(1) must include 5 the units, the limited common elements except as otherwise 6 determined by the board of managers, and the common elements. 7 The insurance need not cover improvements and betterments to 8 the units installed by unit owners, but if improvements and 9 betterments are covered, any increased cost may be assessed 10 by the association against the units affected. 11 Common elements include fixtures located within the 12 unfinished interior surfaces of the perimeter walls, floors, 13 and ceilings of the individual units initially installed by 14 the developer. Common elements exclude floor, wall, and 15 ceiling coverings. "Improvements and betterments" means all 16 decorating, fixtures, and furnishings installed or added to 17 and located within the boundaries of the unit, including 18 electrical fixtures, appliances, air conditioning and heating 19 equipment, water heaters, or built-in cabinets installed by 20 unit owners. 21 (c) Deductibles. The board of directors of the 22 association may, in the case of a claim for damage to a unit 23 or the common elements, (i) pay the deductible amount as a 24 common expense, (ii) after notice and an opportunity for a 25 hearing, assess the deductible amount against the owners who 26 caused the damage or from whose units the damage or cause of 27 loss originated, or (iii) require the unit owners of the 28 units affected to pay the deductible amount. 29 (d) Other coverages. The declaration may require the 30 association to carry any other insurance, including workers 31 compensation, employment practices, environmental hazards, 32 and equipment breakdown, the board of directors considers 33 appropriate to protect the association, the unit owners, or 34 officers, directors, or agents of the association. -4- LRB9202777DJmg 1 (e) Insured parties; waiver of subrogation. Insurance 2 policies carried pursuant to subsections (a) and (b) must 3 include each of the following provisions: 4 (1) Each unit owner and secured party is an insured 5 person under the policy with respect to liability arising 6 out of the unit owner's interest in the common elements 7 or membership in the association. 8 (2) The insurer waives its right to subrogation 9 under the policy against any unit owner of the 10 condominium or members of the unit owner's household and 11 against the association and members of the board of 12 directors. 13 (3) The unit owner waives his or her right to 14 subrogation under the association policy against the 15 association and the board of directors. 16 (f) Primary insurance. If at the time of a loss under 17 the policy there is other insurance in the name of a unit 18 owner covering the same property covered by the policy, the 19 association's policy is primary insurance. 20 (g) Adjustment of losses; distribution of proceeds. Any 21 loss covered by the property policy under subdivision (a)(1) 22 must be adjusted by and with the association. The insurance 23 proceeds for that loss must be payable to the association, or 24 to an insurance trustee designated by the association for 25 that purpose. The insurance trustee or the association must 26 hold any insurance proceeds in trust for unit owners and 27 secured parties as their interests may appear. The proceeds 28 must be disbursed first for the repair or restoration of the 29 damaged common elements, the bare walls, ceilings, and floors 30 of the units, and then to any improvements and betterments 31 the association may insure. Unit owners are not entitled to 32 receive any portion of the proceeds unless there is a surplus 33 of proceeds after the common elements and units have been 34 completely repaired or restored or the association has been -5- LRB9202777DJmg 1 terminated as trustee. 2 (h) Mandatory unit owner coverage. The board of 3 directors may, under the declaration and by-laws or by rule, 4 require condominium unit owners to obtain insurance covering 5 their personal liability and compensatory (but not 6 consequential) damages to another unit caused by the 7 negligence of the owner or his or her guests, residents, or 8 invitees, or regardless of any negligence originating from 9 the unit. The personal liability of a unit owner or 10 association member must include the deductible of the owner 11 whose unit was damaged, any damage not covered by insurance 12 required by this subsection, as well as the decorating, 13 painting, wall and floor coverings, trim, appliances, 14 equipment, and other furnishings. 15 If the unit owner does not purchase or produce evidence 16 of insurance requested by the board, the directors may 17 purchase the insurance coverage and charge the premium cost 18 back to the unit owner. In no event is the board liable to 19 any person either with regard to its decision not to purchase 20 the insurance, or with regard to the timing of its purchase 21 of the insurance or the amounts or types of coverages 22 obtained. 23 (i) Certificates of insurance. An insurer that has 24 issued an insurance policy under this Section must issue 25 certificates or memoranda of insurance, upon request, to any 26 unit owner or secured party. The insurance may not be 27 canceled until 60 days after notice of the proposed 28 cancellation has been mailed to the association, each unit 29 owner, and each secured party for an obligation to whom 30 certificates of insurance have been issued. 31 Contractors and vendors (except public utilities) doing 32 business with a condominium association under contracts 33 exceeding $10,000 per year must provide certificates of 34 insurance naming the association, its board of directors, and -6- LRB9202777DJmg 1 its managing agent as additional insured parties. 2 (j) Non-residential condominiums. The provisions of this 3 Section may be varied or waived in the case of a condominium 4 community in which all units are restricted to nonresidential 5 use. 6 (k) Settlement of claims. Any insurer defending a 7 liability claim against a condominium association must notify 8 the association of the terms of the settlement no less than 9 10 days before settling the claim. The association may not 10 veto the settlement unless otherwise provided by contract or 11 statute.
) (a) (1) The board of managers shall have the12 authority to and shall obtain, except as otherwise provided13 in Section 12.1, insurance for the property against loss or14 damage by fire and such other hazards as are covered under15 standard extended coverage provisions for the full insurable16 replacement cost of the common elements and the units. Every17 insurer issuing a policy against loss or damage by fire and18 such other hazards as are covered under standard extended19 coverage to a condominium association shall print on or20 attach to the premium notice the following statement: "The21 Condominium Property Act requires every condominium22 association to obtain insurance for the property against loss23 or damage by fire and such other hazards as are covered under24 the standard extended coverage provisions for the full25 insurable replacement costs. This policy may or may not26 satisfy this requirement. Please examine your policy27 carefully to determine if it complies with these28 requirements." The full insurable replacement cost of the29 units may include the replacement cost value of betterments30 and improvements made in and to a unit by a unit owner if it31 is so provided by the condominium declaration, and if it is32 so provided in the condominium instruments, any increase33 premium charge therefor shall be assessed to that unit owner34 under the provisions of Section 9 hereof.-7- LRB9202777DJmg 1 (2) Such insurance coverage shall be written in the name2 of, and the proceeds thereof shall be deemed payable to, the3 board of managers, as trustee for each of the unit owners in4 the percentages established in the declaration. Any insurance5 policy obtained for the property pursuant to paragraph (1) of6 subsection (a) of this Section, which fails to contain the7 trustee provisions required by this paragraph (2), shall be8 deemed to incorporate such provisions into the policy by9 operation of law.10 (3) The board of managers, or the persons acting in such11 capacity pursuant to Section 18.2 of this Act, shall have12 authority to designate any corporation qualified to accept13 and execute trusts in this state to act as agent or trustee14 for, or as successor trustee to, said board of managers for15 the purpose of collecting and disbursing the proceeds of such16 insurance in the manner provided by the declaration, the17 bylaws, and this Act. Premiums for such insurance and other18 expenses in connection therewith shall be common expenses.19 (b) The board of managers shall have the authority and20 duty to obtain comprehensive public liability insurance21 against claims and liabilities arising in connection with the22 ownership, existence, use or management of the property in23 amounts, if any, specified by the condominium instruments or24 otherwise deemed sufficient in the judgment of the board of25 managers, insuring the board of managers, the unit owners'26 association, the management agent, and their respective27 employees, agents and all persons acting as agents. The28 developer shall be included as an additional insured in his29 capacity as unit owner and board member. The unit owners30 shall be included as additional insureds but only with31 respect to that portion of the premises not reserved for32 their exclusive use. The insurance shall cover claims of one33 or more insured parties against other insured parties. The34 insurance shall contain a waiver of any rights to subrogation-8- LRB9202777DJmg 1 by the insuring company against any of the above named2 insured persons. Premiums for such insurance shall be common3 expenses.4 (c) The board of managers shall notify insured persons5 concerning the cancellation of insurance obtained pursuant to6 the terms of this Section.7 (d) Any insurer defending a claim against a condominium8 association shall notify the association of the terms of the9 settlement before settling the claim. The association shall10 not have power to veto such settlement, unless otherwise11 provided by contract or statute.12 (Source: P.A. 84-1431; 84-1464.) 13 (765 ILCS 605/12.1) (from Ch. 30, par. 312.1) 14 Sec. 12.1. Insurance risk pooling trusts. 15 (a) This Section shall be known and may be cited as the 16 Condominium and Common Interest Community Risk Pooling Trust 17 Act. 18 (b) The boards of managers or boards of directors, as 19 the case may be, of two or more condominium associations or 20 common interest community associations, are authorized to 21 establish, with the unit owners and the condominium or common 22 interest community associations as the beneficiaries thereof, 23 a trust fund for the purpose of providing protection of the 24 participating condominium and common interest community 25 associations against the risk of financial loss due to damage 26 to, destruction of or loss of property, or the imposition of 27 legal liability as required or authorized under this Act or 28 the declaration of the condominium or common interest 29 community association. Such trust fund shall initially30 assess unit owners an amount actuarially adequate to31 establish such fund and shall assess such amounts as are32 required to maintain such fund. Such amounts may be treated33 as assessments of the condominium or common interest-9- LRB9202777DJmg 1 community association.2 (c) The trust fund shall be established and amended only 3 by a written instrument which shall be filed with and 4 approved by the Director of Insurance prior to its becoming 5 effective. The Director of Insurance shall withhold approval6 of any instrument if it does not comply with the provisions7 of this Section or any rule or regulation of the Director of8 Insurance.9 (d) No common interest communityassociation shall be a 10 beneficiary of the trust fund unless it eithershall be 11 incorporated under the laws of this State or shall have first12 procured a Certificate of Authority from the Secretary of13 State. 14 (e) The trust fund is authorized to indemnify the 15 condominium and common interest community association 16 beneficiaries thereof against the risk of loss due to damage, 17 destruction or loss to property or imposition of legal 18 liability as required or authorized under this Act or the 19 declaration of the condominium or common interest community 20 association. The trustee of the trust fund may determine and21 establish contributions to the trust fund actuarially22 required to fund the operations and carry out the purposes of23 the trust fund and may enter into contracts in order to carry24 out the purposes for which the trust fund was established,25 provided however, that any such contracts shall not provide26 for compensation or payments in excess of that which is27 reasonable in relation to the services actually performed28 thereunder.29 (f) The trust fund may enter into written agreements30 with other trust funds established under this Section whereby31 theRisks assumed by the any suchtrust fund may be pooled 32 and shared with suchother trust funds established under this 33 Section. 34 (g) (Blank). The trustees of all trust funds established-10- LRB9202777DJmg 1 under this Act shall be natural persons over the age of 182 who are residents of this State.3 (h) (Blank). Every such trust fund shall have no fewer4 than 3 nor more than 30 trustees. No less than 2/3 of the5 trustees shall be officers, directors, trustees or full time6 employees of a condominium or common interest community7 association beneficiary of the trust fund.8 (i) No trustee of the trust fund shall be paid a salary 9 or receive other compensation, except that the written trust 10 instrument may provide for reimbursement for actual expenses 11 incurred on behalf of the trust fund. No trustee or any12 employer or affiliate of any trustee of the trust fund shall13 enter into any contract with the trust fund for, or receive14 any monies or other compensation or thing of value whatsoever15 from, the trust fund for services performed for or on behalf16 of such trust fund, except as otherwise provided in this17 Section.18 (j) (Blank). The trustees shall serve pursuant to the19 terms of the written trust instrument except that the written20 trust instrument shall set forth the manner in which a21 trustee of a trust fund may be removed and the manner in22 which vacancies among the trustees of the trust fund may be23 filled.24 (k) (Blank). No trustee of the trust fund shall serve25 for more than 3 consecutive years unless he is reappointed in26 the manner provided for in the written trust instrument.27 (l) (Blank). The trustees of the trust fund shall have28 the powers specified in the written trust instrument which29 established the trust fund.30 (m) Each trust fund shall by June 1 of each yearfile 31 annually with the Director of Insurance a full independently 32 audited financial statement. as of December 31 of the33 preceding year, and by April 1 of each year a report of the34 trustees of the trust fund detailing the operations of the-11- LRB9202777DJmg 1 trust fund and including a list of all beneficiaries during2 the year and a statement that each beneficiary was not3 ineligible except as provided for in this Section. The truth4 and accuracy of the financial statement and report shall be5 attested to by each trustee. The financial statement shall6 include the opinion of an independent certified public7 accountant on the financial condition of the trust fund for8 the most recent calendar year and the results of its9 operations, changes in financial position and changes in10 capital and surplus for the year then ended in conformity11 with accounting practices permitted or prescribed by the12 Illinois Department of Insurance.13 (n) (Blank). A beneficiary is ineligible if he or she14 ceases to be a unit owner of a condominium or common interest15 community association, except where liability of such16 beneficiary was incurred at the time he or she was a unit17 owner.18 (o) (Blank). No beneficiary shall have any cause of19 action against any other beneficiary arising solely out of20 the insolvency or inability of the trust fund to meet its21 obligations, unless such other beneficiary is a trustee of22 such trust fund and has breached a fiduciary duty in23 connection with such trust fund. This subsection shall not24 preclude the assessment and collection of any payments to the25 trust fund to correct such insolvency or inability of the26 trust fund to meet its obligations.27 (p) (Blank). No trust fund established under this28 subsection (d) shall grant any power to the trustees of the29 trust fund which is inconsistent with this Section or any30 other law of this State.31 (q) (Blank). Every trust fund established hereunder32 shall include in the written trust instrument the basis upon33 which payments are made to and from the trust fund.34 (r) (Blank). Trust funds established under this Section-12- LRB9202777DJmg 1 and all persons interested therein or dealing therewith shall2 be subject to the provisions of Sections 133, 144, 144.1,3 149, 401, 401.1, 402, 403, 403A, 412, and all of the4 provisions of Articles VII, VIII, VIII 1/2, XII 1/2, and XIII5 of the Illinois Insurance Code. Except as otherwise provided6 in this Section, trust funds established under and which7 fully comply with this Section shall not be subject to any8 other provision of the Illinois Insurance Code.9 (s) The Director of Insurance shall have with respect to 10 trust funds established under this Section the powers of 11 examination conferred upon him relative to insurance 12 companies by Section Sections132 through 132.7of the 13 Illinois Insurance Code. The cost of any such examination14 shall be paid by the trust fund examined.15 (t) (Blank). The Director of Insurance shall charge,16 collect and give proper acquittances for the payment of the17 following fees and charges:18 (i) For filing trust instruments, amendments19 thereto and financial statement and report of the20 trustees, $25.21 (ii) For copies of papers or records per page, $1.22 (iii) For certificate to copy of paper, $5.23 (iv) For filing an application for the licensing of24 a condominium risk pooling trust, $500.25 (u) (Blank). This Section shall apply regardless of any26 contrary provisions of any instrument.27 (v) Trust funds established under and which fully comply 28 with this Section shall not be considered member insurance 29 companies or to be in the business of insurance nor shall the 30 provision of Article XXXIV of the Illinois Insurance Code 31 apply to any such trust fund established under this Section. 32 (w) (Blank). The provisions of the Administrative Review33 Law shall apply to and govern all proceedings for the34 judicial review of final administrative decisions under this-13- LRB9202777DJmg 1 Section.2 (x) The Director of Insurance shall adopt reasonable 3 rules pertaining to the standards of coverage and 4 administration of trust funds authorized under this Section. 5 (Source: P.A. 89-97, eff. 7-7-95.)
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