State of Illinois
92nd General Assembly
Legislation

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92_HB2994ham002

 










                                             LRB9205492JStmam

 1                    AMENDMENT TO HOUSE BILL 2994

 2        AMENDMENT NO.     .  Amend House Bill  2994  on  page  1,
 3    line  4,  by  changing "by" to "by changing Section 445 and";
 4    and

 5    on  page  1,  by  inserting  immediately  below  line  9  the
 6    following:

 7        "(215 ILCS 5/445) (from Ch. 73, par. 1057)
 8        Sec. 445.  Surplus line.
 9        (1)  Surplus   line   defined;   surplus   line   insurer
10    requirements.  Surplus line  insurance  is  insurance  on  an
11    Illinois  risk  of  the kinds specified in Classes 2 and 3 of
12    Section 4 of this Code procured from an unauthorized  insurer
13    company  or  a  domestic  surplus  line insurer as defined in
14    Section 445a after the insurance  producer  representing  the
15    insured  or  the  surplus  line  producer  is  unable,  after
16    diligent  effort,  to  procure  said  insurance from insurers
17    companies which are authorized to transact business  in  this
18    State other than domestic surplus line insurers as defined in
19    Section 445a.
20        Insurance  producers  may  procure surplus line insurance
21    only if licensed  as  a  surplus  line  producer  under  this
22    Section   and   may  procure  that  insurance  only  from  an
 
                            -2-              LRB9205492JStmam
 1    unauthorized insurer company or from a domestic surplus  line
 2    insurer as defined in Section 445a:
 3             (a)  that  based  upon  information available to the
 4        surplus line producer has a policyholders surplus of  not
 5        less  than  $15,000,000  determined  in  accordance  with
 6        accounting   rules  that  are  applicable  to  authorized
 7        insurers companies; and
 8             (b)  that has standards of solvency  and  management
 9        that  are  adequate  for the protection of policyholders;
10        and
11             (c)  where an unauthorized insurer company does  not
12        meet  the  standards  set  forth  in (a) and (b) above, a
13        surplus  line  producer  may,   if   necessary,   procure
14        insurance from that insurer company only if prior written
15        warning of such fact or condition is given to the insured
16        by the insurance producer or surplus line producer.
17        (2)  Surplus   line   producer;  license.   Any  licensed
18    producer who is a resident of this State, or any  nonresident
19    who  qualifies  under  Section  500-40,  may be licensed as a
20    surplus line producer upon:
21             (a)  completing  a  prelicensing  course  of   study
22        passing  a  written  examination.   The examination shall
23        reasonably test the knowledge of the applicant concerning
24        the surplus line law and the responsibilities assumed  by
25        a   surplus   line   producer   thereunder.   The  course
26        examination  provided  for  by  this  Section  shall   be
27        conducted  under  rules and regulations prescribed by the
28        Director.   The  Director  may  administer   the   course
29        examination   or   may   make   arrangements,   including
30        contracting  with an outside educational testing service,
31        for  administering  the   course   and   collecting   the
32        non-refundable  application  fee  provided  for  in  this
33        subsection  such  examinations.   Any charges assessed by
34        the Director  or  the  educational  testing  service  for
 
                            -3-              LRB9205492JStmam
 1        administering  the course such examinations shall be paid
 2        directly by the individual  applicants.   Each  applicant
 3        required  to take the course an examination shall, at the
 4        time  of  request  for  examination,  enclose  with   the
 5        application  a non-refundable $10 application fee payable
 6        to the Director plus a  separate  course  an  examination
 7        administration  fee.   If  the  Director  administers the
 8        examination,  the   application   fee   and   examination
 9        administration  fee shall be combined and made payable to
10        the Director.  If  the  Director  designates  an  outside
11        testing   service  to  administer  the  examination,  the
12        applicant   shall    make    a    separate    examination
13        administration  fee  remittance payable to the designated
14        testing service for the total fees  the  testing  service
15        charges  for each of the various services being requested
16        by the applicant.  An applicant who fails to  appear  for
17        the course examination as scheduled, or appears but fails
18        to complete the course pass, shall not be entitled to any
19        refund,  and shall be required to submit a new request to
20        attend the course for examination together with  all  the
21        requisite  fees  before  being  rescheduled  for  another
22        course examination at a later date; and
23             (b)  payment of an annual license fee of $200; and
24             (c)  procurement  of  the  surety  bond  required in
25        subsection (4) of this Section.
26        A Each surplus line producer so  licensed  shall  keep  a
27    separate  account of the business transacted thereunder which
28    shall be open at all times to the inspection of the  Director
29    or his representative.
30        The  prelicensing course of study examination requirement
31    in (a) above shall not apply to insurance producers who  were
32    licensed  under  the Illinois surplus line law or individuals
33    designated  to  act  for  a   partnership,   association   or
34    corporation  licensed under the Illinois surplus line law  on
 
                            -4-              LRB9205492JStmam
 1    or before effective date of this amendatory Act of  the  92nd
 2    General Assembly February 27, 1985.
 3        (3)  Taxes and reports.
 4             (a)  Surplus line tax and penalty for late payment.
 5             A  Each  surplus  line  producer shall file with the
 6        Director on or before February 1 and  August  1  of  each
 7        year  a  report in the form prescribed by the Director on
 8        all surplus line  insurance  procured  from  unauthorized
 9        insurers  during  the  preceding  6  month  period ending
10        December 31 or June 30 respectively, and on the filing of
11        such report shall pay to the Director  for  the  use  and
12        benefit  of  the  State  a  sum  equal to 3% of the gross
13        premiums less returned premiums  upon  all  surplus  line
14        insurance  procured  or  cancelled during the preceding 6
15        months.
16             Any surplus line producer who fails to pay the  full
17        amount  due  under this subsection is liable, in addition
18        to the amount due, for such penalty and interest  charges
19        as  are provided for under Section 412 of this Code.  The
20        Director, through the Attorney General, may institute  an
21        action  in  the  name  of  the  People  of  the  State of
22        Illinois, in any court of competent jurisdiction, for the
23        recovery of the amount of such taxes and  penalties  due,
24        and  prosecute  the same to final judgment, and take such
25        steps as are necessary to collect the same.
26             (b)  Fire Marshal Tax.
27             Each surplus  line  producer  shall  file  with  the
28        Director  on  or before March 31 of each year a report in
29        the form prescribed by the Director on all fire insurance
30        procured from unauthorized insurers subject to tax  under
31        Section 12 of the Fire Investigation Act and shall pay to
32        the Director the fire marshal tax required thereunder.
33             (c)  Taxes  and  fees charged to insured.  The taxes
34        imposed under this subsection and the countersigning fees
 
                            -5-              LRB9205492JStmam
 1        charged by the Surplus Line Association of  Illinois  may
 2        be charged to and collected from surplus line insureds.
 3        (4)  Bond.  Each surplus line producer, as a condition to
 4    receiving  a  surplus  line producer's license, shall execute
 5    and deliver to the Director a surety bond to  the  People  of
 6    the State in the penal sum of $20,000, with a surety which is
 7    authorized  to  transact  business in this State, conditioned
 8    that the surplus line producer will pay to the  Director  the
 9    tax,  interest  and  penalties levied under subsection (3) of
10    this Section.
11        (5)  Submission of documents to Surplus Line  Association
12    of Illinois.  A Each surplus line producer shall submit every
13    insurance  contract  issued  under  his or her license to the
14    Surplus  Line  Association  of  Illinois  for  recording  and
15    countersignature.  The submission and countersignature may be
16    effected through electronic means.  The submission  insurance
17    contracts submitted shall set forth:
18             (a)  the name of the insured;
19             (b)  the  description  and  location  of the insured
20        property or risk;
21             (c)  the amount insured;
22             (d)  the gross premiums charged or returned;
23             (e)  the  name  of  the  unauthorized   insurer   or
24        domestic  surplus line insurer as defined in Section 445a
25        from whom coverage has been procured;
26             (f)  the kind or kinds of insurance procured; and
27             (g)  amount of premium subject to  tax  required  by
28        Section 12 of the Fire Investigation Act.
29             Proposals,  endorsements,  and other documents which
30        are incidental to the insurance but  which  do  does  not
31        affect  the  premium charged are exempted from filing and
32        countersignature.
33             The submission of insuring contracts to the  Surplus
34        Line  Association of Illinois constitutes a certification
 
                            -6-              LRB9205492JStmam
 1        by the surplus line producer or by the insurance producer
 2        who presented the risk to the surplus line  producer  for
 3        placement  as  a  surplus  line  risk that after diligent
 4        effort the required insurance could not be procured  from
 5        insurers  companies  which  are  authorized  to  transact
 6        business  in  this State other than domestic surplus line
 7        insurers  as  defined  in  Section  445a  and  that  such
 8        procurement was otherwise in accordance with the  surplus
 9        line law.
10        (6)  Countersignature required.  It shall be unlawful for
11    an  insurance  producer  to  deliver any unauthorized company
12    insurer insurance contract or domestic surplus  line  insurer
13    contract  unless  such insurance contract is countersigned by
14    the Surplus Line Association of Illinois.
15        (7)  Inspection of records.  A Each surplus line producer
16    shall maintain separate records of  the  business  transacted
17    under  his  or  her  license,  including  complete  copies of
18    surplus line insurance contracts maintained on  paper  or  by
19    electronic  means,  which  records shall be open at all times
20    for inspection by  the  Director  and  by  the  Surplus  Line
21    Association of Illinois.
22        (8)  Violations  and penalties.  The Director may suspend
23    or revoke or refuse to renew a surplus line producer  license
24    for  any violation of this Code. In addition to or in lieu of
25    suspension or revocation, the Director may subject a  surplus
26    line  producer  to  a  civil penalty of up to $1,000 for each
27    cause  for  suspension  or  revocation.   Such   penalty   is
28    enforceable  under  subsection  (5)  of  Section 403A of this
29    Code.
30        (9)  Director may declare  insurer  ineligible.   If  the
31    Director  determines  that  the  further  assumption of risks
32    might be hazardous to the policyholders  of  an  unauthorized
33    insurer,  the Director may order the Surplus Line Association
34    of Illinois not to countersign insurance contracts evidencing
 
                            -7-              LRB9205492JStmam
 1    insurance in such insurer and order surplus line producers to
 2    cease procuring insurance from such insurer.
 3        (10)  Service of process upon  Director.   All  Insurance
 4    contracts  delivered  under  this  Section  from unauthorized
 5    insurers shall contain a provision designating  the  Director
 6    and  his successors in office the true and lawful attorney of
 7    the insurer upon whom may be served all lawful process in any
 8    action, suit or proceeding arising out of such insurance  and
 9    further designate the surplus line producer or other resident
10    of this State an agent of the unauthorized insurer to which a
11    copy  of  such process shall be forwarded by the Director for
12    delivery to the insurer.  Service of process  made  upon  the
13    Director  to  be  valid  hereunder must state the name of the
14    insured, the name of the unauthorized  insurer  and  identify
15    the  contract  of  insurance.   The Director at his option is
16    authorized to forward a copy of the process  to  the  Surplus
17    Line Association of Illinois for delivery to the unauthorized
18    insurer surplus line producer or other designated resident of
19    this  State  or  the  Director may deliver the process to the
20    unauthorized insurer by other means which he considers to  be
21    reasonably prompt and certain.
22        (11)  The  Illinois  Surplus  Line  law does not apply to
23    insurance of property and operations of railroads or aircraft
24    engaged in  interstate  or  foreign  commerce,  insurance  of
25    vessels,  crafts  or  hulls, cargoes, marine builder's risks,
26    marine protection and indemnity,  or  other  risks  including
27    strikes and war risks insured under ocean or wet marine forms
28    of policies.
29        (12)  Surplus line insurance procured under this Section,
30    including  insurance  procured  from  a domestic surplus line
31    insurer, is not subject to the  provisions  of  the  Illinois
32    Insurance  Code  other  than Sections 123, 123.1, 401, 401.1,
33    402, 403, 403A, 408, 412, 445, 445.1,  445.2,  445.3,  445.4,
34    and  all of the provisions of Article XXXI to the extent that
 
                            -8-              LRB9205492JStmam
 1    the provisions of Article XXXI are not inconsistent with  the
 2    terms of this Act.
 3    (Source: P.A. 90-794, eff. 8-14-98.)".

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