State of Illinois
92nd General Assembly
Legislation

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92_SB0717ham002

 










                                           LRB9203394JSpcam03

 1                    AMENDMENT TO SENATE BILL 717

 2        AMENDMENT NO.     .  Amend Senate Bill 717,  AS  AMENDED,
 3    by replacing the title with the following:
 4        "AN Act concerning insurer insolvency."; and

 5    by  replacing  everything  after the enacting clause with the
 6    following:

 7        "Section 5.  The Illinois Insurance Code  is  amended  by
 8    changing  Sections  107a.13,  107a.14,  107a.15,  and  205 as
 9    follows:

10        (215 ILCS 5/107a.13)
11        Sec.   107a.13.  Group   Workers'    Compensation    Pool
12    Insolvency Fund.
13        (a)  All  qualified  group  workers'  compensation  pools
14    shall pay a sum equal to 0.5% of all compensation and medical
15    service  payments made under either the Workers' Compensation
16    Act or the Workers' Occupational Diseases Act  during  the  6
17    months  immediately  preceding  the date of payment, into the
18    Group  Workers'  Compensation  Pool  Insolvency   Fund,   the
19    successor  fund  to the Group Self-Insurers' Insolvency Fund.
20    On the effective date of this  amendatory  Act  of  the  91st
21    General  Assembly,  all  moneys  in  the Group Self-Insurers'
 
                            -2-            LRB9203394JSpcam03
 1    Insolvency Fund shall be transferred into the Group  Workers'
 2    Compensation Pool Insolvency Fund.
 3        (b)  The  State  Treasurer is ex-officio custodian of the
 4    Group Workers' Compensation Pool Insolvency Fund.  Moneys  in
 5    the  Fund  shall be deposited the same as are State funds and
 6    any interest accruing on moneys in the Fund shall be added to
 7    the Fund every 6 months. The Fund shall be subject  to  audit
 8    the  same  as State funds and accounts and shall be protected
 9    by the general bond given by the State  Treasurer.  The  Fund
10    shall  be  considered always appropriated for the purposes of
11    compensating employees who are eligible to  receive  benefits
12    from  their  employers  pursuant  to  the  provisions  of the
13    Workers' Compensation Act or Workers'  Occupational  Diseases
14    Act  when  their  employer  is  a member of a qualified group
15    workers' compensation pool and the qualified  group  workers'
16    compensation  pool  has become unable to pay compensation and
17    medical service payments due to financial  insolvency  either
18    prior  to  or following the date of award. Moneys in the Fund
19    may be used to compensate any type of injury or  occupational
20    disease   that  is  compensable  under  either  the  Workers'
21    Compensation Act or the Workers' Occupational  Diseases  Act,
22    to  pay  for or reimburse medical claims covered under either
23    of those Acts, and  to  pay  the  expenses  incurred  in  the
24    administration  and  adjudication  of claims on behalf of the
25    Fund. The Director of  Insurance  State  Treasurer  shall  be
26    joined with the qualified group workers' compensation pool as
27    party  respondent  in any claim or application for adjustment
28    of  claim  filed   against   a   qualified   group   workers'
29    compensation  pool  whenever  the  compensation  and  medical
30    services  provided  pursuant to this Article may be unpaid by
31    reason of default of an insolvent  qualified  group  workers'
32    compensation   pool.   As  of  the  effective  date  of  this
33    amendatory Act of the 92nd General Assembly, the Director  is
34    substituted  for  the  State Treasurer as party respondent in
 
                            -3-            LRB9203394JSpcam03
 1    any workers' compensation proceeding to which  the  Treasurer
 2    has been previously added as a party under this Section.
 3        (c)  Payment  shall  be  made  out  of the Group Workers'
 4    Compensation Pool Insolvency Fund  only  upon  order  of  the
 5    Director  and  only  after the penal sum of the fidelity bond
 6    and securities, if any, has been exhausted. It shall  be  the
 7    obligation of a qualified group workers' compensation pool or
 8    its successor, excluding any purchaser under a loss portfolio
 9    transfer of business negotiated and approved by the Director,
10    to make arrangements to repay the Group Workers' Compensation
11    Pool  Insolvency  Fund for all moneys paid out in its behalf.
12    The Director is authorized  to  make  arrangements  with  the
13    qualified  group  workers'  compensation  pool as to terms of
14    repayment.  The  obligations  of  qualified  group   workers'
15    compensation   pools  to  make  contributions  to  the  Group
16    Workers' Compensation Pool Insolvency Fund shall be waived on
17    any January 1 or July 1, if the Fund has a  positive  balance
18    of  at  least  $2,000,000  on the date one month prior to the
19    date of payment.
20    (Source: P.A. 91-757, eff. 1-1-01.)

21        (215 ILCS 5/107a.14)
22        Sec.   107a.14.  Group   workers'   compensation    pools
23    assessment provisions; management of the Fund.
24        (a)  When  the  Director  determines  by  means of audit,
25    annual certified statement, actuarial opinion,  or  otherwise
26    that  the  assets  possessed  by  a  pool  are  less than the
27    reserves required together with any other unpaid liabilities,
28    he or she  shall  order  the  pool  trustees  to  assess  the
29    individual  pool  participants  in  an  amount  not less than
30    necessary to correct the  deficiency.  This  Section  is  not
31    intended  to  restrict  or preclude the trustees from time to
32    time levying assessments or increasing  premium  deposits  in
33    accordance with the pooling agreement.
 
                            -4-            LRB9203394JSpcam03
 1        (b)  When  the  Director determines that the compensation
 2    and medical services provided pursuant to this Article may be
 3    unpaid by reason of the default  of  an  insolvent  qualified
 4    group  workers'  compensation  pool  and the penal sum of the
 5    fidelity bond and the securities provided  by  the  qualified
 6    group   workers'   compensation  pool  are  about  to  become
 7    exhausted, the Director  shall declare  the  qualified  group
 8    workers'  compensation  pool  to be in default and first levy
 9    upon and collect from the individual employer members of  the
10    qualified  group  workers'  compensation  pool  in default an
11    assessment to  assure  prompt  payment  of  compensation  and
12    medical  services.  No  assessment of any individual employer
13    member of the qualified group workers' compensation pool made
14    pursuant to this subsection shall exceed 25% of  the  average
15    annual  contribution  paid by that employer over the previous
16    3-year period; however, if the  Group  Workers'  Compensation
17    Pool  Insolvency  Fund  is  then  for  any reason financially
18    unable to assure prompt payment of compensation  and  medical
19    services,   the  employer  member  may  be  assessed  without
20    limitation.  If  and  only  if   (i)   the   Group   Workers'
21    Compensation  Pool  Insolvency Fund has a positive balance of
22    less  than  $1,000,000  exclusive  of  any  amounts  received
23    directly or indirectly from the General Revenue Fund  or  any
24    dedicated  fund  of  the State of Illinois, (ii) the Director
25    has declared a qualified group workers' compensation pool  to
26    be in default, and (iii) the Group Workers' Compensation Pool
27    Insolvency  Fund  is  financially unable to pay all employees
28    whose compensation and medical services  remain  unpaid  have
29    been approved, the Director  shall levy upon and collect from
30    all qualified group workers' compensation pools an assessment
31    to  provide the balance necessary to assure prompt payment of
32    approved compensation and medical  services.  The  assessment
33    shall   be  allocated  among  the  qualified  group  workers'
34    compensation pools based upon the ratio of  (1)  the  average
 
                            -5-            LRB9203394JSpcam03
 1    annual  premium  written  by  each  qualified  group workers'
 2    compensation pool over the 3-year period prior to the year in
 3    which the liquidation order,  obtained  pursuant  to  Article
 4    XIII  of  this Code, was issued regarding the qualified group
 5    workers' compensation pool  in  default  or  any  group  self
 6    insurer in default that existed under the repealed Section 4a
 7    of  the  Workers' Compensation Act or the repealed Section 4a
 8    of the Workers' Occupational Disease Act to (2) the aggregate
 9    average  annual  premium  written  by  all  qualified   group
10    workers'  compensation  pools over the 3-year period prior to
11    the year  in  which  the  liquidation  order  was  issued.  A
12    qualified  workers'  compensation  pool in runoff or that has
13    transferred or is transferring its liabilities shall  not  be
14    exempt  from  this assessment. The assessment shall apply for
15    any qualified workers' compensation pool in  default  or  any
16    workers'  compensation pool in default that existed under the
17    repealed law previously cited  in  this  subsection  and  for
18    which an order of liquidation has been obtained after July 1,
19    2000.  If  an  insurance  carrier becomes liable for workers'
20    compensation and occupational  diseases  payments  under  the
21    terms  of  the  policy  covering the qualified group workers'
22    compensation  pool,  the  carrier  shall   make   appropriate
23    payments  and  payments  from the Fund shall cease.  Payments
24    from the Fund shall resume only when the insurance  carrier's
25    liability is exhausted.
26        (c)  Any  appropriation  or loan from the General Revenue
27    Fund or a transfer of moneys  from  dedicated  funds  to  the
28    Group  Workers'  Compensation Pool Insolvency Fund shall be a
29    liability to the General Revenue Fund or the dedicated  funds
30    from which moneys were received.
31        (d)  The   liquidator  of  an  insolvent  group  workers'
32    compensation pool shall permit access  by  the  Fund  or  its
33    authorized  representatives  to  the insolvent group workers'
34    compensation pool's records that are necessary for  the  Fund
 
                            -6-            LRB9203394JSpcam03
 1    in  carrying out its functions under this Article with regard
 2    to covered claims. In addition, the liquidator shall  provide
 3    the  Fund  or its representative with copies of those records
 4    upon the request and at the expense of the Fund.
 5        (e)  The  Fund  shall  be  deemed  the  insolvent   group
 6    workers'  compensation  pool  to  the  extent  of  the Fund's
 7    obligation for covered claims and, to that extent, shall have
 8    all rights, duties, and obligations of  the  insolvent  group
 9    workers'   compensation  pool,  subject  to  the  limitations
10    provided  in  this  Article,  as  if   the   group   workers'
11    compensation   pool   had  not  become  insolvent,  with  the
12    exception that the liquidator shall retain the sole right  to
13    pursue  any  contractual  assessments,  reinsurance proceeds,
14    salvage or subrogation obligations, or other obligations owed
15    to the insolvent group workers' compensation pool.
16        (f)  An insured or claimant  seeking  the  protection  of
17    this Article shall cooperate with the Fund to the same extent
18    as that person would have been required to cooperate with the
19    insolvent group workers' compensation pool.
20        (g)  The  Fund  shall  be recognized as a claimant in the
21    liquidation of an insolvent group workers' compensation  pool
22    for   any   amounts  paid  by  the  Fund  on  covered  claims
23    obligations  as  determined  under  this  Article  and  shall
24    receive dividends at the priority set forth in paragraph  (d)
25    of subsection (1) of Section 205 of this Code. The liquidator
26    of  an  insolvent  group  workers' compensation pool shall be
27    bound by determinations of covered  claim  eligibility  under
28    this Article and by settlements of claims made by the Fund on
29    the  receipt of certification of such payments, to the extent
30    those determinations or settlements  satisfy  obligations  of
31    the  Fund,  but the receiver shall not be bound in any way by
32    those determinations or settlements to the extent that  there
33    remains  a  claim  in the estate for amounts in excess of the
34    payments by the Fund. In submitting  its  claim  for  covered
 
                            -7-            LRB9203394JSpcam03
 1    claim  payments,  the  Fund  shall  not  be  subject  to  the
 2    requirements  of  Sections 208 and 209 of this Code and shall
 3    not be affected by the failure  of  the  person  receiving  a
 4    covered claim payment to file a proof of claim.
 5        (h)  The Fund shall have early access to the assets of an
 6    insolvent  group  workers' compensation pool for carrying out
 7    its functions under  this  Article  in  accordance  with  the
 8    provisions of subsection (2) of Section 205 of this Code. The
 9    costs  and  expenses  of  administration of the Fund shall be
10    accorded the same priority as the  liquidator's  expenses  in
11    accordance with the provisions of paragraph (a) of subsection
12    (1) of Section 205 of this Code.
13        (i)  All amounts received by the Fund from the liquidator
14    and  all  amounts received by the Fund from the collection of
15    assessments  from  members  of  insolvent   qualified   group
16    workers'  compensation  pools  shall  be accounted for by the
17    maintenance of segregated  sub-accounts  for  each  insolvent
18    group  workers' compensation pool. Any distributions from the
19    Fund shall be made first from the  segregated  account  value
20    then  existing  at  the time of the distribution to which the
21    expense item  relates  and  then  from  any  unsegregated  or
22    commingled account of the Fund as the Director deems proper.
23    (Source: P.A. 91-757, eff. 1-1-01.)

24        (215 ILCS 5/107a.15)
25        Sec. 107a.15.  Authority of Director.
26        (a)  If  the  Director  determines  that a group workers'
27    compensation pool is not in compliance with this Article, the
28    Director shall require the pool to  eliminate  the  condition
29    causing  the  noncompliance  within a specified time from the
30    date the notice of the Director's requirement  is  mailed  or
31    delivered to the pool.
32        (b)  If  a  pool  fails  to  comply  with  the Director's
33    requirement, the pool shall be deemed to be  in  a  hazardous
 
                            -8-            LRB9203394JSpcam03
 1    financial condition, and the Director may take one or more of
 2    the  actions  authorized  by  law  as  to  pools in hazardous
 3    financial condition.
 4        (c)  The Director is authorized to  negotiate  and  enter
 5    into   loss   portfolio   transfers,   agreements   for   the
 6    administration  of  claims  adjustment  services  for  claims
 7    covered  by  the  Group Workers' Compensation Pool Insolvency
 8    Fund, claims settlement agreements, and such other agreements
 9    or contracts as he  may  find  necessary  or  appropriate  to
10    effectuate  the  purposes of this Article as administrator of
11    the Fund.
12        (d)  The Director is authorized to make bulk transfers of
13    funds from the Group Workers'  Compensation  Pool  Insolvency
14    Fund  for  deposit  to  claim  payment trust accounts for the
15    payment of medical and compensation  claims  due  under  this
16    Article,  provided  that those accounts may be drawn upon for
17    no other purpose and only when the claim payment  account  is
18    the  subject of a third party claims administration agreement
19    providing for the trust account to be managed as a  fiduciary
20    claims administration service account in conformity with this
21    Article.
22        (e)  All  costs of administration or adjustment of claims
23    under agreements or contracts entered into  under  subsection
24    (c)  of  this  Section  may  be  paid from the Group Workers'
25    Compensation Pool Insolvency Fund.
26        (f)  Whenever it appears to the  Director's  satisfaction
27    that  there  remain  no  existing  liabilities  of  the Group
28    Workers' Compensation Pool Insolvency Fund for  (i)  incurred
29    medical  or  compensation  claims  under  this  Article, (ii)
30    administrative expense liabilities under  this  Article,  and
31    (iii)  reimbursements  due  to  any  liquidation  estate, any
32    amount remaining in the Fund in excess of $1,500,000 shall be
33    distributed by the Director  first  to  the  State's  General
34    Revenue  Fund  and  any  dedicated State fund and then to the
 
                            -9-            LRB9203394JSpcam03
 1    then existing and qualified group workers' compensation pools
 2    in proportion to the assessments paid by each such pool.
 3    (Source: P.A. 91-757, eff. 1-1-01.)

 4        (215 ILCS 5/205) (from Ch. 73, par. 817)
 5        Sec. 205.  Priority of distribution of general assets.
 6        (1)  The priorities of  distribution  of  general  assets
 7    from the company's estate is to be as follows:
 8             (a)  The   costs  and  expenses  of  administration,
 9        including the expenses of the Illinois Insurance Guaranty
10        Fund, the Illinois Life  and  Health  Insurance  Guaranty
11        Association, the Illinois Health Maintenance Organization
12        Guaranty  Association  and of any similar organization in
13        any other  state  as  prescribed  in  subsection  (c)  of
14        Section  545,  and  the  Group Workers' Compensation Pool
15        Insolvency Fund.
16             (b)  Secured claims, including claims for taxes  and
17        debts  due  the federal or any state or local government,
18        that are secured by liens perfected prior to  the  filing
19        of the complaint.
20             (c)  Claims  for  wages  actually owing to employees
21        for services rendered within 3 months prior to  the  date
22        of  the  filing of the complaint, not exceeding $1,000 to
23        each employee unless there are  claims  due  the  federal
24        government under paragraph (f), then the claims for wages
25        shall   have   a  priority  of  distribution  immediately
26        following that of federal claims under paragraph (f)  and
27        immediately  preceding  claims of general creditors under
28        paragraph (g).
29             (d)  Claims   by    policyholders,    beneficiaries,
30        insureds  and  liability  claims against insureds covered
31        under insurance policies and insurance  contracts  issued
32        by  the  company,  and  claims  of the Illinois Insurance
33        Guaranty Fund, the Illinois  Life  and  Health  Insurance
 
                            -10-           LRB9203394JSpcam03
 1        Guaranty  Association,  the  Illinois  Health Maintenance
 2        Organization  Guaranty  Association   and   any   similar
 3        organization  in  another  state as prescribed in Section
 4        545, and the Group Workers' Compensation Pool  Insolvency
 5        Fund.
 6             (e)  Claims  by  policyholders,  beneficiaries,  and
 7        insureds,  the allowed values of which were determined by
 8        estimation under  paragraph  (b)  of  subsection  (4)  of
 9        Section 209.
10             (f)  Any other claims due the federal government.
11             (g)  All  other  claims  of  general  creditors  not
12        falling  within  any  other  priority  under this Section
13        including claims for taxes and debts  due  any  state  or
14        local  government which are not secured claims and claims
15        for attorneys' fees incurred by the company in contesting
16        its conservation, rehabilitation, or liquidation.
17             (h)  Claims of guaranty  fund  certificate  holders,
18        guaranty  capital shareholders, capital note holders, and
19        surplus note holders.
20             (i)  Proprietary claims of shareholders, members, or
21        other owners.
22        (2)  Within 120 days after the issuance of  an  Order  of
23    Liquidation  with  a finding of insolvency against a domestic
24    company, the Director shall make  application  to  the  court
25    requesting  authority  to  disburse  funds  to  the  Illinois
26    Insurance   Guaranty  Fund,  the  Illinois  Life  and  Health
27    Insurance   Guaranty   Association,   the   Illinois   Health
28    Maintenance Organization  Guaranty  Association  and  similar
29    organizations   in  other  states,  and  the  Group  Workers'
30    Compensation Pool Insolvency Fund from time to  time  out  of
31    the  company's  marshaled assets as funds become available in
32    amounts equal to disbursements made by the Illinois Insurance
33    Guaranty  Fund,  the  Illinois  Life  and  Health   Insurance
34    Guaranty   Association,   the   Illinois  Health  Maintenance
 
                            -11-           LRB9203394JSpcam03
 1    Organization Guaranty Association and  similar  organizations
 2    in  other  states,  or  to  be  made  by  the  Group Workers'
 3    Compensation  Pool  Insolvency  Fund   for   covered   claims
 4    obligations   on  the  presentation  of  evidence  that  such
 5    disbursements  have  been  made  by  the  Illinois  Insurance
 6    Guaranty  Fund,  the  Illinois  Life  and  Health   Insurance
 7    Guaranty   Association,   the   Illinois  Health  Maintenance
 8    Organization Guaranty Association and  similar  organizations
 9    in  other  states,  or  will  be  made  by the Group Workers'
10    Compensation Pool Insolvency Fund.
11        The Director shall establish procedures for  the  ratable
12    allocation  and distribution of disbursements to the Illinois
13    Insurance  Guaranty  Fund,  the  Illinois  Life  and   Health
14    Insurance   Guaranty   Association,   the   Illinois   Health
15    Maintenance  Organization  Guaranty  Association  and similar
16    organizations  in  other  states,  and  the  Group   Workers'
17    Compensation   Pool  Insolvency  Fund.   In  determining  the
18    amounts  available  for  disbursement,  the  Director   shall
19    reserve  sufficient assets for the payment of the expenses of
20    administration  described  in  paragraph  (1)  (a)  of   this
21    Section.   All  funds  available  for  disbursement after the
22    establishment of the prescribed  reserve  shall  be  promptly
23    distributed.    As   a  condition  to  receipt  of  funds  in
24    reimbursement of covered  claims  obligations,  the  Director
25    shall  secure  from the Illinois Insurance Guaranty Fund, the
26    Illinois Life and Health Insurance Guaranty Association,  the
27    Illinois Health Maintenance Organization Guaranty Association
28    and  each similar organization in other states, and the Group
29    Workers' Compensation Pool Insolvency Fund, an  agreement  to
30    return to the Director on demand funds previously received as
31    may be required to pay claims of secured creditors and claims
32    falling  within the priorities established in paragraphs (a),
33    (b), (c), and (d)  of  subsection  (1)  of  this  Section  in
34    accordance with such priorities.
 
                            -12-           LRB9203394JSpcam03
 1        (3)  The  provisions  of this Section are severable under
 2    Section 1.31 of the Statute on Statutes.
 3    (Source: P.A. 89-206, eff. 7-21-95; 90-381, eff. 8-14-97.)

 4        Section 99.  Effective date. This Act takes  effect  upon
 5    becoming law.".

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