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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 InsuranceState Treasurershall 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 unpaidhave29been 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.".