State of Illinois
92nd General Assembly
Legislation

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[ Amendatory Veto Motion 001 ][ Engrossed ][ Enrolled ]
[ Re-enrolled ][ Governor's Message ]


92_SB1046

 
                                               LRB9202778DJcs

 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-                LRB9202778DJcs
 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-                LRB9202778DJcs
 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-                LRB9202778DJcs
 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-                LRB9202778DJcs
 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-                LRB9202778DJcs
 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  the
12    authority  to  and shall obtain, except as otherwise provided
13    in Section 12.1, insurance for the property against  loss  or
14    damage  by  fire  and such other hazards as are covered under
15    standard extended coverage provisions for the full  insurable
16    replacement  cost of the common elements and the units. Every
17    insurer issuing a policy against loss or damage by  fire  and
18    such  other  hazards  as  are covered under standard extended
19    coverage to a  condominium  association  shall  print  on  or
20    attach  to  the  premium notice the following statement: "The
21    Condominium   Property   Act   requires   every   condominium
22    association to obtain insurance for the property against loss
23    or damage by fire and such other hazards as are covered under
24    the  standard  extended  coverage  provisions  for  the  full
25    insurable replacement costs.  This  policy  may  or  may  not
26    satisfy   this   requirement.   Please  examine  your  policy
27    carefully  to   determine   if   it   complies   with   these
28    requirements."  The  full  insurable  replacement cost of the
29    units may include the replacement cost value  of  betterments
30    and  improvements made in and to a unit by a unit owner if it
31    is so provided by the condominium declaration, and if  it  is
32    so  provided  in  the  condominium  instruments, any increase
33    premium charge therefor shall be assessed to that unit  owner
34    under the provisions of Section 9 hereof.
 
                            -7-                LRB9202778DJcs
 1        (2)  Such insurance coverage shall be written in the name
 2    of,  and the proceeds thereof shall be deemed payable to, the
 3    board of managers, as trustee for each of the unit owners  in
 4    the percentages established in the declaration. Any insurance
 5    policy obtained for the property pursuant to paragraph (1) of
 6    subsection  (a)  of  this Section, which fails to contain the
 7    trustee provisions required by this paragraph (2),  shall  be
 8    deemed  to  incorporate  such  provisions  into the policy by
 9    operation of law.
10        (3) The board of managers, or the persons acting in  such
11    capacity  pursuant  to  Section  18.2 of this Act, shall have
12    authority to designate any corporation  qualified  to  accept
13    and  execute  trusts in this state to act as agent or trustee
14    for, or as successor trustee to, said board of  managers  for
15    the purpose of collecting and disbursing the proceeds of such
16    insurance  in  the  manner  provided  by the declaration, the
17    bylaws, and this Act. Premiums for such insurance  and  other
18    expenses in connection therewith shall be common expenses.
19        (b)  The  board  of managers shall have the authority and
20    duty  to  obtain  comprehensive  public  liability  insurance
21    against claims and liabilities arising in connection with the
22    ownership, existence, use or management of  the  property  in
23    amounts,  if any, specified by the condominium instruments or
24    otherwise deemed sufficient in the judgment of the  board  of
25    managers,  insuring  the  board of managers, the unit owners'
26    association,  the  management  agent,  and  their  respective
27    employees, agents and all  persons  acting  as  agents.   The
28    developer  shall  be included as an additional insured in his
29    capacity as unit owner and board  member.   The  unit  owners
30    shall  be  included  as  additional  insureds  but  only with
31    respect to that portion of  the  premises  not  reserved  for
32    their exclusive use.  The insurance shall cover claims of one
33    or  more  insured  parties against other insured parties. The
34    insurance shall contain a waiver of any rights to subrogation
 
                            -8-                LRB9202778DJcs
 1    by the insuring  company  against  any  of  the  above  named
 2    insured persons.  Premiums for such insurance shall be common
 3    expenses.
 4        (c)  The  board  of managers shall notify insured persons
 5    concerning the cancellation of insurance obtained pursuant to
 6    the terms of this Section.
 7        (d)  Any insurer defending a claim against a  condominium
 8    association  shall notify the association of the terms of the
 9    settlement before settling the claim.  The association  shall
10    not  have  power  to  veto  such settlement, unless otherwise
11    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  initially
30    assess  unit  owners  an  amount  actuarially   adequate   to
31    establish  such  fund  and  shall  assess such amounts as are
32    required to maintain such fund.  Such amounts may be  treated
33    as   assessments   of  the  condominium  or  common  interest
 
                            -9-                LRB9202778DJcs
 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  approval
 6    of  any  instrument if it does not comply with the provisions
 7    of this Section or any rule or regulation of the Director  of
 8    Insurance.
 9        (d)  No  common interest community association shall be a
10    beneficiary of the trust  fund  unless  it  either  shall  be
11    incorporated under the laws of this State or shall have first
12    procured  a  Certificate  of  Authority from the Secretary of
13    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  and
21    establish   contributions   to  the  trust  fund  actuarially
22    required to fund the operations and carry out the purposes of
23    the trust fund and may enter into contracts in order to carry
24    out the purposes for which the trust  fund  was  established,
25    provided  however,  that any such contracts shall not provide
26    for compensation or payments  in  excess  of  that  which  is
27    reasonable  in  relation  to  the services actually performed
28    thereunder.
29        (f)  The trust fund may  enter  into  written  agreements
30    with other trust funds established under this Section whereby
31    the  Risks  assumed  by the any such trust fund may be pooled
32    and shared with such other trust funds established under this
33    Section.
34        (g)  (Blank). The trustees of all trust funds established
 
                            -10-               LRB9202778DJcs
 1    under this Act shall be natural persons over the  age  of  18
 2    who are residents of this State.
 3        (h)  (Blank).  Every  such trust fund shall have no fewer
 4    than 3 nor more than 30 trustees.  No less than  2/3  of  the
 5    trustees  shall be officers, directors, trustees or full time
 6    employees of  a  condominium  or  common  interest  community
 7    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  any
12    employer  or affiliate of any trustee of the trust fund shall
13    enter into any contract with the trust fund for,  or  receive
14    any monies or other compensation or thing of value whatsoever
15    from,  the trust fund for services performed for or on behalf
16    of such trust fund, except  as  otherwise  provided  in  this
17    Section.
18        (j)  (Blank).  The  trustees  shall serve pursuant to the
19    terms of the written trust instrument except that the written
20    trust instrument shall  set  forth  the  manner  in  which  a
21    trustee  of  a  trust  fund  may be removed and the manner in
22    which vacancies among the trustees of the trust fund  may  be
23    filled.
24        (k)  (Blank).  No  trustee  of the trust fund shall serve
25    for more than 3 consecutive years unless he is reappointed in
26    the manner provided for in the written trust instrument.
27        (l)  (Blank). The trustees of the trust fund  shall  have
28    the  powers  specified  in the written trust instrument which
29    established the trust fund.
30        (m)  Each trust fund shall by June 1 of  each  year  file
31    annually  with the Director of Insurance a full independently
32    audited  financial  statement.  as  of  December  31  of  the
33    preceding year, and by April 1 of each year a report  of  the
34    trustees  of  the  trust fund detailing the operations of the
 
                            -11-               LRB9202778DJcs
 1    trust fund and including a list of all  beneficiaries  during
 2    the  year  and  a  statement  that  each  beneficiary was not
 3    ineligible except as provided for in this Section.  The truth
 4    and accuracy of the financial statement and report  shall  be
 5    attested  to  by  each trustee. The financial statement shall
 6    include  the  opinion  of  an  independent  certified  public
 7    accountant on the financial condition of the trust  fund  for
 8    the  most  recent  calendar  year  and  the  results  of  its
 9    operations,  changes  in  financial  position  and changes in
10    capital and surplus for the year  then  ended  in  conformity
11    with  accounting  practices  permitted  or  prescribed by the
12    Illinois Department of Insurance.
13        (n)  (Blank).  A beneficiary is ineligible if he  or  she
14    ceases to be a unit owner of a condominium or common interest
15    community   association,   except  where  liability  of  such
16    beneficiary was incurred at the time he or  she  was  a  unit
17    owner.
18        (o)  (Blank).  No  beneficiary  shall  have  any cause of
19    action against any other beneficiary arising  solely  out  of
20    the  insolvency  or  inability  of the trust fund to meet its
21    obligations, unless such other beneficiary is  a  trustee  of
22    such  trust  fund  and  has  breached  a  fiduciary  duty  in
23    connection  with  such  trust fund. This subsection shall not
24    preclude the assessment and collection of any payments to the
25    trust fund to correct such insolvency  or  inability  of  the
26    trust fund to meet its obligations.
27        (p)  (Blank).   No  trust  fund  established  under  this
28    subsection (d) shall grant any power to the trustees  of  the
29    trust  fund  which  is  inconsistent with this Section or any
30    other law of this State.
31        (q)  (Blank).  Every  trust  fund  established  hereunder
32    shall include in the written trust instrument the basis  upon
33    which payments are made to and from the trust fund.
34        (r)  (Blank).  Trust funds established under this Section
 
                            -12-               LRB9202778DJcs
 1    and all persons interested therein or dealing therewith shall
 2    be subject to the provisions of  Sections  133,  144,  144.1,
 3    149,  401,  401.1,  402,  403,  403A,  412,  and  all  of the
 4    provisions of Articles VII, VIII, VIII 1/2, XII 1/2, and XIII
 5    of the Illinois Insurance Code. Except as otherwise  provided
 6    in  this  Section,  trust  funds  established under and which
 7    fully comply with this Section shall not be  subject  to  any
 8    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  Sections  132  through  132.7  of the
13    Illinois Insurance Code.  The cost of  any  such  examination
14    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  the
17    following fees and charges:
18             (i)  For   filing   trust   instruments,  amendments
19        thereto  and  financial  statement  and  report  of   the
20        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 of
24        a condominium risk pooling trust, $500.
25        (u)  (Blank).  This Section shall apply regardless of any
26    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 Review
33    Law shall  apply  to  and  govern  all  proceedings  for  the
34    judicial  review of final administrative decisions under this
 
                            -13-               LRB9202778DJcs
 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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