State of Illinois
92^nd General Assembly
Legislation

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92_SB1046ren

 
SB1046 Re-enrolled                             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.  No policy of insurance shall  be
 9    issued  or  delivered  to  a  condominium association, and no
10    policy of insurance issued to a condominium association shall
11    be renewed, unless the insurance coverage  under  the  policy
12    includes the following:
13             (1)  Property  insurance.  Property insurance (i) on
14        the common elements and the units, including the  limited
15        common elements and except as otherwise determined by the
16        board  of  managers, the bare walls, floors, and ceilings
17        of the unit, (ii) providing  coverage  for  special  form
18        causes  of  loss, and (iii) in a total amount of not less
19        than the full insurable replacement cost of  the  insured
20        property,  less  deductibles,  but including coverage for
21        the increased costs of construction due to building  code
22        requirements,  at the time the insurance is purchased and
23        at each renewal date.
24             (2)  General liability insurance. Commercial general
25        liability  insurance  against  claims   and   liabilities
26        arising in connection with the ownership, existence, use,
27        or  management  of  the  property  in a minimum amount of
28        $1,000,000, or a greater amount deemed sufficient in  the
29        judgment   of   the   board,   insuring  the  board,  the
30        association, the management agent, and  their  respective
31        employees  and  agents  and all persons acting as agents.
 
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 1        The developer must be included as an  additional  insured
 2        in  its  capacity as a unit owner, manager, board member,
 3        or  officer.  The  unit  owners  must  be   included   as
 4        additional  insured  parties  but  only  for  claims  and
 5        liabilities  arising  in  connection  with the ownership,
 6        existence, use, or management of the common elements. The
 7        insurance must  cover  claims  of  one  or  more  insured
 8        parties against other insured parties.
 9             (3)  Fidelity bond; directors and officers coverage.
10                  (A)  An  association  with  6  or more dwelling
11             units must  obtain  and  maintain  a  fidelity  bond
12             covering  persons,  including the managing agent and
13             its employees who control or disburse funds  of  the
14             association,  for  the  maximum  amount  of coverage
15             available to protect funds in the custody or control
16             of the association,  plus  the  association  reserve
17             fund.
18                  (B)  All    management   companies   that   are
19             responsible for the funds held  or  administered  by
20             the  association  must be covered by a fidelity bond
21             for the maximum  amount  of  coverage  available  to
22             protect those funds. The association has standing to
23             make  a  loss claim against the bond of the managing
24             agent as a party covered under the bond.
25                  (C)  For purposes of paragraphs  (A)  and  (B),
26             the  fidelity  bond  must  be  in the full amount of
27             association funds and reserves in the custody of the
28             association or the management company.
29                  (D)  The  board  of   directors   must   obtain
30             directors and officers liability coverage at a level
31             deemed  reasonable  by  the  board, if not otherwise
32             established by the declaration or bylaws.  Directors
33             and  officers  liability coverage must extend to all
34             contracts and other actions taken by  the  board  in
 
SB1046 Re-enrolled             -3-             LRB9202778DJcs
 1             their  official  capacity as directors and officers,
 2             but this coverage shall exclude  actions  for  which
 3             the  directors  are  not entitled to indemnification
 4             under the General Not For Profit Corporation Act  of
 5             1986   or   the   declaration   and  bylaws  of  the
 6             association.
 7        (b)  Contiguous units; improvements and betterments.  The
 8    insurance  maintained  under  subdivision (a)(1) must include
 9    the units, the limited common elements  except  as  otherwise
10    determined by the board of managers, and the common elements.
11    The  insurance need not cover improvements and betterments to
12    the units installed by unit owners, but if  improvements  and
13    betterments  are  covered, any increased cost may be assessed
14    by the association against the units affected.
15        Common  elements  include  fixtures  located  within  the
16    unfinished interior surfaces of the perimeter walls,  floors,
17    and  ceilings  of the individual units initially installed by
18    the developer.  Common  elements  exclude  floor,  wall,  and
19    ceiling  coverings.  "Improvements and betterments" means all
20    decorating, fixtures, and furnishings installed or  added  to
21    and  located  within  the  boundaries  of the unit, including
22    electrical fixtures, appliances, air conditioning and heating
23    equipment, water heaters, or built-in cabinets  installed  by
24    unit owners.
25        (c)  Deductibles.   The   board   of   directors  of  the
26    association may, in the case of a claim for damage to a  unit
27    or  the  common  elements, (i) pay the deductible amount as a
28    common expense, (ii) after notice and an  opportunity  for  a
29    hearing,  assess the deductible amount against the owners who
30    caused the damage or from whose units the damage or cause  of
31    loss  originated,  or  (iii)  require  the unit owners of the
32    units affected to pay the deductible amount.
33        (d)  Other coverages. The  declaration  may  require  the
34    association  to  carry any other insurance, including workers
 
SB1046 Re-enrolled             -4-             LRB9202778DJcs
 1    compensation, employment  practices,  environmental  hazards,
 2    and  equipment  breakdown,  the  board of directors considers
 3    appropriate to protect the association, the unit  owners,  or
 4    officers, directors, or agents of the association.
 5        (e)  Insured  parties;  waiver  of subrogation. Insurance
 6    policies carried pursuant to subsections  (a)  and  (b)  must
 7    include each of the following provisions:
 8             (1)  Each unit owner and secured party is an insured
 9        person under the policy with respect to liability arising
10        out  of  the unit owner's interest in the common elements
11        or membership in the association.
12             (2)  The insurer waives  its  right  to  subrogation
13        under   the   policy   against  any  unit  owner  of  the
14        condominium or members of the unit owner's household  and
15        against  the  association  and  members  of  the board of
16        directors.
17             (3)  The unit owner  waives  his  or  her  right  to
18        subrogation  under  the  association  policy  against the
19        association and the board of directors.
20        (f)  Primary insurance. If at the time of  a  loss  under
21    the  policy  there  is  other insurance in the name of a unit
22    owner covering the same property covered by the  policy,  the
23    association's policy is primary insurance.
24        (g)  Adjustment  of losses; distribution of proceeds. Any
25    loss covered by the property policy under subdivision  (a)(1)
26    must  be  adjusted by and with the association. The insurance
27    proceeds for that loss must be payable to the association, or
28    to an insurance trustee designated  by  the  association  for
29    that  purpose.  The insurance trustee or the association must
30    hold any insurance proceeds in  trust  for  unit  owners  and
31    secured  parties  as their interests may appear. The proceeds
32    must be disbursed first for the repair or restoration of  the
33    damaged common elements, the bare walls, ceilings, and floors
34    of  the  units,  and then to any improvements and betterments
 
SB1046 Re-enrolled             -5-             LRB9202778DJcs
 1    the association may insure. Unit owners are not  entitled  to
 2    receive any portion of the proceeds unless there is a surplus
 3    of  proceeds  after  the  common elements and units have been
 4    completely repaired or restored or the association  has  been
 5    terminated as trustee.
 6        (h)  Mandatory   unit   owner   coverage.  The  board  of
 7    directors may, under the declaration and bylaws or  by  rule,
 8    require  condominium unit owners to obtain insurance covering
 9    their  personal   liability   and   compensatory   (but   not
10    consequential)   damages   to  another  unit  caused  by  the
11    negligence of the owner or his or her guests,  residents,  or
12    invitees,  or  regardless  of any negligence originating from
13    the  unit.  The  personal  liability  of  a  unit  owner   or
14    association  member  must include the deductible of the owner
15    whose unit was damaged, any damage not covered  by  insurance
16    required  by  this  subsection,  as  well  as the decorating,
17    painting,  wall  and  floor  coverings,   trim,   appliances,
18    equipment, and other furnishings.
19        If  the  unit owner does not purchase or produce evidence
20    of insurance  requested  by  the  board,  the  directors  may
21    purchase  the  insurance coverage and charge the premium cost
22    back to the unit owner. In no event is the  board  liable  to
23    any person either with regard to its decision not to purchase
24    the  insurance,  or with regard to the timing of its purchase
25    of the  insurance  or  the  amounts  or  types  of  coverages
26    obtained.
27        (i)  Certificates  of insurance.  Contractors and vendors
28    (except public utilities) doing business with  a  condominium
29    association  under  contracts exceeding $10,000 per year must
30    provide certificates of insurance naming the association, its
31    board of directors, and  its  managing  agent  as  additional
32    insured parties.
33        (j)  Non-residential condominiums. The provisions of this
34    Section  may be varied or waived in the case of a condominium
 
SB1046 Re-enrolled             -6-             LRB9202778DJcs
 1    community in which all units are restricted to nonresidential
 2    use.
 3        (k)  Settlement  of  claims.  Any  insurer  defending   a
 4    liability claim against a condominium association must notify
 5    the  association  of the terms of the settlement no less than
 6    10 days before settling the claim. The  association  may  not
 7    veto  the settlement unless otherwise provided by contract or
 8    statute. )  (a) (1) The board  of  managers  shall  have  the
 9    authority  to  and shall obtain, except as otherwise provided
10    in Section 12.1, insurance for the property against  loss  or
11    damage  by  fire  and such other hazards as are covered under
12    standard extended coverage provisions for the full  insurable
13    replacement  cost of the common elements and the units. Every
14    insurer issuing a policy against loss or damage by  fire  and
15    such  other  hazards  as  are covered under standard extended
16    coverage to a  condominium  association  shall  print  on  or
17    attach  to  the  premium notice the following statement: "The
18    Condominium   Property   Act   requires   every   condominium
19    association to obtain insurance for the property against loss
20    or damage by fire and such other hazards as are covered under
21    the  standard  extended  coverage  provisions  for  the  full
22    insurable replacement costs.  This  policy  may  or  may  not
23    satisfy   this   requirement.   Please  examine  your  policy
24    carefully  to   determine   if   it   complies   with   these
25    requirements."  The  full  insurable  replacement cost of the
26    units may include the replacement cost value  of  betterments
27    and  improvements made in and to a unit by a unit owner if it
28    is so provided by the condominium declaration, and if  it  is
29    so  provided  in  the  condominium  instruments, any increase
30    premium charge therefor shall be assessed to that unit  owner
31    under the provisions of Section 9 hereof.
32        (2)  Such insurance coverage shall be written in the name
33    of,  and the proceeds thereof shall be deemed payable to, the
34    board of managers, as trustee for each of the unit owners  in
 
SB1046 Re-enrolled             -7-             LRB9202778DJcs
 1    the percentages established in the declaration. Any insurance
 2    policy obtained for the property pursuant to paragraph (1) of
 3    subsection  (a)  of  this Section, which fails to contain the
 4    trustee provisions required by this paragraph (2),  shall  be
 5    deemed  to  incorporate  such  provisions  into the policy by
 6    operation of law.
 7        (3) The board of managers, or the persons acting in  such
 8    capacity  pursuant  to  Section  18.2 of this Act, shall have
 9    authority to designate any corporation  qualified  to  accept
10    and  execute  trusts in this state to act as agent or trustee
11    for, or as successor trustee to, said board of  managers  for
12    the purpose of collecting and disbursing the proceeds of such
13    insurance  in  the  manner  provided  by the declaration, the
14    bylaws, and this Act. Premiums for such insurance  and  other
15    expenses in connection therewith shall be common expenses.
16        (b)  The  board  of managers shall have the authority and
17    duty  to  obtain  comprehensive  public  liability  insurance
18    against claims and liabilities arising in connection with the
19    ownership, existence, use or management of  the  property  in
20    amounts,  if any, specified by the condominium instruments or
21    otherwise deemed sufficient in the judgment of the  board  of
22    managers,  insuring  the  board of managers, the unit owners'
23    association,  the  management  agent,  and  their  respective
24    employees, agents and all  persons  acting  as  agents.   The
25    developer  shall  be included as an additional insured in his
26    capacity as unit owner and board  member.   The  unit  owners
27    shall  be  included  as  additional  insureds  but  only with
28    respect to that portion of  the  premises  not  reserved  for
29    their exclusive use.  The insurance shall cover claims of one
30    or  more  insured  parties against other insured parties. The
31    insurance shall contain a waiver of any rights to subrogation
32    by the insuring  company  against  any  of  the  above  named
33    insured persons.  Premiums for such insurance shall be common
34    expenses.
 
SB1046 Re-enrolled             -8-             LRB9202778DJcs
 1        (c)  The  board  of managers shall notify insured persons
 2    concerning the cancellation of insurance obtained pursuant to
 3    the terms of this Section.
 4        (d)  Any insurer defending a claim against a  condominium
 5    association  shall notify the association of the terms of the
 6    settlement before settling the claim.  The association  shall
 7    not  have  power  to  veto  such settlement, unless otherwise
 8    provided by contract or statute.
 9    (Source: P.A. 84-1431; 84-1464.)

10        (765 ILCS 605/12.1) (from Ch. 30, par. 312.1)
11        Sec. 12.1.  Insurance risk pooling trusts.
12        (a) This Section shall be known and may be cited  as  the
13    Condominium  and Common Interest Community Risk Pooling Trust
14    Act.
15        (b)  The boards of managers or boards  of  directors,  as
16    the  case  may be, of two or more condominium associations or
17    common interest community  associations,  are  authorized  to
18    establish, with the unit owners and the condominium or common
19    interest community associations as the beneficiaries thereof,
20    a  trust  fund for the purpose of providing protection of the
21    participating  condominium  and  common  interest   community
22    associations against the risk of financial loss due to damage
23    to,  destruction of or loss of property, or the imposition of
24    legal liability as required or authorized under this  Act  or
25    the   declaration  of  the  condominium  or  common  interest
26    community  association.   Such  trust  fund  shall  initially
27    assess  unit  owners  an  amount  actuarially   adequate   to
28    establish  such  fund  and  shall  assess such amounts as are
29    required to maintain such fund.  Such amounts may be  treated
30    as   assessments   of  the  condominium  or  common  interest
31    community association.
32        (c)  The trust fund shall be established and amended only
33    by a  written  instrument  which  shall  be  filed  with  and
 
SB1046 Re-enrolled             -9-             LRB9202778DJcs
 1    approved  by  the Director of Insurance prior to its becoming
 2    effective. The Director of Insurance shall withhold  approval
 3    of  any  instrument if it does not comply with the provisions
 4    of this Section or any rule or regulation of the Director  of
 5    Insurance.
 6        (d)  No  common interest community association shall be a
 7    beneficiary of the trust  fund  unless  it  either  shall  be
 8    incorporated under the laws of this State or shall have first
 9    procured  a  Certificate  of  Authority from the Secretary of
10    State.
11        (e)  The  trust  fund  is  authorized  to  indemnify  the
12    condominium  and  common   interest   community   association
13    beneficiaries thereof against the risk of loss due to damage,
14    destruction  or  loss  to  property  or  imposition  of legal
15    liability as required or authorized under  this  Act  or  the
16    declaration  of  the condominium or common interest community
17    association. The trustee of the trust fund may determine  and
18    establish   contributions   to  the  trust  fund  actuarially
19    required to fund the operations and carry out the purposes of
20    the trust fund and may enter into contracts in order to carry
21    out the purposes for which the trust  fund  was  established,
22    provided  however,  that any such contracts shall not provide
23    for compensation or payments  in  excess  of  that  which  is
24    reasonable  in  relation  to  the services actually performed
25    thereunder.
26        (f)  The trust fund may  enter  into  written  agreements
27    with other trust funds established under this Section whereby
28    the  Risks  assumed  by the any such trust fund may be pooled
29    and shared with such other trust funds established under this
30    Section.
31        (g)  (Blank). The trustees of all trust funds established
32    under this Act shall be natural persons over the  age  of  18
33    who are residents of this State.
34        (h)  (Blank).  Every  such trust fund shall have no fewer
 
SB1046 Re-enrolled             -10-            LRB9202778DJcs
 1    than 3 nor more than 30 trustees.  No less than  2/3  of  the
 2    trustees  shall be officers, directors, trustees or full time
 3    employees of  a  condominium  or  common  interest  community
 4    association beneficiary of the trust fund.
 5        (i)  No  trustee of the trust fund shall be paid a salary
 6    or receive other compensation, except that the written  trust
 7    instrument  may provide for reimbursement for actual expenses
 8    incurred on behalf of the trust  fund.   No  trustee  or  any
 9    employer  or affiliate of any trustee of the trust fund shall
10    enter into any contract with the trust fund for,  or  receive
11    any monies or other compensation or thing of value whatsoever
12    from,  the trust fund for services performed for or on behalf
13    of such trust fund, except  as  otherwise  provided  in  this
14    Section.
15        (j)  (Blank).  The  trustees  shall serve pursuant to the
16    terms of the written trust instrument except that the written
17    trust instrument shall  set  forth  the  manner  in  which  a
18    trustee  of  a  trust  fund  may be removed and the manner in
19    which vacancies among the trustees of the trust fund  may  be
20    filled.
21        (k)  (Blank).  No  trustee  of the trust fund shall serve
22    for more than 3 consecutive years unless he is reappointed in
23    the manner provided for in the written trust instrument.
24        (l)  (Blank). The trustees of the trust fund  shall  have
25    the  powers  specified  in the written trust instrument which
26    established the trust fund.
27        (m)  Each trust fund shall by June 1 of  each  year  file
28    annually  with the Director of Insurance a full independently
29    audited  financial  statement.  as  of  December  31  of  the
30    preceding year, and by April 1 of each year a report  of  the
31    trustees  of  the  trust fund detailing the operations of the
32    trust fund and including a list of all  beneficiaries  during
33    the  year  and  a  statement  that  each  beneficiary was not
34    ineligible except as provided for in this Section.  The truth
 
SB1046 Re-enrolled             -11-            LRB9202778DJcs
 1    and accuracy of the financial statement and report  shall  be
 2    attested  to  by  each trustee. The financial statement shall
 3    include  the  opinion  of  an  independent  certified  public
 4    accountant on the financial condition of the trust  fund  for
 5    the  most  recent  calendar  year  and  the  results  of  its
 6    operations,  changes  in  financial  position  and changes in
 7    capital and surplus for the year  then  ended  in  conformity
 8    with  accounting  practices  permitted  or  prescribed by the
 9    Illinois Department of Insurance.
10        (n)  (Blank).  A beneficiary is ineligible if he  or  she
11    ceases to be a unit owner of a condominium or common interest
12    community   association,   except  where  liability  of  such
13    beneficiary was incurred at the time he or  she  was  a  unit
14    owner.
15        (o)  (Blank).  No  beneficiary  shall  have  any cause of
16    action against any other beneficiary arising  solely  out  of
17    the  insolvency  or  inability  of the trust fund to meet its
18    obligations, unless such other beneficiary is  a  trustee  of
19    such  trust  fund  and  has  breached  a  fiduciary  duty  in
20    connection  with  such  trust fund. This subsection shall not
21    preclude the assessment and collection of any payments to the
22    trust fund to correct such insolvency  or  inability  of  the
23    trust fund to meet its obligations.
24        (p)  (Blank).   No  trust  fund  established  under  this
25    subsection (d) shall grant any power to the trustees  of  the
26    trust  fund  which  is  inconsistent with this Section or any
27    other law of this State.
28        (q)  (Blank).  Every  trust  fund  established  hereunder
29    shall include in the written trust instrument the basis  upon
30    which payments are made to and from the trust fund.
31        (r)  (Blank).  Trust funds established under this Section
32    and all persons interested therein or dealing therewith shall
33    be subject to the provisions of  Sections  133,  144,  144.1,
34    149,  401,  401.1,  402,  403,  403A,  412,  and  all  of the
 
SB1046 Re-enrolled             -12-            LRB9202778DJcs
 1    provisions of Articles VII, VIII, VIII 1/2, XII 1/2, and XIII
 2    of the Illinois Insurance Code. Except as otherwise  provided
 3    in  this  Section,  trust  funds  established under and which
 4    fully comply with this Section shall not be  subject  to  any
 5    other provision of the Illinois Insurance Code.
 6        (s)  The Director of Insurance shall have with respect to
 7    trust  funds  established  under  this  Section the powers of
 8    examination  conferred  upon  him   relative   to   insurance
 9    companies  by  Section  Sections  132  through  132.7  of the
10    Illinois Insurance Code.  The cost of  any  such  examination
11    shall be paid by the trust fund examined.
12        (t)  (Blank).  The  Director  of  Insurance shall charge,
13    collect and give proper acquittances for the payment  of  the
14    following fees and charges:
15             (i)  For   filing   trust   instruments,  amendments
16        thereto  and  financial  statement  and  report  of   the
17        trustees, $25.
18             (ii)  For copies of papers or records per  page, $1.
19             (iii)  For certificate to copy of paper, $5.
20             (iv)  For filing an application for the licensing of
21        a condominium risk pooling trust, $500.
22        (u)  (Blank).  This Section shall apply regardless of any
23    contrary provisions of any instrument.
24        (v)  Trust funds established under and which fully comply
25    with this Section shall not be  considered  member  insurance
26    companies or to be in the business of insurance nor shall the
27    provision  of  Article  XXXIV  of the Illinois Insurance Code
28    apply to any such trust fund established under this Section.
29        (w)  (Blank). The provisions of the Administrative Review
30    Law shall  apply  to  and  govern  all  proceedings  for  the
31    judicial  review of final administrative decisions under this
32    Section.
33        (x)  The Director of  Insurance  shall  adopt  reasonable
34    rules   pertaining   to   the   standards   of  coverage  and
 
SB1046 Re-enrolled             -13-            LRB9202778DJcs
 1    administration of trust funds authorized under this Section.
 2    (Source: P.A. 89-97, eff. 7-7-95.)

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