State of Illinois
92nd General Assembly
Legislation

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


92_SB1046eng

 
SB1046 Engrossed                               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
 
SB1046 Engrossed            -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
 
SB1046 Engrossed            -3-                LRB9202778DJcs
 1             1986  or  the  declaration   and   bylaws   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.
 
SB1046 Engrossed            -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
 
SB1046 Engrossed            -5-                LRB9202778DJcs
 1    terminated as trustee.
 2        (h)  Mandatory  unit  owner  coverage.   The   board   of
 3    directors  may,  under the declaration and bylaws 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
 
SB1046 Engrossed            -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.
 
SB1046 Engrossed            -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
 
SB1046 Engrossed            -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
 
SB1046 Engrossed            -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
 
SB1046 Engrossed            -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
 
SB1046 Engrossed            -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
 
SB1046 Engrossed            -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
 
SB1046 Engrossed            -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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