State of Illinois
92nd General Assembly
Legislation

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[ Introduced ][ Engrossed ][ House Amendment 001 ]


92_SB1976enr

 
SB1976 Enrolled                               LRB9214934JSpcA

 1        AN ACT concerning insurance.

 2        Be  it  enacted  by  the People of the State of Illinois,
 3    represented in the General Assembly:

 4        Section 5.  The Illinois Insurance  Code  is  amended  by
 5    changing Sections 205 and 226.1 as follows:

 6        (215 ILCS 5/205) (from Ch. 73, par. 817)
 7        Sec. 205.  Priority of distribution of general assets.
 8        (1)  The  priorities  of  distribution  of general assets
 9    from the company's estate is to be as follows:
10             (a)  The  costs  and  expenses  of   administration,
11        including the expenses of the Illinois Insurance Guaranty
12        Fund,  the  Illinois  Life  and Health Insurance Guaranty
13        Association, the Illinois Health Maintenance Organization
14        Guaranty Association and of any similar  organization  in
15        any  other  state  as  prescribed  in  subsection  (c) of
16        Section 545.
17             (b)  Secured claims, including claims for taxes  and
18        debts  due  the federal or any state or local government,
19        that are secured by liens perfected prior to  the  filing
20        of the complaint.
21             (c)  Claims  for  wages  actually owing to employees
22        for services rendered within 3 months prior to  the  date
23        of  the  filing of the complaint, not exceeding $1,000 to
24        each employee unless there are  claims  due  the  federal
25        government under paragraph (f), then the claims for wages
26        shall   have   a  priority  of  distribution  immediately
27        following that of federal claims under paragraph (f)  and
28        immediately  preceding  claims of general creditors under
29        paragraph (g).
30             (d)  Claims  by  policyholders,  beneficiaries,  and
31        insureds, under insurance  policies,  annuity  contracts,
 
SB1976 Enrolled            -2-                LRB9214934JSpcA
 1        and  funding  agreements,  and  liability  claims against
 2        insureds covered under insurance policies  and  insurance
 3        contracts  issued  by  the  company,  and  claims  of the
 4        Illinois Insurance Guaranty Fund, the Illinois  Life  and
 5        Health   Insurance  Guaranty  Association,  the  Illinois
 6        Health Maintenance Organization Guaranty Association  and
 7        any  similar  organization in another state as prescribed
 8        in Section 545.  For purposes of this  Section,  "funding
 9        agreement"   means   an   agreement  whereby  an  insurer
10        authorized to write business under Class 1 of  Section  4
11        of this Code may accept and accumulate funds and make one
12        or  more payments at future dates in amounts that are not
13        based upon mortality or morbidity contingencies.
14             (e)  Claims  by  policyholders,  beneficiaries,  and
15        insureds, the allowed values of which were determined  by
16        estimation  under  paragraph  (b)  of  subsection  (4) of
17        Section 209.
18             (f)  Any other claims due the federal government.
19             (g)  All  other  claims  of  general  creditors  not
20        falling within any  other  priority  under  this  Section
21        including  claims  for  taxes  and debts due any state or
22        local government which are not secured claims and  claims
23        for attorneys' fees incurred by the company in contesting
24        its conservation, rehabilitation, or liquidation.
25             (h)  Claims  of  guaranty  fund certificate holders,
26        guaranty capital shareholders, capital note holders,  and
27        surplus note holders.
28             (i)  Proprietary claims of shareholders, members, or
29        other owners.
30        Every  claim  under a written agreement, statute, or rule
31    providing that the assets  in  a  separate  account  are  not
32    chargeable  with  the  liabilities  arising  out of any other
33    business of the insurer shall be satisfied out of the  funded
34    assets  in  the separate account equal to, but not to exceed,
 
SB1976 Enrolled            -3-                LRB9214934JSpcA
 1    the reserves maintained in the  separate  account  under  the
 2    separate  account  agreement,  and to the extent, if any, the
 3    claim is not fully discharged thereby, the remainder  of  the
 4    claim  shall  be  treated as a priority level (d) claim under
 5    paragraph (d) of this subsection to the extent that  reserves
 6    have  been  established  in  the  insurer's  general  account
 7    pursuant to statute, rule, or the separate account agreement.
 8        For   purposes   of  this  provision,  "separate  account
 9    policies,  contracts,  or  agreements"  means  any  policies,
10    contracts, or agreements that provide for  separate  accounts
11    as contemplated by Section 245.21.
12        To  the  extent that any assets of an insurer, other than
13    those assets  properly  allocated  to  and  maintained  in  a
14    separate account, have been used to fund or pay any expenses,
15    taxes,  or  policyholder  benefits that are attributable to a
16    separate account policy, contract, or agreement  that  should
17    have   been   paid   by  a  separate  account  prior  to  the
18    commencement  of  receivership  proceedings,  then  upon  the
19    commencement  of  receivership  proceedings,   the   separate
20    accounts  that  benefited  from this payment or funding shall
21    first be used to repay or  reimburse  the  company's  general
22    assets  or  account  for any unreimbursed net sums due at the
23    commencement  of  receivership  proceedings  prior   to   the
24    application   of   the   separate   account   assets  to  the
25    satisfaction of liabilities  or  the  corresponding  separate
26    account policies, contracts, and agreements.
27        To  the  extent, if any, reserves or assets maintained in
28    the separate account are in excess of the amounts  needed  to
29    satisfy  claims  under  the  separate  account contracts, the
30    excess shall be treated as part of the general assets of  the
31    insurer's estate.
32        (2)  Within  120  days  after the issuance of an Order of
33    Liquidation with a finding of insolvency against  a  domestic
34    company,  the  Director  shall  make application to the court
 
SB1976 Enrolled            -4-                LRB9214934JSpcA
 1    requesting  authority  to  disburse  funds  to  the  Illinois
 2    Insurance  Guaranty  Fund,  the  Illinois  Life  and   Health
 3    Insurance   Guaranty   Association,   the   Illinois   Health
 4    Maintenance  Organization  Guaranty  Association  and similar
 5    organizations in other states from time to time  out  of  the
 6    company's  marshaled  assets  as  funds  become  available in
 7    amounts equal to disbursements made by the Illinois Insurance
 8    Guaranty  Fund,  the  Illinois  Life  and  Health   Insurance
 9    Guaranty   Association,   the   Illinois  Health  Maintenance
10    Organization Guaranty Association and  similar  organizations
11    in  other  states  for  covered  claims  obligations  on  the
12    presentation  of  evidence  that such disbursements have been
13    made by the Illinois Insurance Guaranty  Fund,  the  Illinois
14    Life  and Health Insurance Guaranty Association, the Illinois
15    Health  Maintenance  Organization  Guaranty  Association  and
16    similar organizations in other states.
17        The Director shall establish procedures for  the  ratable
18    allocation  and distribution of disbursements to the Illinois
19    Insurance  Guaranty  Fund,  the  Illinois  Life  and   Health
20    Insurance   Guaranty   Association,   the   Illinois   Health
21    Maintenance  Organization  Guaranty  Association  and similar
22    organizations in other states.  In  determining  the  amounts
23    available   for  disbursement,  the  Director  shall  reserve
24    sufficient  assets  for  the  payment  of  the  expenses   of
25    administration   described  in  paragraph  (1)  (a)  of  this
26    Section.  All funds  available  for  disbursement  after  the
27    establishment  of  the  prescribed  reserve shall be promptly
28    distributed.   As  a  condition  to  receipt  of   funds   in
29    reimbursement  of  covered  claims  obligations, the Director
30    shall secure from the Illinois Insurance Guaranty  Fund,  the
31    Illinois  Life and Health Insurance Guaranty Association, the
32    Illinois Health Maintenance Organization Guaranty Association
33    and each similar organization in other states,  an  agreement
34    to return to the Director on demand funds previously received
 
SB1976 Enrolled            -5-                LRB9214934JSpcA
 1    as  may  be  required  to pay claims of secured creditors and
 2    claims  falling  within   the   priorities   established   in
 3    paragraphs  (a),  (b), (c), and (d) of subsection (1) of this
 4    Section in accordance with such priorities.
 5        (3)  The provisions of this Section are  severable  under
 6    Section 1.31 of the Statute on Statutes.
 7    (Source: P.A. 92-65, eff. 7-12-01.)

 8        (215 ILCS 5/226.1) (from Ch. 73, par. 838.1)
 9        Sec.  226.1.  Entitled  annuity  payment options. Annuity
10    contracts and funding agreements may be issued without a life
11    contingency  annuity  payment   option   in   the   following
12    circumstances: (1) to fund benefits under an employee benefit
13    plan  as  defined  in the Employee Retirement Income Security
14    Act of 1974, as now or hereafter amended;  (2)  to  fund  the
15    activities  of  an  organization  exempt  from taxation under
16    Internal Revenue Code Section 501(c),  as  now  or  hereafter
17    amended; (3) to fund a program of a governmental entity or of
18    an   agency  or  instrumentality  thereof;  (4)  to  fund  an
19    agreement providing for periodic  payments  entered  into  in
20    satisfaction  of  a  claim;  or  (5)  to fund a program of an
21    institution having assets in excess of $25,000,000.
22    (Source: P.A. 86-753.)

23        Section 99.  Effective date.  This Act takes effect  upon
24    becoming law.

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