Public Act 90-0499 of the 90th General Assembly
Public Act 90-0499
HB0223 Enrolled LRB9001100JSgc
AN ACT concerning insurance.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Employee Leasing Company Act.
Section 5. Purpose. For the purpose of ensuring that an
employer that leases some or all of its workers properly
obtains workers' compensation insurance coverage for all of
its employees, including those leased from another entity,
and that premium is paid commensurate with exposure and
anticipated claim experience, this Act is required to
regulate employee leasing companies.
Section 10. Applicability. This Act applies to all
policies issued, renewed, or delivered after the effective
date of this Act.
Section 15. Definitions. In this Act:
"Department" means the Illinois Department of Insurance.
"Employee leasing arrangement" means an arrangement,
under contract or otherwise, whereby one business or other
entity leases all or a majority number of its workers from
another business. Employee leasing arrangements include, but
are not limited to, full service employee leasing
arrangements, long-term temporary arrangements, and any other
arrangement that involves the allocation of employment
responsibilities among 2 or more entities. For purposes of
this Act, "employee leasing arrangement" does not include
arrangements to provide temporary help service. "Temporary
help service" means a service whereby an organization hires
its own employees and assigns them to clients for a finite
time period to support or supplement the client's work force
in special work situations such as employee absences,
temporary skill shortages, and seasonal workloads.
"Leased employee" means a person performing services for
a lessee under an employee leasing arrangement.
"Lessee" or "client company" means an entity that obtains
all or part of its work force from another entity through an
employee leasing arrangement or that employs the services of
an entity through an employee leasing arrangement.
"Lessor" or "employee leasing company" means an entity
that grants a written lease to a lessee through an employee
leasing arrangement.
"Long-term temporary arrangement" means an arrangement
where all or a majority number of employees from one company
are leased to another for a period in excess of 6 months or
consecutive periods equal to or greater than one year.
"Premium subject to dispute" means the insured has
provided a written notice of dispute of the premium to the
insurer or service carrier, has initiated any applicable
proceeding for resolving these disputes as prescribed by law
or rating organization rule, or has initiated litigation
regarding the premium dispute. The insured must have
detailed the specific areas of dispute and provided an
estimate of the premium the insured believes to be correct.
The insured must have paid any undisputed portion of the
bill.
"Residual market mechanism" means the residual market
mechanism as defined in Section 468 of the Illinois Insurance
Code.
Section 20. Registration.
(a) An employee leasing company may not engage in
business in this State without first registering with the
Department. A corporation, partnership, sole proprietorship,
or other business entity that provides staff, personnel, or
employees to be employed in this State to other businesses
pursuant to a lease arrangement or agreement shall, before
becoming eligible to be issued any policy of workers'
compensation insurance, register with the Department. The
registration shall:
(1) identify the name of the lessor;
(2) identify the address of the principal place of
business of the lessor and the address of each office it
maintains within this State;
(3) include the lessor's taxpayer or employer
identification number;
(4) include a list by jurisdiction of each and
every name that the lessor has operated under in the
preceding 5 years including any alternative names and
names of predecessors and, if known, successor business
entities;
(5) include a list of the officers and directors of
the employee leasing company or its predecessors,
successors, or alter egos in the preceding 5 years; and
(6) include a list of each and every cancellation
or nonrenewal of workers' compensation insurance that has
been issued to the lessor or any predecessor in the
preceding 5 years. The list shall include the policy or
certificate number, name of insurer or other provider of
coverage, date of cancellation, and reason for
cancellation. If coverage has not been cancelled or
nonrenewed, the registration shall include a sworn
affidavit signed by the chief executive officer of the
lessor attesting to that fact.
Each employee leasing company registrant shall pay to the
Department upon initial registration, and upon each renewal
annually thereafter, a registration fee of $500.
Each employee leasing company shall maintain accounting
and employment records relating to all employee leasing
activities for a minimum of 3 calendar years.
(b) Any lessor of employees whose workers' compensation
insurance has been terminated within the past 5 years in any
jurisdiction due to a determination that an employee leasing
arrangement was being utilized to avoid premium otherwise
payable by lessees shall be ineligible to register with the
Department or to remain registered, if previously registered.
(c) Persons filing registration statements pursuant to
this Section shall notify the Department as to any changes in
any information provided pursuant to this Section.
(d) The Department shall maintain a list of those
lessors of employees who are satisfactorily registered with
the Department.
(e) The Department may prescribe any forms that are
necessary to promote the efficient administration of this
Section.
(f) Any lessor of employees that was doing business in
this State prior to enactment of this Act shall register with
the Department within 60 days of the effective date of this
Act.
Section 25. Reporting requirement.
(a) A lessor shall maintain and furnish once every 12
months or in the event of a termination of the employee
leasing arrangement sufficient information to the insurer,
who shall submit such information to permit the calculation
of an experience modification factor by a rating organization
licensed under Section 459 of the Illinois Insurance Code for
each lessee. This information shall be submitted in a manner
consistent with a licensed rating organization's data
submission requirements and shall include but not be limited
to the following:
(1) the lessee's corporate name, or operating name
if not a corporation, and address;
(2) the lessee's taxpayer or employer
identification number;
(3) the lessee's risk identification number;
(4) a listing of all leased employees associated
with each lessee, the applicable classification code, and
payroll; and
(5) claims information grouped by lessee and any
other information necessary to permit the calculation of
an experience modification factor for each lessee.
(b) In the event that a lessee's experience modification
factor exceeds the lessor's experience modification factor by
50% at the inception of the employee leasing arrangement, the
lessee's experience modification factor shall be utilized to
calculate the premium or costs charged to the lessee for
workers' compensation coverage for a period of 2 years.
Thereafter, the premium charged by the insurance company for
inclusion of a lessee under a lessor's policy may be
calculated on the basis of the lessor's experience
modification factor.
Section 30. Responsibility for policy issuance and
continuance.
(a) When a workers' compensation policy written to cover
leased employees is issued to the employee leasing company as
the named insured, the client company shall be identified
thereon by the attachment of an appropriate endorsement
indicating that the policy provides coverage for leased
employees in accordance with Illinois law. The endorsement
shall, at a minimum, provide for the following:
(1) Coverage under the policy shall be limited to
the named insured's employees leased to the lessees.
(2) The experience of the employees leased to the
particular lessee shall be separately maintained by the
lessor.
(3) Cancellation of the policy shall not affect the
rights and obligations of the named insured as an
employee leasing company with respect to any other
workers' compensation and employers' liability policy
issued to the named insured.
(b) The insurer of the lessor may take all reasonable
steps to ascertain exposure under the policy and collect the
appropriate premium through the following procedures:
(1) complete description of the lessor's
operations;
(2) periodic reporting of the covered lessee's
payroll, classifications, experience rating modification
factors, and jurisdictions with exposure. This reporting
must be supplemented by a submission of Internal Revenue
Service Form 941 or its equivalent to the carrier on a
quarterly basis;
(3) physical inspection of the client company
premises;
(4) audit of the lessor's operations; and
(5) any other reasonable measures to determine the
appropriate premium.
(c) The lessor shall notify the insurer or a licensed
rating organization 30 days prior to the effective date of
termination or immediately upon notification of cancellation
by the lessor of an employee leasing arrangement with the
lessee in order to allow sufficient time to calculate an
experience modification factor for the lessee.
(d) The lessor shall provide proof of workers'
compensation insurance to each lessee within 30 days of the
coverage effective date. Notice of any coverage changes
shall be provided to the lessor and to each lessee within 30
days of the effective date of the change.
(e) Nothing in this Act shall limit an insurer from
utilizing schedule credits, debits, or other rating plans
filed with the Department for calculation of a lessor's or
lessee's premium.
Section 35. Lessee's obligation. Nothing in this Act
shall have any effect on the statutory obligation, if any, of
a lessee to secure workers' compensation coverage for
employees not provided, supplied, or maintained by a lessor
pursuant to an employee leasing arrangement.
Section 40. Insurer or service carrier audit. Insurers
shall audit policies issued through the residual market
pursuant to Section 30 of this Act within 90 days of the
policy effective date and may conduct quarterly audits
thereafter. Insurers may audit policies issued through the
voluntary market within 90 days of the policy effective date
and shall conduct audits thereafter. The purpose of the
audit will be to determine whether all classifications,
experience modification factors, and estimated payroll
utilized with respect to the development of the premium
charged to the lessor are appropriate.
Section 45. Exclusivity and vicarious liability. Subject
to any contrary provisions of the contract between the client
and the employee leasing company, the employee leasing
arrangement that exists between an employee leasing company
and its clients shall be interpreted for purposes of
insurance, bonding, and employers' liability as follows:
(1) The employee leasing company shall be entitled
along with the client to the exclusivity of the remedy
under both the workers' compensation and employers'
liability provisions of a workers' compensation policy or
plan that either party has secured.
(2) An employee leasing company is not liable for
the acts, errors, or omissions of a client or of any
leased employee acting under the sole and exclusive
direction and control of a client. A client shall not be
liable for the acts, errors, or omissions of an employee
leasing company or of any employee of an employee leasing
company acting under the sole and exclusive direction or
control of an employee leasing company. Nothing herein
shall limit any contractual liability between an employee
leasing company and the client company, nor shall the
same limit any liability or responsibility imposed by
this Act.
(3) Employees leased to a client by an employee
leasing company shall be considered as the employees of
the client for the purposes of general liability
insurance, automobile insurance, fidelity bonds, surety
bonds, and liquor liability insurance carried by the
client. Employees leased to a client by an employee
leasing company are not deemed employees of the employee
leasing company for purposes of general liability
insurance, automobile insurance, fidelity bonds, surety
bonds, and liquor liability insurance carried by the
employee leasing company unless the employees are
included by specific reference in the applicable
employment arrangement contract, insurance contract, or
bond.
Section 50. Grounds for removal of eligibility; order;
hearing; review.
(a) When the Director of Insurance has cause to believe
that grounds for the removal of a registrant's eligibility
under this Section exists, he or she shall issue an order to
the employee leasing company stating the grounds upon which
the removal is based. The order shall be sent to the
employee leasing company by certified or registered mail.
The employee leasing company may in writing request a hearing
within 30 days of receipt of the order. If no written
request is made, the order shall be final upon the expiration
of the 30 days.
(b) If the employee leasing company requests a hearing
pursuant to this Section, the Director shall issue a written
notice of hearing sent to the employee leasing company by
certified or registered mail stating the following:
(1) a specified time for the hearing, which may not
be less than 20 days nor more than 30 days after receipt
of the notice of hearing; and
(2) a specific place for the hearing, which may be
either in the city of Springfield or in the county where
the employee leasing company's principal place of
business is located.
(c) After the hearing, or upon the failure of the
employee leasing company to appear at the hearing, the
Director of Insurance shall take such action as is deemed
advisable on written findings that shall be served on the
employee leasing company. The action of the Director of
Insurance shall be subject to review under and in accordance
with the Administrative Review Law.
Section 55. Criminal penalties. Any corporation,
partnership, sole proprietorship or other form of business
entity and any officer, director, general partner, agent,
representative, or employee of any of the foregoing who
knowingly utilizes or participates in any employee leasing
agreement, arrangement, or mechanism for the purpose of: (i)
depriving one or more insurers of premium otherwise properly
payable, (ii) failing to remit premiums on behalf of a
client company, or (iii) otherwise converting moneys or other
funds remitted by the client company for payroll, insurance
premiums, or other benefits commits a Class A misdemeanor and
shall upon conviction be subject to restitution and a fine of
$1,000 or the amount specified in the offense, whichever is
greater.
Section 91. The Illinois Insurance Code is amended by
changing Sections 107.02, 107.06a, 491.1, 499.1, 534.3,
534.4, 538.4, 545, 546, 802.1, and 803.1 and adding Sections
107.28, 107.29, and 155.31 as follows:
(215 ILCS 5/107.02) (from Ch. 73, par. 719.02)
Sec. 107.02. Incorporation.
(a) There is hereby created an exchange for the
reinsurance and insurance of risks. Within 60 days after this
Act becomes law, the Director of Insurance shall appoint an
interim Board of Directors to adopt temporary by-laws, hire
employees, and take such other steps as are authorized or
necessary to establish the Exchange. When subscriptions
totalling $4,000,000 have been received pursuant to Section
107.07, the Board of Directors shall apply to the Director
for a Certificate of Authority. The Director shall approve
such Certificate within 30 days unless he determines that the
requirements of this Article have not been met and specifies
his objections in writing. Within 30 days after receiving
proof from the Exchange that the objections have been met,
the Director shall approve the application of the Exchange.
(b) After the effective date of this amendatory Act of
1997, the Director may organize, in accordance with
subsection (a), an additional exchange for the reinsurance
and insurance of risks. The additional exchange shall comply
with the provisions of this Article.
(Source: P.A. 81-1509.)
(215 ILCS 5/107.06a) (from Ch. 73, par. 719.06a)
Sec. 107.06a. Organization under Illinois Insurance
Code.
(a) After December 31, 1997, a syndicate or limited
syndicate may only be organized pursuant to Sections 7, 8,
10, 11, 12, 14, 14.1 (other than subsection (d) thereof), 15
(other than subsection (d) thereof), 18, 19, 20, 21, 22, 23,
25, 27.1, 28, 28.1, 28.2, 29, 30, 31, 32, 32.1, 33, and 35.1
and Article X of this Code, to carry on the business of a
syndicate, or limited syndicate under Article V-1/2 of this
Code; provided that such syndicate is admitted to the
Illinois Insurance Exchange.
(b) After December 31, 1997, syndicates and limited
syndicates are subject to the following:
(1) Articles I, IIA, VIII, VIII 1/2, X, XI, XII,
XII 1/2, XIII, XIII 1/2, XXIV, XXV, and XXVIII (except
for Sections 445, 445.1, 445.2, 445.3, 445.4, and 445.5)
of this Code;
(2) Subsections (2) and (3) of Section 155.04 and
Sections 13, 132.1 through 140, 141a, 144, 155.01,
155.03, 378, 379.1, 393.1, 395, and 396 of this Code;
(3) the Reinsurance Intermediary Act; and
(4) the Producer Controlled Insurer Act.
(c) No other provision of this Insurance Code shall be
applicable to any such syndicate or limited syndicate except
as provided in this Article V-1/2.
(Source: P.A. 89-97, eff. 7-7-95.)
(215 ILCS 5/107.28 new)
Sec. 107.28. Syndicate reorganization.
(a) A syndicate may seek the approval of the Director
for reorganization as provided in this Section.
(b) The Director shall approve the reorganization,
merger, or consolidation so long as:
(1) the resulting company is authorized to transact
the kind or kinds of business the syndicate was
authorized to transact as of the effective date of this
amendatory Act of 1997;
(2) all applicable provisions of this Code are
satisfied, except that for purposes of complying with
Article VIII the Director may grant an extension of time,
not to exceed one 6-month period, within which the
reorganized, merged, or consolidated company shall divest
itself of any nonadmitted assets held by the syndicate on
or before the effective date of this amendatory Act of
1997; and
(3) the books and records of the syndicate
accurately reflect its financial condition and affairs as
of the date of its most recently filed financial
statement, and no material change in its financial
condition or affairs has subsequently occurred.
(215 ILCS 5/107.29 new)
Sec. 107.29. Exchange operations runoff.
(a) The Board may adopt a plan of operation for the
orderly runoff of the operations of the exchange. The plan
of operation shall provide that all funds, legal rights,
title to property, and causes of action of the Illinois
Insurance Exchange including, but not limited to, all
assessments, subscription payments, proceeds, investments,
premium fees, surcharge receipts, and funds maintained under
Sections 107.26 and 107.27 and the rules or regulations of
the Illinois Insurance Exchange implementing those Sections
or any other provision of this Article, shall be accounted
for and paid over to the Director as receiver of any
delinquent syndicate in receivership after settlement of all
claims against the exchange.
(1) In the event that 2 or more syndicates are then
in receivership, the amount paid over to each estate
shall be proportional to the relative size of the surplus
deficiency of each.
(2) Any excess remaining after the payment of any
and all claims against such receivership estates shall be
transferred, in equal shares, to the domestic companies
which result from the reorganization, merger, or
consolidation of former syndicates of the Illinois
Insurance Exchange.
(b) For purposes of this Section, "syndicate" means a
syndicate or a limited syndicate.
(215 ILCS 5/155.31 new)
Sec. 155.31. Insurance compliance self-evaluative
privilege.
(a) To encourage insurance companies and persons
conducting activities regulated under this Code, both to
conduct voluntary internal audits of their compliance
programs and management systems and to assess and improve
compliance with State and federal statutes, rules, and
orders, an insurance compliance self-evaluative privilege is
recognized to protect the confidentiality of communications
relating to voluntary internal compliance audits. The
General Assembly hereby finds and declares that protection of
insurance consumers is enhanced by companies' voluntary
compliance with this State's insurance and other laws and
that the public will benefit from incentives to identify and
remedy insurance and other compliance issues. It is further
declared that limited expansion of the protection against
disclosure will encourage voluntary compliance and improve
insurance market conduct quality and that the voluntary
provisions of this Section will not inhibit the exercise of
the regulatory authority by those entrusted with protecting
insurance consumers.
(b)(1) An insurance compliance self-evaluative audit
document is privileged information and is not admissible as
evidence in any legal action in any civil, criminal, or
administrative proceeding, except as provided in subsections
(c) and (d) of this Section. Documents, communications,
data, reports, or other information created as a result of a
claim involving personal injury or workers' compensation made
against an insurance policy are not insurance compliance
self-evaluative audit documents and are admissible as
evidence in civil proceedings as otherwise provided by
applicable rules of evidence or civil procedure, subject to
any applicable statutory or common law privilege, including
but not limited to the work product doctrine, the
attorney-client privilege, or the subsequent remedial
measures exclusion.
(2) If any company, person, or entity performs or
directs the performance of an insurance compliance audit, an
officer or employee involved with the insurance compliance
audit, or any consultant who is hired for the purpose of
performing the insurance compliance audit, may not be
examined in any civil, criminal, or administrative proceeding
as to the insurance compliance audit or any insurance
compliance self-evaluative audit document, as defined in this
Section. This subsection (b)(2) does not apply if the
privilege set forth in subsection (b)(1) of this Section is
determined under subsection (c) or (d) not to apply.
(3) A company may voluntarily submit, in connection with
examinations conducted under this Article, an insurance
compliance self-evaluative audit document to the Director, or
his or her designee, as a confidential document under
subsection (f) of Section 132.5 of this Code without waiving
the privilege set forth in this Section to which the company
would otherwise be entitled; provided, however, that the
provisions in subsection (f) of Section 132.5 permitting the
Director to make confidential documents public pursuant to
subsection (e) of Section 132.5 and access to the National
Association of Insurance Commissioners shall not apply to the
insurance compliance self-evaluative audit document so
voluntarily submitted. Nothing contained in this subsection
shall give the Director any authority to compel a company to
disclose involuntarily or otherwise provide an insurance
compliance self-evaluative audit document.
(c)(1) The privilege set forth in subsection (b) of this
Section does not apply to the extent that it is expressly
waived by the company that prepared or caused to be prepared
the insurance compliance self-evaluative audit document.
(2) In a civil or administrative proceeding, a court of
record may, after an in camera review, require disclosure of
material for which the privilege set forth in subsection (b)
of this Section is asserted, if the court determines one of
the following:
(A) the privilege is asserted for a fraudulent
purpose;
(B) the material is not subject to the privilege;
or
(C) even if subject to the privilege, the material
shows evidence of noncompliance with State and federal
statutes, rules and orders and the company failed to
undertake reasonable corrective action or eliminate the
noncompliance within a reasonable time.
(3) In a criminal proceeding, a court of record may,
after an in camera review, require disclosure of material for
which the privilege described in subsection (b) of this
Section is asserted, if the court determines one of the
following:
(A) the privilege is asserted for a fraudulent
purpose;
(B) the material is not subject to the privilege;
(C) even if subject to the privilege, the material
shows evidence of noncompliance with State and federal
statutes, rules and orders and the company failed to
undertake reasonable corrective action or eliminate such
noncompliance within a reasonable time; or
(D) the material contains evidence relevant to
commission of a criminal offense under this Code, and all
of the following factors are present:
(i) the Director, State's Attorney, or
Attorney General has a compelling need for the
information;
(ii) the information is not otherwise
available; and
(iii) the Director, State's Attorney, or
Attorney General is unable to obtain the substantial
equivalent of the information by any means without
incurring unreasonable cost and delay.
(d)(1) Within 30 days after the Director, State's
Attorney, or Attorney General makes a written request by
certified mail for disclosure of an insurance compliance
self-evaluative audit document under this subsection, the
company that prepared or caused the document to be prepared
may file with the appropriate court a petition requesting an
in camera hearing on whether the insurance compliance
self-evaluative audit document or portions of the document
are privileged under this Section or subject to disclosure.
The court has jurisdiction over a petition filed by a company
under this subsection requesting an in camera hearing on
whether the insurance compliance self-evaluative audit
document or portions of the document are privileged or
subject to disclosure. Failure by the company to file a
petition waives the privilege.
(2) A company asserting the insurance compliance
self-evaluative privilege in response to a request for
disclosure under this subsection shall include in its request
for an in camera hearing all of the information set forth in
subsection (d)(5) of this Section.
(3) Upon the filing of a petition under this subsection,
the court shall issue an order scheduling, within 45 days
after the filing of the petition, an in camera hearing to
determine whether the insurance compliance self-evaluative
audit document or portions of the document are privileged
under this Section or subject to disclosure.
(4) The court, after an in camera review, may require
disclosure of material for which the privilege in subsection
(b) of this Section is asserted if the court determines,
based upon its in camera review, that any one of the
conditions set forth in subsection (c)(2)(A) through (C) is
applicable as to a civil or administrative proceeding or that
any one of the conditions set forth in subsection (c)(3)(A)
through (D) is applicable as to a criminal proceeding. Upon
making such a determination, the court may only compel the
disclosure of those portions of an insurance compliance
self-evaluative audit document relevant to issues in dispute
in the underlying proceeding. Any compelled disclosure will
not be considered to be a public document or be deemed to be
a waiver of the privilege for any other civil, criminal, or
administrative proceeding. A party unsuccessfully opposing
disclosure may apply to the court for an appropriate order
protecting the document from further disclosure.
(5) A company asserting the insurance compliance
self-evaluative privilege in response to a request for
disclosure under this subsection (d) shall provide to the
Director, State's Attorney, or Attorney General, as the case
may be, at the time of filing any objection to the
disclosure, all of the following information:
(A) The date of the insurance compliance
self-evaluative audit document.
(B) The identity of the entity conducting the
audit.
(C) The general nature of the activities covered by
the insurance compliance audit.
(D) An identification of the portions of the
insurance compliance self-evaluative audit document for
which the privilege is being asserted.
(e) (1) A company asserting the insurance compliance
self-evaluative privilege set forth in subsection (b) of this
Section has the burden of demonstrating the applicability of
the privilege. Once a company has established the
applicability of the privilege, a party seeking disclosure
under subsections (c)(2)(A) or (C) of this Section has the
burden of proving that the privilege is asserted for a
fraudulent purpose or that the company failed to undertake
reasonable corrective action or eliminate the noncompliance
with a reasonable time. The Director, State's Attorney, or
Attorney General seeking disclosure under subsection (c)(3)
of this Section has the burden of proving the elements set
forth in subsection (c)(3) of this Section.
(2) The parties may at any time stipulate in proceedings
under subsections (c) or (d) of this Section to entry of an
order directing that specific information contained in an
insurance compliance self-evaluative audit document is or is
not subject to the privilege provided under subsection (b) of
this Section.
(f) The privilege set forth in subsection (b) of this
Section shall not extend to any of the following:
(1) documents, communications, data, reports, or
other information required to be collected, developed,
maintained, reported, or otherwise made available to a
regulatory agency pursuant to this Code, or other federal
or State law, rule, or order;
(2) information obtained by observation or
monitoring by any regulatory agency; or
(3) information obtained from a source independent
of the insurance compliance audit.
(g) As used in this Section:
(1) "Insurance compliance audit" means a voluntary,
internal evaluation, review, assessment, or audit not
otherwise expressly required by law of a company or an
activity regulated under this Code, or other State or
federal law applicable to a company, or of management
systems related to the company or activity, that is
designed to identify and prevent noncompliance and to
improve compliance with those statutes, rules, or orders.
An insurance compliance audit may be conducted by the
company, its employees, or by independent contractors.
(2) "Insurance compliance self-evaluative audit
document" means documents prepared as a result of or in
connection with and not prior to an insurance compliance
audit. An insurance compliance self-evaluation audit
document may include a written response to the findings
of an insurance compliance audit. An insurance
compliance self-evaluative audit document may include,
but is not limited to, as applicable, field notes and
records of observations, findings, opinions, suggestions,
conclusions, drafts, memoranda, drawings, photographs,
computer-generated or electronically recorded
information, phone records, maps, charts, graphs, and
surveys, provided this supporting information is
collected or developed for the primary purpose and in the
course of an insurance compliance audit. An insurance
compliance self-evaluative audit document may also
include any of the following:
(A) an insurance compliance audit report
prepared by an auditor, who may be an employee of
the company or an independent contractor, which may
include the scope of the audit, the information
gained in the audit, and conclusions and
recommendations, with exhibits and appendices;
(B) memoranda and documents analyzing portions
or all of the insurance compliance audit report and
discussing potential implementation issues;
(C) an implementation plan that addresses
correcting past noncompliance, improving current
compliance, and preventing future noncompliance; or
(D) analytic data generated in the course of
conducting the insurance compliance audit.
(3) "Company" has the same meaning as provided in
Section 2 of this Code.
(h) Nothing in this Section shall limit, waive, or
abrogate the scope or nature of any statutory or common law
privilege including, but not limited to, the work product
doctrine, the attorney-client privilege, or the subsequent
remedial measures exclusion.
(215 ILCS 5/491.1) (from Ch. 73, par. 1065.38-1)
Sec. 491.1. Definitions. In addition to the definitions
in Section 2, the following definitions apply to this
Article.
(a) Insurance. Insurance is any of the classes of
insurance found in Section 4.
(b) Insurance Producer. An insurance producer is an
individual who solicits, negotiates, effects, procures,
renews, continues or binds policies of insurance covering
property or risks located in Illinois.
(c) License. A license is a document authorizing an
individual to act as an insurance producer, limited insurance
representative or temporary insurance producer, as specified
in such document.
(d) Limited Insurance Representative. A limited
insurance representative is an individual appointed by an
insurance company to represent that company regarding the
types of insurance set forth in Section 495.1.
(e) Registered Firm. A registered firm is a
corporation, or partnership, or limited liability company
which transacts the business of insurance as an insurance
agency.
(Source: P.A. 85-334.)
(215 ILCS 5/499.1) (from Ch. 73, par. 1065.46-1)
Sec. 499.1. Registered firms.
(a) Any corporation, or partnership, or limited
liability company transacting insurance business as an
insurance agency shall register with the Director before
transacting insurance business in this State. Such
registration shall remain in effect as long as the firm pays
the annual fee required by Section 509.1 of this Code by the
date due, unless the registration is revoked or suspended
pursuant to Section 505.1 of this Code.
(b) Each firm required to register before acting as a
registered firm pursuant to this Article shall appoint one or
more licensed insurance producers who are officers,
directors, or partners in the firm to be responsible for the
firm's compliance with the insurance laws and Title 50 of the
Illinois Administrative Code. Such individual or individuals
shall submit to the Director a registration form and the fees
required by Section 509.1. The Director shall prescribe the
registration form and may require any documents reasonably
necessary to verify the information contained in the
registration form. Within 30 days of a change in officers,
directors, or partners who are appointed to be responsible
for the firm's compliance with the insurance laws and Title
50 of the Illinois Administrative Code, the firm shall report
the change to the Department.
(c) The registered firm shall inform the Director in
writing of a change in its business address within 30 days of
such change.
(d) Each registered firm shall disclose its members,
officers or directors who are authorized to act as insurance
producers, and report any changes in such personnel to the
Director within 30 days of such changes.
(e) A registered firm may not be a national bank located
in a city, village or incorporated town with a population
exceeding 5,000 according to the last federal census, a State
bank or a trust company, or a subsidiary, affiliate, officer
or employee of any such national or State bank or trust
company contributing directly or indirectly to the income of
such bank or trust company any profit or fees or part thereof
derived from the solicitation, negotiation or effecting of
insurance.
(Source: P.A. 89-240, eff. 1-1-96.)
(215 ILCS 5/534.3) (from Ch. 73, par. 1065.84-3)
Sec. 534.3. Covered claim; unearned premium defined.
(a) "Covered claim" means an unpaid claim for a loss
arising out of and within the coverage of an insurance policy
to which this Article applies and which is in force at the
time of the occurrence giving rise to the unpaid claim,
including claims presented during any extended discovery
period which was purchased from the company before the entry
of a liquidation order or which is purchased or obtained from
the liquidator after the entry of a liquidation order, made
by a person insured under such policy or by a person
suffering injury or damage for which a person insured under
such policy is legally liable, and for unearned premium, if:
(i) The company issuing the policy becomes an
insolvent company as defined in Section 534.4 after the
effective date of this Article; and
(ii) The claimant or insured is a resident of this
State at the time of the insured occurrence, or the
property from which a first party claim for damage to
property arises is permanently located in this State or,
in the case of an unearned premium claim, the
policyholder is a resident of this State at the time the
policy was issued; provided, that for entities other than
an individual, the residence of a claimant, insured, or
policyholder is the state in which its principal place of
business is located at the time of the insured event.
(b) "Covered claim" does not include:
(i) any amount in excess of the applicable limits
of liability provided by an insurance policy to which
this Article applies; nor
(ii) any claim for punitive or exemplary damages;
nor
(iii) any first party claim by an insured who is an
affiliate of the insolvent company; nor
(iv) any first party or third party claim by or
against an insured whose net worth on December 31 of the
year next preceding the date the insurer becomes an
insolvent insurer exceeds $25,000,000 $50 million;
provided that an insured's net worth on such date shall
be deemed to include the aggregate net worth of the
insured and all of its affiliates as calculated on a
consolidated basis. However, this exclusion shall not
apply to third party claims against the insured where the
insured has applied for or consented to the appointment
of a receiver, trustee, or liquidator for all or a
substantial part of its assets, filed a voluntary
petition in bankruptcy, filed a petition or an answer
seeking a reorganization or arrangement with creditors or
to take advantage of any insolvency law, or if an order,
judgment, or decree is entered by a court of competent
jurisdiction, on the application of a creditor,
adjudicating the insured bankrupt or insolvent or
approving a petition seeking reorganization of the
insured or of all or substantial part of its assets; nor
(v) any claim for any amount due any reinsurer,
insurer, insurance pool, or underwriting association as
subrogated recoveries, reinsurance recoverables,
contribution, indemnification or otherwise. No such claim
held by a reinsurer, insurer, insurance pool, or
underwriting association may be asserted in any legal
action against a person insured under a policy issued by
an insolvent company other than to the extent such claim
exceeds the Fund obligation limitations set forth in
Section 537.2 of this Code.
(c) "Unearned Premium" means the premium for the
unexpired period of a policy which has been terminated prior
to the expiration of the period for which premium has been
paid and does not mean premium which is returnable to the
insured for any other reason.
(Source: P.A. 89-97, eff. 7-7-95.)
(215 ILCS 5/534.4) (from Ch. 73, par. 1065.84-4)
Sec. 534.4. "Insolvent company" means a company
organized as a stock company, mutual company, reciprocal or
Lloyds (a) which holds a certificate of authority to transact
insurance in this State either at the time the policy was
issued or when the insured event occurred, or any company
which has assumed such policy obligation through merger,
consolidation or reinsurance, whether or not such assuming
company held a certificate of authority to transact insurance
in this State at the time such policy was issued or when the
insured event occurred; and (b) against which a final an
Order of Liquidation with a finding of insolvency to which
there is no further right of appeal has been entered by a
court of competent jurisdiction in the company's State of
domicile after the effective date of this Article, and which
Order of Liquidation has not been stayed or been the subject
of a writ or supersedeas or other comparable order.
(Source: P.A. 85-576.)
(215 ILCS 5/538.4) (from Ch. 73, par. 1065.88-4)
Sec. 538.4. Legal actions by Fund. The Fund may sue or
be sued, including taking any legal actions necessary or
proper for recovery of any unpaid assessments under Sections
537.1 or 537.6. The Fund's power to sue includes, but is not
limited to, the power and right to intervene as a party
before any court that has jurisdiction over an insolvent
insurer when the Fund is a creditor or potential creditor of
the insolvent insurer.
(Source: P.A. 89-97, eff. 7-7-95.)
(215 ILCS 5/545) (from Ch. 73, par. 1065.95)
Sec. 545. Effect of paid claims.
(a) Every insured or claimant seeking the protection of
this Article shall cooperate with the Fund to the same extent
as such person would have been required to cooperate with the
insolvent company. The Fund shall have all the rights, duties
and obligations under the policy to the extent of the covered
claim payment, provided the Fund shall have no cause of
action against the insured of the insolvent company for any
sums it has paid out except such causes of action as the
insolvent company would have had if such sums had been paid
by the insolvent company and except as provided in paragraph
(d) of this Section.
(b) The Fund and any similar organization in another
state shall be recognized as claimants in the liquidation of
an insolvent company for any amounts paid by them on covered
claims obligations as determined under this Article or
similar laws in other states and shall receive dividends at
the priority set forth in paragraph (d) of subsection (1) of
Section 205 of this Code. The liquidator of an insolvent
company shall be bound by determinations of covered claim
eligibility under the Act and by settlements of claims made
the amounts of covered claim payments by the Fund or a
similar organization in another state on the receipt of
certification of such payments, to the extent those
determinations or settlements satisfy obligations of the
Fund, but the receiver shall not be bound in any way by those
determinations or settlements to the extent that there
remains a claim in the estate for amounts in excess of the
payments by the Fund. In submitting their claim for covered
claim payments the Fund and any similar organization in
another state shall not be subject to the requirements of
Sections 208 and 209 of this Code and shall not be affected
by the failure of the person receiving a covered claim
payment to file a proof of claim.
(c) The expenses of the Fund and of any similar
organization in any other state, other than expenses incurred
in the performance of duties under Section 547 or similar
duties under the statute governing a similar organization in
another state, shall be accorded the same priority as the
liquidator's expenses. The liquidator shall make prompt
reimbursement to the Fund and any similar organization for
such expense payments.
(d) The Fund has the right to recover from the following
persons the amount of any covered claims and allocated claims
expenses which the Fund paid or incurred on behalf of such
person in satisfaction, in whole or in part, of liability
obligations of such person to any other person:
(i) any insured whose net worth on December 31 of
the year next preceding the date the company becomes an
insolvent company exceeds $25,000,000 $50 million;
provided that an insured's net worth on such date shall
be deemed to include the aggregate net worth of the
insured and all of its affiliates as calculated on a
consolidated basis.
(ii) any insured who is an affiliate of the
insolvent company.
(Source: P.A. 89-206, eff. 7-21-95.)
(215 ILCS 5/546) (from Ch. 73, par. 1065.96)
Sec. 546. Other insurance. Non-duplication of recovery.
(a) An insured or claimant shall be required first to
exhaust all coverage provided by any other insurance policy,
regardless of whether or not such other insurance policy was
written by a member company, if the claim under such other
policy arises from the same facts, injury, or loss that gave
rise to the covered claim against the Fund. The Fund's
obligation under Section 537.2 shall be reduced by the amount
recovered or recoverable, whichever is greater, under such
other insurance policy. Where such other insurance policy
provides uninsured or underinsured motorist coverage, the
amount recoverable shall be deemed to be the full applicable
limits of such coverage. To the extent that the Fund's
obligation under Section 537.2 is reduced by application of
this Section, the liability of the person insured by the
insolvent insurer's policy for the claim shall be reduced in
the same amount. Any insured or claimant having a covered
claim against the Fund shall be required first to exhaust his
rights under any provision in any other insurance policy
which may be applicable to the claim, whether or not the
insurance policy was written by a member company. Any amount
payable on a covered claim under this Article shall be
reduced by the amount of such recovery under such insurance
policy.
(b) Any insured or claimant having a claim which may be
recovered under more than one insurance guaranty fund or its
equivalent shall seek recovery first from the Fund of the
place of residence of the insured except that if it is a
first party claim for damage to property with a permanent
location, he shall first seek recovery from the Fund of the
location of the property; if it is a workers' compensation
claim, he shall first seek recovery from the Fund of the
residence of the claimant. Any recovery under this Article
shall be reduced by the amount of the recovery from any other
insurance guaranty fund or its equivalent.
(Source: P.A. 89-97, eff. 7-7-95.)
(215 ILCS 5/802.1)
Sec. 802.1. Definitions. As used in this Article:
(a) "Commercial Building" means any building, other than
a residence, permanently affixed to realty located in
Illinois, including basements, footings, foundations, septic
systems and underground pipes directly servicing the
building, but does not include sidewalks, driveways, parking
lots, living units, land, trees, plants, crops or
agricultural field drainage tile.
(b) "Commercial Coverage" means mine subsidence
insurance for a commercial building.
(c) "Insurer" or "Insurers" means insurance companies
and reciprocals licensed and authorized to write Class 3
policies of insurance, as defined in this Code, within
Illinois.
(d) "Living Unit" shall mean that physical portion
designated for separate ownership or occupancy for
residential purposes, of a building or group of buildings,
permanently affixed to realty located in Illinois, having
elements which are owned or used in common, including a
condominium unit, a cooperative unit or any other similar
unit.
(e) "Living Unit Coverage" means mine subsidence
insurance for a living unit covering the losses described in
Section 805.1(d).
(f) "Mine Subsidence" means lateral or vertical ground
movement caused by a failure initiated at the mine level, of
man-made underground mines, including, but not limited to
coal mines, clay mines, limestone mines, and fluorspar mines
that directly damages residences or commercial buildings.
"Mine Subsidence" does not include lateral or vertical ground
movement caused by earthquake, landslide, volcanic eruption,
soil conditions, soil erosion, soil freezing and thawing,
improperly compacted soil, construction defects, roots of
trees and shrubs or collapse of storm and sewer drains and
rapid transit tunnels.
(g) "Mine Subsidence Insurance Fund" or "Fund" means the
fund established by this Article.
(h) "Policy" or "policies" means any contract or
contracts of insurance providing the coverage of the Standard
Fire Policy and Extended Coverage Endorsement on any
residence, living unit or commercial building. It does not
include those insurance contracts that are referred to as
marine or inland marine policies.
(i) "Premium" or "premiums" means the gross amount
charged to policyholders for the mine subsidence insurance
made available under this Article.
(j) "Rates" or "rate schedules" means the rates by which
premiums shall be computed for the mine subsidence insurance
made available under this Article.
(k) "Residence" means a building used principally for
residential purposes up to and including a four family
dwelling, permanently affixed to realty located in Illinois,
including appurtenant structures, driveways, sidewalks,
basements, footings, foundations, septic systems and
underground pipes directly servicing the dwelling or
building, but does not include living units, land, trees,
plants, crops or agricultural field drainage tile.
(l) "Residential Coverage" means mine subsidence
insurance for a residence.
(m) "Intergovernmental cooperative" means an
intergovernmental cooperative organized pursuant to Article
VII, Section 10 of the Illinois Constitution and Section 6 of
the Intergovernmental Cooperation Act.
(Source: P.A. 88-379.)
(215 ILCS 5/803.1)
Sec. 803.1. Establishment of Fund.
(a) There is established a fund to be known as the
"Illinois Mine Subsidence Insurance Fund". The Fund shall
operate pursuant to this Article. The Fund is authorized to
transact business, provide services, enter into contracts and
sue or be sued in its own name.
(b) The Fund shall provide reinsurance for mine
subsidence losses to all insurers writing mine subsidence
insurance pursuant to this Article.
(c) The monies in the Fund shall be derived from
premiums for mine subsidence insurance collected on behalf of
the Fund pursuant to this Article, from investment income and
from receipt of Federal or State funds. No insurer shall
have any liability to the Fund or to any creditor of the
Fund, except as may be set forth in this Article, in the
Articles of Governance which may be adopted by the Fund, in a
reinsurance agreement executed pursuant to paragraph 810.1,
in the Plan of Operation established by the Fund, or in the
rules and procedures adopted by the Fund as authorized by the
reinsurance agreement.
(d) The Fund shall establish the rates, rating
schedules, deductibles and retentions, minimum premiums, and
classifications for mine subsidence insurance which the Fund
shall file with the Director. The Director shall have 30
days from the date of receipt to approve or disapprove a rate
filing. If no action is taken by the Director within 30
days, the rate is deemed to be approved. The Director may,
in writing, extend the period for an additional 30 days if
the Director determines that additional time is needed.
(e) The Fund shall establish its rates, rating
schedules, deductibles and retentions, minimum premiums, and
classification in such a manner as to satisfy all reasonably
foreseeable claims and expenses the Fund is likely to incur.
The Fund shall give due consideration to loss experience and
relevant trends, premium and other income and reasonable
reserves established for contingencies in establishing the
mine subsidence rates.
(f) The Fund shall compile and publish an annual
operating report.
(g) The Fund shall develop at least 2 consumer
information publications to aid the public in understanding
mine subsidence and mine subsidence insurance and shall
establish a schedule for the distribution of the publications
pursuant to the reinsurance agreement. Topics that shall be
addressed shall include but are not limited to:
(1) Descriptive information about mine subsidence,
and what benefits mine subsidence insurance provides to
the property owner.
(2) Information that will be useful to a
policyholder who has filed a mine subsidence claim, such
as information that explains the claim investigation
process and claim handling procedures.
(h) The Fund shall be empowered to conduct research
programs in an effort to improve the administration of the
mine subsidence insurance program and help reduce and
mitigate mine subsidence losses consistent with the public
interest.
(i) The Fund may enter into reinsurance agreements with
any intergovernmental cooperative that provides joint
self-insurance for mine subsidence losses of its members.
These reinsurance agreements shall be substantially similar
to reinsurance agreements described in Section 810.1.
(Source: P.A. 88-379; 89-206, eff. 7-21-95.)
Section 93. The Illinois Insurance Code is amended by
changing Sections 107.03, 107.05, 107.07, 107.09, 107.13,
107.13a, 107.17, and 107.27 and adding Sections 107.15b,
107.30, and 107.31 as follows:
(215 ILCS 5/107.03) (from Ch. 73, par. 719.03)
Sec. 107.03. Kinds of Business. The syndicates of the
Exchange may conduct the kind of insurance business listed in
Class 2 and Class 3 of Section 4 of this Code when the
Exchange is issued a Certificate of Authority.
(Source: P.A. 81-1047.)
(215 ILCS 5/107.05) (from Ch. 73, par. 719.05)
Sec. 107.05. Transaction of business.
(a) Reinsurance may shall be provided by and through
syndicates.
(b) Only Exchange brokers may present insurance business
to the Exchange.
(c) Syndicates may reinsure risks with syndicates or
other persons subject to the rules of the Exchange.
(d) The minimum premium for any insurance presented to
the Exchange shall be $50,000. For group insurance, the
minimum premium requirements must be met separately by each
group member. However, if an Exchange broker by affidavit
states that after diligent effort he was unable to procure
the policies or contracts required to protect the property or
risk described in the affidavit from companies authorized to
transact business in this State, an insurance policy may be
issued through the Exchange for any amount of premium. This
subsection shall apply only to direct coverage of Illinois
domiciled risks.
(Source: P.A. 88-364; 89-97, eff. 7-7-95.)
(215 ILCS 5/107.07) (from Ch. 73, par. 719.07)
Sec. 107.07. Admission. Capitalization:
Syndicate - at least $2,000,000.
Subscriber - at least $30,000.
Fees: (a) Exchange brokers. An annual fee shall be paid
to the Exchange by any person who presents risks to the
Exchange. The annual fee established by the Exchange shall
not exceed $5,000.
(b) The Exchange may establish annual fees for the
admission of syndicates, limited syndicates, and subscribers.
Standards: The Exchange may establish additional
standards for the admission of subscribers and Exchange
brokers.
Assessments: The Exchange may make assessments of
subscribers or syndicates for the expenses of operating the
Exchange.
(Source: P.A. 81-1047.)
(215 ILCS 5/107.09) (from Ch. 73, par. 719.09)
Sec. 107.09. All written policy applications and written
policies shall prominently state that the policy is being
submitted or issued through the Exchange; that coverage
thereunder is provided solely by the underwriting syndicate
or syndicates; that the Exchange is not an insurer; and that
the Exchange is not a party to the contract and has no
liability thereunder.
(Source: P.A. 81-1047.)
(215 ILCS 5/107.13) (from Ch. 73, par. 719.13)
Sec. 107.13. Annual statement. The Department shall by
rule may require an annual statement from the Exchange, which
shall be an aggregate of all syndicate's and limited
syndicate's financial records for the year ending December 31
immediately preceding. The statement shall be filed with the
Department by June 1 of each year. The rule shall specify
the format.
(Source: P.A. 81-1047.)
(215 ILCS 5/107.13a) (from Ch. 73, par. 719.13a)
Sec. 107.13a. (a) Periodic filings Annual Statement of
syndicates.
(a) Every syndicate doing business on the Exchange shall
file with the Board and with the Director of Insurance by
March 1st in each year a financial statement for the year
ending December 31st immediately preceding on forms
prescribed by the Director Board, which shall conform
substantially to the form of statement adopted by the
National Association of Insurance Commissioners and in use on
the effective date the statement is filed of this amendatory
Act of 1981. In the preparation of such annual statement,
each syndicate shall compute the combined amount earned
during the year from investment income and from underwriting
income on the basis of the accounting method incorporated in
the underwriting and investment exhibit of such annual
statement. The Board shall have power to make such
modifications and additions in this form as it may deem
desirable or necessary to ascertain the condition and affairs
of the syndicate. The Board shall have authority to extend
the time for filing any statement by any syndicate for
reasons which the Board considers good and sufficient. Such
statement shall be verified by oaths of the president and
secretary of the syndicate, or, in their absence, by 2 other
principal officers. In addition, any syndicate transacting
business on the Exchange may be required by the Board, when
it considers such action to be necessary and appropriate for
the protection of policyholders, creditors, subscribers or
claimants, to file, within 60 days after mailing to the
syndicate of a notice that such is required, a supplemental
summary statement as of the last day of any calendar month
occurring during the 100 days next preceding the mailing of
such notice designed by the Board on forms prescribed and
furnished by the Board. No syndicate shall be required to
file more than 4 supplemental summary statements during any
consecutive 12-month period. The Board may require
supplemental summary statements to be certified by an
independent actuary deemed competent by the Board or by an
independent certified public accountant.
(b) Within 45 days after the end of each quarter, each
syndicate shall file with the Director and with the Board
quarterly financial statements that conform substantially to
the quarterly statement form adopted by the N.A.I.C.
(c) By March 1 of each year, each syndicate shall file
with the Director and the Board a certification of loss
reserves signed by a fellow or associate of the Casualty
Actuary Society, to be followed on or before June 1 of that
year by a detailed report prepared by such actuary.
(d) By June 1 of each year, each syndicate shall file
with the Director and with the Board an annual audited
financial report certified by an independent certified public
accountant.
(e) Each syndicate doing business on the Exchange shall
file with the Director and the Board by May 1 of each year an
annual Form B Registration Statement in accordance with
Sections 131.14 and 131.15 of this Code.
(b) For the information of the public generally, the
Board shall cause an abstract of the information contained in
the annual statement to be made available to the public as
soon as practicable after filing with the Exchange, by
printing such abstracts in pamphlet tabular form for free
general distribution by the Exchange, or by such other
publication in the City of Chicago as may be reasonably
necessary more fully to inform the public of the financial
condition of syndicates transacting business on the Exchange.
(Source: P.A. 83-1362.)
(215 ILCS 5/107.15b new)
Sec. 107.15b. Board rulemaking authority.
(a) The Board has the authority to adopt such rules as
it deems necessary to carry out its duties under this Article
and to maintain a well-regulated marketplace.
(b) A rule or modification to an existing rule adopted
by the Board after the effective date of this amendatory Act
of 1997 shall be filed with the Director not less than 30
days before the proposed effective date of the rule or
modification. The Director, upon written order, may
disapprove the rule or modification, in whole or in part,
upon a finding that the rule or modification would cause the
exchange to be operated in a manner that would be hazardous
to the public or its policyholders.
(c) An order by the Director disapproving a rule or
modification shall be deemed to be a final administrative
decision and shall be subject to judicial review pursuant to
the provisions of the Administrative Review Law.
(215 ILCS 5/107.17) (from Ch. 73, par. 719.17)
Sec. 107.17. Governance Trustees. The business and
affairs of the Exchange shall be managed by an Executive
Committee with the advice and consent of the a Board of
Trustees.
There shall be 2 classes of trustees: Subscriber
trustees and public trustees. Both public trustees and
subscriber trustees shall be elected by a majority vote of
the subscribers. In addition, the public trustees shall be
approved by the Director.
The trustees shall be 13 in number. There shall be 5
public trustees who shall be individual persons who are not
insurers, subscribers, exchange brokers, or employees of
insurers, subscribers, exchange brokers, syndicates, or
affiliates thereof.
The Executive Committee shall be composed of 3 public
trustees elected by the Board. Members of the Executive
Committee shall serve for a term of 3 years, except that of
the initial members of the Executive Committee, one member
shall serve for a term of one year, one member shall serve
for a term of 2 years, and one member shall serve for a term
of 3 years. The terms of the initial members of the
Executive Committee shall be determined by lot.
All decisions of the Executive Committee, except those of
a ministerial nature that may be delegated by the Board,
shall be subject to the approval of the Board. All action of
the Executive Committee shall be approved unless disapproved
on a recorded vote by 9 members of the Board.
(Source: P.A. 89-206, eff. 7-21-95; 89-669, eff. 1-1-97.)
(215 ILCS 5/107.27) (from Ch. 73, par. 719.27)
Sec. 107.27. Syndicate trust account; certificates of
guaranty.
(a) In addition to any other requirements imposed by
this Article the Board may require each syndicate to maintain
a trust or custodial account in such amounts as the Board may
determine by rule; provided that, except by special order of
the Board, no syndicate may be required to maintain in the
trust or custodial account an amount in excess of 50% of the
amount of its surplus as regards policyholders as shown by
its most recent audited report. Any trust or custodial
account so established shall be for the benefit of all
policyholders and claimants of the syndicate for losses
arising out of and within the coverage of insurance risks or
obligations underwritten by the syndicate. Upon entry of an
Order of Liquidation against a syndicate all amounts in the
trust or custodial account shall be immediately transferred
to the Association created under Section 107.26 to be used to
investigate, negotiate, and satisfy the syndicate's
outstanding insurance obligations. Expenses of the
Association or the Liquidator in performing these functions
may be paid from the insolvent syndicate's trust or custodial
account upon application to and approval by the Liquidation
Court. The Board shall provide by rule for the establishment
and maintenance of such trust or custodial accounts including
the investment of funds held in such accounts. Any amounts
deposited into a trust or custodial account required to be
maintained by this Section shall be an asset of the
syndicate.
(b) The Board shall determine limitations on the amount
of insurance or reinsurance written or assumed by a syndicate
under subsection (c) of Section 107.10. In addition to the
capitalization requirement under Section 107.07 a syndicate
may proportionately increase its ratio of net premiums to
capitalization, pursuant to rules adopted by the Board, by
providing security in the form of certificates of guaranty or
in the form of direct obligations of a member bank of the
Federal Reserve System. Any such certificate of guaranty or
bank obligation shall be for the benefit of all policyholders
and claimants of the syndicate for losses arising out of and
within the coverage of insurance risks or obligations
underwritten by the syndicate. Upon entry of an Order of
Liquidation against a syndicate, amounts payable under
certificates of guaranty or bank obligations shall
immediately be paid to the Association created under Section
107.26 to be used to satisfy the syndicate's outstanding
insurance obligations. The Board by rule shall establish the
form and amounts of such certificates or obligations and
standards for determining the security necessary to ensure
performance under them. The Board may provide for different
limitations by line or in the aggregate based on the
existence or non-existence of certificates of guaranty or
bank obligations and the type of security backing such
certificates or obligations.
(Source: P.A. 89-97, eff. 7-7-95; 89-206, eff. 7-21-95.)
(215 ILCS 5/107.30 new)
Sec. 107.30. Letters of credit. If approved by the
Board of Trustees, a syndicate may utilize letters of credit
that meet the requirements of Section 173.1(2)(c) and Section
173.1(3)(A) of this Code.
(215 ILCS 5/107.31 new)
Sec. 107.31. Information required from applicants.
(a) A person desiring to form an insurance company for
the purpose of doing business as a syndicate shall apply to
the Exchange and provide such information the Exchanges deems
necessary. The information shall be submitted on forms
provided by the Exchange. The information required may
include, but is not limited to, the information specified in
Sections 131.5 and 155.04 of this Code.
(b) If, after a review of the application and other
relevant information, the Exchange finds the applicant to be
a fit and proper person to form a syndicate, the Exchange
shall notify the Director of that finding in writing.
(215 ILCS 5/107.14 rep.)
Section 95. The Illinois Insurance Code is amended by
repealing Section 107.14.
(215 ILCS 5/493.1 rep.)
Section 97. The Illinois Insurance Code is amended by
repealing Section 493.1.
Section 99. Effective date. This Section and Sections
91 and 97 of this Act take effect upon becoming law; Sections
1 through 55, 93, and 95 of this Act take effect January 1,
1998.