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Public Act 101-0060


 

Public Act 0060 101ST GENERAL ASSEMBLY

  
  
  

 


 
Public Act 101-0060
 
HB2173 EnrolledLRB101 05282 SMS 50295 b

    AN ACT concerning regulation.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Illinois Insurance Code is amended by
changing Sections 534.3, 537.6, 537.7, 538.3, 538.4, and 545
and by adding Section 538.9 as follows:
 
    (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 or
    fines and penalties paid to government authorities; 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; 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; 90-499, eff. 8-19-97.)
 
    (215 ILCS 5/537.6)  (from Ch. 73, par. 1065.87-6)
    Sec. 537.6. Allocation of claims; assessments. The Fund
shall allocate covered claims paid and expenses incurred
between the accounts established by Section 535 separately, and
assess member companies separately for each account amounts
necessary to pay the obligations of the Fund under Section
537.2 subsequent to the entry of an Order of Liquidation
against an insolvent company, the expenses of handling covered
claims subsequent to such Order of Liquidation and other
expenses authorized by this Article. The assessments of each
member company shall be in the proportion that the net direct
written premiums of the member company for the calendar year
immediately preceding the year in which the assessment is
levied on the kinds of insurance in the account bears to the
net direct written premiums of all member companies for such
preceding calendar year on the kinds of insurance in the
account. Each member company shall be notified of the
assessment not later than 30 days before it is due. Before
January 1, 2002, no member company may be assessed in any year
on any account an amount greater than 1% of that member
company's net direct written premiums on the kinds of insurance
in the account for the calendar year preceding the assessment.
Beginning January 1, 2002, the amount a member company may be
assessed in any year on any account shall be a maximum of 2% of
that member company's net direct written premium on the kinds
of insurance in the account for the calendar year preceding the
assessment. This 2% maximum shall apply regardless of the date
of any insolvency that gives rise to the need for the
assessment. If the maximum assessment, together with the other
assets of the Fund in any account, does not provide, in any one
year, in any account, an amount sufficient to make all
necessary payments from that account, the funds available shall
be paid in the manner determined by the Fund and approved by
the Director and the unpaid portion shall be paid as soon
thereafter as funds become available. If requested by a member
company, the Director may exempt or defer the assessment of any
member company, if the assessment would cause the member
company's financial impairment.
    In addition to the other assessment authority provided in
this Section, the board of directors shall also have the
assessment authority to pay off a loan as provided in Section
538.3. If a loan is projected to be outstanding for 3 years or
more, then the board of directors shall have the authority to
increase the assessment to 3% of the net direct written
premiums for the previous year until the loan has been paid in
full.
(Source: P.A. 92-77, eff. 7-12-01.)
 
    (215 ILCS 5/537.7)  (from Ch. 73, par. 1065.87-7)
    Sec. 537.7. Investigation of claims; disposition.
    (a) The Fund shall investigate claims brought against the
Fund and adjust, compromise, settle, and pay covered claims to
the extent of the Fund's obligation and deny all other claims.
    (b) The Fund shall not be bound by a settlement, release,
compromise, waiver, or final judgment executed or entered
within 12 months prior to an order of liquidation and shall
have the right to assert all defenses available to the Fund
including, but not limited to, defenses applicable to
determining and enforcing its statutory rights and obligations
to any claim. The Fund shall be bound by a settlement, release,
compromise, waiver, or final judgment executed or entered more
than 12 months prior to an order of liquidation, but only
however, if the claim is a covered claim and the settlement,
release, compromise, waiver, or final judgment was not a result
of fraud, collusion, default, or failure to defend. In
addition, with respect to covered claims arising from a
judgment under a decision, verdict, or finding based on the
default of the insolvent insurer or its failure to defend, upon
application by the Fund, either on its own behalf or on behalf
of an insured, the court shall set aside the judgment, order,
decision, verdict, or finding, and the Fund shall be permitted
to defend against the claim on the merits. The same criteria
determining whether the Fund will be bound, as specified in
this subsection (b), shall apply to any settlement, release,
compromise, waiver, or final judgment entered into by a high
net worth insured before the date on which claims by or against
that insured became non-exempt for reasons specified in
paragraph (iv) of subsection (b) of Section 534.3.
    (c) The Fund shall have the right to appoint or approve and
to direct legal counsel retained under liability insurance
policies for the defense of covered claims.
(Source: P.A. 92-77, eff. 7-12-01.)
 
    (215 ILCS 5/538.3)  (from Ch. 73, par. 1065.88-3)
    Sec. 538.3. The Fund may borrow an amount of money
necessary to effect the purposes of this Article in accord with
the plan of operation. The board of directors shall have the
authority to pledge all or an appropriate portion of future
assessments as necessary to secure a loan that may be needed to
pay covered claims. Until all loans secured by assessments are
fully satisfied, the board of directors shall assess the
maximum allowable under Section 537.6.
(Source: P.A. 77-305.)
 
    (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, but not limited to, taking any legal actions
necessary or proper for recovery of: (i) any unpaid assessments
under Section Sections 537.1 or 537.6; (ii) any amounts due to
the Fund for salvage and subrogation under Section 537.4 or
from insurers described in subsection (a) of Section 546; or
(iii) any amounts due from an insured pursuant to subsections
(a) and (d) of Section 545. 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; 90-499, eff. 8-19-97.)
 
    (215 ILCS 5/538.9 new)
    Sec. 538.9. Action regarding insolvent company records.
    (a) In this Section, "claims information" includes files,
records, and electronic data.
    (b) The Fund may bring an action against any third-party
administrator, agent, attorney, or other representative of the
insolvent insurer to obtain custody and control of all claims
information related to an insolvent company that are
appropriate or necessary for the Fund or a similar association
in other states to carry out its duties under this Article. In
such an action, the Fund shall have the absolute right through
emergency equitable relief to obtain custody and control of
such claims information in possession of such third-party
administrator, agent, attorney or other representative of the
insolvent insurer, regardless of where that claims information
may be physically located. In bringing an action under this
Section, the Fund shall not be subject to any defense, lien
(possessory or otherwise), or other legal or equitable ground
whatsoever for refusal to surrender such claims information
that might be asserted against the liquidator of the insolvent
insurers. To the extent that litigation is required for the
Fund to obtain custody and control of the claims information
requested and it results in the relinquishment of claims
information to the Fund after refusal to provide that
information in response to a written demand, the court shall
award the Fund its costs, expenses, and reasonable attorney's
fees incurred in bringing the action. This Section shall have
the same effect on the rights and remedies that the custodian
of such claims information may have against the insolvent
insurers, so long as these rights and remedies do not conflict
with the rights of the Fund to custody and control of the
claims information under this Article.
 
    (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 subsection
paragraph (d) of this Section. Any person recovering under this
Article and any insured whose liabilities are satisfied under
this Article shall be deemed to have assigned the person's or
insured's rights under the policy to the Fund to the extent of
his or her recovery or satisfaction obtained from the Fund's
payments.
    (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; provided that if, at the time that
the liquidator issues a cut-off notice to the Fund in
anticipation of closing the estate, a reserve has been
established by the Fund, or any similar organization in another
state, for the amount of their future administrative expenses
and loss development associated with unpaid reported pending
claims, these reserves will be deemed to have been paid as of
the date of the notice and payment shall be made accordingly.
The liquidator of an insolvent company shall be bound by
determinations of covered claim eligibility under the Act and
by settlements of claims made 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 priority over all claims
against the estate, except as provided for in paragraph (a) of
subsection (1) of Section 205 of this Code. 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 (as determined without
regard to the exemption in paragraph (iv) of subsection (b) of
Section 534.3) 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; 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.
    The Fund may also, at its sole discretion and without
assumption of any ongoing duty to do so, pay any workers
compensation claims or any other third-party claims covered by
a policy of an insolvent company on behalf of a high net worth
insured as defined in paragraph (iv) of subsection (b) of
Section 534.3. In that case, the Fund shall recover from the
high net worth insured under this Section for all amounts paid
on its behalf, all allocated claim adjusted expenses related to
such claims, the Fund's attorney's fees, and all court costs in
any action necessary to collect the full amount to the Fund's
reimbursement under this Section.
(Source: P.A. 100-410, eff. 8-25-17.)
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 7/12/2019