Public Act 100-0410
 
SB0683 EnrolledLRB100 06876 SMS 16925 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 adding 
Section 141b and  by changing Sections 205 and 545 as follows:
 
    (215 ILCS 5/141b new)
    Sec. 141b. Third party access to files. Any contract with a 
third party ("administrator") to provide claim services for a 
property and casualty company must contain the following 
provisions:
        (1) Upon liquidation or rehabilitation of the insurer, 
    the files and any data related thereto become the sole 
    property of the estate. The administrator shall have 
    reasonable access and right to copy files at the 
    administrator's expense.
        (2) In the event electronic files are used, the 
    administrator must keep all data in such a format that it 
    is easily separated from other data maintained by the 
    administrator and timely transferred to the liquidator 
    upon the entry of an order or liquidation. "Timely 
    transferred", in this context, means the claim file data 
    must be transferred to the liquidator within 10 days after 
    the entry of an order of liquidation.
    The provisions of this Section shall apply to all contracts 
entered into  after the effective date of this amendatory Act of 
the 100th General Assembly, and any existing contracts shall 
have one year to come into compliance with this Section.
 



    (215 ILCS 5/205)  (from Ch. 73, par. 817)



    Sec. 205. Priority of distribution of general assets. 

    (1) The priorities of distribution of general assets from 
the
company's estate is to be as follows:


        (a) The costs and expenses of administration, 
    including, but not limited to, the following:
            (i) The reasonable expenses of the Illinois 
        Insurance Guaranty Fund, the Illinois Life and Health 
        Insurance Guaranty Association, and the Illinois 
        Health Maintenance Organization Guaranty Association 
        and of any similar organization in any other state, 
        including overhead, salaries, and other general 
        administrative expenses allocable to the receivership 
        (administrative and claims handling expenses and 
        expenses in connection with arrangements for ongoing 
        coverage), but excluding expenses incurred in the 
        performance of duties under Section 547 or similar 
        duties under the statute governing a similar 
        organization in another state. For property and 
        casualty insurance guaranty associations that guaranty 
        certain obligations of any member company as defined by 
        Section 534.5, expenses shall include, but not be 
        limited to, loss adjustment expenses, which shall 
        include adjusting and other expenses and defense and 
        cost containment expenses. The expenses of such 
        property and casualty guaranty associations, including 
        the Illinois Insurance Guaranty Fund, shall be 
        reimbursed as prescribed by Section 545, but shall be 
        subordinate to all other costs and expenses of 
        administration, including the expenses reimbursed 
        pursuant to subparagraph (ii) of this paragraph (a).
            (ii) The expenses expressly approved or ratified 
        by the Director as liquidator or rehabilitator, 
        including, but not limited to, the following:
                (1) the actual and necessary costs of 
            preserving or recovering the property of the 
            insurer;
                (2) reasonable compensation for all services 
            rendered on behalf of the administrative 
            supervisor or receiver;
                (3) any necessary filing fees;
                (4) the fees and mileage payable to witnesses;
                (5) unsecured loans obtained by the receiver; 
            and
                (6) expenses approved by the conservator or 
        rehabilitator of the insurer, if any, incurred in the 
        course of the conservation or rehabilitation that are 
        unpaid at the time of the entry of the order of 
        liquidation.
        Any unsecured loan falling under item (5) of 
    subparagraph (ii) of this paragraph (a) shall have priority 
    over all other costs and expenses of administration, unless 
    the lender agrees otherwise.  Absent agreement to the 
    contrary, all other costs and expenses of administration 
    shall be shared on a pro-rata basis, except for the 
    expenses of property and casualty guaranty associations, 
    which shall have a lower priority pursuant to subparagraph 
    (i) of this paragraph (a). , including the expenses of
the 
    Illinois Insurance Guaranty Fund, the Illinois Life and 
    Health Insurance
Guaranty Association, the Illinois Health 
    Maintenance Organization Guaranty
Association and of any 
    similar organization in any other state
as prescribed in 
    subsection (c) of Section 545.


        (b) Secured
claims,
including claims for taxes and 
    debts due the federal or any state or local
government, 
    that are secured by liens perfected prior to the
filing of 
    the
complaint.


        (c) Claims for wages actually owing to employees for 
    services rendered
within
3 months prior to the date of the 
    filing of the complaint, not exceeding $1,000
to each 
    employee unless there are claims due the federal government 
    under
paragraph (f), then the claims for wages shall have a 
    priority of
distribution immediately following that of 
    federal claims under paragraph (f)
and immediately 
    preceding claims of general creditors under paragraph (g).


        (d) Claims by policyholders, beneficiaries, and 
    insureds, under
insurance policies, annuity contracts, and 
    funding agreements,
liability
claims against insureds 
    covered under insurance policies and insurance
contracts 
    issued by the company, claims of obligees (and, subject to 
    the discretion of the
receiver, completion contractors) 
    under surety bonds and surety undertakings (not to include 
    bail bonds, mortgage or financial guaranty, or other forms 
    of insurance offering protection against
investment risk), 
    claims by principals under surety bonds and surety 
    undertakings for wrongful
dissipation of collateral by the 
    insurer or its agents, and claims incurred during any 
    extension of
coverage provided under subsection (5) of 
    Section 193, and claims of the Illinois Insurance
Guaranty 
    Fund, the Illinois Life and Health Insurance Guaranty 
    Association,
the Illinois Health Maintenance Organization 
    Guaranty Association, and any
similar organization in 
    another state
as prescribed in Section 545.  For purposes of 
    this Section, "funding
agreement" means an agreement 
    whereby an insurer authorized to write business
under Class 
    1 of Section 4 of this Code may accept and accumulate funds 
    and
make one or more payments at future dates in amounts 
    that are not based upon
mortality or morbidity 
    contingencies.


        (e) Claims by policyholders, beneficiaries, and 
    insureds, the
allowed
values of which were determined by 
    estimation under paragraph (b) of subsection
(4) of Section 
    209.


        (f) Any other claims due the federal government.


        (g) All other claims of general creditors not falling 
    within
any
other
priority under this Section including 
    claims for taxes and debts due any state
or local 
    government which are not secured
claims and claims for

    attorneys' fees incurred by the company in contesting its 
    conservation,
rehabilitation, or liquidation.


        (h) Claims of guaranty fund certificate holders,

    guaranty
capital
shareholders, capital note holders, and 
    surplus note holders.


        (i) Proprietary claims of shareholders, members, or 
    other
owners.

    Every claim under a written agreement, statute, or rule 
providing that the
assets in a separate account are not 
chargeable with the liabilities arising
out of any other 
business of the insurer shall be satisfied out of the funded

assets in the separate account equal to, but not to exceed, the 
reserves
maintained in the separate account under the separate 
account agreement, and to
the extent, if any, the claim is not 
fully discharged thereby, the remainder
of the claim shall be 
treated as a priority level (d) claim under paragraph
 (d) of 
this subsection to the extent that reserves have been 
established in the
insurer's general account pursuant to 
statute, rule, or the separate account
agreement.

    For purposes of this provision, "separate account 
policies, contracts, or
agreements" means any policies, 
contracts, or agreements that provide for
separate accounts as 
contemplated by Section 245.21.

    To the extent that any assets of an insurer, other than 
those assets properly
allocated to and maintained in a separate 
account, have been used to fund or
pay any expenses, taxes, or 
policyholder benefits that are attributable to a
separate 
account policy, contract, or agreement that should have been 
paid by a
separate account prior to the commencement of 
receivership proceedings, then
upon the commencement of 
receivership proceedings, the separate accounts
that benefited 
from this payment or funding shall first be used to repay or

reimburse the company's general assets or account for any 
unreimbursed net sums
due at the commencement of receivership 
proceedings prior to the application of
the separate account 
assets to the satisfaction of liabilities or the
corresponding 
separate account policies, contracts, and agreements.

    To the extent, if any, reserves or assets maintained in the 
separate account
are in excess of the amounts needed to satisfy 
claims under the separate
account contracts, the excess shall 
be treated as part of the general assets of
the insurer's 
estate.

    (2) Within 120 days after the issuance of an Order of 
Liquidation with a
finding of insolvency against a domestic 
company, the Director shall make
application to the court 
requesting authority to disburse funds to the
Illinois 
Insurance Guaranty Fund, the Illinois Life and Health Insurance

Guaranty Association, the Illinois Health Maintenance 
Organization Guaranty
Association, and similar organizations 
in other states from time to time out
of the company's 
marshaled assets as funds
become available in amounts equal to 
disbursements made by the
Illinois Insurance Guaranty Fund, the 
Illinois Life and Health Insurance
Guaranty Association, the 
Illinois Health Maintenance Organization Guaranty
Association, 
and similar organizations in other states
for covered claims 
obligations on the presentation of evidence that such

disbursements have been made by the Illinois Insurance
Guaranty 
Fund, the Illinois Life and Health Insurance Guaranty

Association, the Illinois Health Maintenance Organization 
Guaranty Association,
and similar organizations in other 
states.

    The Director shall establish procedures for the ratable 
allocation and
distribution of disbursements to the Illinois 
Insurance Guaranty Fund,
the Illinois Life and Health Insurance 
Guaranty Association, the Illinois
Health Maintenance 
Organization Guaranty Association, and
similar organizations 
in other states.  In determining the amounts available
for 
disbursement, the Director shall reserve sufficient assets for 
the
payment of the expenses of administration described in 
paragraph (1)(a)
of this Section.  All funds available for 
disbursement after the establishment
of the prescribed reserve 
shall be promptly distributed.   As a condition
to receipt of 
funds in reimbursement of covered claims obligations,
the 
Director shall secure from the Illinois Insurance Guaranty 
Fund,
the Illinois Life and Health Insurance Guaranty 
Association, the Illinois
Health Maintenance Organization 
Guaranty Association, and
each similar organization in other 
states, an agreement to return to the
Director on demand funds 
previously received as may be required to pay claims
of secured 
creditors and claims falling within the priorities established

in paragraphs (a), (b), (c), and (d) of subsection (1) of
this 
Section in accordance
with such priorities.

    (3) The changes made in this Section by this amendatory Act 
of the 100th General Assembly apply to all liquidation,

rehabilitation, or conservation proceedings that are pending 
on the effective date of this amendatory
Act of the 100th 
General Assembly and to all future liquidation, 
rehabilitation, or conservation proceedings. 
    (4) The provisions of this Section are severable under 
Section 1.31 of
the Statute on Statutes.

(Source: P.A. 92-65, eff. 7-12-01; 92-875, eff. 1-3-03.)

 



    (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; provided that if, at the time that 
the liquidator 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 the same priority over all 
claims
against the estate, except as provided for in paragraph 
(a) of subsection (1) of
Section 205 of this Code 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; 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. 96-1450, eff. 8-20-10.)

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