Public Act 094-0248
 
HB0316 Enrolled LRB094 06684 LJB 36778 b

    AN ACT in relation to insurance.
 
    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 205.1 and 500-77 as follows:
 
    (215 ILCS 5/205.1)
    Sec. 205.1. Policyholder collateral, deductible
reimbursements, and other policyholder obligations.
    (a) Any collateral held by, for the benefit of, or assigned
to the insurer or the Director as rehabilitator or liquidator
to secure the obligations of a policyholder under a deductible
agreement shall not be considered an asset of the estate and
shall be maintained and administered by the Director as
rehabilitator or liquidator as provided in this Section and
notwithstanding any other provision of law or contract to the
contrary.
    (b) If the collateral is being held by, for the benefit of,
or assigned to the insurer or subsequently the Director as
rehabilitator or liquidator to secure obligations under a
deductible agreement with a policyholder, subject to the
provisions of this Section, the collateral shall be used to
secure the policyholder's obligation to fund or reimburse
claims payment within the agreed deductible amount.
    (c) If a claim that is subject to a deductible agreement
and secured by collateral is not covered by any guaranty
association or the Illinois Insurance Guaranty Fund and the
policyholder is unwilling or unable to take over the handling
and payment of the non-covered claims, the Director as
rehabilitator or liquidator shall adjust and pay the
non-covered claims utilizing the collateral but only to the
extent the available collateral after allocation under
subsection (d), is sufficient to pay all outstanding and
anticipated claims. If the collateral is exhausted and the
insured is not able to provide funds to pay the remaining
claims within the deductible after all reasonable means of
collection against the insured have been exhausted, the
Director's obligation to pay such claims from the collateral as
the rehabilitator or liquidator terminates, and the remaining
claims shall be claims against the insurer's estate subject to
complying with other provisions in this Article for the filing
and allowance of such claims. When the liquidator determines
that the collateral is insufficient to pay all additional and
anticipated claims, the liquidator may file a plan for
equitably allocating the collateral among claimants, subject
to court approval.
    (d) To the extent that the Director as rehabilitator or
liquidator is holding collateral provided by a policyholder
that was obtained to secure a deductible agreement and to
secure other obligations of the policyholder to pay the
insurer, directly or indirectly, amounts that become assets of
the estate, such as reinsurance obligations under a captive
reinsurance program or adjustable premium obligations under a
retrospectively rated insurance policy where the premium due is
subject to adjustment based upon actual loss experience, the
Director as rehabilitator or liquidator shall equitably
allocate the collateral among such obligations and administer
the collateral allocated to the deductible agreement pursuant
to this Section. With respect to the collateral allocated to
obligations under the deductible agreement, if the collateral
secured reimbursement obligations under more than one line of
insurance, then the collateral shall be equitably allocated
among the various lines based upon the estimated ultimate
exposure within the deductible amount for each line. The
Director as rehabilitator or liquidator shall inform the
guaranty association or the Illinois Insurance Guaranty Fund
that is or may be obligated for claims against the insurer of
the method and details of all the foregoing allocations.
    (e) Regardless of whether there is collateral, if the
insurer has contractually agreed to allow the policyholder to
fund its own claims within the deductible amount pursuant to a
deductible agreement, either through the policyholder's own
administration of its claims or through the policyholder
providing funds directly to a third party administrator who
administers the claims, the Director as rehabilitator or
liquidator shall allow such funding arrangement to continue
and, where applicable, will enforce such arrangements to the
fullest extent possible. The funding of such claims by the
policyholder within the deductible amount will act as a bar to
any claim for such amount in the liquidation proceeding,
including but not limited to any such claim by the policyholder
or the third party claimant. The funding will extinguish both
the obligation, if any, of any guaranty association or the
Illinois Insurance Guaranty Fund to pay such claims within the
deductible amount, as well as the obligations, if any, of the
policyholder or third party administrator to reimburse the
guaranty association or the Illinois Insurance Guaranty Fund.
No charge of any kind shall be made by the Director as
rehabilitator or liquidator against any guaranty association
or the Illinois Insurance Guaranty Fund on the basis of the
policyholder funding of claims payment made pursuant to the
mechanism set forth in this subsection.
    (f) If the insurer has not contractually agreed to allow
the policyholder to fund its own claims within the deductible
amount, to the extent a guaranty association or the Illinois
Insurance Guaranty Fund is required by applicable state law to
pay any claims for which the insurer would be or would have
been entitled to reimbursement from the policyholder under the
terms of the deductible agreement and to the extent the claims
have not been paid by a policyholder or third party, the
Director as rehabilitator or liquidator shall promptly bill the
policyholder for such reimbursement and the policyholder will
be obligated to pay such amount to the Director as
rehabilitator or liquidator for the benefit of the guaranty
association or the Illinois Insurance Guaranty Fund that paid
such claims. Neither the insolvency of the insurer, nor its
inability to perform any of its obligations under the
deductible agreement, shall be a defense to the policyholder's
reimbursement obligation under the deductible agreement. When
the policyholder reimbursements are collected, the Director as
rehabilitator or liquidator shall promptly reimburse the
guaranty association or the Illinois Insurance Guaranty Fund
for claims paid that were subject to the deductible. If the
policyholder fails to pay the amounts due within 60 days after
such bill for such reimbursements is due, the Director as
rehabilitator or liquidator shall use the collateral to the
extent necessary to reimburse the guaranty association or the
Illinois Insurance Guaranty Fund, and, at the same time, may
pursue other collections efforts against the policyholder. If
more than one guaranty association or the Illinois Insurance
Guaranty Fund has a claim against the same collateral and the
available collateral (after allocation under subsection (d)),
along with billing and collection efforts, are together
insufficient to pay each guaranty association or the Illinois
Insurance Guaranty Fund in full, then the Director as
rehabilitator or liquidator will pro-rate payments to each
guaranty association or the Illinois Insurance Guaranty Fund
based upon the relationship the amount of claims each guaranty
association or the Illinois Insurance Guaranty Fund has paid
bears to the total of all claims paid by such guaranty
association or the Illinois Insurance Guaranty Fund.
    (g) Director's duties and powers as rehabilitator or
liquidator.
        (1) The Director as rehabilitator or liquidator is
    entitled to deduct from reimbursements owed to guaranty
    associations or the Illinois Insurance Guaranty Fund or
    collateral to be returned to a policyholder reasonable
    actual expenses incurred in fulfilling the
    responsibilities under this provision, not to exceed 3% of
    the collateral or the total deductible reimbursements
    actually collected by the Director as rehabilitator or
    liquidator.
        (2) With respect to claim payments made by any guaranty
    association or the Illinois Insurance Guaranty Fund, the
    Director as rehabilitator or liquidator shall promptly
    provide the court, with a copy to of the guaranty
    associations or the Illinois Insurance Guaranty Fund, with
    a complete report of the Director's deductible billing and
    collection activities as rehabilitator or liquidator
    including copies of the policyholder billings when
    rendered, the reimbursements collected, the available
    amounts and use of collateral for each policyholder, and
    any pro-ration of payments when it occurs. If the Director
    as rehabilitator or liquidator fails to make a good faith
    effort within 120 days of receipt of claims payment reports
    to collect reimbursements due from a policyholder under a
    deductible agreement based on claim payments made by one or
    more guaranty associations or the Illinois Insurance
    Guaranty Fund, then after such 120 day period such guaranty
    associations or the Illinois Insurance Guaranty Fund may
    pursue collection from the policyholders directly on the
    same basis as the Director as rehabilitator or liquidator,
    and with the same rights and remedies, and will report any
    amounts so collected from each policyholder to the Director
    as rehabilitator or , liquidator, or conservator. To the
    extent that guaranty associations or the Illinois
    Insurance Guaranty Fund pay claims within the deductible
    amount, but are not reimbursed by either the Director as
    rehabilitator, liquidator, or conservator under this
    Section or by policyholder payments from the guaranty
    associations' or the Illinois Insurance Guaranty Fund's
    own collection efforts, the guaranty association or the
    Illinois Insurance Guaranty Fund shall have a claim in the
    insolvent insurer's estate for such un-reimbursed claims
    payments.
        (3) The Director as rehabilitator or liquidator shall
    periodically adjust the collateral being held as the claims
    subject to the deductible agreement are run-off, provided
    that adequate collateral is maintained to secure the entire
    estimated ultimate obligation of the policyholder plus a
    reasonable safety factor, and the Director as
    rehabilitator or liquidator shall not be required to adjust
    the collateral more than once a year. The guaranty
    associations or the Illinois Insurance Guaranty Fund shall
    be informed of all such collateral reviews, including but
    not limited to the basis for the adjustment. Once all
    claims covered by the collateral have been paid and the
    Director as rehabilitator or liquidator is satisfied that
    no new claims can be presented, the Director as
    rehabilitator or liquidator will release any remaining
    collateral to the policyholder.
    (h) The Illinois Circuit Court having jurisdiction over the
liquidation proceedings shall have jurisdiction to resolve
disputes arising under this provision.
    (i) Nothing in this Section is intended to limit or
adversely affect any right the guaranty associations or the
Illinois Insurance Guaranty Fund may have under applicable
state law to obtain reimbursement from certain classes of
policyholders for claims payments made by such guaranty
associations or the Illinois Insurance Guaranty Fund under
policies of the insolvent insurer, or for related expenses the
guaranty associations or the Illinois Insurance Guaranty Fund
incur.
    (j) This Section applies to all receivership proceedings
under Article XIII that either (1) commence on or after the
effective date of this amendatory Act of the 93rd General
Assembly or (2) are on file or open on the effective date of
this amendatory Act of the 93rd General Assembly and in which
an Order of Liquidation is entered on or after May 1, 2004.
However, this Section applies to rehabilitation proceedings
only to the extent that guaranty associations are required to
pay claims and does not apply to receivership proceedings in
which only an order of conservation has been entered.
    (k) For purposes of this Section, a "deductible agreement"
is any combination of one or more policies, endorsements,
contracts, or security agreements, which provide for the
policyholder to bear the risk of loss within a specified amount
per claim or occurrence covered under a policy of insurance,
and may be subject to the aggregate limit of policyholder
reimbursement obligations. This Section shall not apply to
first party claims, or to claims funded by a guaranty
association or the Illinois Insurance Guaranty Fund in excess
of the deductible unless subsection (e) above applies. The term
"non-covered claim" shall mean a claim that is subject to a
deductible agreement and is not covered by a guaranty
association or the Illinois Insurance Guaranty Fund.
(Source: P.A. 93-1028, eff. 8-25-04.)
 
    (215 ILCS 5/500-77)
    Sec. 500-77. Policyholder information and exclusive
ownership of expirations.
    (a) As used in this Section, "expirations" means all
information relative to an insurance policy including, but not
limited to, the name and address of the insured, the location
and description of the property insured, the value of the
insurance policy, the inception date, the renewal date, and the
expiration date of the insurance policy, the premiums, the
limits and a description of the terms and coverage of the
insurance policy, and any other personal and privileged
information, as defined by Section 1003 of this Code, compiled
by a business entity registered firm or furnished by the
insured to the insurer or any agent, contractor, or
representative of the insurer.
    For purposes of this Section only, a business entity
registered firm also includes a sole proprietorship that
transacts the business of insurance as an insurance agency.
    (b) All "expirations" as defined in subsection (a) of this
Section shall be mutually and exclusively owned by the insured
and the business entity registered firm. The limitations on the
use of expirations as provided in subsections (c) and (d) of
this Section shall be for mutual benefit of the insured and the
business entity registered firm.
    (c) Except as otherwise provided in this Section, for
purposes of soliciting, selling, or negotiating the renewal or
sale of insurance coverage, insurance products, or insurance
services or for any other marketing purpose, a business entity
registered firm shall own and have the exclusive use of
expirations, records, and other written or electronically
stored information directly related to an insurance
application submitted by, or an insurance policy written
through, the business entity registered firm. No insurance
company, managing general agent, surplus lines insurance
broker, wholesale broker, group self-insurance fund,
third-party administrator, or any other entity, other than a
financial institution as defined in Section 1402 of this Code,
shall use such expirations, records, or other written or
electronically stored information to solicit, sell, or
negotiate the renewal or sale of insurance coverage, insurance
products, or insurance services to the insured or for any other
marketing purposes, either directly or by providing such
information to others, without, separate from the general
agency contract, the written consent of the business entity
registered firm. However, such expirations, records, or other
written or electronically stored information may be used for
any purpose necessary for placing such business through the
insurance producer including reviewing an application and
issuing or renewing a policy and for loss control services.
    (d) With respect to a business entity registered firm, this
Section shall not apply:
        (1) when the insured requests either orally or in
    writing that another business entity registered firm
    obtain quotes for insurance from another insurance company
    or when the insured requests in writing individually or
    through another business entity registered firm, that the
    insurance company renew the policy;
        (2) to policies in the Illinois Fair Plan, the Illinois
    Automobile Insurance Plan, or the Illinois Assigned Risk
    Plan for coverage under the Workers' Compensation Act and
    the Workers' Occupational Diseases Act;
        (3) when the insurance producer is employed by or has
    agreed to act exclusively or primarily for one company or
    group of affiliated insurance companies or to a producer
    who submits to the company or group of affiliated companies
    that are organized to transact business in this State as a
    reciprocal company, as defined in Article IV of this Code,
    every request or application for insurance for the classes
    and lines underwritten by the company or group of
    affiliated companies;
        (4) to policies providing life and accident and health
    insurance;
        (5) when the business entity registered firm is in
    default for nonpayment of premiums under the contract with
    the insurer or is guilty of conversion of the insured's or
    insurer's premiums or its license is revoked by or
    surrendered to the Department;
        (6) to any insurance company's obligations under
    Sections 143.17 and 143.17a of this Code; or
        (7) to any insurer that, separate from a producer or
    business entity registered firm, creates, develops,
    compiles, and assembles its own, identifiable expirations
    as defined in subsection (a).
    For purposes of this Section, an insurance producer shall
be deemed to have agreed to act primarily for one company or a
group of affiliated insurance companies if the producer (i)
receives 75% or more of his or her insurance related
commissions from one company or a group of affiliated companies
or (ii) places 75% or more of his or her policies with one
company or a group of affiliated companies.
    Nothing in this Section prohibits an insurance company,
with respect to any items herein, from conveying to the insured
or the business entity registered firm any additional benefits
or ownership rights including, but not limited to, the
ownership of expirations on any policy issued or the imposition
of further restrictions on the insurance company's use of the
insured's personal information.
    (e) Nothing in this Section prevents a financial
institution, as defined in Section 1402 of this Code, from
obtaining from the insured, the insurer, or the business entity
registered firm the expiration dates of an insurance policy
placed on collateral or otherwise used as security in
connection with a loan made or serviced by the financial
institution when the financial institution requires the
expiration dates for evidence of insurance.
    (f) For purposes of this Section, "financial institution"
does not include an insurance company, business entity
registered firm, managing general agent, surplus lines broker,
wholesale broker, group self-funded insurance fund, or
third-party administrator.
    (g) The Director may adopt rules in accordance with Section
401 of this Code for the enforcement of this Section.
    (h) This Section applies to the expirations relative to all
policies of insurance bound, applied for, sold, renewed, or
otherwise taking effect on or after June 1, 2001 the effective
date of this amendatory Act of the 92nd General Assembly.
(Source: P.A. 92-5, eff. 6-1-01; 92-651, eff. 7-11-02.)
 
    Section 99. Effective date. This Act takes effect upon
becoming law.