SB1297 EngrossedLRB100 09657 JLS 19826 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Insurance Code is amended by
5changing Sections 189 and 204 as follows:
 
6    (215 ILCS 5/189)  (from Ch. 73, par. 801)
7    Sec. 189. Injunction. The court shall have jurisdiction,
8upon, or at any time after the filing of the complaint to issue
9an injunction restraining such company and its officers,
10agents, directors, employees and all other persons from
11transacting any company business or disposing of its property
12until the further order of the court. The court may also
13restrain all persons, companies, and entities from bringing or
14further prosecuting all actions and proceedings at law or in
15equity or otherwise, whether in this State or elsewhere,
16against the company or its assets or property or the Director
17except insofar as those actions or proceedings arise in or are
18brought in the conservation, rehabilitation, or liquidation
19proceeding. The court may issue such other injunctions or enter
20such other orders as may be deemed necessary to prevent
21interference with the proceedings, or with the Director's
22possession and control or title, rights or interests as herein
23provided or to prevent interference with the conduct of the

 

 

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1business by the Director, and may issue such other injunctions
2or enter such other orders as may be deemed necessary to
3prevent waste of assets or the obtaining, asserting, or
4enforcing of preferences, judgments, attachments, or other
5like liens, including common law retaining liens, or the making
6of any levy against such company or its property and assets
7while in the possession and control of the Director. The court
8may issue any other injunctions or enter any other orders that
9are necessary to protect enrollees in accordance with
10subsection (c) of Section 5-6 of the Health Maintenance
11Organization Act. Any injunction issued under this article may
12be served and enforced as in other civil proceedings, but no
13bond or other security shall be required of the plaintiff,
14either for costs or for any injunction. The provisions of this
15Section are subject to the exclusion set forth in subsection
16(o) of Section 204 of this Article.
17(Source: P.A. 88-297; 89-206, eff. 7-21-95.)
 
18    (215 ILCS 5/204)  (from Ch. 73, par. 816)
19    Sec. 204. Prohibited and voidable transfers and liens.
20    (a)(1) A preference is a transfer of any of the property of
21a company to or for the benefit of a creditor, for or on
22account of an antecedent debt, made or suffered by the company
23within 2 years before the filing of a complaint under this
24Article, the effect of which may be to enable the creditor to
25obtain a greater percentage of this debt than another creditor

 

 

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1of the same class would receive.
2    (2) Any preference may be avoided by the Director as
3rehabilitator, liquidator, or conservator if:
4        (A) the company was insolvent at the time of the
5    transfer; and
6        (B) the transfer was made within 4 months before the
7    filing of the complaint; or the creditor receiving it was
8    (i) an officer, or any employee or attorney or other person
9    who was in fact in a position of comparable influence in
10    the company to an officer whether or not that person held
11    such a position, (ii) any shareholder holding, directly or
12    indirectly, more than 5% of any class of any equity
13    security issued by the company, or (iii) any other person,
14    firm, corporation, association, or aggregation of
15    individuals with whom the company did not deal at arm's
16    length.
17    (3) Where the preference is voidable, the Director as
18rehabilitator, liquidator, or conservator may recover the
19property or, if it has been converted, its value from any
20person who has received or converted the property; except where
21a bona fide purchaser or lienor has given less than fair
22equivalent value, the purchaser or lienor shall have a lien
23upon the property to the extent of the consideration actually
24given. Where a preference by way of lien or security title is
25voidable, the court may on due notice order the lien or title
26to be preserved for the benefit of the estate, in which event

 

 

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1the lien or title shall pass to the Director as rehabilitator
2or liquidator.
3    (b) (1) A transfer of property other than real property
4shall be deemed to be made or suffered when it becomes so far
5perfected that no subsequent lien obtainable by legal or
6equitable proceedings on a simple contract could become
7superior to the rights of the transferee.
8    (2) A transfer of real property shall be deemed to be made
9or suffered when it becomes so far perfected that no subsequent
10bona fide purchaser from the company could obtain rights
11superior to the rights of the transferee.
12    (3) A transfer that creates an equitable lien shall not be
13deemed to be perfected if there are available means by which a
14legal lien could be created.
15    (4) A transfer not perfected before the filing of a
16complaint shall be deemed to be made immediately before the
17filing of the complaint.
18    (5) The provisions of this subsection apply whether or not
19there are or were creditors who might have obtained liens or
20persons who might have become bona fide purchasers.
21    (c) For purposes of this Section:
22        (1) A lien obtainable by legal or equitable proceedings
23    upon a simple contract is one arising in the ordinary
24    course of the proceedings upon the entry or docketing of a
25    judgment or decree, or upon attachment, garnishment,
26    execution, or like process, whether before, upon, or after

 

 

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1    judgment or decree and whether before or upon levy. It does
2    not include liens that, under applicable law, are given a
3    special priority over other liens that are prior in time.
4        (2) A lien obtainable by legal or equitable proceedings
5    could become superior to the rights of a transferee, or a
6    purchaser could obtain rights superior to the rights of a
7    transferee within the meaning of subsection (b) of this
8    Section, if such consequences would follow only from the
9    lien or purchase itself, or from the lien or purchase
10    followed by any step wholly within the control of the
11    respective lienholder or purchaser, with or without the aid
12    of ministerial action by public officials. A lien could
13    not, however, become superior and a purchase could not
14    create superior rights for the purpose of subsection (b) of
15    this Section through any acts subsequent to an obtaining of
16    the lien or subsequent to a purchase that requires the
17    agreement or concurrence of any third party or that
18    requires any further judicial action or ruling.
19    (d) A transfer of property for or on account of a new and
20contemporaneous consideration which is deemed under subsection
21(b) of this Section to be made or suffered after the transfer
22because of delay in perfecting it does not thereby become a
23transfer for or on account of an antecedent debt if any acts
24required by the applicable law to be performed in order to
25perfect the transfer as against liens or bona fide purchasers'
26rights are performed within 21 days or any period expressly

 

 

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1allowed by the law, whichever is less. A transfer to secure a
2future loan, if the loan is actually made, or a transfer that
3becomes security for a future loan, shall have the same effect
4as a transfer for or on account of a new and contemporaneous
5consideration.
6    (e) If any lien deemed voidable under part (2) of
7subsection (a) of this Section has been dissolved by the
8furnishing of a bond or other obligation, the surety on which
9has been indemnified directly or indirectly by the transfer of
10or the creation of a lien upon any property of a company before
11the filing of a complaint under this Article, the indemnifying
12transfer or lien shall also be deemed voidable.
13    (f) The property affected by any lien deemed voidable under
14subsections (a) and (e) of this Section shall be discharged
15from the lien, and that property and any of the indemnifying
16property transferred to or for the benefit of a surety shall
17pass to the Director as rehabilitator or liquidator, except
18that the court may, on due notice, order any such lien to be
19preserved for the benefit of the estate and the court may
20direct that such conveyance be executed as may be proper or
21adequate to evidence the title of the Director as rehabilitator
22or liquidator.
23    (g) The court shall have summary jurisdiction over any
24proceeding by the Director as rehabilitator, liquidator, or
25conservator to hear and determine the rights of any parties
26under this Section. Reasonable notice of any hearings in the

 

 

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1proceeding shall be given to all parties in interest, including
2the obligee of a releasing bond or other life obligation. Where
3an order is entered for the recovery of indemnifying property
4in kind or for the avoidance of an indemnifying lien, the
5court, upon application of any party in interest, shall in the
6same proceeding ascertain the value of the property or lien,
7and if the value is less than the amount for which the property
8is indemnity or than the amount of the lien, the transferee or
9lienholder may elect to retain the property or lien upon
10payment of its value, as ascertained by the court, to the
11Director as rehabilitator, liquidator, or conservator, within
12such reasonable times as the court shall fix.
13    (h) The liability of the surety under the releasing bond or
14other similar obligation shall be discharged to the extent of
15the value of the indemnifying property recovered or the
16indemnifying lien nullified and avoided by the Director as
17rehabilitator, liquidator, or conservator. Where the property
18is retained under subsection (g) of this Section, the liability
19shall be discharged to the extent of the amount paid to the
20Director as rehabilitator, liquidator, or conservator.
21    (i) If a creditor has been preferred and thereafter in good
22faith gives the company further credit without security of any
23kind, for property which becomes a part of the company's
24estate, the amount of the new credit remaining unpaid at the
25time of the petition may be set off against the preference
26which would otherwise be recoverable from the creditor.

 

 

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1    (j) If a company shall, directly or indirectly, within 4
2months before the filing of a complaint under this Article, or
3at any time in contemplation of such a proceeding, pay money or
4transfer property to any attorney for services rendered or to
5be rendered, the transactions may be examined by the court on
6its own motion or shall be examined by the court on petition of
7the Director as rehabilitator, liquidator, or conservator and
8shall be held valid only to the extent of a reasonable amount
9to be determined by the court, and the excess may be recovered
10by the Director as rehabilitator, liquidator, or conservator
11for the benefit of the estate provided that where the attorney
12is in a position of influence in the company or an affiliate
13thereof payment of any money or the transfer of any property to
14the attorney for services rendered or to be rendered shall be
15governed by item (B) of part (2) of subsection (a) of this
16Section.
17    (k) (1) An officer, director, manager, employee,
18shareholder, member, subscriber, attorney, or other person
19acting on behalf of the company who knowingly participates in
20giving any preference when that officer, director, manager,
21employee, shareholder, member, subscriber, attorney, or other
22person has reasonable cause to believe the company is or is
23about to become insolvent at the time of the preference shall
24be personally liable to the Director as rehabilitator,
25liquidator, or conservator for the amount of the preference.
26There is a reasonable cause to so believe if the transfer was

 

 

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1made within 4 months before the date of filing of the
2complaint.
3    (2) A person receiving any property from the company or the
4benefit thereof as a preference voidable under subsection (a)
5of this Section shall be personally liable therefor and shall
6be bound to account to the Director as rehabilitator,
7liquidator, or conservator.
8    (3) Nothing in this Section shall prejudice any other claim
9by the Director as rehabilitator, liquidator, or conservator
10against any person.
11    (l) For purposes of this Section, the company is presumed
12to have been insolvent on and during the 4 month period
13immediately preceding the date of the filing of the complaint.
14    (m) The Director as rehabilitator, liquidator, or
15conservator may not avoid a transfer under this Section to the
16extent that the transfer was:
17        (A) Intended by the company and the creditor to or for
18    whose benefit the transfer was made to be a contemporaneous
19    exchange for new value given to the company, and was in
20    fact a substantially contemporaneous exchange; or
21        (B) In payment of a debt incurred by the company in the
22    ordinary course of business or financial affairs of the
23    company and the transferee; made in the ordinary course of
24    business or financial affairs of the company and the
25    transferee; and made according to ordinary business terms;
26    or

 

 

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1        (C) In the case of a transfer by a company where the
2    Director has determined that an event described in Section
3    35A-25 or 35A-30 has occurred, specifically approved by the
4    Director in writing pursuant to this subsection, whether or
5    not the company is in receivership under this Article. Upon
6    approval by the Director, such a transfer cannot later be
7    found to constitute a prohibited or voidable transfer based
8    solely upon a deviation from the statutory payment
9    priorities established by law for any subsequent
10    receivership; or .
11        (D) Of money or other property arising under or in
12    connection with any Federal Home Loan Bank security
13    agreement or any pledge, security, collateral or guarantee
14    agreement, or any other similar arrangement or credit
15    enhancement relating to a Federal Home Loan Bank security
16    agreement.
17    (n) The Director as rehabilitator, liquidator, or
18conservator may avoid any transfer of or lien upon the property
19of a company that the estate of the company or a policyholder,
20creditor, member, or stockholder of the company may have
21avoided, and the Director as rehabilitator, liquidator, or
22conservator may recover and collect the property so transferred
23or its value from the person to whom it was transferred unless
24the property was transferred to a bona fide holder for value
25before the filing of the complaint. The Director as
26rehabilitator, liquidator, or conservator shall be deemed a

 

 

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1creditor for purposes of pursuing claims under the Uniform
2Fraudulent Transfer Act.
3    (o) Notwithstanding any provision of this Article to the
4contrary, a Federal Home Loan Bank shall not be stayed,
5enjoined, or prohibited from exercising or enforcing any right
6or cause of action regarding collateral pledged under any
7security agreement or any pledge, security, collateral or
8guarantee agreement, or any other similar arrangement or credit
9enhancement relating to a Federal Home Loan Bank security
10agreement.
11(Source: P.A. 93-1083, eff. 2-7-05.)
 
12    Section 99. Effective date. This Act takes effect upon
13becoming law.