Full Text of HB1870 97th General Assembly
HB1870eng 97TH GENERAL ASSEMBLY |
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| 1 | | AN ACT concerning insurance.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Illinois Insurance Code is amended by | 5 | | changing Sections 531.03, 531.05, 531.07, 531.08, 531.09, and | 6 | | 531.14 as follows:
| 7 | | (215 ILCS 5/531.03) (from Ch. 73, par. 1065.80-3)
| 8 | | Sec. 531.03. Coverage and limitations.
| 9 | | (1) This Article shall provide
coverage for the policies | 10 | | and contracts specified in paragraph (2) of this
Section:
| 11 | | (a) to persons who, regardless of where they reside | 12 | | (except for
non-resident certificate holders under group | 13 | | policies or contracts), are the
beneficiaries, assignees | 14 | | or payees of the persons covered under subparagraph
(1)(b), | 15 | | and
| 16 | | (b) to persons who are owners of or certificate holders | 17 | | under the policies or contracts (other than unallocated | 18 | | annuity contracts and structured settlement annuities) and | 19 | | in each case who: | 20 | | (i) are residents; or | 21 | | (ii) are not residents, but only under all of the | 22 | | following conditions: | 23 | | (A) the insurer that issued the policies or |
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| 1 | | contracts is domiciled in this State; | 2 | | (B) the states in which the persons reside have | 3 | | associations similar to the Association created by | 4 | | this Article; | 5 | | (C) the persons are not eligible for coverage | 6 | | by an association in any other state due to the | 7 | | fact that the insurer was not licensed in that | 8 | | state at the time specified in that state's | 9 | | guaranty association law. | 10 | | (c) For unallocated annuity contracts specified in | 11 | | subsection (2), paragraphs (a) and (b) of this subsection | 12 | | (1) shall not apply and this Article shall (except as | 13 | | provided in paragraphs (e) and (f) of this subsection) | 14 | | provide coverage to: | 15 | | (i) persons who are the owners of the unallocated | 16 | | annuity contracts if the contracts are issued to or in | 17 | | connection with a specific benefit plan whose plan | 18 | | sponsor has its principal place of business in this | 19 | | State; and | 20 | | (ii) persons who are owners of unallocated annuity | 21 | | contracts issued to or in connection with government | 22 | | lotteries if the owners are residents. | 23 | | (d) For structured settlement annuities specified in | 24 | | subsection (2), paragraphs (a) and (b) of this subsection | 25 | | (1) shall not apply and this Article shall (except as | 26 | | provided in paragraphs (e) and (f) of this subsection) |
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| 1 | | provide coverage to a person who is a payee under a | 2 | | structured settlement annuity (or beneficiary of a payee if | 3 | | the payee is deceased), if the payee: | 4 | | (i) is a resident, regardless of where the contract | 5 | | owner resides; or | 6 | | (ii) is not a resident, but only under both of the | 7 | | following conditions: | 8 | | (A) with regard to residency: | 9 | | (I) the contract owner of the structured | 10 | | settlement annuity is a resident; or | 11 | | (II) the contract owner of the structured | 12 | | settlement annuity is not a resident but the | 13 | | insurer that issued the structured settlement | 14 | | annuity is domiciled in this State and the | 15 | | state in which the contract owner resides has | 16 | | an association similar to the Association | 17 | | created by this Article; and | 18 | | (B) neither the payee or beneficiary nor the | 19 | | contract owner is eligible for coverage by the | 20 | | association of the state in which the payee or | 21 | | contract owner resides. | 22 | | (e) This Article shall not provide coverage to: | 23 | | (i) a person who is a payee or beneficiary of a | 24 | | contract owner resident of this State if the payee or | 25 | | beneficiary is afforded any coverage by the | 26 | | association of another state; or |
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| 1 | | (ii) a person covered under paragraph (c) of this | 2 | | subsection (1), if any coverage is provided by the | 3 | | association of another state to that person. | 4 | | (f) This Article is intended to provide coverage to a | 5 | | person who is a resident of this State and, in special | 6 | | circumstances, to a nonresident. In order to avoid | 7 | | duplicate coverage, if a person who would otherwise receive | 8 | | coverage under this Article is provided coverage under the | 9 | | laws of any other state, then the person shall not be | 10 | | provided coverage under this Article. In determining the | 11 | | application of the provisions of this paragraph in | 12 | | situations where a person could be covered by the | 13 | | association of more than one state, whether as an owner, | 14 | | payee, beneficiary, or assignee, this Article shall be | 15 | | construed in conjunction with other state laws to result in | 16 | | coverage by only one association.
| 17 | | (2)(a) This Article shall provide coverage to the persons
| 18 | | specified in paragraph (l) of this Section for direct, (i)
| 19 | | nongroup life, health, annuity and
supplemental policies, or | 20 | | contracts, (ii) for
certificates under direct group policies or | 21 | | contracts, (iii) for unallocated
annuity contracts and (iv) for | 22 | | contracts to furnish
health care services and subscription | 23 | | certificates for medical or health
care services issued by | 24 | | persons licensed to transact insurance business
in this State | 25 | | under the Illinois Insurance Code.
Annuity contracts and | 26 | | certificates under group annuity contracts include
but are not |
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| 1 | | limited to guaranteed investment contracts, deposit
| 2 | | administration contracts, unallocated funding agreements, | 3 | | allocated funding
agreements, structured settlement | 4 | | agreements, lottery contracts
and any immediate or deferred | 5 | | annuity contracts.
| 6 | | (b) This Article shall not provide coverage for:
| 7 | | (i) that portion of a policy or contract not guaranteed | 8 | | by the insurer, or under which the risk is borne by the | 9 | | policy or contract owner;
| 10 | | (ii) any such policy or contract or part thereof | 11 | | assumed by the impaired
or insolvent insurer under a | 12 | | contract of reinsurance, other than reinsurance
for which | 13 | | assumption certificates have been issued;
| 14 | | (iii) any portion of a policy or contract to the extent | 15 | | that the rate of interest on which it is based or the | 16 | | interest rate, crediting rate, or similar factor is | 17 | | determined by use of an index or other external reference | 18 | | stated in the policy or contract employed in calculating | 19 | | returns or changes in value:
| 20 | | (A) averaged over the period of 4 years prior to | 21 | | the date on which the member insurer becomes an | 22 | | impaired or insolvent insurer under this Article, | 23 | | whichever is earlier, exceeds the rate of interest | 24 | | determined by subtracting 2 percentage points from | 25 | | Moody's Corporate Bond Yield Average averaged for that | 26 | | same 4-year period or for such lesser period if the |
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| 1 | | policy or contract was issued less than 4 years before | 2 | | the member insurer becomes an impaired or insolvent | 3 | | insurer under this Article, whichever is earlier; and
| 4 | | (B) on and after the date on which the member | 5 | | insurer becomes an impaired or insolvent insurer under | 6 | | this Article, whichever is earlier, exceeds the rate of | 7 | | interest determined by subtracting 3 percentage points | 8 | | from Moody's Corporate Bond Yield Average as most | 9 | | recently available;
| 10 | | (iv) any unallocated annuity contract issued to or in | 11 | | connection with a benefit plan protected under the federal | 12 | | Pension Benefit Guaranty Corporation, regardless of | 13 | | whether the federal Pension Benefit Guaranty Corporation | 14 | | has yet become liable to make any payments with respect to | 15 | | the benefit plan;
| 16 | | (v) any portion of any unallocated annuity contract | 17 | | which is not issued
to or in connection with a specific | 18 | | employee, union or association of
natural persons benefit | 19 | | plan or a government lottery;
| 20 | | (vi) an obligation that does not arise under the | 21 | | express written terms of the policy or contract issued by | 22 | | the insurer to the contract owner or policy owner, | 23 | | including without limitation: | 24 | | (A) a claim based on marketing materials; | 25 | | (B) a claim based on side letters, riders, or other | 26 | | documents that were issued by the insurer without |
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| 1 | | meeting applicable policy form filing or approval | 2 | | requirements; | 3 | | (C) a misrepresentation of or regarding policy | 4 | | benefits; | 5 | | (D) an extra-contractual claim; or | 6 | | (E) a claim for penalties or consequential or | 7 | | incidental damages;
| 8 | | (vii) any stop-loss insurance, as defined in clause (b) | 9 | | of Class 1 or
clause (a) of Class 2 of Section 4, and | 10 | | further defined in subsection (d) of
Section 352;
| 11 | | (viii) any policy or contract providing any hospital, | 12 | | medical, prescription drug, or other health care benefits | 13 | | pursuant to Part C or Part D of Subchapter XVIII, Chapter 7 | 14 | | of Title 42 of the United States Code (commonly known as | 15 | | Medicare Part C & D) or any regulations issued pursuant | 16 | | thereto; | 17 | | (ix) any portion of a policy or contract to the extent | 18 | | that the assessments required by Section 531.09 of this | 19 | | Code with respect to the policy or contract are preempted | 20 | | or otherwise not permitted by federal or State law; | 21 | | (x) any portion of a policy or contract issued to a | 22 | | plan or program of an employer, association, or other | 23 | | person to provide life, health, or annuity benefits to its | 24 | | employees, members, or others to the extent that the plan | 25 | | or program is self-funded or uninsured, including, but not | 26 | | limited to, benefits payable by an employer, association, |
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| 1 | | or other person under: | 2 | | (A) a multiple employer welfare arrangement as | 3 | | defined in 29 U.S.C. Section 1002 29 U.S.C. Section | 4 | | 1144 ; | 5 | | (B) a minimum premium group insurance plan; | 6 | | (C) a stop-loss group insurance plan; or | 7 | | (D) an administrative services only contract; | 8 | | (xi) any portion of a policy or contract to the extent | 9 | | that it provides for: | 10 | | (A) dividends or experience rating credits; | 11 | | (B) voting rights; or | 12 | | (C) payment of any fees or allowances to any | 13 | | person, including the policy or contract owner, in | 14 | | connection with the service to or administration of the | 15 | | policy or contract; | 16 | | (xii) any policy or contract issued in this State by a | 17 | | member insurer at a time when it was not licensed or did | 18 | | not have a certificate of authority to issue the policy or | 19 | | contract in this State; | 20 | | (xiii) any contractual agreement that establishes the | 21 | | member insurer's obligations to provide a book value | 22 | | accounting guaranty for defined contribution benefit plan | 23 | | participants by reference to a portfolio of assets that is | 24 | | owned by the benefit plan or its trustee, which in each | 25 | | case is not an affiliate of the member insurer; | 26 | | (xiv) any portion of a policy or contract to the extent |
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| 1 | | that it provides for interest or other changes in value to | 2 | | be determined by the use of an index or other external | 3 | | reference stated in the policy or contract, but which have | 4 | | not been credited to the policy or contract, or as to which | 5 | | the policy or contract owner's rights are subject to | 6 | | forfeiture, as of the date the member insurer becomes an | 7 | | impaired or insolvent insurer under this Code, whichever is | 8 | | earlier. If a policy's or contract's interest or changes in | 9 | | value are credited less frequently than annually, then for | 10 | | purposes of determining the values that have been credited | 11 | | and are not subject to forfeiture under this Section, the | 12 | | interest or change in value determined by using the | 13 | | procedures defined in the policy or contract will be | 14 | | credited as if the contractual date of crediting interest | 15 | | or changing values was the date of impairment or | 16 | | insolvency, whichever is earlier, and will not be subject | 17 | | to forfeiture; or
| 18 | | (xv) that portion or part of a variable life insurance | 19 | | or
variable
annuity
contract not guaranteed by an insurer.
| 20 | | (3) The benefits for which the Association may become | 21 | | liable shall in
no event exceed the lesser of:
| 22 | | (a) the contractual obligations for which the insurer | 23 | | is liable or would
have been liable if it were not an | 24 | | impaired or insolvent insurer, or
| 25 | | (b)(i) with respect to any one life, regardless of the | 26 | | number of policies
or
contracts:
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| 1 | | (A) $300,000 in life insurance death benefits, but | 2 | | not more than
$100,000 in net cash surrender and net | 3 | | cash withdrawal values for life
insurance;
| 4 | | (B) in health insurance benefits: | 5 | | (I) $100,000 for coverages not defined as | 6 | | disability insurance or basic hospital, medical, | 7 | | and surgical insurance or major medical insurance | 8 | | or long-term care insurance, including any net | 9 | | cash surrender and net cash withdrawal values; | 10 | | (II) $300,000 for disability insurance and | 11 | | $300,000 for long-term care insurance as defined | 12 | | in Section 351A-1 of this Code; and | 13 | | (III) $500,000 for basic hospital medical and | 14 | | surgical insurance or major medical insurance;
| 15 | | (C) $250,000 in the present value of annuity | 16 | | benefits, including net cash surrender and net cash | 17 | | withdrawal values; | 18 | | (ii) with respect to each individual participating in a | 19 | | governmental retirement benefit plan established under | 20 | | Sections 401, 403(b), or 457 of the U.S. Internal Revenue | 21 | | Code covered by an unallocated annuity contract or the | 22 | | beneficiaries of each such individual if deceased, in the | 23 | | aggregate, $250,000 in present value annuity benefits, | 24 | | including net cash surrender and net cash withdrawal | 25 | | values; | 26 | | (iii) with respect to each payee of a structured |
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| 1 | | settlement annuity or beneficiary or beneficiaries of the | 2 | | payee if deceased, $250,000 in present value annuity | 3 | | benefits, in the aggregate, including net cash surrender | 4 | | and net cash withdrawal values, if any; or | 5 | | (iv) with respect to either (1) one contract owner | 6 | | provided coverage under subparagraph (ii) of paragraph (c) | 7 | | of subsection (1) of this Section or (2) one plan sponsor | 8 | | whose plans own directly or in trust one or more | 9 | | unallocated annuity contracts not included in subparagraph | 10 | | (ii) of paragraph (b) of this subsection, $5,000,000 in | 11 | | benefits, irrespective of the number of contracts with | 12 | | respect to the contract owner or plan sponsor. However, in | 13 | | the case where one or more unallocated annuity contracts | 14 | | are covered contracts under this Article and are owned by a | 15 | | trust or other entity for the benefit of 2 or more plan | 16 | | sponsors, coverage shall be afforded by the Association if | 17 | | the largest interest in the trust or entity owning the | 18 | | contract or contracts is held by a plan sponsor whose | 19 | | principal place of business is in this State. In no event | 20 | | shall the Association be obligated to cover more than | 21 | | $5,000,000 in benefits with respect to all these | 22 | | unallocated contracts. | 23 | | In no event shall the Association be obligated to cover | 24 | | more than (1) an aggregate of $300,000 in benefits with respect | 25 | | to any one life under subparagraphs (i), (ii), and (iii) of | 26 | | this paragraph (b) except with respect to benefits for basic |
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| 1 | | hospital, medical, and surgical insurance and major medical | 2 | | insurance under item (B) of subparagraph (i) of this paragraph | 3 | | (b), in which case the aggregate liability of the Association | 4 | | shall not exceed $500,000 with respect to any one individual or | 5 | | (2) with respect to one owner of multiple nongroup policies of | 6 | | life insurance, whether the policy owner is an individual, | 7 | | firm, corporation, or other person and whether the persons | 8 | | insured are officers, managers, employees, or other persons, | 9 | | $5,000,000 in benefits, regardless of the number of policies | 10 | | and contracts held by the owner. | 11 | | The limitations set forth in this subsection are | 12 | | limitations on the benefits for which the Association is | 13 | | obligated before taking into account either its subrogation and | 14 | | assignment rights or the extent to which those benefits could | 15 | | be provided out of the assets of the impaired or insolvent | 16 | | insurer attributable to covered policies. The costs of the | 17 | | Association's obligations under this Article may be met by the | 18 | | use of assets attributable to covered policies or reimbursed to | 19 | | the Association pursuant to its subrogation and assignment | 20 | | rights.
| 21 | | (4) In performing its obligations to provide coverage under | 22 | | Section 531.08 of this Code, the Association shall not be | 23 | | required to guarantee, assume, reinsure, or perform or cause to | 24 | | be guaranteed, assumed, reinsured, or performed the | 25 | | contractual obligations of the insolvent or impaired insurer | 26 | | under a covered policy or contract that do not materially |
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| 1 | | affect the economic values or economic benefits of the covered | 2 | | policy or contract. | 3 | | (Source: P.A. 96-1450, eff. 8-20-10.)
| 4 | | (215 ILCS 5/531.05) (from Ch. 73, par. 1065.80-5)
| 5 | | Sec. 531.05. Definitions. As used in this Act:
| 6 | | "Account" means either of the 2 3 accounts created under | 7 | | Section
531.06.
| 8 | | "Association" means the Illinois Life and Health Insurance
| 9 | | Guaranty Association created under Section 531.06.
| 10 | | "Authorized assessment" or the term "authorized" when used | 11 | | in the context of assessments means a resolution by the Board | 12 | | of Directors has been passed whereby an assessment shall be | 13 | | called immediately or in the future from member insurers for a | 14 | | specified amount. An assessment is authorized when the | 15 | | resolution is passed. | 16 | | "Benefit plan" means a specific employee, union, or | 17 | | association of natural persons benefit plan. | 18 | | "Called assessment" or the term "called" when used in the | 19 | | context of assessments means that a notice has been issued by | 20 | | the Association to member insurers requiring that an authorized | 21 | | assessment be paid within the time frame set forth within the | 22 | | notice. An authorized assessment becomes a called assessment | 23 | | when notice is mailed by the Association to member insurers. | 24 | | "Director" means the Director of Insurance of this State.
| 25 | | "Contractual obligation" means any obligation under a |
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| 1 | | policy or
contract or certificate under a group policy or | 2 | | contract, or portion
thereof for which coverage is provided | 3 | | under Section 531.03.
| 4 | | "Covered person" means any person who is entitled to the
| 5 | | protection of the Association as described in Section 531.02.
| 6 | | "Covered policy" means any policy or contract within the | 7 | | scope
of this Article under Section 531.03.
| 8 | | "Extra-contractual claims" shall include , for example, | 9 | | claims relating to bad faith in the payment of claims, punitive | 10 | | or exemplary damages, or attorneys' fees and costs. | 11 | | "Impaired insurer" means (A) a member insurer which, after | 12 | | the effective date of this amendatory Act of the 97th General | 13 | | Assembly amendatory Act of the 96th General Assembly , is not an | 14 | | insolvent insurer, and is placed under an order of | 15 | | rehabilitation or conservation by a court of competent | 16 | | jurisdiction or (B) a member insurer deemed by the Director | 17 | | after the effective date of this amendatory Act of the 96th | 18 | | General Assembly to be potentially unable to fulfill its | 19 | | contractual obligations and not an insolvent insurer.
| 20 | | "Insolvent insurer" means a member insurer that, after the | 21 | | effective date of this amendatory Act of the 96th General | 22 | | Assembly, is placed under a final order of liquidation by a | 23 | | court of competent jurisdiction with a finding of insolvency.
| 24 | | "Member insurer" means an insurer licensed or holding a | 25 | | certificate of authority to transact in this State any kind of | 26 | | insurance for which coverage is provided under Section 531.03 |
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| 1 | | of this Code and includes an insurer whose license or | 2 | | certificate of authority in this State may have been suspended, | 3 | | revoked, not renewed, or voluntarily withdrawn or whose | 4 | | certificate of authority may have been suspended pursuant to | 5 | | Section 119 of this Code, but does not include: | 6 | | (1) a hospital or medical service organization, | 7 | | whether profit or nonprofit; | 8 | | (2) a health maintenance organization; | 9 | | (3) any burial society organized under Article XIX of | 10 | | this Code, any fraternal benefit society organized under | 11 | | Article XVII of this Code, any mutual benefit association | 12 | | organized under Article XVIII of this Code, and any foreign | 13 | | fraternal benefit society licensed under Article VI of this | 14 | | Code or
a fraternal benefit society ; | 15 | | (4) a mandatory State pooling plan; | 16 | | (5) a mutual assessment company or other person that | 17 | | operates on an assessment basis; | 18 | | (6) an insurance exchange; | 19 | | (7) an organization that is permitted to issue | 20 | | charitable gift annuities pursuant to Section 121-2.10 of | 21 | | this Code; | 22 | | (8) any health services plan corporation established | 23 | | pursuant to the Voluntary Health Services Plans Act; | 24 | | (9) any dental service plan corporation established | 25 | | pursuant to the Dental Service Plan Act; or | 26 | | (10) an entity similar to any of the above.
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| 1 | | "Moody's Corporate Bond Yield Average" means the Monthly | 2 | | Average
Corporates as published by Moody's Investors Service, | 3 | | Inc., or any successor
thereto. | 4 | | "Owner" of a policy or contract and "policy owner" and | 5 | | "contract owner" mean the person who is identified as the legal | 6 | | owner under the terms of the policy or contract or who is | 7 | | otherwise vested with legal title to the policy or contract | 8 | | through a valid assignment completed in accordance with the | 9 | | terms of the policy or contract and properly recorded as the | 10 | | owner on the books of the insurer. The terms owner, contract | 11 | | owner, and policy owner do not include persons with a mere | 12 | | beneficial interest in a policy or contract. | 13 | | "Person" means an individual, corporation, limited | 14 | | liability company, partnership, association, governmental body | 15 | | or entity, or voluntary organization. | 16 | | "Plan sponsor" means: | 17 | | (1) the employer in the case of a benefit plan | 18 | | established or maintained by a single employer; | 19 | | (2) the employee organization in the case of a benefit | 20 | | plan established or maintained by an employee | 21 | | organization; or | 22 | | (3) in a case of a benefit plan established or | 23 | | maintained by 2 or more employers or jointly by one or more | 24 | | employers and one or more employee organizations, the | 25 | | association, committee, joint board of trustees, or other | 26 | | similar group of representatives of the parties who |
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| 1 | | establish or maintain the benefit plan. | 2 | | "Premiums" mean amounts or considerations, by whatever | 3 | | name called, received on covered policies or contracts less | 4 | | returned premiums, considerations, and deposits and less | 5 | | dividends and experience credits. | 6 | | "Premiums" does not include: | 7 | | (A) amounts or considerations received for policies or | 8 | | contracts or for the portions of policies or contracts for | 9 | | which coverage is not provided under Section 531.03 of this | 10 | | Code except that assessable premium shall not be reduced on | 11 | | account of the provisions of subparagraph (iii) of | 12 | | paragraph (b) of subsection (a) of Section 531.03 of this | 13 | | Code relating to interest limitations and the provisions of | 14 | | paragraph (b) of subsection (3) of Section 531.03 relating | 15 | | to limitations with respect to one individual, one | 16 | | participant, and one contract owner; | 17 | | (B) premiums in excess of $5,000,000 on an unallocated | 18 | | annuity contract not issued under a governmental | 19 | | retirement benefit plan (or its trustee) established under | 20 | | Section 401, 403(b) or 457 of the United States Internal | 21 | | Revenue Code; or | 22 | | (C) with respect to multiple nongroup policies of life | 23 | | insurance owned by one owner, whether the policy owner is | 24 | | an individual, firm, corporation, or other person, and | 25 | | whether the persons insured are officers, managers, | 26 | | employees, or other persons, premiums in excess of |
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| 1 | | $5,000,000 with respect to these policies or contracts, | 2 | | regardless of the number of policies or contracts held by | 3 | | the owner.
| 4 | | "Principal place of business" of a plan sponsor or a person | 5 | | other than a natural person means the single state in which the | 6 | | natural persons who establish policy for the direction, | 7 | | control, and coordination of the operations of the entity as a | 8 | | whole primarily exercise that function, determined by the | 9 | | Association in its reasonable judgment by considering the | 10 | | following factors: | 11 | | (A) the state in which the primary executive and | 12 | | administrative headquarters of the entity is located; | 13 | | (B) the state in which the principal office of the | 14 | | chief executive officer of the entity is located; | 15 | | (C) the state in which the board of directors (or | 16 | | similar governing person or persons) of the entity conducts | 17 | | the majority of its meetings; | 18 | | (D) the state in which the executive or management | 19 | | committee of the board of directors (or similar governing | 20 | | person or persons) of the entity conducts the majority of | 21 | | its meetings; | 22 | | (E) the state from which the management of the overall | 23 | | operations of the entity is directed; and | 24 | | (F) in the case of a benefit plan sponsored by | 25 | | affiliated companies comprising a consolidated | 26 | | corporation, the state in which the holding company or |
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| 1 | | controlling affiliate has its principal place of business | 2 | | as determined using the above factors. However, in the case | 3 | | of a plan sponsor, if more than 50% of the participants in | 4 | | the benefit plan are employed in a single state, that state | 5 | | shall be deemed to be the principal place of business of | 6 | | the plan sponsor. | 7 | | The principal place of business of a plan sponsor of a | 8 | | benefit plan described in paragraph (3) of the definition of | 9 | | "plan sponsor" this Section shall be deemed to be the principal | 10 | | place of business of the association, committee, joint board of | 11 | | trustees, or other similar group of representatives of the | 12 | | parties who establish or maintain the benefit plan that, in | 13 | | lieu of a specific or clear designation of a principal place of | 14 | | business, shall be deemed to be the principal place of business | 15 | | of the employer or employee organization that has the largest | 16 | | investment in the benefit plan in question. | 17 | | "Receivership court" means the court in the insolvent or | 18 | | impaired insurer's state having jurisdiction over the | 19 | | conservation, rehabilitation, or liquidation of the insurer. | 20 | | "Resident" means a person to whom a contractual obligation | 21 | | is owed and who resides in this State on the date of entry of a | 22 | | court order that determines a member insurer to be an impaired | 23 | | insurer or a court order that determines a member insurer to be | 24 | | an insolvent insurer. A person may be a resident of only one | 25 | | state, which in the case of a person other than a natural | 26 | | person shall be its principal place of business. Citizens of |
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| 1 | | the United States that are either (i) residents of foreign | 2 | | countries or (ii) residents of United States possessions, | 3 | | territories, or protectorates that do not have an association | 4 | | similar to the Association created by this Article, shall be | 5 | | deemed residents of the state of domicile of the insurer that | 6 | | issued the policies or contracts.
| 7 | | "Structured settlement annuity" means an annuity purchased | 8 | | in order to fund periodic payments for a plaintiff or other | 9 | | claimant in payment for or with respect to personal injury | 10 | | suffered by the plaintiff or other claimant. | 11 | | "State" means a state, the District of Columbia, Puerto | 12 | | Rico, and a United States possession, territory, or | 13 | | protectorate. | 14 | | "Supplemental contract" means a written agreement entered | 15 | | into for the distribution of proceeds under a life, health, or | 16 | | annuity policy or a life, health, or annuity contract.
| 17 | | "Unallocated annuity contract" means any annuity contract | 18 | | or group
annuity certificate which is not issued to and owned | 19 | | by an individual,
except to the extent of any annuity benefits | 20 | | guaranteed to an individual by
an insurer under such contract | 21 | | or certificate.
| 22 | | (Source: P.A. 96-1450, eff. 8-20-10.)
| 23 | | (215 ILCS 5/531.07) (from Ch. 73, par. 1065.80-7)
| 24 | | Sec. 531.07. Board of Directors. ) The board of directors | 25 | | of the
Association consists of not less than 7 nor more than 11 |
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| 1 | | members serving
terms as established in the plan of operation. | 2 | | The insurer members insurers of the board
are to be selected by | 3 | | member insurers subject to the approval of the
Director. In | 4 | | addition, 2 persons who must be public representatives may be | 5 | | appointed by the Director to the board of directors. A public | 6 | | representative may not be an officer, director, or employee of | 7 | | an insurance company or any person engaged in the business of | 8 | | insurance. Vacancies on the board must be filled for the | 9 | | remaining period
of the term in the manner described in the | 10 | | plan of operation.
| 11 | | In approving selections or in appointing members to the | 12 | | board, the
Director must consider, whether all member insurers | 13 | | are
fairly represented.
| 14 | | Members of the board may be reimbursed from the assets of | 15 | | the Association
for expenses incurred by them as members of the | 16 | | board of directors but
members of the board may not otherwise | 17 | | be compensated by the Association for
their services.
| 18 | | (Source: P.A. 96-1450, eff. 8-20-10.)
| 19 | | (215 ILCS 5/531.08) (from Ch. 73, par. 1065.80-8)
| 20 | | Sec. 531.08. Powers and duties of the Association. | 21 | | (a) In addition to
the powers and duties enumerated in | 22 | | other Sections of this Article:
| 23 | | (1) If a member insurer is an impaired insurer, then | 24 | | the Association may, in its discretion and subject to any | 25 | | conditions imposed by the Association that do not impair |
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| 1 | | the contractual obligations of the impaired insurer and | 2 | | that are approved by the Director: | 3 | | (A) guarantee, assume, or reinsure or cause to be | 4 | | guaranteed, assumed, or reinsured, any or all of the | 5 | | policies or contracts of the impaired insurer; or | 6 | | (B) provide such money, pledges, loans, notes, | 7 | | guarantees, or other means as are proper to effectuate | 8 | | paragraph (A) and assure payment of the contractual | 9 | | obligations of the impaired insurer pending action | 10 | | under paragraph (A). | 11 | | (2) If a member insurer is an insolvent insurer, then | 12 | | the Association shall, in its discretion, either: | 13 | | (A) guaranty, assume, or reinsure or cause to be | 14 | | guaranteed, assumed, or reinsured the policies or | 15 | | contracts of the insolvent insurer or assure payment of | 16 | | the contractual obligations of the insolvent insurer | 17 | | and provide money, pledges, loans, notes, guarantees, | 18 | | or other means reasonably necessary to discharge the | 19 | | Association's duties; or | 20 | | (B) provide benefits and coverages in accordance | 21 | | with the following provisions: | 22 | | (i) with respect to life and health insurance | 23 | | policies and annuities, ensure payment of benefits | 24 | | for premiums identical to the premiums and | 25 | | benefits (except for terms of conversion and | 26 | | renewability) that would have been payable under |
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| 1 | | the policies or contracts of the insolvent insurer | 2 | | for claims incurred: | 3 | | (a) with respect to group policies and | 4 | | contracts, not later than the earlier of the | 5 | | next renewal date under those policies or | 6 | | contracts or 45 days, but in no event less than | 7 | | 30 days, after the date on which the | 8 | | Association becomes obligated with respect to | 9 | | the policies and contracts; | 10 | | (b) with respect to nongroup policies, | 11 | | contracts, and annuities not later than the | 12 | | earlier of the next renewal date (if any) under | 13 | | the policies or contracts or one year, but in | 14 | | no event less than 30 days, from the date on | 15 | | which the Association becomes obligated with | 16 | | respect to the policies or contracts; | 17 | | (ii) make diligent efforts to provide all | 18 | | known insureds or annuitants (for nongroup | 19 | | policies and contracts), or group policy owners | 20 | | with respect to group policies and contracts, 30 | 21 | | days notice of the termination (pursuant to | 22 | | subparagraph (i) of this paragraph (B)) of the | 23 | | benefits provided; | 24 | | (iii) with respect to nongroup life and health | 25 | | insurance policies and annuities covered by the | 26 | | Association, make available to each known insured |
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| 1 | | or annuitant, or owner if other than the insured or | 2 | | annuitant, and with respect to an individual | 3 | | formerly insured or formerly an annuitant under a | 4 | | group policy who is not eligible for replacement | 5 | | group coverage, make available substitute coverage | 6 | | on an individual basis in accordance with the | 7 | | provisions of paragraph (3), if the insureds or | 8 | | annuitants had a right under law or the terminated | 9 | | policy or annuity to convert coverage to | 10 | | individual coverage or to continue an individual | 11 | | policy or annuity in force until a specified age or | 12 | | for a specified time, during which the insurer had | 13 | | no right unilaterally to make changes in any | 14 | | provision of the policy or annuity or had a right | 15 | | only to make changes in premium by class.
| 16 | | (b) In providing the substitute coverage required under | 17 | | subparagraph (iii) of paragraph (B) of item (2) of subsection | 18 | | (a)
of this Section, the Association may offer either to | 19 | | reissue the
terminated coverage or to issue an alternative | 20 | | policy.
| 21 | | Alternative or reissued policies shall be offered without | 22 | | requiring
evidence of insurability, and shall not provide for | 23 | | any waiting period or
exclusion that would not have applied | 24 | | under the terminated policy.
| 25 | | The Association may reinsure any alternative or reissued | 26 | | policy.
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| 1 | | Alternative policies adopted by the Association shall be | 2 | | subject
to the approval of the Director. The Association may | 3 | | adopt alternative
policies of various types for future | 4 | | insurance without regard to any
particular impairment or | 5 | | insolvency.
| 6 | | Alternative policies shall contain at least the minimum | 7 | | statutory
provisions required in this State and provide | 8 | | benefits that shall not be
unreasonable in relation to the | 9 | | premium charged. The
Association shall set the premium in | 10 | | accordance with a table of rates which
it shall adopt. The | 11 | | premium shall reflect the amount of insurance to be
provided | 12 | | and the age and class of risk of each insured, but shall not
| 13 | | reflect any changes in the health of the insured after the | 14 | | original policy
was last underwritten.
| 15 | | Any alternative policy issued by the Association shall | 16 | | provide
coverage of a type similar to that of the policy issued | 17 | | by the impaired or
insolvent insurer, as determined by the | 18 | | Association.
| 19 | | (c) If the Association elects to reissue terminated | 20 | | coverage at a
premium rate different from that charged under | 21 | | the terminated policy, the
premium shall be set by the | 22 | | Association in accordance with the amount of
insurance provided | 23 | | and the age and class of risk, subject to approval of
the | 24 | | Director or by a court of competent jurisdiction.
| 25 | | (d) The Association's obligations with respect to coverage | 26 | | under any
policy of the impaired or insolvent insurer or under |
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| 1 | | any reissued or
alternative policy shall cease on the date such | 2 | | coverage or policy is
replaced by another similar policy by the | 3 | | policyholder, the insured, or the
Association.
| 4 | | (e) When proceeding under this Section with
respect to any | 5 | | policy or contract carrying guaranteed minimum interest
rates, | 6 | | the Association shall assure the payment or crediting of a rate | 7 | | of
interest consistent with subparagraph (2)(b)(iii)(B) of | 8 | | Section 531.03.
| 9 | | (f) Nonpayment of premiums thirty-one days after the date | 10 | | required under
the terms of any guaranteed, assumed, | 11 | | alternative or reissued policy or
contract or substitute | 12 | | coverage shall terminate the Association's
obligations under | 13 | | such policy or coverage under this Act with respect to
such | 14 | | policy or coverage, except with respect to any claims incurred | 15 | | or any
net cash surrender value which may be due in accordance | 16 | | with the provisions of
this Act.
| 17 | | (g) Premiums due for coverage after entry of an order of | 18 | | liquidation of
an insolvent insurer shall belong to and be | 19 | | payable at the direction of the
Association,
and the | 20 | | Association shall be liable for unearned premiums due to policy | 21 | | or
contract owners arising after the entry of such order.
| 22 | | (h) In carrying out its duties under paragraph (2) of | 23 | | subsection (a) of this Section, the Association may: | 24 | | (1) subject to approval by a court in this State , | 25 | | impose permanent policy or contract liens in connection | 26 | | with a guarantee, assumption, or reinsurance agreement if |
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| 1 | | the Association finds that the amounts which can be | 2 | | assessed under this Article are less than the amounts | 3 | | needed to assure full and prompt performance of the | 4 | | Association's duties under this Article or that the | 5 | | economic or financial conditions as they affect member | 6 | | insurers are sufficiently adverse to render the imposition | 7 | | of such permanent policy or contract liens to be in the | 8 | | public interest; or | 9 | | (2) subject to approval by a court in this State , | 10 | | impose temporary moratoriums or liens on payments of cash | 11 | | values and policy loans or any other right to withdraw | 12 | | funds held in conjunction with policies or contracts in | 13 | | addition to any contractual provisions for deferral of cash | 14 | | or policy loan value. In addition, in the event of a | 15 | | temporary moratorium or moratorium charge imposed by the | 16 | | receivership court on payment of cash values or policy | 17 | | loans or on any other right to withdraw funds held in | 18 | | conjunction with policies or contracts, out of the assets | 19 | | of the impaired or insolvent insurer, the Association may | 20 | | defer the payment of cash values, policy loans, or other | 21 | | rights by the Association for the period of the moratorium | 22 | | or moratorium charge imposed by the receivership court, | 23 | | except for claims covered by the Association to be paid in | 24 | | accordance with a hardship procedure established by the | 25 | | liquidator or rehabilitator and approved by the | 26 | | receivership court.
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| 1 | | (i) There shall be no liability on the part of and no cause | 2 | | of action
shall arise against the Association or against any | 3 | | transferee from the
Association in connection with the transfer | 4 | | by reinsurance or otherwise of
all or any part of an impaired | 5 | | or insolvent insurer's business by reason of
any action taken | 6 | | or any failure to take any action by the impaired or
insolvent | 7 | | insurer at any time.
| 8 | | (j) If the Association fails to act within a reasonable | 9 | | period of
time as provided in subsection (2) of this Section | 10 | | with respect to an
insolvent insurer, the
Director shall have | 11 | | the powers and duties of the Association under this
Act with | 12 | | regard to such insolvent insurers.
| 13 | | (k) The Association or its designated representatives
may | 14 | | render assistance and advice to the
Director, upon his request, | 15 | | concerning rehabilitation, payment of
claims, continuations of | 16 | | coverage, or the performance of other
contractual obligations | 17 | | of any impaired or insolvent insurer.
| 18 | | (l) The Association shall have standing to appear or | 19 | | intervene before a court or agency in this State with | 20 | | jurisdiction over an impaired or insolvent insurer concerning | 21 | | which the Association is or may become obligated under this | 22 | | Article or with jurisdiction over any person or property | 23 | | against which the Association may have rights through | 24 | | subrogation or otherwise. Standing shall extend to all matters | 25 | | germane to the powers and duties of the Association, including, | 26 | | but not limited to, proposals for reinsuring, modifying, or |
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| 1 | | guaranteeing the policies or contracts of the impaired or | 2 | | insolvent insurer and the determination of the policies or | 3 | | contracts and contractual obligations. The Association shall | 4 | | also have the right to appear or intervene before a court or | 5 | | agency in another state with jurisdiction over an impaired or | 6 | | insolvent insurer for which the Association is or may become | 7 | | obligated or with jurisdiction over any person or property | 8 | | against whom the Association may have rights through | 9 | | subrogation or otherwise.
| 10 | | (m)(1) A person receiving benefits under this Article shall | 11 | | be deemed to have assigned the rights under and any causes of | 12 | | action against any person for losses arising under, resulting | 13 | | from, or otherwise relating to the covered policy or contract | 14 | | to the Association to the extent of the benefits received | 15 | | because of this Article, whether the benefits are payments of | 16 | | or on account of contractual obligations, continuation of | 17 | | coverage, or provision of substitute or alternative coverages. | 18 | | The Association may require an assignment to it of such rights | 19 | | and cause of action by any payee, policy, or contract owner, | 20 | | beneficiary, insured, or annuitant as a condition precedent to | 21 | | the receipt of any right or benefits conferred by this Article | 22 | | upon the person.
| 23 | | (2) The subrogation rights of the Association under this | 24 | | subsection
have the same priority against the assets of the | 25 | | impaired or insolvent insurer as
that possessed by the person | 26 | | entitled to receive benefits under this
Article. |
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| 1 | | (3) In addition to paragraphs (1) and (2), the Association | 2 | | shall have all common law rights of subrogation and any other | 3 | | equitable or legal remedy that would have been available to the | 4 | | impaired or insolvent insurer or owner, beneficiary, or payee | 5 | | of a policy or contract with respect to the policy or | 6 | | contracts, including without limitation, in the case of a | 7 | | structured settlement annuity, any rights of the owner, | 8 | | beneficiary, or payee of the annuity to the extent of benefits | 9 | | received pursuant to this Article, against a person originally | 10 | | or by succession responsible for the losses arising from the | 11 | | personal injury relating to the annuity or payment therefor, | 12 | | excepting any such person responsible solely by reason of | 13 | | serving as an assignee in respect of a qualified assignment | 14 | | under Internal Revenue Code Section 130. | 15 | | (4) If the preceding provisions of this subsection (l) are | 16 | | invalid or ineffective with respect to any person or claim for | 17 | | any reason, then the amount payable by the Association with | 18 | | respect to the related covered obligations shall be reduced by | 19 | | the amount realized by any other person with respect to the | 20 | | person or claim that is attributable to the policies, or | 21 | | portion thereof, covered by the Association. | 22 | | (5) If the Association has provided benefits with respect | 23 | | to a covered obligation and a person recovers amounts as to | 24 | | which the Association has rights as described in the preceding | 25 | | paragraphs of this subsection (10), then the person shall pay | 26 | | to the Association the portion of the recovery attributable to |
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| 1 | | the policies, or portion thereof, covered by the Association.
| 2 | | (n) The Association may:
| 3 | |
(1) Enter into such contracts as are necessary or | 4 | | proper to carry
out the provisions and purposes of this | 5 | | Article . ;
| 6 | |
(2) Sue or be sued, including taking any legal actions | 7 | | necessary or
proper for recovery of any unpaid assessments | 8 | | under Section 531.09. The
Association shall not be liable | 9 | | for punitive or exemplary damages . ;
| 10 | |
(3) Borrow money to effect the purposes of this | 11 | | Article. Any notes
or other evidence of indebtedness of the | 12 | | Association not in default are
legal investments for | 13 | | domestic insurers and may be carried as admitted
assets.
| 14 | |
(4) Employ or retain such persons as are necessary to | 15 | | handle the
financial transactions of the Association, and | 16 | | to perform such other
functions as become necessary or | 17 | | proper under this Article.
| 18 | |
(5) Negotiate and contract with any liquidator, | 19 | | rehabilitator,
conservator, or ancillary receiver to carry | 20 | | out the powers and duties of
the Association.
| 21 | |
(6) Take such legal action as may be necessary to | 22 | | avoid payment of
improper claims.
| 23 | |
(7) Exercise, for the purposes of this Article and to | 24 | | the extent
approved by the Director, the powers of a | 25 | | domestic life or health
insurer, but in no case may the | 26 | | Association issue insurance policies or
annuity contracts |
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| 1 | | other than those issued to perform the contractual
| 2 | | obligations of the impaired or insolvent insurer.
| 3 | |
(8) Exercise all the rights of the Director under | 4 | | Section 193(4) of
this Code with respect to covered | 5 | | policies after the association becomes
obligated by | 6 | | statute.
| 7 | | (9) Request information from a person seeking coverage | 8 | | from the Association in order to aid the Association in | 9 | | determining its obligations under this Article with | 10 | | respect to the person, and the person shall promptly comply | 11 | | with the request. | 12 | | (10) Take other necessary or appropriate action to | 13 | | discharge its duties and obligations under this Article or | 14 | | to exercise its powers under this Article.
| 15 | | (o) With respect to covered policies for which the | 16 | | Association becomes
obligated after an entry of an order of | 17 | | liquidation or rehabilitation,
the Association may
elect to | 18 | | succeed to the rights of the insolvent insurer arising after | 19 | | the
date of the order of liquidation or rehabilitation under | 20 | | any contract
of reinsurance to which
the insolvent insurer was | 21 | | a party, to the extent that such contract
provides coverage for | 22 | | losses occurring after the date of the order of
liquidation or | 23 | | rehabilitation. As a condition to making this election,
the | 24 | | Association must pay all unpaid premiums due under the contract | 25 | | for
coverage relating to periods before and after the date of | 26 | | the order of
liquidation or rehabilitation.
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| 1 | | (p) A deposit in this State, held pursuant to law or | 2 | | required by the Director for the benefit of creditors, | 3 | | including policy owners, not turned over to the domiciliary | 4 | | liquidator upon the entry of a final order of liquidation or | 5 | | order approving a rehabilitation plan of an insurer domiciled | 6 | | in this State or in a reciprocal state, pursuant to Article | 7 | | XIII 1/2 of this Code, shall be promptly paid to the | 8 | | Association. The Association shall be entitled to retain a | 9 | | portion of any amount so paid to it equal to the percentage | 10 | | determined by dividing the aggregate amount of policy owners' | 11 | | claims related to that insolvency for which the Association has | 12 | | provided statutory benefits by the aggregate amount of all | 13 | | policy owners' claims in this State related to that insolvency | 14 | | and shall remit to the domiciliary receiver the amount so paid | 15 | | to the Association less the amount retained pursuant to this | 16 | | subsection (13). Any amount so paid to the Association and | 17 | | retained by it shall be treated as a distribution of estate | 18 | | assets pursuant to applicable State receivership law dealing | 19 | | with early access disbursements. | 20 | | (q) The Board of Directors of the Association shall have | 21 | | discretion and may exercise reasonable business judgment to | 22 | | determine the means by which the Association is to provide the | 23 | | benefits of this Article in an economical and efficient manner. | 24 | | (r) Where the Association has arranged or offered to | 25 | | provide the benefits of this Article to a covered person under | 26 | | a plan or arrangement that fulfills the Association's |
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| 1 | | obligations under this Article, the person shall not be | 2 | | entitled to benefits from the Association in addition to or | 3 | | other than those provided under the plan or arrangement. | 4 | | (s) Venue in a suit against the Association arising under | 5 | | the Article shall be in Cook County. The Association shall not | 6 | | be required to give any appeal bond in an appeal that relates | 7 | | to a cause of action arising under this Article. | 8 | | (t) The Association may join an organization of one or more | 9 | | other State associations of similar purposes to further the | 10 | | purposes and administer the powers and duties of the | 11 | | Association. | 12 | | (u) In carrying out its duties in connection with | 13 | | guaranteeing, assuming, or reinsuring policies or contracts | 14 | | under subsections (1) or (2), the Association may, subject to | 15 | | approval of the receivership court, issue substitute coverage | 16 | | for a policy or contract that provides an interest rate, | 17 | | crediting rate, or similar factor determined by use of an index | 18 | | or other external reference stated in the policy or contract | 19 | | employed in calculating returns or changes in value by issuing | 20 | | an alternative policy or contract in accordance with the | 21 | | following provisions: | 22 | | (1) in lieu of the index or other external reference | 23 | | provided for in the original policy or contract, the | 24 | | alternative policy or contract provides for (i) a fixed | 25 | | interest rate, or (ii) payment of dividends with minimum | 26 | | guarantees, or (iii) a different method for calculating |
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| 1 | | interest or changes in value; | 2 | | (2) there is no requirement for evidence of | 3 | | insurability, waiting period, or other exclusion that | 4 | | would not have applied under the replaced policy or | 5 | | contract; and | 6 | | (3) the alternative policy or contract is | 7 | | substantially similar to the replaced policy or contract in | 8 | | all other material terms. | 9 | | (Source: P.A. 96-1450, eff. 8-20-10; revised 9-16-10.)
| 10 | | (215 ILCS 5/531.09) (from Ch. 73, par. 1065.80-9)
| 11 | | Sec. 531.09. Assessments. | 12 | | (1) For the purpose of providing the funds
necessary to | 13 | | carry out the powers and duties of the Association, the board
| 14 | | of directors shall assess the member insurers, separately for | 15 | | each account, at such
times and for such amounts as the board | 16 | | finds necessary. Assessments shall
be due not less than 30 days | 17 | | after written notice to the member insurers
and shall accrue | 18 | | interest from the due date at such adjusted rate as is
| 19 | | established under Section 6621 of Chapter 26 of the United | 20 | | States Code and
such interest shall be compounded daily.
| 21 | | (2) There shall be 2 classes of assessments, as follows:
| 22 | | (a) Class A assessments shall be made for the purpose | 23 | | of meeting administrative
costs and other general expenses | 24 | | and examinations conducted under the authority
of the | 25 | | Director under subsection (5) of Section 531.12.
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| 1 | | (b) Class B assessments shall be made to the extent | 2 | | necessary to carry
out the powers and duties of the | 3 | | Association under Section 531.08 with regard
to an impaired | 4 | | or insolvent domestic insurer or insolvent foreign or alien | 5 | | insurers.
| 6 | | (3)(a) The amount of any Class A assessment shall be | 7 | | determined at the discretion of the board of directors and such | 8 | | assessments shall be authorized and called on a non-pro rata | 9 | | basis. The amount of any Class B
assessment shall be allocated | 10 | | for assessment
purposes among the accounts
and subaccounts | 11 | | pursuant to an allocation formula which may be based on
the | 12 | | premiums or reserves of the impaired or insolvent insurer or | 13 | | any other
standard deemed by the board in its sole discretion | 14 | | as being fair and
reasonable under the circumstances.
| 15 | | (b) Class B assessments against member insurers for each | 16 | | account and
subaccount shall
be in the proportion that the | 17 | | premiums received on business in this State
by each assessed | 18 | | member insurer on policies or contracts covered by
each account | 19 | | or subaccount for the three most recent calendar years
for | 20 | | which information is available preceding the year in which the | 21 | | insurer
became impaired or insolvent, as the case may be, bears | 22 | | to such premiums
received on business in this State for such | 23 | | calendar years by all assessed
member insurers.
| 24 | | (c) Assessments for funds to meet the requirements of the | 25 | | Association
with respect to an impaired or insolvent insurer | 26 | | shall not be made until
necessary to implement the purposes of |
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| 1 | | this Article. Classification
of assessments
under subsection | 2 | | (2) and computations of assessments under this subsection
shall | 3 | | be made with a reasonable degree of accuracy, recognizing that | 4 | | exact
determinations may not always be possible.
| 5 | | (4) The Association may abate or defer, in whole or in | 6 | | part, the assessment of a member insurer if, in the opinion of | 7 | | the board, payment of the assessment would endanger the ability | 8 | | of the member insurer to fulfill its contractual obligations. | 9 | | In the event an assessment against a member insurer is abated | 10 | | or deferred in whole or in part the amount by which the | 11 | | assessment is abated or deferred may be assessed against the | 12 | | other member insurers in a manner consistent with the basis for | 13 | | assessments set forth in this Section. Once the conditions that | 14 | | caused a deferral have been removed or rectified, the member | 15 | | insurer shall pay all assessments that were deferred pursuant | 16 | | to a repayment plan approved by the Association. | 17 | | (5) (a) (i) Subject to the provisions of subparagraph (ii) | 18 | | of this paragraph, the total of all assessments authorized by | 19 | | the Association with respect to a member insurer for each | 20 | | subaccount of the life insurance and annuity account and for | 21 | | the health account shall not in one calendar year exceed 2% of | 22 | | that member insurer's average annual premiums received in this | 23 | | State on the policies and contracts covered by the subaccount | 24 | | or account during the 3 calendar years preceding the year in | 25 | | which the insurer became an impaired or insolvent insurer. | 26 | | (ii) If 2 or more assessments are authorized in one |
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| 1 | | calendar year with respect to insurers that become impaired or | 2 | | insolvent in different calendar years, the average annual | 3 | | premiums for purposes of the aggregate assessment percentage | 4 | | limitation referenced in subparagraph (a) of this paragraph | 5 | | shall be equal and limited to the higher of the 3-year average | 6 | | annual premiums for the applicable subaccount or account as | 7 | | calculated pursuant to this Section. | 8 | | (iii) If the maximum assessment, together with the other | 9 | | assets of the Association in an account, does not provide in | 10 | | one year in either account an amount sufficient to carry out | 11 | | the responsibilities of the Association, the necessary | 12 | | additional funds shall be assessed as soon thereafter as | 13 | | permitted by this Article. | 14 | | (b) The board may provide in the plan of operation a method | 15 | | of allocating funds among claims, whether relating to one or | 16 | | more impaired or insolvent insurers, when the maximum | 17 | | assessment will be insufficient to cover anticipated claims. | 18 | | (c) If the maximum assessment for a subaccount of the life | 19 | | insurance and annuity account in one year does not provide an | 20 | | amount sufficient to carry out the responsibilities of the | 21 | | Association, then pursuant to paragraph (b) of subsection (3), | 22 | | the board shall assess the other subaccounts of the life and | 23 | | annuity account for the necessary additional amount, subject to | 24 | | the maximum stated in paragraph (a) of this subsection.
| 25 | | (6) The board may, by an equitable method as established in | 26 | | the
plan of operation, refund to member insurers, in proportion |
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| 1 | | to the contribution
of each insurer to that account, the amount | 2 | | by which the assets of the account
exceed the amount the board | 3 | | finds is necessary to carry out during the coming
year the | 4 | | obligations of the Association with regard to that account, | 5 | | including
assets accruing from net realized gains and income | 6 | | from investments. A
reasonable amount may be retained in any | 7 | | account to provide funds for the
continuing expenses of the | 8 | | Association and for future losses.
| 9 | | (7) An assessment is deemed to occur on the date upon which | 10 | | the board
votes such assessment. The board may defer calling | 11 | | the payment of the
assessment or may call for payment in one or | 12 | | more installments.
| 13 | | (8) It is proper for any member insurer, in determining its | 14 | | premium
rates and policyowner dividends as to any kind of | 15 | | insurance within the scope of
this Article, to consider the | 16 | | amount reasonably necessary to meet its assessment
obligations | 17 | | under this Article.
| 18 | | (9) The Association must issue to each insurer paying a
| 19 | | Class B assessment
under this Article a certificate of | 20 | | contribution,
in a form acceptable to the
Director, for the | 21 | | amount of the assessment so paid. All outstanding certificates
| 22 | | are of equal
dignity and priority without reference to amounts | 23 | | or dates of issue. A certificate
of contribution may be shown | 24 | | by the insurer in its financial statement as an asset
in such | 25 | | form and for such amount, if any, and period of time as the | 26 | | Director
may approve, provided the insurer shall in any event |
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| 1 | | at its option have
the right to show a certificate of | 2 | | contribution as an admitted asset at
percentages of the | 3 | | original face amount for calendar years as follows:
| 4 | | 100% for the calendar year after the year of issuance;
| 5 | | 80% for the second calendar year after the year of | 6 | | issuance;
| 7 | | 60% for the third calendar year after the year of issuance;
| 8 | | 40% for the fourth calendar year after the year of | 9 | | issuance;
| 10 | | 20% for the fifth calendar year after the year of issuance.
| 11 | | (10) The Association may request information of member | 12 | | insurers in order to aid in the exercise of its power under | 13 | | this Section and member insurers shall promptly comply with a | 14 | | request. | 15 | | (Source: P.A. 95-86, eff. 9-25-07 (changed from 1-1-08 by P.A. | 16 | | 95-632); 96-1450, eff. 8-20-10.)
| 17 | | (215 ILCS 5/531.14) (from Ch. 73, par. 1065.80-14)
| 18 | | Sec. 531.14. Miscellaneous Provisions. | 19 | | (1) Nothing in this
Article may be construed to reduce the | 20 | | liability for unpaid assessments of the insured
of an impaired | 21 | | or insolvent insurer operating under a plan with assessment | 22 | | liability.
| 23 | | (2) Records must be kept of all negotiations and meetings | 24 | | in which
the Association or its representatives are involved to | 25 | | discuss the activities of the
Association in carrying out its |
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| 1 | | powers and duties under Section 531.08. Records of such
| 2 | | negotiations or meetings may be made public only upon the | 3 | | termination of a
liquidation, rehabilitation, or conservation | 4 | | proceeding involving the impaired
or insolvent insurer, upon | 5 | | the termination of the impairment or insolvency
of the insurer, | 6 | | or upon the order
of a court of competent jurisdiction. Nothing | 7 | | in this paragraph (2) limits the
duty of the Association to | 8 | | render a report of its activities under Section
531.15.
| 9 | | (3) For the purpose of carrying out its obligations under | 10 | | this Article,
the Association is deemed to be a creditor of the | 11 | | impaired or insolvent
insurer to the extent of assets | 12 | | attributable to covered policies reduced by any
amounts to | 13 | | which the Association is entitled as subrogee (under paragraph | 14 | | (8)
of Section 531.08). All assets of the impaired or insolvent | 15 | | insurer
attributable to covered policies must be used to | 16 | | continue all covered policies
and pay all contractual | 17 | | obligations of the impaired insurer as required by this
| 18 | | Article. "Assets attributable to covered policies", as used in | 19 | | this paragraph
(3), is that proportion of the
assets which the | 20 | | reserves that should have been established
for such policies | 21 | | bear to the reserve that should have been
established for all | 22 | | policies of
insurance written by the impaired or insolvent | 23 | | insurer.
| 24 | | (4) (a) Prior to the termination of any liquidation, | 25 | | rehabilitation,
or conservation proceeding, the court may take | 26 | | into consideration the contributions
of the respective |
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| 1 | | parties, including the Association, the shareholders and
| 2 | | policyowners of the impaired or insolvent insurer, and any | 3 | | other party with
a bona fide interest,
in making an equitable | 4 | | distribution of the ownership rights of such impaired
or | 5 | | insolvent
insurer. In such a determination, consideration must | 6 | | be given to the welfare of the
policyholders of the continuing | 7 | | or successor insurer.
| 8 | | (b) No distribution to stockholders, if any, of an impaired | 9 | | or insolvent insurer
may be made until and unless the total
| 10 | | amount of valid claims of the Association for funds expended , | 11 | | with interest, in carrying
out its powers and duties under | 12 | | Section 531.08, with respect to such insurer
have been fully | 13 | | recovered by the Association.
| 14 | | (5) (a) If an order for liquidation or rehabilitation of
an | 15 | | insurer
domiciled in this State has been entered, the receiver | 16 | | appointed under such
order has a right to recover on behalf of | 17 | | the insurer, from any affiliate that
controlled it, the amount | 18 | | of distributions, other than stock dividends paid by
the | 19 | | insurer on its capital stock, made at any time during the 5 | 20 | | years preceding
the petition for liquidation or rehabilitation | 21 | | subject to the limitations of
paragraphs (b) to (d).
| 22 | | (b) No such dividend is recoverable if the insurer shows | 23 | | that when
paid the distribution was lawful and reasonable, and | 24 | | that the insurer did not
know and could not reasonably have | 25 | | known that the distribution might adversely affect
the ability | 26 | | of the insurer to fulfill its contractual obligations.
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| 1 | | (c) Any person who as an affiliate that controlled the | 2 | | insurer at
the time the distributions were paid is liable up to | 3 | | the amount of distributions
he received. Any person who was an | 4 | | affiliate that controlled the insurer at the
time the | 5 | | distributions were declared, is liable up to the amount of | 6 | | distributions
he would have received if they had been paid | 7 | | immediately. If 2 persons are
liable with respect to the same | 8 | | distributions, they are jointly and severally liable.
| 9 | | (d) The maximum amount recoverable under subsection (5) of | 10 | | this Section is
the amount needed in excess of all other | 11 | | available assets of the insolvent insurer
to pay the | 12 | | contractual obligations of the insolvent insurer.
| 13 | | (e) If any person liable under paragraph (c) of subsection | 14 | | (5) of this
Section is insolvent, all its
affiliates that | 15 | | controlled it at the time the dividend was paid are jointly and
| 16 | | severally liable for any resulting deficiency in the amount | 17 | | recovered from
the insolvent affiliate.
| 18 | | (6) As a creditor of the impaired or insolvent insurer as | 19 | | established in subsection (3) of this Section and consistent | 20 | | with subsection (2) of Section 205 of this Code, the | 21 | | Association and other similar associations shall be entitled to | 22 | | receive a disbursement of assets out of the marshaled assets, | 23 | | from time to time as the assets become available to reimburse | 24 | | it, as a credit against contractual obligations under this | 25 | | Article. If the liquidator has not, within 120 days after a | 26 | | final determination of insolvency of an insurer by the |
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| 1 | | receivership court, made an application to the court for the | 2 | | approval of a proposal to disburse assets out of marshaled | 3 | | assets to guaranty associations having obligations because of | 4 | | the insolvency, then the Association shall be entitled to make | 5 | | application to the receivership court for approval of its own | 6 | | proposal to disburse these assets. | 7 | | (Source: P.A. 96-1450, eff. 8-20-10.)
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