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90_HB0223enr
215 ILCS 5/493.1 rep.
Amends the Illinois Insurance Code. Repeals a Section
concerning single case appointment of agents by insurer.
LRB9001100JSgc
HB0223 Enrolled LRB9001100JSgc
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 1. Short title. This Act may be cited as the
5 Employee Leasing Company Act.
6 Section 5. Purpose. For the purpose of ensuring that an
7 employer that leases some or all of its workers properly
8 obtains workers' compensation insurance coverage for all of
9 its employees, including those leased from another entity,
10 and that premium is paid commensurate with exposure and
11 anticipated claim experience, this Act is required to
12 regulate employee leasing companies.
13 Section 10. Applicability. This Act applies to all
14 policies issued, renewed, or delivered after the effective
15 date of this Act.
16 Section 15. Definitions. In this Act:
17 "Department" means the Illinois Department of Insurance.
18 "Employee leasing arrangement" means an arrangement,
19 under contract or otherwise, whereby one business or other
20 entity leases all or a majority number of its workers from
21 another business. Employee leasing arrangements include, but
22 are not limited to, full service employee leasing
23 arrangements, long-term temporary arrangements, and any other
24 arrangement that involves the allocation of employment
25 responsibilities among 2 or more entities. For purposes of
26 this Act, "employee leasing arrangement" does not include
27 arrangements to provide temporary help service. "Temporary
28 help service" means a service whereby an organization hires
29 its own employees and assigns them to clients for a finite
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1 time period to support or supplement the client's work force
2 in special work situations such as employee absences,
3 temporary skill shortages, and seasonal workloads.
4 "Leased employee" means a person performing services for
5 a lessee under an employee leasing arrangement.
6 "Lessee" or "client company" means an entity that obtains
7 all or part of its work force from another entity through an
8 employee leasing arrangement or that employs the services of
9 an entity through an employee leasing arrangement.
10 "Lessor" or "employee leasing company" means an entity
11 that grants a written lease to a lessee through an employee
12 leasing arrangement.
13 "Long-term temporary arrangement" means an arrangement
14 where all or a majority number of employees from one company
15 are leased to another for a period in excess of 6 months or
16 consecutive periods equal to or greater than one year.
17 "Premium subject to dispute" means the insured has
18 provided a written notice of dispute of the premium to the
19 insurer or service carrier, has initiated any applicable
20 proceeding for resolving these disputes as prescribed by law
21 or rating organization rule, or has initiated litigation
22 regarding the premium dispute. The insured must have
23 detailed the specific areas of dispute and provided an
24 estimate of the premium the insured believes to be correct.
25 The insured must have paid any undisputed portion of the
26 bill.
27 "Residual market mechanism" means the residual market
28 mechanism as defined in Section 468 of the Illinois Insurance
29 Code.
30 Section 20. Registration.
31 (a) An employee leasing company may not engage in
32 business in this State without first registering with the
33 Department. A corporation, partnership, sole proprietorship,
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1 or other business entity that provides staff, personnel, or
2 employees to be employed in this State to other businesses
3 pursuant to a lease arrangement or agreement shall, before
4 becoming eligible to be issued any policy of workers'
5 compensation insurance, register with the Department. The
6 registration shall:
7 (1) identify the name of the lessor;
8 (2) identify the address of the principal place of
9 business of the lessor and the address of each office it
10 maintains within this State;
11 (3) include the lessor's taxpayer or employer
12 identification number;
13 (4) include a list by jurisdiction of each and
14 every name that the lessor has operated under in the
15 preceding 5 years including any alternative names and
16 names of predecessors and, if known, successor business
17 entities;
18 (5) include a list of the officers and directors of
19 the employee leasing company or its predecessors,
20 successors, or alter egos in the preceding 5 years; and
21 (6) include a list of each and every cancellation
22 or nonrenewal of workers' compensation insurance that has
23 been issued to the lessor or any predecessor in the
24 preceding 5 years. The list shall include the policy or
25 certificate number, name of insurer or other provider of
26 coverage, date of cancellation, and reason for
27 cancellation. If coverage has not been cancelled or
28 nonrenewed, the registration shall include a sworn
29 affidavit signed by the chief executive officer of the
30 lessor attesting to that fact.
31 Each employee leasing company registrant shall pay to the
32 Department upon initial registration, and upon each renewal
33 annually thereafter, a registration fee of $500.
34 Each employee leasing company shall maintain accounting
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1 and employment records relating to all employee leasing
2 activities for a minimum of 3 calendar years.
3 (b) Any lessor of employees whose workers' compensation
4 insurance has been terminated within the past 5 years in any
5 jurisdiction due to a determination that an employee leasing
6 arrangement was being utilized to avoid premium otherwise
7 payable by lessees shall be ineligible to register with the
8 Department or to remain registered, if previously registered.
9 (c) Persons filing registration statements pursuant to
10 this Section shall notify the Department as to any changes in
11 any information provided pursuant to this Section.
12 (d) The Department shall maintain a list of those
13 lessors of employees who are satisfactorily registered with
14 the Department.
15 (e) The Department may prescribe any forms that are
16 necessary to promote the efficient administration of this
17 Section.
18 (f) Any lessor of employees that was doing business in
19 this State prior to enactment of this Act shall register with
20 the Department within 60 days of the effective date of this
21 Act.
22 Section 25. Reporting requirement.
23 (a) A lessor shall maintain and furnish once every 12
24 months or in the event of a termination of the employee
25 leasing arrangement sufficient information to the insurer,
26 who shall submit such information to permit the calculation
27 of an experience modification factor by a rating organization
28 licensed under Section 459 of the Illinois Insurance Code for
29 each lessee. This information shall be submitted in a manner
30 consistent with a licensed rating organization's data
31 submission requirements and shall include but not be limited
32 to the following:
33 (1) the lessee's corporate name, or operating name
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1 if not a corporation, and address;
2 (2) the lessee's taxpayer or employer
3 identification number;
4 (3) the lessee's risk identification number;
5 (4) a listing of all leased employees associated
6 with each lessee, the applicable classification code, and
7 payroll; and
8 (5) claims information grouped by lessee and any
9 other information necessary to permit the calculation of
10 an experience modification factor for each lessee.
11 (b) In the event that a lessee's experience modification
12 factor exceeds the lessor's experience modification factor by
13 50% at the inception of the employee leasing arrangement, the
14 lessee's experience modification factor shall be utilized to
15 calculate the premium or costs charged to the lessee for
16 workers' compensation coverage for a period of 2 years.
17 Thereafter, the premium charged by the insurance company for
18 inclusion of a lessee under a lessor's policy may be
19 calculated on the basis of the lessor's experience
20 modification factor.
21 Section 30. Responsibility for policy issuance and
22 continuance.
23 (a) When a workers' compensation policy written to cover
24 leased employees is issued to the employee leasing company as
25 the named insured, the client company shall be identified
26 thereon by the attachment of an appropriate endorsement
27 indicating that the policy provides coverage for leased
28 employees in accordance with Illinois law. The endorsement
29 shall, at a minimum, provide for the following:
30 (1) Coverage under the policy shall be limited to
31 the named insured's employees leased to the lessees.
32 (2) The experience of the employees leased to the
33 particular lessee shall be separately maintained by the
HB0223 Enrolled -6- LRB9001100JSgc
1 lessor.
2 (3) Cancellation of the policy shall not affect the
3 rights and obligations of the named insured as an
4 employee leasing company with respect to any other
5 workers' compensation and employers' liability policy
6 issued to the named insured.
7 (b) The insurer of the lessor may take all reasonable
8 steps to ascertain exposure under the policy and collect the
9 appropriate premium through the following procedures:
10 (1) complete description of the lessor's
11 operations;
12 (2) periodic reporting of the covered lessee's
13 payroll, classifications, experience rating modification
14 factors, and jurisdictions with exposure. This reporting
15 must be supplemented by a submission of Internal Revenue
16 Service Form 941 or its equivalent to the carrier on a
17 quarterly basis;
18 (3) physical inspection of the client company
19 premises;
20 (4) audit of the lessor's operations; and
21 (5) any other reasonable measures to determine the
22 appropriate premium.
23 (c) The lessor shall notify the insurer or a licensed
24 rating organization 30 days prior to the effective date of
25 termination or immediately upon notification of cancellation
26 by the lessor of an employee leasing arrangement with the
27 lessee in order to allow sufficient time to calculate an
28 experience modification factor for the lessee.
29 (d) The lessor shall provide proof of workers'
30 compensation insurance to each lessee within 30 days of the
31 coverage effective date. Notice of any coverage changes
32 shall be provided to the lessor and to each lessee within 30
33 days of the effective date of the change.
34 (e) Nothing in this Act shall limit an insurer from
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1 utilizing schedule credits, debits, or other rating plans
2 filed with the Department for calculation of a lessor's or
3 lessee's premium.
4 Section 35. Lessee's obligation. Nothing in this Act
5 shall have any effect on the statutory obligation, if any, of
6 a lessee to secure workers' compensation coverage for
7 employees not provided, supplied, or maintained by a lessor
8 pursuant to an employee leasing arrangement.
9 Section 40. Insurer or service carrier audit. Insurers
10 shall audit policies issued through the residual market
11 pursuant to Section 30 of this Act within 90 days of the
12 policy effective date and may conduct quarterly audits
13 thereafter. Insurers may audit policies issued through the
14 voluntary market within 90 days of the policy effective date
15 and shall conduct audits thereafter. The purpose of the
16 audit will be to determine whether all classifications,
17 experience modification factors, and estimated payroll
18 utilized with respect to the development of the premium
19 charged to the lessor are appropriate.
20 Section 45. Exclusivity and vicarious liability. Subject
21 to any contrary provisions of the contract between the client
22 and the employee leasing company, the employee leasing
23 arrangement that exists between an employee leasing company
24 and its clients shall be interpreted for purposes of
25 insurance, bonding, and employers' liability as follows:
26 (1) The employee leasing company shall be entitled
27 along with the client to the exclusivity of the remedy
28 under both the workers' compensation and employers'
29 liability provisions of a workers' compensation policy or
30 plan that either party has secured.
31 (2) An employee leasing company is not liable for
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1 the acts, errors, or omissions of a client or of any
2 leased employee acting under the sole and exclusive
3 direction and control of a client. A client shall not be
4 liable for the acts, errors, or omissions of an employee
5 leasing company or of any employee of an employee leasing
6 company acting under the sole and exclusive direction or
7 control of an employee leasing company. Nothing herein
8 shall limit any contractual liability between an employee
9 leasing company and the client company, nor shall the
10 same limit any liability or responsibility imposed by
11 this Act.
12 (3) Employees leased to a client by an employee
13 leasing company shall be considered as the employees of
14 the client for the purposes of general liability
15 insurance, automobile insurance, fidelity bonds, surety
16 bonds, and liquor liability insurance carried by the
17 client. Employees leased to a client by an employee
18 leasing company are not deemed employees of the employee
19 leasing company for purposes of general liability
20 insurance, automobile insurance, fidelity bonds, surety
21 bonds, and liquor liability insurance carried by the
22 employee leasing company unless the employees are
23 included by specific reference in the applicable
24 employment arrangement contract, insurance contract, or
25 bond.
26 Section 50. Grounds for removal of eligibility; order;
27 hearing; review.
28 (a) When the Director of Insurance has cause to believe
29 that grounds for the removal of a registrant's eligibility
30 under this Section exists, he or she shall issue an order to
31 the employee leasing company stating the grounds upon which
32 the removal is based. The order shall be sent to the
33 employee leasing company by certified or registered mail.
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1 The employee leasing company may in writing request a hearing
2 within 30 days of receipt of the order. If no written
3 request is made, the order shall be final upon the expiration
4 of the 30 days.
5 (b) If the employee leasing company requests a hearing
6 pursuant to this Section, the Director shall issue a written
7 notice of hearing sent to the employee leasing company by
8 certified or registered mail stating the following:
9 (1) a specified time for the hearing, which may not
10 be less than 20 days nor more than 30 days after receipt
11 of the notice of hearing; and
12 (2) a specific place for the hearing, which may be
13 either in the city of Springfield or in the county where
14 the employee leasing company's principal place of
15 business is located.
16 (c) After the hearing, or upon the failure of the
17 employee leasing company to appear at the hearing, the
18 Director of Insurance shall take such action as is deemed
19 advisable on written findings that shall be served on the
20 employee leasing company. The action of the Director of
21 Insurance shall be subject to review under and in accordance
22 with the Administrative Review Law.
23 Section 55. Criminal penalties. Any corporation,
24 partnership, sole proprietorship or other form of business
25 entity and any officer, director, general partner, agent,
26 representative, or employee of any of the foregoing who
27 knowingly utilizes or participates in any employee leasing
28 agreement, arrangement, or mechanism for the purpose of: (i)
29 depriving one or more insurers of premium otherwise properly
30 payable, (ii) failing to remit premiums on behalf of a
31 client company, or (iii) otherwise converting moneys or other
32 funds remitted by the client company for payroll, insurance
33 premiums, or other benefits commits a Class A misdemeanor and
HB0223 Enrolled -10- LRB9001100JSgc
1 shall upon conviction be subject to restitution and a fine of
2 $1,000 or the amount specified in the offense, whichever is
3 greater.
4 Section 91. The Illinois Insurance Code is amended by
5 changing Sections 107.02, 107.06a, 491.1, 499.1, 534.3,
6 534.4, 538.4, 545, 546, 802.1, and 803.1 and adding Sections
7 107.28, 107.29, and 155.31 as follows:
8 (215 ILCS 5/107.02) (from Ch. 73, par. 719.02)
9 Sec. 107.02. Incorporation.
10 (a) There is hereby created an exchange for the
11 reinsurance and insurance of risks. Within 60 days after this
12 Act becomes law, the Director of Insurance shall appoint an
13 interim Board of Directors to adopt temporary by-laws, hire
14 employees, and take such other steps as are authorized or
15 necessary to establish the Exchange. When subscriptions
16 totalling $4,000,000 have been received pursuant to Section
17 107.07, the Board of Directors shall apply to the Director
18 for a Certificate of Authority. The Director shall approve
19 such Certificate within 30 days unless he determines that the
20 requirements of this Article have not been met and specifies
21 his objections in writing. Within 30 days after receiving
22 proof from the Exchange that the objections have been met,
23 the Director shall approve the application of the Exchange.
24 (b) After the effective date of this amendatory Act of
25 1997, the Director may organize, in accordance with
26 subsection (a), an additional exchange for the reinsurance
27 and insurance of risks. The additional exchange shall comply
28 with the provisions of this Article.
29 (Source: P.A. 81-1509.)
30 (215 ILCS 5/107.06a) (from Ch. 73, par. 719.06a)
31 Sec. 107.06a. Organization under Illinois Insurance
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1 Code.
2 (a) After December 31, 1997, a syndicate or limited
3 syndicate may only be organized pursuant to Sections 7, 8,
4 10, 11, 12, 14, 14.1 (other than subsection (d) thereof), 15
5 (other than subsection (d) thereof), 18, 19, 20, 21, 22, 23,
6 25, 27.1, 28, 28.1, 28.2, 29, 30, 31, 32, 32.1, 33, and 35.1
7 and Article X of this Code, to carry on the business of a
8 syndicate, or limited syndicate under Article V-1/2 of this
9 Code; provided that such syndicate is admitted to the
10 Illinois Insurance Exchange.
11 (b) After December 31, 1997, syndicates and limited
12 syndicates are subject to the following:
13 (1) Articles I, IIA, VIII, VIII 1/2, X, XI, XII,
14 XII 1/2, XIII, XIII 1/2, XXIV, XXV, and XXVIII (except
15 for Sections 445, 445.1, 445.2, 445.3, 445.4, and 445.5)
16 of this Code;
17 (2) Subsections (2) and (3) of Section 155.04 and
18 Sections 13, 132.1 through 140, 141a, 144, 155.01,
19 155.03, 378, 379.1, 393.1, 395, and 396 of this Code;
20 (3) the Reinsurance Intermediary Act; and
21 (4) the Producer Controlled Insurer Act.
22 (c) No other provision of this Insurance Code shall be
23 applicable to any such syndicate or limited syndicate except
24 as provided in this Article V-1/2.
25 (Source: P.A. 89-97, eff. 7-7-95.)
26 (215 ILCS 5/107.28 new)
27 Sec. 107.28. Syndicate reorganization.
28 (a) A syndicate may seek the approval of the Director
29 for reorganization as provided in this Section.
30 (b) The Director shall approve the reorganization,
31 merger, or consolidation so long as:
32 (1) the resulting company is authorized to transact
33 the kind or kinds of business the syndicate was
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1 authorized to transact as of the effective date of this
2 amendatory Act of 1997;
3 (2) all applicable provisions of this Code are
4 satisfied, except that for purposes of complying with
5 Article VIII the Director may grant an extension of time,
6 not to exceed one 6-month period, within which the
7 reorganized, merged, or consolidated company shall divest
8 itself of any nonadmitted assets held by the syndicate on
9 or before the effective date of this amendatory Act of
10 1997; and
11 (3) the books and records of the syndicate
12 accurately reflect its financial condition and affairs as
13 of the date of its most recently filed financial
14 statement, and no material change in its financial
15 condition or affairs has subsequently occurred.
16 (215 ILCS 5/107.29 new)
17 Sec. 107.29. Exchange operations runoff.
18 (a) The Board may adopt a plan of operation for the
19 orderly runoff of the operations of the exchange. The plan
20 of operation shall provide that all funds, legal rights,
21 title to property, and causes of action of the Illinois
22 Insurance Exchange including, but not limited to, all
23 assessments, subscription payments, proceeds, investments,
24 premium fees, surcharge receipts, and funds maintained under
25 Sections 107.26 and 107.27 and the rules or regulations of
26 the Illinois Insurance Exchange implementing those Sections
27 or any other provision of this Article, shall be accounted
28 for and paid over to the Director as receiver of any
29 delinquent syndicate in receivership after settlement of all
30 claims against the exchange.
31 (1) In the event that 2 or more syndicates are then
32 in receivership, the amount paid over to each estate
33 shall be proportional to the relative size of the surplus
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1 deficiency of each.
2 (2) Any excess remaining after the payment of any
3 and all claims against such receivership estates shall be
4 transferred, in equal shares, to the domestic companies
5 which result from the reorganization, merger, or
6 consolidation of former syndicates of the Illinois
7 Insurance Exchange.
8 (b) For purposes of this Section, "syndicate" means a
9 syndicate or a limited syndicate.
10 (215 ILCS 5/155.31 new)
11 Sec. 155.31. Insurance compliance self-evaluative
12 privilege.
13 (a) To encourage insurance companies and persons
14 conducting activities regulated under this Code, both to
15 conduct voluntary internal audits of their compliance
16 programs and management systems and to assess and improve
17 compliance with State and federal statutes, rules, and
18 orders, an insurance compliance self-evaluative privilege is
19 recognized to protect the confidentiality of communications
20 relating to voluntary internal compliance audits. The
21 General Assembly hereby finds and declares that protection of
22 insurance consumers is enhanced by companies' voluntary
23 compliance with this State's insurance and other laws and
24 that the public will benefit from incentives to identify and
25 remedy insurance and other compliance issues. It is further
26 declared that limited expansion of the protection against
27 disclosure will encourage voluntary compliance and improve
28 insurance market conduct quality and that the voluntary
29 provisions of this Section will not inhibit the exercise of
30 the regulatory authority by those entrusted with protecting
31 insurance consumers.
32 (b)(1) An insurance compliance self-evaluative audit
33 document is privileged information and is not admissible as
HB0223 Enrolled -14- LRB9001100JSgc
1 evidence in any legal action in any civil, criminal, or
2 administrative proceeding, except as provided in subsections
3 (c) and (d) of this Section. Documents, communications,
4 data, reports, or other information created as a result of a
5 claim involving personal injury or workers' compensation made
6 against an insurance policy are not insurance compliance
7 self-evaluative audit documents and are admissible as
8 evidence in civil proceedings as otherwise provided by
9 applicable rules of evidence or civil procedure, subject to
10 any applicable statutory or common law privilege, including
11 but not limited to the work product doctrine, the
12 attorney-client privilege, or the subsequent remedial
13 measures exclusion.
14 (2) If any company, person, or entity performs or
15 directs the performance of an insurance compliance audit, an
16 officer or employee involved with the insurance compliance
17 audit, or any consultant who is hired for the purpose of
18 performing the insurance compliance audit, may not be
19 examined in any civil, criminal, or administrative proceeding
20 as to the insurance compliance audit or any insurance
21 compliance self-evaluative audit document, as defined in this
22 Section. This subsection (b)(2) does not apply if the
23 privilege set forth in subsection (b)(1) of this Section is
24 determined under subsection (c) or (d) not to apply.
25 (3) A company may voluntarily submit, in connection with
26 examinations conducted under this Article, an insurance
27 compliance self-evaluative audit document to the Director, or
28 his or her designee, as a confidential document under
29 subsection (f) of Section 132.5 of this Code without waiving
30 the privilege set forth in this Section to which the company
31 would otherwise be entitled; provided, however, that the
32 provisions in subsection (f) of Section 132.5 permitting the
33 Director to make confidential documents public pursuant to
34 subsection (e) of Section 132.5 and access to the National
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1 Association of Insurance Commissioners shall not apply to the
2 insurance compliance self-evaluative audit document so
3 voluntarily submitted. Nothing contained in this subsection
4 shall give the Director any authority to compel a company to
5 disclose involuntarily or otherwise provide an insurance
6 compliance self-evaluative audit document.
7 (c)(1) The privilege set forth in subsection (b) of this
8 Section does not apply to the extent that it is expressly
9 waived by the company that prepared or caused to be prepared
10 the insurance compliance self-evaluative audit document.
11 (2) In a civil or administrative proceeding, a court of
12 record may, after an in camera review, require disclosure of
13 material for which the privilege set forth in subsection (b)
14 of this Section is asserted, if the court determines one of
15 the following:
16 (A) the privilege is asserted for a fraudulent
17 purpose;
18 (B) the material is not subject to the privilege;
19 or
20 (C) even if subject to the privilege, the material
21 shows evidence of noncompliance with State and federal
22 statutes, rules and orders and the company failed to
23 undertake reasonable corrective action or eliminate the
24 noncompliance within a reasonable time.
25 (3) In a criminal proceeding, a court of record may,
26 after an in camera review, require disclosure of material for
27 which the privilege described in subsection (b) of this
28 Section is asserted, if the court determines one of the
29 following:
30 (A) the privilege is asserted for a fraudulent
31 purpose;
32 (B) the material is not subject to the privilege;
33 (C) even if subject to the privilege, the material
34 shows evidence of noncompliance with State and federal
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1 statutes, rules and orders and the company failed to
2 undertake reasonable corrective action or eliminate such
3 noncompliance within a reasonable time; or
4 (D) the material contains evidence relevant to
5 commission of a criminal offense under this Code, and all
6 of the following factors are present:
7 (i) the Director, State's Attorney, or
8 Attorney General has a compelling need for the
9 information;
10 (ii) the information is not otherwise
11 available; and
12 (iii) the Director, State's Attorney, or
13 Attorney General is unable to obtain the substantial
14 equivalent of the information by any means without
15 incurring unreasonable cost and delay.
16 (d)(1) Within 30 days after the Director, State's
17 Attorney, or Attorney General makes a written request by
18 certified mail for disclosure of an insurance compliance
19 self-evaluative audit document under this subsection, the
20 company that prepared or caused the document to be prepared
21 may file with the appropriate court a petition requesting an
22 in camera hearing on whether the insurance compliance
23 self-evaluative audit document or portions of the document
24 are privileged under this Section or subject to disclosure.
25 The court has jurisdiction over a petition filed by a company
26 under this subsection requesting an in camera hearing on
27 whether the insurance compliance self-evaluative audit
28 document or portions of the document are privileged or
29 subject to disclosure. Failure by the company to file a
30 petition waives the privilege.
31 (2) A company asserting the insurance compliance
32 self-evaluative privilege in response to a request for
33 disclosure under this subsection shall include in its request
34 for an in camera hearing all of the information set forth in
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1 subsection (d)(5) of this Section.
2 (3) Upon the filing of a petition under this subsection,
3 the court shall issue an order scheduling, within 45 days
4 after the filing of the petition, an in camera hearing to
5 determine whether the insurance compliance self-evaluative
6 audit document or portions of the document are privileged
7 under this Section or subject to disclosure.
8 (4) The court, after an in camera review, may require
9 disclosure of material for which the privilege in subsection
10 (b) of this Section is asserted if the court determines,
11 based upon its in camera review, that any one of the
12 conditions set forth in subsection (c)(2)(A) through (C) is
13 applicable as to a civil or administrative proceeding or that
14 any one of the conditions set forth in subsection (c)(3)(A)
15 through (D) is applicable as to a criminal proceeding. Upon
16 making such a determination, the court may only compel the
17 disclosure of those portions of an insurance compliance
18 self-evaluative audit document relevant to issues in dispute
19 in the underlying proceeding. Any compelled disclosure will
20 not be considered to be a public document or be deemed to be
21 a waiver of the privilege for any other civil, criminal, or
22 administrative proceeding. A party unsuccessfully opposing
23 disclosure may apply to the court for an appropriate order
24 protecting the document from further disclosure.
25 (5) A company asserting the insurance compliance
26 self-evaluative privilege in response to a request for
27 disclosure under this subsection (d) shall provide to the
28 Director, State's Attorney, or Attorney General, as the case
29 may be, at the time of filing any objection to the
30 disclosure, all of the following information:
31 (A) The date of the insurance compliance
32 self-evaluative audit document.
33 (B) The identity of the entity conducting the
34 audit.
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1 (C) The general nature of the activities covered by
2 the insurance compliance audit.
3 (D) An identification of the portions of the
4 insurance compliance self-evaluative audit document for
5 which the privilege is being asserted.
6 (e) (1) A company asserting the insurance compliance
7 self-evaluative privilege set forth in subsection (b) of this
8 Section has the burden of demonstrating the applicability of
9 the privilege. Once a company has established the
10 applicability of the privilege, a party seeking disclosure
11 under subsections (c)(2)(A) or (C) of this Section has the
12 burden of proving that the privilege is asserted for a
13 fraudulent purpose or that the company failed to undertake
14 reasonable corrective action or eliminate the noncompliance
15 with a reasonable time. The Director, State's Attorney, or
16 Attorney General seeking disclosure under subsection (c)(3)
17 of this Section has the burden of proving the elements set
18 forth in subsection (c)(3) of this Section.
19 (2) The parties may at any time stipulate in proceedings
20 under subsections (c) or (d) of this Section to entry of an
21 order directing that specific information contained in an
22 insurance compliance self-evaluative audit document is or is
23 not subject to the privilege provided under subsection (b) of
24 this Section.
25 (f) The privilege set forth in subsection (b) of this
26 Section shall not extend to any of the following:
27 (1) documents, communications, data, reports, or
28 other information required to be collected, developed,
29 maintained, reported, or otherwise made available to a
30 regulatory agency pursuant to this Code, or other federal
31 or State law, rule, or order;
32 (2) information obtained by observation or
33 monitoring by any regulatory agency; or
34 (3) information obtained from a source independent
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1 of the insurance compliance audit.
2 (g) As used in this Section:
3 (1) "Insurance compliance audit" means a voluntary,
4 internal evaluation, review, assessment, or audit not
5 otherwise expressly required by law of a company or an
6 activity regulated under this Code, or other State or
7 federal law applicable to a company, or of management
8 systems related to the company or activity, that is
9 designed to identify and prevent noncompliance and to
10 improve compliance with those statutes, rules, or orders.
11 An insurance compliance audit may be conducted by the
12 company, its employees, or by independent contractors.
13 (2) "Insurance compliance self-evaluative audit
14 document" means documents prepared as a result of or in
15 connection with and not prior to an insurance compliance
16 audit. An insurance compliance self-evaluation audit
17 document may include a written response to the findings
18 of an insurance compliance audit. An insurance
19 compliance self-evaluative audit document may include,
20 but is not limited to, as applicable, field notes and
21 records of observations, findings, opinions, suggestions,
22 conclusions, drafts, memoranda, drawings, photographs,
23 computer-generated or electronically recorded
24 information, phone records, maps, charts, graphs, and
25 surveys, provided this supporting information is
26 collected or developed for the primary purpose and in the
27 course of an insurance compliance audit. An insurance
28 compliance self-evaluative audit document may also
29 include any of the following:
30 (A) an insurance compliance audit report
31 prepared by an auditor, who may be an employee of
32 the company or an independent contractor, which may
33 include the scope of the audit, the information
34 gained in the audit, and conclusions and
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1 recommendations, with exhibits and appendices;
2 (B) memoranda and documents analyzing portions
3 or all of the insurance compliance audit report and
4 discussing potential implementation issues;
5 (C) an implementation plan that addresses
6 correcting past noncompliance, improving current
7 compliance, and preventing future noncompliance; or
8 (D) analytic data generated in the course of
9 conducting the insurance compliance audit.
10 (3) "Company" has the same meaning as provided in
11 Section 2 of this Code.
12 (h) Nothing in this Section shall limit, waive, or
13 abrogate the scope or nature of any statutory or common law
14 privilege including, but not limited to, the work product
15 doctrine, the attorney-client privilege, or the subsequent
16 remedial measures exclusion.
17 (215 ILCS 5/491.1) (from Ch. 73, par. 1065.38-1)
18 Sec. 491.1. Definitions. In addition to the definitions
19 in Section 2, the following definitions apply to this
20 Article.
21 (a) Insurance. Insurance is any of the classes of
22 insurance found in Section 4.
23 (b) Insurance Producer. An insurance producer is an
24 individual who solicits, negotiates, effects, procures,
25 renews, continues or binds policies of insurance covering
26 property or risks located in Illinois.
27 (c) License. A license is a document authorizing an
28 individual to act as an insurance producer, limited insurance
29 representative or temporary insurance producer, as specified
30 in such document.
31 (d) Limited Insurance Representative. A limited
32 insurance representative is an individual appointed by an
33 insurance company to represent that company regarding the
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1 types of insurance set forth in Section 495.1.
2 (e) Registered Firm. A registered firm is a
3 corporation, or partnership, or limited liability company
4 which transacts the business of insurance as an insurance
5 agency.
6 (Source: P.A. 85-334.)
7 (215 ILCS 5/499.1) (from Ch. 73, par. 1065.46-1)
8 Sec. 499.1. Registered firms.
9 (a) Any corporation, or partnership, or limited
10 liability company transacting insurance business as an
11 insurance agency shall register with the Director before
12 transacting insurance business in this State. Such
13 registration shall remain in effect as long as the firm pays
14 the annual fee required by Section 509.1 of this Code by the
15 date due, unless the registration is revoked or suspended
16 pursuant to Section 505.1 of this Code.
17 (b) Each firm required to register before acting as a
18 registered firm pursuant to this Article shall appoint one or
19 more licensed insurance producers who are officers,
20 directors, or partners in the firm to be responsible for the
21 firm's compliance with the insurance laws and Title 50 of the
22 Illinois Administrative Code. Such individual or individuals
23 shall submit to the Director a registration form and the fees
24 required by Section 509.1. The Director shall prescribe the
25 registration form and may require any documents reasonably
26 necessary to verify the information contained in the
27 registration form. Within 30 days of a change in officers,
28 directors, or partners who are appointed to be responsible
29 for the firm's compliance with the insurance laws and Title
30 50 of the Illinois Administrative Code, the firm shall report
31 the change to the Department.
32 (c) The registered firm shall inform the Director in
33 writing of a change in its business address within 30 days of
HB0223 Enrolled -22- LRB9001100JSgc
1 such change.
2 (d) Each registered firm shall disclose its members,
3 officers or directors who are authorized to act as insurance
4 producers, and report any changes in such personnel to the
5 Director within 30 days of such changes.
6 (e) A registered firm may not be a national bank located
7 in a city, village or incorporated town with a population
8 exceeding 5,000 according to the last federal census, a State
9 bank or a trust company, or a subsidiary, affiliate, officer
10 or employee of any such national or State bank or trust
11 company contributing directly or indirectly to the income of
12 such bank or trust company any profit or fees or part thereof
13 derived from the solicitation, negotiation or effecting of
14 insurance.
15 (Source: P.A. 89-240, eff. 1-1-96.)
16 (215 ILCS 5/534.3) (from Ch. 73, par. 1065.84-3)
17 Sec. 534.3. Covered claim; unearned premium defined.
18 (a) "Covered claim" means an unpaid claim for a loss
19 arising out of and within the coverage of an insurance policy
20 to which this Article applies and which is in force at the
21 time of the occurrence giving rise to the unpaid claim,
22 including claims presented during any extended discovery
23 period which was purchased from the company before the entry
24 of a liquidation order or which is purchased or obtained from
25 the liquidator after the entry of a liquidation order, made
26 by a person insured under such policy or by a person
27 suffering injury or damage for which a person insured under
28 such policy is legally liable, and for unearned premium, if:
29 (i) The company issuing the policy becomes an
30 insolvent company as defined in Section 534.4 after the
31 effective date of this Article; and
32 (ii) The claimant or insured is a resident of this
33 State at the time of the insured occurrence, or the
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1 property from which a first party claim for damage to
2 property arises is permanently located in this State or,
3 in the case of an unearned premium claim, the
4 policyholder is a resident of this State at the time the
5 policy was issued; provided, that for entities other than
6 an individual, the residence of a claimant, insured, or
7 policyholder is the state in which its principal place of
8 business is located at the time of the insured event.
9 (b) "Covered claim" does not include:
10 (i) any amount in excess of the applicable limits
11 of liability provided by an insurance policy to which
12 this Article applies; nor
13 (ii) any claim for punitive or exemplary damages;
14 nor
15 (iii) any first party claim by an insured who is an
16 affiliate of the insolvent company; nor
17 (iv) any first party or third party claim by or
18 against an insured whose net worth on December 31 of the
19 year next preceding the date the insurer becomes an
20 insolvent insurer exceeds $25,000,000 $50 million;
21 provided that an insured's net worth on such date shall
22 be deemed to include the aggregate net worth of the
23 insured and all of its affiliates as calculated on a
24 consolidated basis. However, this exclusion shall not
25 apply to third party claims against the insured where the
26 insured has applied for or consented to the appointment
27 of a receiver, trustee, or liquidator for all or a
28 substantial part of its assets, filed a voluntary
29 petition in bankruptcy, filed a petition or an answer
30 seeking a reorganization or arrangement with creditors or
31 to take advantage of any insolvency law, or if an order,
32 judgment, or decree is entered by a court of competent
33 jurisdiction, on the application of a creditor,
34 adjudicating the insured bankrupt or insolvent or
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1 approving a petition seeking reorganization of the
2 insured or of all or substantial part of its assets; nor
3 (v) any claim for any amount due any reinsurer,
4 insurer, insurance pool, or underwriting association as
5 subrogated recoveries, reinsurance recoverables,
6 contribution, indemnification or otherwise. No such claim
7 held by a reinsurer, insurer, insurance pool, or
8 underwriting association may be asserted in any legal
9 action against a person insured under a policy issued by
10 an insolvent company other than to the extent such claim
11 exceeds the Fund obligation limitations set forth in
12 Section 537.2 of this Code.
13 (c) "Unearned Premium" means the premium for the
14 unexpired period of a policy which has been terminated prior
15 to the expiration of the period for which premium has been
16 paid and does not mean premium which is returnable to the
17 insured for any other reason.
18 (Source: P.A. 89-97, eff. 7-7-95.)
19 (215 ILCS 5/534.4) (from Ch. 73, par. 1065.84-4)
20 Sec. 534.4. "Insolvent company" means a company
21 organized as a stock company, mutual company, reciprocal or
22 Lloyds (a) which holds a certificate of authority to transact
23 insurance in this State either at the time the policy was
24 issued or when the insured event occurred, or any company
25 which has assumed such policy obligation through merger,
26 consolidation or reinsurance, whether or not such assuming
27 company held a certificate of authority to transact insurance
28 in this State at the time such policy was issued or when the
29 insured event occurred; and (b) against which a final an
30 Order of Liquidation with a finding of insolvency to which
31 there is no further right of appeal has been entered by a
32 court of competent jurisdiction in the company's State of
33 domicile after the effective date of this Article, and which
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1 Order of Liquidation has not been stayed or been the subject
2 of a writ or supersedeas or other comparable order.
3 (Source: P.A. 85-576.)
4 (215 ILCS 5/538.4) (from Ch. 73, par. 1065.88-4)
5 Sec. 538.4. Legal actions by Fund. The Fund may sue or
6 be sued, including taking any legal actions necessary or
7 proper for recovery of any unpaid assessments under Sections
8 537.1 or 537.6. The Fund's power to sue includes, but is not
9 limited to, the power and right to intervene as a party
10 before any court that has jurisdiction over an insolvent
11 insurer when the Fund is a creditor or potential creditor of
12 the insolvent insurer.
13 (Source: P.A. 89-97, eff. 7-7-95.)
14 (215 ILCS 5/545) (from Ch. 73, par. 1065.95)
15 Sec. 545. Effect of paid claims.
16 (a) Every insured or claimant seeking the protection of
17 this Article shall cooperate with the Fund to the same extent
18 as such person would have been required to cooperate with the
19 insolvent company. The Fund shall have all the rights, duties
20 and obligations under the policy to the extent of the covered
21 claim payment, provided the Fund shall have no cause of
22 action against the insured of the insolvent company for any
23 sums it has paid out except such causes of action as the
24 insolvent company would have had if such sums had been paid
25 by the insolvent company and except as provided in paragraph
26 (d) of this Section.
27 (b) The Fund and any similar organization in another
28 state shall be recognized as claimants in the liquidation of
29 an insolvent company for any amounts paid by them on covered
30 claims obligations as determined under this Article or
31 similar laws in other states and shall receive dividends at
32 the priority set forth in paragraph (d) of subsection (1) of
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1 Section 205 of this Code. The liquidator of an insolvent
2 company shall be bound by determinations of covered claim
3 eligibility under the Act and by settlements of claims made
4 the amounts of covered claim payments by the Fund or a
5 similar organization in another state on the receipt of
6 certification of such payments, to the extent those
7 determinations or settlements satisfy obligations of the
8 Fund, but the receiver shall not be bound in any way by those
9 determinations or settlements to the extent that there
10 remains a claim in the estate for amounts in excess of the
11 payments by the Fund. In submitting their claim for covered
12 claim payments the Fund and any similar organization in
13 another state shall not be subject to the requirements of
14 Sections 208 and 209 of this Code and shall not be affected
15 by the failure of the person receiving a covered claim
16 payment to file a proof of claim.
17 (c) The expenses of the Fund and of any similar
18 organization in any other state, other than expenses incurred
19 in the performance of duties under Section 547 or similar
20 duties under the statute governing a similar organization in
21 another state, shall be accorded the same priority as the
22 liquidator's expenses. The liquidator shall make prompt
23 reimbursement to the Fund and any similar organization for
24 such expense payments.
25 (d) The Fund has the right to recover from the following
26 persons the amount of any covered claims and allocated claims
27 expenses which the Fund paid or incurred on behalf of such
28 person in satisfaction, in whole or in part, of liability
29 obligations of such person to any other person:
30 (i) any insured whose net worth on December 31 of
31 the year next preceding the date the company becomes an
32 insolvent company exceeds $25,000,000 $50 million;
33 provided that an insured's net worth on such date shall
34 be deemed to include the aggregate net worth of the
HB0223 Enrolled -27- LRB9001100JSgc
1 insured and all of its affiliates as calculated on a
2 consolidated basis.
3 (ii) any insured who is an affiliate of the
4 insolvent company.
5 (Source: P.A. 89-206, eff. 7-21-95.)
6 (215 ILCS 5/546) (from Ch. 73, par. 1065.96)
7 Sec. 546. Other insurance. Non-duplication of recovery.
8 (a) An insured or claimant shall be required first to
9 exhaust all coverage provided by any other insurance policy,
10 regardless of whether or not such other insurance policy was
11 written by a member company, if the claim under such other
12 policy arises from the same facts, injury, or loss that gave
13 rise to the covered claim against the Fund. The Fund's
14 obligation under Section 537.2 shall be reduced by the amount
15 recovered or recoverable, whichever is greater, under such
16 other insurance policy. Where such other insurance policy
17 provides uninsured or underinsured motorist coverage, the
18 amount recoverable shall be deemed to be the full applicable
19 limits of such coverage. To the extent that the Fund's
20 obligation under Section 537.2 is reduced by application of
21 this Section, the liability of the person insured by the
22 insolvent insurer's policy for the claim shall be reduced in
23 the same amount. Any insured or claimant having a covered
24 claim against the Fund shall be required first to exhaust his
25 rights under any provision in any other insurance policy
26 which may be applicable to the claim, whether or not the
27 insurance policy was written by a member company. Any amount
28 payable on a covered claim under this Article shall be
29 reduced by the amount of such recovery under such insurance
30 policy.
31 (b) Any insured or claimant having a claim which may be
32 recovered under more than one insurance guaranty fund or its
33 equivalent shall seek recovery first from the Fund of the
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1 place of residence of the insured except that if it is a
2 first party claim for damage to property with a permanent
3 location, he shall first seek recovery from the Fund of the
4 location of the property; if it is a workers' compensation
5 claim, he shall first seek recovery from the Fund of the
6 residence of the claimant. Any recovery under this Article
7 shall be reduced by the amount of the recovery from any other
8 insurance guaranty fund or its equivalent.
9 (Source: P.A. 89-97, eff. 7-7-95.)
10 (215 ILCS 5/802.1)
11 Sec. 802.1. Definitions. As used in this Article:
12 (a) "Commercial Building" means any building, other than
13 a residence, permanently affixed to realty located in
14 Illinois, including basements, footings, foundations, septic
15 systems and underground pipes directly servicing the
16 building, but does not include sidewalks, driveways, parking
17 lots, living units, land, trees, plants, crops or
18 agricultural field drainage tile.
19 (b) "Commercial Coverage" means mine subsidence
20 insurance for a commercial building.
21 (c) "Insurer" or "Insurers" means insurance companies
22 and reciprocals licensed and authorized to write Class 3
23 policies of insurance, as defined in this Code, within
24 Illinois.
25 (d) "Living Unit" shall mean that physical portion
26 designated for separate ownership or occupancy for
27 residential purposes, of a building or group of buildings,
28 permanently affixed to realty located in Illinois, having
29 elements which are owned or used in common, including a
30 condominium unit, a cooperative unit or any other similar
31 unit.
32 (e) "Living Unit Coverage" means mine subsidence
33 insurance for a living unit covering the losses described in
HB0223 Enrolled -29- LRB9001100JSgc
1 Section 805.1(d).
2 (f) "Mine Subsidence" means lateral or vertical ground
3 movement caused by a failure initiated at the mine level, of
4 man-made underground mines, including, but not limited to
5 coal mines, clay mines, limestone mines, and fluorspar mines
6 that directly damages residences or commercial buildings.
7 "Mine Subsidence" does not include lateral or vertical ground
8 movement caused by earthquake, landslide, volcanic eruption,
9 soil conditions, soil erosion, soil freezing and thawing,
10 improperly compacted soil, construction defects, roots of
11 trees and shrubs or collapse of storm and sewer drains and
12 rapid transit tunnels.
13 (g) "Mine Subsidence Insurance Fund" or "Fund" means the
14 fund established by this Article.
15 (h) "Policy" or "policies" means any contract or
16 contracts of insurance providing the coverage of the Standard
17 Fire Policy and Extended Coverage Endorsement on any
18 residence, living unit or commercial building. It does not
19 include those insurance contracts that are referred to as
20 marine or inland marine policies.
21 (i) "Premium" or "premiums" means the gross amount
22 charged to policyholders for the mine subsidence insurance
23 made available under this Article.
24 (j) "Rates" or "rate schedules" means the rates by which
25 premiums shall be computed for the mine subsidence insurance
26 made available under this Article.
27 (k) "Residence" means a building used principally for
28 residential purposes up to and including a four family
29 dwelling, permanently affixed to realty located in Illinois,
30 including appurtenant structures, driveways, sidewalks,
31 basements, footings, foundations, septic systems and
32 underground pipes directly servicing the dwelling or
33 building, but does not include living units, land, trees,
34 plants, crops or agricultural field drainage tile.
HB0223 Enrolled -30- LRB9001100JSgc
1 (l) "Residential Coverage" means mine subsidence
2 insurance for a residence.
3 (m) "Intergovernmental cooperative" means an
4 intergovernmental cooperative organized pursuant to Article
5 VII, Section 10 of the Illinois Constitution and Section 6 of
6 the Intergovernmental Cooperation Act.
7 (Source: P.A. 88-379.)
8 (215 ILCS 5/803.1)
9 Sec. 803.1. Establishment of Fund.
10 (a) There is established a fund to be known as the
11 "Illinois Mine Subsidence Insurance Fund". The Fund shall
12 operate pursuant to this Article. The Fund is authorized to
13 transact business, provide services, enter into contracts and
14 sue or be sued in its own name.
15 (b) The Fund shall provide reinsurance for mine
16 subsidence losses to all insurers writing mine subsidence
17 insurance pursuant to this Article.
18 (c) The monies in the Fund shall be derived from
19 premiums for mine subsidence insurance collected on behalf of
20 the Fund pursuant to this Article, from investment income and
21 from receipt of Federal or State funds. No insurer shall
22 have any liability to the Fund or to any creditor of the
23 Fund, except as may be set forth in this Article, in the
24 Articles of Governance which may be adopted by the Fund, in a
25 reinsurance agreement executed pursuant to paragraph 810.1,
26 in the Plan of Operation established by the Fund, or in the
27 rules and procedures adopted by the Fund as authorized by the
28 reinsurance agreement.
29 (d) The Fund shall establish the rates, rating
30 schedules, deductibles and retentions, minimum premiums, and
31 classifications for mine subsidence insurance which the Fund
32 shall file with the Director. The Director shall have 30
33 days from the date of receipt to approve or disapprove a rate
HB0223 Enrolled -31- LRB9001100JSgc
1 filing. If no action is taken by the Director within 30
2 days, the rate is deemed to be approved. The Director may,
3 in writing, extend the period for an additional 30 days if
4 the Director determines that additional time is needed.
5 (e) The Fund shall establish its rates, rating
6 schedules, deductibles and retentions, minimum premiums, and
7 classification in such a manner as to satisfy all reasonably
8 foreseeable claims and expenses the Fund is likely to incur.
9 The Fund shall give due consideration to loss experience and
10 relevant trends, premium and other income and reasonable
11 reserves established for contingencies in establishing the
12 mine subsidence rates.
13 (f) The Fund shall compile and publish an annual
14 operating report.
15 (g) The Fund shall develop at least 2 consumer
16 information publications to aid the public in understanding
17 mine subsidence and mine subsidence insurance and shall
18 establish a schedule for the distribution of the publications
19 pursuant to the reinsurance agreement. Topics that shall be
20 addressed shall include but are not limited to:
21 (1) Descriptive information about mine subsidence,
22 and what benefits mine subsidence insurance provides to
23 the property owner.
24 (2) Information that will be useful to a
25 policyholder who has filed a mine subsidence claim, such
26 as information that explains the claim investigation
27 process and claim handling procedures.
28 (h) The Fund shall be empowered to conduct research
29 programs in an effort to improve the administration of the
30 mine subsidence insurance program and help reduce and
31 mitigate mine subsidence losses consistent with the public
32 interest.
33 (i) The Fund may enter into reinsurance agreements with
34 any intergovernmental cooperative that provides joint
HB0223 Enrolled -32- LRB9001100JSgc
1 self-insurance for mine subsidence losses of its members.
2 These reinsurance agreements shall be substantially similar
3 to reinsurance agreements described in Section 810.1.
4 (Source: P.A. 88-379; 89-206, eff. 7-21-95.)
5 Section 93. The Illinois Insurance Code is amended by
6 changing Sections 107.03, 107.05, 107.07, 107.09, 107.13,
7 107.13a, 107.17, and 107.27 and adding Sections 107.15b,
8 107.30, and 107.31 as follows:
9 (215 ILCS 5/107.03) (from Ch. 73, par. 719.03)
10 Sec. 107.03. Kinds of Business. The syndicates of the
11 Exchange may conduct the kind of insurance business listed in
12 Class 2 and Class 3 of Section 4 of this Code when the
13 Exchange is issued a Certificate of Authority.
14 (Source: P.A. 81-1047.)
15 (215 ILCS 5/107.05) (from Ch. 73, par. 719.05)
16 Sec. 107.05. Transaction of business.
17 (a) Reinsurance may shall be provided by and through
18 syndicates.
19 (b) Only Exchange brokers may present insurance business
20 to the Exchange.
21 (c) Syndicates may reinsure risks with syndicates or
22 other persons subject to the rules of the Exchange.
23 (d) The minimum premium for any insurance presented to
24 the Exchange shall be $50,000. For group insurance, the
25 minimum premium requirements must be met separately by each
26 group member. However, if an Exchange broker by affidavit
27 states that after diligent effort he was unable to procure
28 the policies or contracts required to protect the property or
29 risk described in the affidavit from companies authorized to
30 transact business in this State, an insurance policy may be
31 issued through the Exchange for any amount of premium. This
HB0223 Enrolled -33- LRB9001100JSgc
1 subsection shall apply only to direct coverage of Illinois
2 domiciled risks.
3 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
4 (215 ILCS 5/107.07) (from Ch. 73, par. 719.07)
5 Sec. 107.07. Admission. Capitalization:
6 Syndicate - at least $2,000,000.
7 Subscriber - at least $30,000.
8 Fees: (a) Exchange brokers. An annual fee shall be paid
9 to the Exchange by any person who presents risks to the
10 Exchange. The annual fee established by the Exchange shall
11 not exceed $5,000.
12 (b) The Exchange may establish annual fees for the
13 admission of syndicates, limited syndicates, and subscribers.
14 Standards: The Exchange may establish additional
15 standards for the admission of subscribers and Exchange
16 brokers.
17 Assessments: The Exchange may make assessments of
18 subscribers or syndicates for the expenses of operating the
19 Exchange.
20 (Source: P.A. 81-1047.)
21 (215 ILCS 5/107.09) (from Ch. 73, par. 719.09)
22 Sec. 107.09. All written policy applications and written
23 policies shall prominently state that the policy is being
24 submitted or issued through the Exchange; that coverage
25 thereunder is provided solely by the underwriting syndicate
26 or syndicates; that the Exchange is not an insurer; and that
27 the Exchange is not a party to the contract and has no
28 liability thereunder.
29 (Source: P.A. 81-1047.)
30 (215 ILCS 5/107.13) (from Ch. 73, par. 719.13)
31 Sec. 107.13. Annual statement. The Department shall by
HB0223 Enrolled -34- LRB9001100JSgc
1 rule may require an annual statement from the Exchange, which
2 shall be an aggregate of all syndicate's and limited
3 syndicate's financial records for the year ending December 31
4 immediately preceding. The statement shall be filed with the
5 Department by June 1 of each year. The rule shall specify
6 the format.
7 (Source: P.A. 81-1047.)
8 (215 ILCS 5/107.13a) (from Ch. 73, par. 719.13a)
9 Sec. 107.13a. (a) Periodic filings Annual Statement of
10 syndicates.
11 (a) Every syndicate doing business on the Exchange shall
12 file with the Board and with the Director of Insurance by
13 March 1st in each year a financial statement for the year
14 ending December 31st immediately preceding on forms
15 prescribed by the Director Board, which shall conform
16 substantially to the form of statement adopted by the
17 National Association of Insurance Commissioners and in use on
18 the effective date the statement is filed of this amendatory
19 Act of 1981. In the preparation of such annual statement,
20 each syndicate shall compute the combined amount earned
21 during the year from investment income and from underwriting
22 income on the basis of the accounting method incorporated in
23 the underwriting and investment exhibit of such annual
24 statement. The Board shall have power to make such
25 modifications and additions in this form as it may deem
26 desirable or necessary to ascertain the condition and affairs
27 of the syndicate. The Board shall have authority to extend
28 the time for filing any statement by any syndicate for
29 reasons which the Board considers good and sufficient. Such
30 statement shall be verified by oaths of the president and
31 secretary of the syndicate, or, in their absence, by 2 other
32 principal officers. In addition, any syndicate transacting
33 business on the Exchange may be required by the Board, when
HB0223 Enrolled -35- LRB9001100JSgc
1 it considers such action to be necessary and appropriate for
2 the protection of policyholders, creditors, subscribers or
3 claimants, to file, within 60 days after mailing to the
4 syndicate of a notice that such is required, a supplemental
5 summary statement as of the last day of any calendar month
6 occurring during the 100 days next preceding the mailing of
7 such notice designed by the Board on forms prescribed and
8 furnished by the Board. No syndicate shall be required to
9 file more than 4 supplemental summary statements during any
10 consecutive 12-month period. The Board may require
11 supplemental summary statements to be certified by an
12 independent actuary deemed competent by the Board or by an
13 independent certified public accountant.
14 (b) Within 45 days after the end of each quarter, each
15 syndicate shall file with the Director and with the Board
16 quarterly financial statements that conform substantially to
17 the quarterly statement form adopted by the N.A.I.C.
18 (c) By March 1 of each year, each syndicate shall file
19 with the Director and the Board a certification of loss
20 reserves signed by a fellow or associate of the Casualty
21 Actuary Society, to be followed on or before June 1 of that
22 year by a detailed report prepared by such actuary.
23 (d) By June 1 of each year, each syndicate shall file
24 with the Director and with the Board an annual audited
25 financial report certified by an independent certified public
26 accountant.
27 (e) Each syndicate doing business on the Exchange shall
28 file with the Director and the Board by May 1 of each year an
29 annual Form B Registration Statement in accordance with
30 Sections 131.14 and 131.15 of this Code.
31 (b) For the information of the public generally, the
32 Board shall cause an abstract of the information contained in
33 the annual statement to be made available to the public as
34 soon as practicable after filing with the Exchange, by
HB0223 Enrolled -36- LRB9001100JSgc
1 printing such abstracts in pamphlet tabular form for free
2 general distribution by the Exchange, or by such other
3 publication in the City of Chicago as may be reasonably
4 necessary more fully to inform the public of the financial
5 condition of syndicates transacting business on the Exchange.
6 (Source: P.A. 83-1362.)
7 (215 ILCS 5/107.15b new)
8 Sec. 107.15b. Board rulemaking authority.
9 (a) The Board has the authority to adopt such rules as
10 it deems necessary to carry out its duties under this Article
11 and to maintain a well-regulated marketplace.
12 (b) A rule or modification to an existing rule adopted
13 by the Board after the effective date of this amendatory Act
14 of 1997 shall be filed with the Director not less than 30
15 days before the proposed effective date of the rule or
16 modification. The Director, upon written order, may
17 disapprove the rule or modification, in whole or in part,
18 upon a finding that the rule or modification would cause the
19 exchange to be operated in a manner that would be hazardous
20 to the public or its policyholders.
21 (c) An order by the Director disapproving a rule or
22 modification shall be deemed to be a final administrative
23 decision and shall be subject to judicial review pursuant to
24 the provisions of the Administrative Review Law.
25 (215 ILCS 5/107.17) (from Ch. 73, par. 719.17)
26 Sec. 107.17. Governance Trustees. The business and
27 affairs of the Exchange shall be managed by an Executive
28 Committee with the advice and consent of the a Board of
29 Trustees.
30 There shall be 2 classes of trustees: Subscriber
31 trustees and public trustees. Both public trustees and
32 subscriber trustees shall be elected by a majority vote of
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1 the subscribers. In addition, the public trustees shall be
2 approved by the Director.
3 The trustees shall be 13 in number. There shall be 5
4 public trustees who shall be individual persons who are not
5 insurers, subscribers, exchange brokers, or employees of
6 insurers, subscribers, exchange brokers, syndicates, or
7 affiliates thereof.
8 The Executive Committee shall be composed of 3 public
9 trustees elected by the Board. Members of the Executive
10 Committee shall serve for a term of 3 years, except that of
11 the initial members of the Executive Committee, one member
12 shall serve for a term of one year, one member shall serve
13 for a term of 2 years, and one member shall serve for a term
14 of 3 years. The terms of the initial members of the
15 Executive Committee shall be determined by lot.
16 All decisions of the Executive Committee, except those of
17 a ministerial nature that may be delegated by the Board,
18 shall be subject to the approval of the Board. All action of
19 the Executive Committee shall be approved unless disapproved
20 on a recorded vote by 9 members of the Board.
21 (Source: P.A. 89-206, eff. 7-21-95; 89-669, eff. 1-1-97.)
22 (215 ILCS 5/107.27) (from Ch. 73, par. 719.27)
23 Sec. 107.27. Syndicate trust account; certificates of
24 guaranty.
25 (a) In addition to any other requirements imposed by
26 this Article the Board may require each syndicate to maintain
27 a trust or custodial account in such amounts as the Board may
28 determine by rule; provided that, except by special order of
29 the Board, no syndicate may be required to maintain in the
30 trust or custodial account an amount in excess of 50% of the
31 amount of its surplus as regards policyholders as shown by
32 its most recent audited report. Any trust or custodial
33 account so established shall be for the benefit of all
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1 policyholders and claimants of the syndicate for losses
2 arising out of and within the coverage of insurance risks or
3 obligations underwritten by the syndicate. Upon entry of an
4 Order of Liquidation against a syndicate all amounts in the
5 trust or custodial account shall be immediately transferred
6 to the Association created under Section 107.26 to be used to
7 investigate, negotiate, and satisfy the syndicate's
8 outstanding insurance obligations. Expenses of the
9 Association or the Liquidator in performing these functions
10 may be paid from the insolvent syndicate's trust or custodial
11 account upon application to and approval by the Liquidation
12 Court. The Board shall provide by rule for the establishment
13 and maintenance of such trust or custodial accounts including
14 the investment of funds held in such accounts. Any amounts
15 deposited into a trust or custodial account required to be
16 maintained by this Section shall be an asset of the
17 syndicate.
18 (b) The Board shall determine limitations on the amount
19 of insurance or reinsurance written or assumed by a syndicate
20 under subsection (c) of Section 107.10. In addition to the
21 capitalization requirement under Section 107.07 a syndicate
22 may proportionately increase its ratio of net premiums to
23 capitalization, pursuant to rules adopted by the Board, by
24 providing security in the form of certificates of guaranty or
25 in the form of direct obligations of a member bank of the
26 Federal Reserve System. Any such certificate of guaranty or
27 bank obligation shall be for the benefit of all policyholders
28 and claimants of the syndicate for losses arising out of and
29 within the coverage of insurance risks or obligations
30 underwritten by the syndicate. Upon entry of an Order of
31 Liquidation against a syndicate, amounts payable under
32 certificates of guaranty or bank obligations shall
33 immediately be paid to the Association created under Section
34 107.26 to be used to satisfy the syndicate's outstanding
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1 insurance obligations. The Board by rule shall establish the
2 form and amounts of such certificates or obligations and
3 standards for determining the security necessary to ensure
4 performance under them. The Board may provide for different
5 limitations by line or in the aggregate based on the
6 existence or non-existence of certificates of guaranty or
7 bank obligations and the type of security backing such
8 certificates or obligations.
9 (Source: P.A. 89-97, eff. 7-7-95; 89-206, eff. 7-21-95.)
10 (215 ILCS 5/107.30 new)
11 Sec. 107.30. Letters of credit. If approved by the
12 Board of Trustees, a syndicate may utilize letters of credit
13 that meet the requirements of Section 173.1(2)(c) and Section
14 173.1(3)(A) of this Code.
15 (215 ILCS 5/107.31 new)
16 Sec. 107.31. Information required from applicants.
17 (a) A person desiring to form an insurance company for
18 the purpose of doing business as a syndicate shall apply to
19 the Exchange and provide such information the Exchanges deems
20 necessary. The information shall be submitted on forms
21 provided by the Exchange. The information required may
22 include, but is not limited to, the information specified in
23 Sections 131.5 and 155.04 of this Code.
24 (b) If, after a review of the application and other
25 relevant information, the Exchange finds the applicant to be
26 a fit and proper person to form a syndicate, the Exchange
27 shall notify the Director of that finding in writing.
28 (215 ILCS 5/107.14 rep.)
29 Section 95. The Illinois Insurance Code is amended by
30 repealing Section 107.14.
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1 (215 ILCS 5/493.1 rep.)
2 Section 97. The Illinois Insurance Code is amended by
3 repealing Section 493.1.
4 Section 99. Effective date. This Section and Sections
5 91 and 97 of this Act take effect upon becoming law; Sections
6 1 through 55, 93, and 95 of this Act take effect January 1,
7 1998.