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90_HB0223ccr001
SRS90HB0223MNbmccr2
1 90TH GENERAL ASSEMBLY
2 CONFERENCE COMMITTEE REPORT
3 ON HOUSE BILL 223
4 -------------------------------------------------------------
5 -------------------------------------------------------------
6 To the President of the Senate and the Speaker of the
7 House of Representatives:
8 We, the conference committee appointed to consider the
9 differences between the houses in relation to Senate
10 Amendments Nos. 1 and 2 to House Bill 223, recommend the
11 following:
12 (1) that the Senate recede from Senate Amendments Nos. 1
13 and 2; and
14 (2) that House Bill 223 be amended by replacing the
15 title with the following:
16 "AN ACT concerning insurance."; and
17 by replacing everything after the enacting clause with the
18 following:
19 "Section 1. Short title. This Act may be cited as the
20 Employee Leasing Company Act.
21 Section 5. Purpose. For the purpose of ensuring that an
22 employer that leases some or all of its workers properly
23 obtains workers' compensation insurance coverage for all of
24 its employees, including those leased from another entity,
25 and that premium is paid commensurate with exposure and
26 anticipated claim experience, this Act is required to
27 regulate employee leasing companies.
28 Section 10. Applicability. This Act applies to all
29 policies issued, renewed, or delivered after the effective
30 date of this Act.
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1 Section 15. Definitions. In this Act:
2 "Department" means the Illinois Department of Insurance.
3 "Employee leasing arrangement" means an arrangement,
4 under contract or otherwise, whereby one business or other
5 entity leases all or a majority number of its workers from
6 another business. Employee leasing arrangements include, but
7 are not limited to, full service employee leasing
8 arrangements, long-term temporary arrangements, and any other
9 arrangement that involves the allocation of employment
10 responsibilities among 2 or more entities. For purposes of
11 this Act, "employee leasing arrangement" does not include
12 arrangements to provide temporary help service. "Temporary
13 help service" means a service whereby an organization hires
14 its own employees and assigns them to clients for a finite
15 time period to support or supplement the client's work force
16 in special work situations such as employee absences,
17 temporary skill shortages, and seasonal workloads.
18 "Leased employee" means a person performing services for
19 a lessee under an employee leasing arrangement.
20 "Lessee" or "client company" means an entity that obtains
21 all or part of its work force from another entity through an
22 employee leasing arrangement or that employs the services of
23 an entity through an employee leasing arrangement.
24 "Lessor" or "employee leasing company" means an entity
25 that grants a written lease to a lessee through an employee
26 leasing arrangement.
27 "Long-term temporary arrangement" means an arrangement
28 where all or a majority number of employees from one company
29 are leased to another for a period in excess of 6 months or
30 consecutive periods equal to or greater than one year.
31 "Premium subject to dispute" means the insured has
32 provided a written notice of dispute of the premium to the
33 insurer or service carrier, has initiated any applicable
34 proceeding for resolving these disputes as prescribed by law
35 or rating organization rule, or has initiated litigation
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1 regarding the premium dispute. The insured must have
2 detailed the specific areas of dispute and provided an
3 estimate of the premium the insured believes to be correct.
4 The insured must have paid any undisputed portion of the
5 bill.
6 "Residual market mechanism" means the residual market
7 mechanism as defined in Section 468 of the Illinois Insurance
8 Code.
9 Section 20. Registration.
10 (a) An employee leasing company may not engage in
11 business in this State without first registering with the
12 Department. A corporation, partnership, sole proprietorship,
13 or other business entity that provides staff, personnel, or
14 employees to be employed in this State to other businesses
15 pursuant to a lease arrangement or agreement shall, before
16 becoming eligible to be issued any policy of workers'
17 compensation insurance, register with the Department. The
18 registration shall:
19 (1) identify the name of the lessor;
20 (2) identify the address of the principal place of
21 business of the lessor and the address of each office it
22 maintains within this State;
23 (3) include the lessor's taxpayer or employer
24 identification number;
25 (4) include a list by jurisdiction of each and
26 every name that the lessor has operated under in the
27 preceding 5 years including any alternative names and
28 names of predecessors and, if known, successor business
29 entities;
30 (5) include a list of the officers and directors of
31 the employee leasing company or its predecessors,
32 successors, or alter egos in the preceding 5 years; and
33 (6) include a list of each and every cancellation
34 or nonrenewal of workers' compensation insurance that has
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1 been issued to the lessor or any predecessor in the
2 preceding 5 years. The list shall include the policy or
3 certificate number, name of insurer or other provider of
4 coverage, date of cancellation, and reason for
5 cancellation. If coverage has not been cancelled or
6 nonrenewed, the registration shall include a sworn
7 affidavit signed by the chief executive officer of the
8 lessor attesting to that fact.
9 Each employee leasing company registrant shall pay to the
10 Department upon initial registration, and upon each renewal
11 annually thereafter, a registration fee of $500.
12 Each employee leasing company shall maintain accounting
13 and employment records relating to all employee leasing
14 activities for a minimum of 3 calendar years.
15 (b) Any lessor of employees whose workers' compensation
16 insurance has been terminated within the past 5 years in any
17 jurisdiction due to a determination that an employee leasing
18 arrangement was being utilized to avoid premium otherwise
19 payable by lessees shall be ineligible to register with the
20 Department or to remain registered, if previously registered.
21 (c) Persons filing registration statements pursuant to
22 this Section shall notify the Department as to any changes in
23 any information provided pursuant to this Section.
24 (d) The Department shall maintain a list of those
25 lessors of employees who are satisfactorily registered with
26 the Department.
27 (f) The Department may prescribe any forms that are
28 necessary to promote the efficient administration of this
29 Section.
30 (g) Any lessor of employees that was doing business in
31 this State prior to enactment of this Act shall register with
32 the Department within 60 days of the effective date of this
33 Act.
34 Section 25. Reporting requirement.
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1 (a) A lessor shall maintain and furnish once every 12
2 months or in the event of a termination of the employee
3 leasing arrangement sufficient information to the insurer,
4 who shall submit such information to permit the calculation
5 of an experience modification factor by a rating organization
6 licensed under Section 459 of the Illinois Insurance Code for
7 each lessee. This information shall be submitted in a manner
8 consistent with a licensed rating organization's data
9 submission requirements and shall include but not be limited
10 to the following:
11 (1) the lessee's corporate name, or operating name
12 if not a corporation, and address;
13 (2) the lessee's taxpayer or employer
14 identification number;
15 (3) the lessee's risk identification number;
16 (4) a listing of all leased employees associated
17 with each lessee, the applicable classification code, and
18 payroll; and
19 (5) claims information grouped by lessee and any
20 other information necessary to permit the calculation of
21 an experience modification factor for each lessee.
22 (b) In the event that a lessee's experience modification
23 factor exceeds the lessor's experience modification factor by
24 50% at the inception of the employee leasing arrangement, the
25 lessee's experience modification factor shall be utilized to
26 calculate the premium or costs charged to the lessee for
27 workers' compensation coverage for a period of 2 years.
28 Thereafter, the premium charged by the insurance company for
29 inclusion of a lessee under a lessor's policy may be
30 calculated on the basis of the lessor's experience
31 modification factor.
32 Section 30. Responsibility for policy issuance and
33 continuance.
34 (a) When a workers' compensation policy written to cover
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1 leased employees is issued to the employee leasing company as
2 the named insured, the client company shall be identified
3 thereon by the attachment of an appropriate endorsement
4 indicating that the policy provides coverage for leased
5 employees in accordance with Illinois law. The endorsement
6 shall, at a minimum, provide for the following:
7 (1) Coverage under the policy shall be limited to
8 the named insured's employees leased to the lessees.
9 (2) The experience of the employees leased to the
10 particular lessee shall be separately maintained by the
11 lessor.
12 (3) Cancellation of the policy shall not affect the
13 rights and obligations of the named insured as an
14 employee leasing company with respect to any other
15 workers' compensation and employers' liability policy
16 issued to the named insured.
17 (b) The insurer of the lessor may take all reasonable
18 steps to ascertain exposure under the policy and collect the
19 appropriate premium through the following procedures:
20 (1) complete description of the lessor's
21 operations;
22 (2) periodic reporting of the covered lessee's
23 payroll, classifications, experience rating modification
24 factors, and jurisdictions with exposure. This reporting
25 must be supplemented by a submission of Internal Revenue
26 Service Form 941 or its equivalent to the carrier on a
27 quarterly basis;
28 (3) physical inspection of the client company
29 premises;
30 (4) audit of the lessor's operations; and
31 (5) any other reasonable measures to determine the
32 appropriate premium.
33 (c) The lessor shall notify the insurer or a licensed
34 rating organization 30 days prior to the effective date of
35 termination or immediately upon notification of cancellation
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1 by the lessor of an employee leasing arrangement with the
2 lessee in order to allow sufficient time to calculate an
3 experience modification factor for the lessee.
4 (d) The lessor shall provide proof of workers'
5 compensation insurance to each lessee within 30 days of the
6 coverage effective date. Notice of any coverage changes
7 shall be provided to the lessor and to each lessee within 30
8 days of the effective date of the change.
9 (e) Nothing in this Act shall limit an insurer from
10 utilizing schedule credits, debits, or other rating plans
11 filed with the Department for calculation of a lessor's or
12 lessee's premium.
13 Section 35. Lessee's obligation. Nothing in this Act
14 shall have any effect on the statutory obligation, if any, of
15 a lessee to secure workers' compensation coverage for
16 employees not provided, supplied, or maintained by a lessor
17 pursuant to an employee leasing arrangement.
18 Section 40. Insurer or service carrier audit. Insurers
19 shall audit policies issued through the residual market
20 pursuant to Section 30 of this Act within 90 days of the
21 policy effective date and may conduct quarterly audits
22 thereafter. Insurers may audit policies issued through the
23 voluntary market within 90 days of the policy effective date
24 and shall conduct audits thereafter. The purpose of the
25 audit will be to determine whether all classifications,
26 experience modification factors, and estimated payroll
27 utilized with respect to the development of the premium
28 charged to the lessor are appropriate.
29 Section 45. Exclusivity and vicarious liability. Subject
30 to any contrary provisions of the contract between the client
31 and the employee leasing company, the employee leasing
32 arrangement that exists between an employee leasing company
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1 and its clients shall be interpreted for purposes of
2 insurance, bonding, and employers' liability as follows:
3 (1) The employee leasing company shall be entitled
4 along with the client to the exclusivity of the remedy
5 under both the workers' compensation and employers'
6 liability provisions of a workers' compensation policy or
7 plan that either party has secured.
8 (2) An employee leasing company is not liable for
9 the acts, errors, or omissions of a client or of any
10 leased employee acting under the sole and exclusive
11 direction and control of a client. A client shall not be
12 liable for the acts, errors, or omissions of an employee
13 leasing company or of any employee of an employee leasing
14 company acting under the sole and exclusive direction or
15 control of an employee leasing company. Nothing herein
16 shall limit any contractual liability between an employee
17 leasing company and the client company, nor shall the
18 same limit any liability or responsibility imposed by
19 this Act.
20 (3) Employees leased to a client by an employee
21 leasing company shall be considered as the employees of
22 the client for the purposes of general liability
23 insurance, automobile insurance, fidelity bonds, surety
24 bonds, and liquor liability insurance carried by the
25 client. Employees leased to a client by an employee
26 leasing company are not deemed employees of the employee
27 leasing company for purposes of general liability
28 insurance, automobile insurance, fidelity bonds, surety
29 bonds, and liquor liability insurance carried by the
30 employee leasing company unless the employees are
31 included by specific reference in the applicable
32 employment arrangement contract, insurance contract, or
33 bond.
34 Section 50. Grounds for removal of eligibility; order;
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1 hearing; review.
2 (a) When the Director of Insurance has cause to believe
3 that grounds for the removal of a registrant's eligibility
4 under this Section exists, he or she shall issue an order to
5 the employee leasing company stating the grounds upon which
6 the removal is based. The order shall be sent to the
7 employee leasing company by certified or registered mail.
8 The employee leasing company may in writing request a hearing
9 within 30 days of receipt of the order. If no written
10 request is made, the order shall be final upon the expiration
11 of the 30 days.
12 (b) If the employee leasing company requests a hearing
13 pursuant to this Section, the Director shall issue a written
14 notice of hearing sent to the employee leasing company by
15 certified or registered mail stating the following:
16 (1) a specified time for the hearing, which may not
17 be less than 20 days nor more than 30 days after receipt
18 of the notice of hearing; and
19 (2) a specific place for the hearing, which may be
20 either in the city of Springfield or in the county where
21 the employee leasing company's principal place of
22 business is located.
23 (c) After the hearing, or upon the failure of the
24 employee leasing company to appear at the hearing, the
25 Director of Insurance shall take such action as is deemed
26 advisable on written findings that shall be served on the
27 employee leasing company. The action of the Director of
28 Insurance shall be subject to review under and in accordance
29 with the Administrative Review Law.
30 Section 55. Criminal penalties. Any corporation,
31 partnership, sole proprietorship or other form of business
32 entity and any officer, director, general partner, agent,
33 representative, or employee of any of the foregoing who
34 knowingly utilizes or participates in any employee leasing
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1 agreement, arrangement, or mechanism for the purpose of: (i)
2 depriving one or more insurers of premium otherwise properly
3 payable, (ii) failing to remit premiums on behalf of a
4 client company, or (iii) otherwise converting moneys or other
5 funds remitted by the client company for payroll, insurance
6 premiums, or other benefits commits a Class A misdemeanor and
7 shall upon conviction be subject to restitution and a fine of
8 $1,000 or the amount specified in the offense, whichever is
9 greater.
10 Section 91. The Illinois Insurance Code is amended by
11 changing Sections 107.02, 107.06a, 491.1, 499.1, 534.3,
12 534.4, 538.4, 545, 546, 802.1, and 803.1 and adding Sections
13 107.28, 107.29, and 155.31 as follows:
14 (215 ILCS 5/107.02) (from Ch. 73, par. 719.02)
15 Sec. 107.02. Incorporation.
16 (a) There is hereby created an exchange for the
17 reinsurance and insurance of risks. Within 60 days after this
18 Act becomes law, the Director of Insurance shall appoint an
19 interim Board of Directors to adopt temporary by-laws, hire
20 employees, and take such other steps as are authorized or
21 necessary to establish the Exchange. When subscriptions
22 totalling $4,000,000 have been received pursuant to Section
23 107.07, the Board of Directors shall apply to the Director
24 for a Certificate of Authority. The Director shall approve
25 such Certificate within 30 days unless he determines that the
26 requirements of this Article have not been met and specifies
27 his objections in writing. Within 30 days after receiving
28 proof from the Exchange that the objections have been met,
29 the Director shall approve the application of the Exchange.
30 (b) After the effective date of this amendatory Act of
31 1997, the Director may organize, in accordance with
32 subsection (a), an additional exchange for the reinsurance
33 and insurance of risks. The additional exchange shall comply
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1 with the provisions of this Article.
2 (Source: P.A. 81-1509.)
3 (215 ILCS 5/107.06a) (from Ch. 73, par. 719.06a)
4 Sec. 107.06a. Organization under Illinois Insurance
5 Code.
6 (a) After December 31, 1997, a syndicate or limited
7 syndicate may only be organized pursuant to Sections 7, 8,
8 10, 11, 12, 14, 14.1 (other than subsection (d) thereof), 15
9 (other than subsection (d) thereof), 18, 19, 20, 21, 22, 23,
10 25, 27.1, 28, 28.1, 28.2, 29, 30, 31, 32, 32.1, 33, and 35.1
11 and Article X of this Code, to carry on the business of a
12 syndicate, or limited syndicate under Article V-1/2 of this
13 Code; provided that such syndicate is admitted to the
14 Illinois Insurance Exchange.
15 (b) After December 31, 1997, syndicates and limited
16 syndicates are subject to the following:
17 (1) Articles I, IIA, VIII, VIII 1/2, X, XI, XII,
18 XII 1/2, XIII, XIII 1/2, XXIV, XXV, and XXVIII (except
19 for Sections 445, 445.1, 445.2, 445.3, 445.4, and 445.5)
20 of this Code;
21 (2) Subsections (2) and (3) of Section 155.04 and
22 Sections 13, 132.1 through 140, 141a, 144, 155.01,
23 155.03, 378, 379.1, 393.1, 395, and 396 of this Code;
24 (3) the Reinsurance Intermediary Act; and
25 (4) the Producer Controlled Insurer Act.
26 (c) No other provision of this Insurance Code shall be
27 applicable to any such syndicate or limited syndicate except
28 as provided in this Article V-1/2.
29 (Source: P.A. 89-97, eff. 7-7-95.)
30 (215 ILCS 5/107.28 new)
31 Sec. 107.28. Syndicate reorganization.
32 (a) A syndicate may seek the approval of the Director
33 for reorganization as provided in this Section.
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1 (b) The Director shall approve the reorganization,
2 merger, or consolidation so long as:
3 (1) the resulting company is authorized to transact
4 the kind or kinds of business the syndicate was
5 authorized to transact as of the effective date of this
6 amendatory Act of 1997;
7 (2) all applicable provisions of this Code are
8 satisfied, except that for purposes of complying with
9 Article VIII the Director may grant an extension of time,
10 not to exceed one 6-month period, within which the
11 reorganized, merged, or consolidated company shall divest
12 itself of any nonadmitted assets held by the syndicate on
13 or before the effective date of this amendatory Act of
14 1997; and
15 (3) the books and records of the syndicate
16 accurately reflect its financial condition and affairs as
17 of the date of its most recently filed financial
18 statement, and no material change in its financial
19 condition or affairs has subsequently occurred.
20 (215 ILCS 5/107.29 new)
21 Sec. 107.29. Exchange operations runoff.
22 (a) The Board may adopt a plan of operation for the
23 orderly runoff of the operations of the exchange. The plan
24 of operation shall provide that all funds, legal rights,
25 title to property, and causes of action of the Illinois
26 Insurance Exchange including, but not limited to, all
27 assessments, subscription payments, proceeds, investments,
28 premium fees, surcharge receipts, and funds maintained under
29 Sections 107.26 and 107.27 and the rules or regulations of
30 the Illinois Insurance Exchange implementing those Sections
31 or any other provision of this Article, shall be accounted
32 for and paid over to the Director as receiver of any
33 delinquent syndicate in receivership after settlement of all
34 claims against the exchange.
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1 (1) In the event that 2 or more syndicates are then
2 in receivership, the amount paid over to each estate
3 shall be proportional to the relative size of the surplus
4 deficiency of each.
5 (2) Any excess remaining after the payment of any
6 and all claims against such receivership estates shall be
7 transferred, in equal shares, to the domestic companies
8 which result from the reorganization, merger, or
9 consolidation of former syndicates of the Illinois
10 Insurance Exchange.
11 (b) For purposes of this Section, "syndicate" means a
12 syndicate or a limited syndicate.
13 (215 ILCS 5/155.31 new)
14 Sec. 155.31. Insurance compliance self-evaluative
15 privilege.
16 (a) To encourage insurance companies and persons
17 conducting activities regulated under this Code, both to
18 conduct voluntary internal audits of their compliance
19 programs and management systems and to assess and improve
20 compliance with State and federal statutes, rules, and
21 orders, an insurance compliance self-evaluative privilege is
22 recognized to protect the confidentiality of communications
23 relating to voluntary internal compliance audits. The
24 General Assembly hereby finds and declares that protection of
25 insurance consumers is enhanced by companies' voluntary
26 compliance with this State's insurance and other laws and
27 that the public will benefit from incentives to identify and
28 remedy insurance and other compliance issues. It is further
29 declared that limited expansion of the protection against
30 disclosure will encourage voluntary compliance and improve
31 insurance market conduct quality and that the voluntary
32 provisions of this Section will not inhibit the exercise of
33 the regulatory authority by those entrusted with protecting
34 insurance consumers.
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1 (b)(1) An insurance compliance self-evaluative audit
2 document is privileged information and is not admissible as
3 evidence in any legal action in any civil, criminal, or
4 administrative proceeding, except as provided in subsections
5 (c) and (d) of this Section. Documents, communications,
6 data, reports, or other information created as a result of a
7 claim involving personal injury or workers' compensation made
8 against an insurance policy are not insurance compliance
9 self-evaluative audit documents and are admissible as
10 evidence in civil proceedings as otherwise provided by
11 applicable rules of evidence or civil procedure, subject to
12 any applicable statutory or common law privilege, including
13 but not limited to the work product doctrine, the
14 attorney-client privilege, or the subsequent remedial
15 measures exclusion.
16 (2) If any company, person, or entity performs or
17 directs the performance of an insurance compliance audit, an
18 officer or employee involved with the insurance compliance
19 audit, or any consultant who is hired for the purpose of
20 performing the insurance compliance audit, may not be
21 examined in any civil, criminal, or administrative proceeding
22 as to the insurance compliance audit or any insurance
23 compliance self-evaluative audit document, as defined in this
24 Section. This subsection (b)(2) does not apply if the
25 privilege set forth in subsection (b)(1) of this Section is
26 determined under subsection (c) or (d) not to apply.
27 (3) A company may voluntarily submit, in connection with
28 examinations conducted under this Article, an insurance
29 compliance self-evaluative audit document to the Director, or
30 his or her designee, as a confidential document under
31 subsection (f) of Section 132.5 of this Code without waiving
32 the privilege set forth in this Section to which the company
33 would otherwise be entitled; provided, however, that the
34 provisions in subsection (f) of Section 132.5 permitting the
35 Director to make confidential documents public pursuant to
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1 subsection (e) of Section 132.5 and access to the National
2 Association of Insurance Commissioners shall not apply to the
3 insurance compliance self-evaluative audit document so
4 voluntarily submitted. Nothing contained in this subsection
5 shall give the Director any authority to compel a company to
6 disclose involuntarily or otherwise provide an insurance
7 compliance self-evaluative audit document.
8 (c)(1) The privilege set forth in subsection (b) of this
9 Section does not apply to the extent that it is expressly
10 waived by the company that prepared or caused to be prepared
11 the insurance compliance self-evaluative audit document.
12 (2) In a civil or administrative proceeding, a court of
13 record may, after an in camera review, require disclosure of
14 material for which the privilege set forth in subsection (b)
15 of this Section is asserted, if the court determines one of
16 the following:
17 (A) the privilege is asserted for a fraudulent
18 purpose;
19 (B) the material is not subject to the privilege;
20 or
21 (C) even if subject to the privilege, the material
22 shows evidence of noncompliance with State and federal
23 statutes, rules and orders and the company failed to
24 undertake reasonable corrective action or eliminate the
25 noncompliance within a reasonable time.
26 (3) In a criminal proceeding, a court of record may,
27 after an in camera review, require disclosure of material for
28 which the privilege described in subsection (b) of this
29 Section is asserted, if the court determines one of the
30 following:
31 (A) the privilege is asserted for a fraudulent
32 purpose;
33 (B) the material is not subject to the privilege;
34 (C) even if subject to the privilege, the material
35 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
35 subsection (d)(5) of this Section.
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1 (3) Upon the filing of a petition under this subsection,
2 the court shall issue an order scheduling, within 45 days
3 after the filing of the petition, an in camera hearing to
4 determine whether the insurance compliance self-evaluative
5 audit document or portions of the document are privileged
6 under this Section or subject to disclosure.
7 (4) The court, after an in camera review, may require
8 disclosure of material for which the privilege in subsection
9 (b) of this Section is asserted if the court determines,
10 based upon its in camera review, that any one of the
11 conditions set forth in subsection (c)(2)(A) through (C) is
12 applicable as to a civil or administrative proceeding or that
13 any one of the conditions set forth in subsection (c)(3)(A)
14 through (D) is applicable as to a criminal proceeding. Upon
15 making such a determination, the court may only compel the
16 disclosure of those portions of an insurance compliance
17 self-evaluative audit document relevant to issues in dispute
18 in the underlying proceeding. Any compelled disclosure will
19 not be considered to be a public document or be deemed to be
20 a waiver of the privilege for any other civil, criminal, or
21 administrative proceeding. A party unsuccessfully opposing
22 disclosure may apply to the court for an appropriate order
23 protecting the document from further disclosure.
24 (5) A company asserting the insurance compliance
25 self-evaluative privilege in response to a request for
26 disclosure under this subsection (d) shall provide to the
27 Director, State's Attorney, or Attorney General, as the case
28 may be, at the time of filing any objection to the
29 disclosure, all of the following information:
30 (A) The date of the insurance compliance
31 self-evaluative audit document.
32 (B) The identity of the entity conducting the
33 audit.
34 (C) The general nature of the activities covered by
35 the insurance compliance audit.
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1 (D) An identification of the portions of the
2 insurance compliance self-evaluative audit document for
3 which the privilege is being asserted.
4 (e) (1) A company asserting the insurance compliance
5 self-evaluative privilege set forth in subsection (b) of this
6 Section has the burden of demonstrating the applicability of
7 the privilege. Once a company has established the
8 applicability of the privilege, a party seeking disclosure
9 under subsections (c)(2)(A) or (C) of this Section has the
10 burden of proving that the privilege is asserted for a
11 fraudulent purpose or that the company failed to undertake
12 reasonable corrective action or eliminate the noncompliance
13 with a reasonable time. The Director, State's Attorney, or
14 Attorney General seeking disclosure under subsection (c)(3)
15 of this Section has the burden of proving the elements set
16 forth in subsection (c)(3)of this Section.
17 (2) The parties may at any time stipulate in proceedings
18 under subsections (c) or (d) of this Section to entry of an
19 order directing that specific information contained in an
20 insurance compliance self-evaluative audit document is or is
21 not subject to the privilege provided under subsection (b) of
22 this Section.
23 (f) The privilege set forth in subsection (b) of this
24 Section shall not extend to any of the following:
25 (1) documents, communications, data, reports, or
26 other information required to be collected, developed,
27 maintained, reported, or otherwise made available to a
28 regulatory agency pursuant to this Code, or other federal
29 or State law, rule, or order;
30 (2) information obtained by observation or
31 monitoring by any regulatory agency; or
32 (3) information obtained from a source independent
33 of the insurance compliance audit.
34 (g) As used in this Section:
35 (1) "Insurance compliance audit" means a voluntary,
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1 internal evaluation, review, assessment, or audit not
2 otherwise expressly required by law of a company or an
3 activity regulated under this Code, or other State or
4 federal law applicable to a company, or of management
5 systems related to the company or activity, that is
6 designed to identify and prevent noncompliance and to
7 improve compliance with those statues, rules, or orders.
8 An insurance compliance audit may be conducted by the
9 company, its employees, or by independent contractors.
10 (2) "Insurance compliance self-evaluative audit
11 document" means documents prepared as a result of or in
12 connection with and not prior to an insurance compliance
13 audit. An insurance compliance self-evaluation audit
14 document may include a written response to the findings
15 of an insurance compliance audit. An insurance
16 compliance self-evaluative audit document may include,
17 but is not limited to, as applicable, field notes and
18 records of observations, findings, opinions, suggestions,
19 conclusions, drafts, memoranda, drawings, photographs,
20 computer-generated or electronically recorded
21 information, phone records, maps, charts, graphs, and
22 surveys, provided this supporting information is
23 collected or developed for the primary purpose and in the
24 course of an insurance compliance audit. An insurance
25 compliance self-evaluative audit document may also
26 include any of the following:
27 (A) an insurance compliance audit report
28 prepared by an auditor, who may be an employee of
29 the company or an independent contractor, which may
30 include the scope of the audit, the information
31 gained in the audit, and conclusions and
32 recommendations, with exhibits and appendices;
33 (B) memoranda and documents analyzing portions
34 or of all of the insurance compliance audit report
35 and discussing potential implementation issues;
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1 (C) an implementation plan that addresses
2 correcting past noncompliance, improving current
3 compliance, and preventing future noncompliance; or
4 (D) analytic data generated in the course of
5 conducting the insurance compliance audit.
6 (3) "Company" has the same meaning as provided in
7 Section 2 of this Code.
8 (h) Nothing in this Section shall limit, waive, or
9 abrogate the scope or nature of any statutory or common law
10 privilege including, but not limited to, the work product
11 doctrine, the attorney-client privilege, or the subsequent
12 remedial measures exclusion.
13 (215 ILCS 5/491.1) (from Ch. 73, par. 1065.38-1)
14 Sec. 491.1. Definitions. In addition to the definitions
15 in Section 2, the following definitions apply to this
16 Article.
17 (a) Insurance. Insurance is any of the classes of
18 insurance found in Section 4.
19 (b) Insurance Producer. An insurance producer is an
20 individual who solicits, negotiates, effects, procures,
21 renews, continues or binds policies of insurance covering
22 property or risks located in Illinois.
23 (c) License. A license is a document authorizing an
24 individual to act as an insurance producer, limited insurance
25 representative or temporary insurance producer, as specified
26 in such document.
27 (d) Limited Insurance Representative. A limited
28 insurance representative is an individual appointed by an
29 insurance company to represent that company regarding the
30 types of insurance set forth in Section 495.1.
31 (e) Registered Firm. A registered firm is a
32 corporation, or partnership, or limited liability company
33 which transacts the business of insurance as an insurance
34 agency.
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1 (Source: P.A. 85-334.)
2 (215 ILCS 5/499.1) (from Ch. 73, par. 1065.46-1)
3 Sec. 499.1. Registered firms.
4 (a) Any corporation, or partnership, or limited
5 liability company transacting insurance business as an
6 insurance agency shall register with the Director before
7 transacting insurance business in this State. Such
8 registration shall remain in effect as long as the firm pays
9 the annual fee required by Section 509.1 of this Code by the
10 date due, unless the registration is revoked or suspended
11 pursuant to Section 505.1 of this Code.
12 (b) Each firm required to register before acting as a
13 registered firm pursuant to this Article shall appoint one or
14 more licensed insurance producers who are officers,
15 directors, or partners in the firm to be responsible for the
16 firm's compliance with the insurance laws and Title 50 of the
17 Illinois Administrative Code. Such individual or individuals
18 shall submit to the Director a registration form and the fees
19 required by Section 509.1. The Director shall prescribe the
20 registration form and may require any documents reasonably
21 necessary to verify the information contained in the
22 registration form. Within 30 days of a change in officers,
23 directors, or partners who are appointed to be responsible
24 for the firm's compliance with the insurance laws and Title
25 50 of the Illinois Administrative Code, the firm shall report
26 the change to the Department.
27 (c) The registered firm shall inform the Director in
28 writing of a change in its business address within 30 days of
29 such change.
30 (d) Each registered firm shall disclose its members,
31 officers or directors who are authorized to act as insurance
32 producers, and report any changes in such personnel to the
33 Director within 30 days of such changes.
34 (e) A registered firm may not be a national bank located
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1 in a city, village or incorporated town with a population
2 exceeding 5,000 according to the last federal census, a State
3 bank or a trust company, or a subsidiary, affiliate, officer
4 or employee of any such national or State bank or trust
5 company contributing directly or indirectly to the income of
6 such bank or trust company any profit or fees or part thereof
7 derived from the solicitation, negotiation or effecting of
8 insurance.
9 (Source: P.A. 89-240, eff. 1-1-96.)
10 (215 ILCS 5/534.3) (from Ch. 73, par. 1065.84-3)
11 Sec. 534.3. Covered claim; unearned premium defined.
12 (a) "Covered claim" means an unpaid claim for a loss
13 arising out of and within the coverage of an insurance policy
14 to which this Article applies and which is in force at the
15 time of the occurrence giving rise to the unpaid claim,
16 including claims presented during any extended discovery
17 period which was purchased from the company before the entry
18 of a liquidation order or which is purchased or obtained from
19 the liquidator after the entry of a liquidation order, made
20 by a person insured under such policy or by a person
21 suffering injury or damage for which a person insured under
22 such policy is legally liable, and for unearned premium, if:
23 (i) The company issuing the policy becomes an
24 insolvent company as defined in Section 534.4 after the
25 effective date of this Article; and
26 (ii) The claimant or insured is a resident of this
27 State at the time of the insured occurrence, or the
28 property from which a first party claim for damage to
29 property arises is permanently located in this State or,
30 in the case of an unearned premium claim, the
31 policyholder is a resident of this State at the time the
32 policy was issued; provided, that for entities other than
33 an individual, the residence of a claimant, insured, or
34 policyholder is the state in which its principal place of
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1 business is located at the time of the insured event.
2 (b) "Covered claim" does not include:
3 (i) any amount in excess of the applicable limits
4 of liability provided by an insurance policy to which
5 this Article applies; nor
6 (ii) any claim for punitive or exemplary damages;
7 nor
8 (iii) any first party claim by an insured who is an
9 affiliate of the insolvent company; nor
10 (iv) any first party or third party claim by or
11 against an insured whose net worth on December 31 of the
12 year next preceding the date the insurer becomes an
13 insolvent insurer exceeds $25,000,000 $50 million;
14 provided that an insured's net worth on such date shall
15 be deemed to include the aggregate net worth of the
16 insured and all of its affiliates as calculated on a
17 consolidated basis. However, this exclusion shall not
18 apply to third party claims against the insured where the
19 insured has applied for or consented to the appointment
20 of a receiver, trustee, or liquidator for all or a
21 substantial part of its assets, filed a voluntary
22 petition in bankruptcy, filed a petition or an answer
23 seeking a reorganization or arrangement with creditors or
24 to take advantage of any insolvency law, or if an order,
25 judgment, or decree is entered by a court of competent
26 jurisdiction, on the application of a creditor,
27 adjudicating the insured bankrupt or insolvent or
28 approving a petition seeking reorganization of the
29 insured or of all or substantial part of its assets; nor
30 (v) any claim for any amount due any reinsurer,
31 insurer, insurance pool, or underwriting association as
32 subrogated recoveries, reinsurance recoverables,
33 contribution, indemnification or otherwise. No such claim
34 held by a reinsurer, insurer, insurance pool, or
35 underwriting association may be asserted in any legal
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1 action against a person insured under a policy issued by
2 an insolvent company other than to the extent such claim
3 exceeds the Fund obligation limitations set forth in
4 Section 537.2 of this Code.
5 (c) "Unearned Premium" means the premium for the
6 unexpired period of a policy which has been terminated prior
7 to the expiration of the period for which premium has been
8 paid and does not mean premium which is returnable to the
9 insured for any other reason.
10 (Source: P.A. 89-97, eff. 7-7-95.)
11 (215 ILCS 5/534.4) (from Ch. 73, par. 1065.84-4)
12 Sec. 534.4. "Insolvent company" means a company
13 organized as a stock company, mutual company, reciprocal or
14 Lloyds (a) which holds a certificate of authority to transact
15 insurance in this State either at the time the policy was
16 issued or when the insured event occurred, or any company
17 which has assumed such policy obligation through merger,
18 consolidation or reinsurance, whether or not such assuming
19 company held a certificate of authority to transact insurance
20 in this State at the time such policy was issued or when the
21 insured event occurred; and (b) against which a final an
22 Order of Liquidation with a finding of insolvency to which
23 there is no further right of appeal has been entered by a
24 court of competent jurisdiction in the company's State of
25 domicile after the effective date of this Article, and which
26 Order of Liquidation has not been stayed or been the subject
27 of a writ or supersedeas or other comparable order.
28 (Source: P.A. 85-576.)
29 (215 ILCS 5/538.4) (from Ch. 73, par. 1065.88-4)
30 Sec. 538.4. Legal actions by Fund. The Fund may sue or
31 be sued, including taking any legal actions necessary or
32 proper for recovery of any unpaid assessments under Sections
33 537.1 or 537.6. The Fund's power to sue includes, but is not
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1 limited to, the power and right to intervene as a party
2 before any court that has jurisdiction over an insolvent
3 insurer when the Fund is a creditor or potential creditor of
4 the insolvent insurer.
5 (Source: P.A. 89-97, eff. 7-7-95.)
6 (215 ILCS 5/545) (from Ch. 73, par. 1065.95)
7 Sec. 545. Effect of paid claims.
8 (a) Every insured or claimant seeking the protection of
9 this Article shall cooperate with the Fund to the same extent
10 as such person would have been required to cooperate with the
11 insolvent company. The Fund shall have all the rights, duties
12 and obligations under the policy to the extent of the covered
13 claim payment, provided the Fund shall have no cause of
14 action against the insured of the insolvent company for any
15 sums it has paid out except such causes of action as the
16 insolvent company would have had if such sums had been paid
17 by the insolvent company and except as provided in paragraph
18 (d) of this Section.
19 (b) The Fund and any similar organization in another
20 state shall be recognized as claimants in the liquidation of
21 an insolvent company for any amounts paid by them on covered
22 claims obligations as determined under this Article or
23 similar laws in other states and shall receive dividends at
24 the priority set forth in paragraph (d) of subsection (1) of
25 Section 205 of this Code. The liquidator of an insolvent
26 company shall be bound by determinations of covered claim
27 eligibility under the Act and by settlements of claims made
28 the amounts of covered claim payments by the Fund or a
29 similar organization in another state on the receipt of
30 certification of such payments, to the extent those
31 determinations or settlements satisfy obligations of the
32 Fund, but the receiver shall not be bound in any way by those
33 determinations or settlements to the extent that there
34 remains a claim in the estate for amounts in excess of the
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1 payments by the Fund. In submitting their claim for covered
2 claim payments the Fund and any similar organization in
3 another state shall not be subject to the requirements of
4 Sections 208 and 209 of this Code and shall not be affected
5 by the failure of the person receiving a covered claim
6 payment to file a proof of claim.
7 (c) The expenses of the Fund and of any similar
8 organization in any other state, other than expenses incurred
9 in the performance of duties under Section 547 or similar
10 duties under the statute governing a similar organization in
11 another state, shall be accorded the same priority as the
12 liquidator's expenses. The liquidator shall make prompt
13 reimbursement to the Fund and any similar organization for
14 such expense payments.
15 (d) The Fund has the right to recover from the following
16 persons the amount of any covered claims and allocated claims
17 expenses which the Fund paid or incurred on behalf of such
18 person in satisfaction, in whole or in part, of liability
19 obligations of such person to any other person:
20 (i) any insured whose net worth on December 31 of
21 the year next preceding the date the company becomes an
22 insolvent company exceeds $25,000,000 $50 million;
23 provided that an insured's net worth on such date shall
24 be deemed to include the aggregate net worth of the
25 insured and all of its affiliates as calculated on a
26 consolidated basis.
27 (ii) any insured who is an affiliate of the
28 insolvent company.
29 (Source: P.A. 89-206, eff. 7-21-95.)
30 (215 ILCS 5/546) (from Ch. 73, par. 1065.96)
31 Sec. 546. Other insurance. Non-duplication of recovery.
32 (a) An insured or claimant shall be required first to
33 exhaust all coverage provided by any other insurance policy,
34 regardless of whether or not such other insurance policy was
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1 written by a member company, if the claim under such other
2 policy arises from the same facts, injury, or loss that gave
3 rise to the covered claim against the Fund. The Fund's
4 obligation under Section 537.2 shall be reduced by the amount
5 recovered or recoverable, whichever is greater, under such
6 other insurance policy. Where such other insurance policy
7 provides uninsured or underinsured motorist coverage, the
8 amount recoverable shall be deemed to be the full applicable
9 limits of such coverage. To the extent that the Fund's
10 obligation under Section 537.2 is reduced by application of
11 this Section, the liability of the person insured by the
12 insolvent insurer's policy for the claim shall be reduced in
13 the same amount. Any insured or claimant having a covered
14 claim against the Fund shall be required first to exhaust his
15 rights under any provision in any other insurance policy
16 which may be applicable to the claim, whether or not the
17 insurance policy was written by a member company. Any amount
18 payable on a covered claim under this Article shall be
19 reduced by the amount of such recovery under such insurance
20 policy.
21 (b) Any insured or claimant having a claim which may be
22 recovered under more than one insurance guaranty fund or its
23 equivalent shall seek recovery first from the Fund of the
24 place of residence of the insured except that if it is a
25 first party claim for damage to property with a permanent
26 location, he shall first seek recovery from the Fund of the
27 location of the property; if it is a workers' compensation
28 claim, he shall first seek recovery from the Fund of the
29 residence of the claimant. Any recovery under this Article
30 shall be reduced by the amount of the recovery from any other
31 insurance guaranty fund or its equivalent.
32 (Source: P.A. 89-97, eff. 7-7-95.)
33 (215 ILCS 5/802.1)
34 Sec. 802.1. Definitions. As used in this Article:
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1 (a) "Commercial Building" means any building, other than
2 a residence, permanently affixed to realty located in
3 Illinois, including basements, footings, foundations, septic
4 systems and underground pipes directly servicing the
5 building, but does not include sidewalks, driveways, parking
6 lots, living units, land, trees, plants, crops or
7 agricultural field drainage tile.
8 (b) "Commercial Coverage" means mine subsidence
9 insurance for a commercial building.
10 (c) "Insurer" or "Insurers" means insurance companies
11 and reciprocals licensed and authorized to write Class 3
12 policies of insurance, as defined in this Code, within
13 Illinois.
14 (d) "Living Unit" shall mean that physical portion
15 designated for separate ownership or occupancy for
16 residential purposes, of a building or group of buildings,
17 permanently affixed to realty located in Illinois, having
18 elements which are owned or used in common, including a
19 condominium unit, a cooperative unit or any other similar
20 unit.
21 (e) "Living Unit Coverage" means mine subsidence
22 insurance for a living unit covering the losses described in
23 Section 805.1(d).
24 (f) "Mine Subsidence" means lateral or vertical ground
25 movement caused by a failure initiated at the mine level, of
26 man-made underground mines, including, but not limited to
27 coal mines, clay mines, limestone mines, and fluorspar mines
28 that directly damages residences or commercial buildings.
29 "Mine Subsidence" does not include lateral or vertical ground
30 movement caused by earthquake, landslide, volcanic eruption,
31 soil conditions, soil erosion, soil freezing and thawing,
32 improperly compacted soil, construction defects, roots of
33 trees and shrubs or collapse of storm and sewer drains and
34 rapid transit tunnels.
35 (g) "Mine Subsidence Insurance Fund" or "Fund" means the
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1 fund established by this Article.
2 (h) "Policy" or "policies" means any contract or
3 contracts of insurance providing the coverage of the Standard
4 Fire Policy and Extended Coverage Endorsement on any
5 residence, living unit or commercial building. It does not
6 include those insurance contracts that are referred to as
7 marine or inland marine policies.
8 (i) "Premium" or "premiums" means the gross amount
9 charged to policyholders for the mine subsidence insurance
10 made available under this Article.
11 (j) "Rates" or "rate schedules" means the rates by which
12 premiums shall be computed for the mine subsidence insurance
13 made available under this Article.
14 (k) "Residence" means a building used principally for
15 residential purposes up to and including a four family
16 dwelling, permanently affixed to realty located in Illinois,
17 including appurtenant structures, driveways, sidewalks,
18 basements, footings, foundations, septic systems and
19 underground pipes directly servicing the dwelling or
20 building, but does not include living units, land, trees,
21 plants, crops or agricultural field drainage tile.
22 (l) "Residential Coverage" means mine subsidence
23 insurance for a residence.
24 (m) "Intergovernmental cooperative" means an
25 intergovernmental cooperative organized pursuant to Article
26 VII, Section 10 of the Illinois Constitution and Section 6 of
27 the Intergovernmental Cooperation Act.
28 (Source: P.A. 88-379.)
29 (215 ILCS 5/803.1)
30 Sec. 803.1. Establishment of Fund.
31 (a) There is established a fund to be known as the
32 "Illinois Mine Subsidence Insurance Fund". The Fund shall
33 operate pursuant to this Article. The Fund is authorized to
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1 transact business, provide services, enter into contracts and
2 sue or be sued in its own name.
3 (b) The Fund shall provide reinsurance for mine
4 subsidence losses to all insurers writing mine subsidence
5 insurance pursuant to this Article.
6 (c) The monies in the Fund shall be derived from
7 premiums for mine subsidence insurance collected on behalf of
8 the Fund pursuant to this Article, from investment income and
9 from receipt of Federal or State funds. No insurer shall
10 have any liability to the Fund or to any creditor of the
11 Fund, except as may be set forth in this Article, in the
12 Articles of Governance which may be adopted by the Fund, in a
13 reinsurance agreement executed pursuant to paragraph 810.1,
14 in the Plan of Operation established by the Fund, or in the
15 rules and procedures adopted by the Fund as authorized by the
16 reinsurance agreement.
17 (d) The Fund shall establish the rates, rating
18 schedules, deductibles and retentions, minimum premiums, and
19 classifications for mine subsidence insurance which the Fund
20 shall file with the Director. The Director shall have 30
21 days from the date of receipt to approve or disapprove a rate
22 filing. If no action is taken by the Director within 30
23 days, the rate is deemed to be approved. The Director may,
24 in writing, extend the period for an additional 30 days if
25 the Director determines that additional time is needed.
26 (e) The Fund shall establish its rates, rating
27 schedules, deductibles and retentions, minimum premiums, and
28 classification in such a manner as to satisfy all reasonably
29 foreseeable claims and expenses the Fund is likely to incur.
30 The Fund shall give due consideration to loss experience and
31 relevant trends, premium and other income and reasonable
32 reserves established for contingencies in establishing the
33 mine subsidence rates.
34 (f) The Fund shall compile and publish an annual
35 operating report.
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1 (g) The Fund shall develop at least 2 consumer
2 information publications to aid the public in understanding
3 mine subsidence and mine subsidence insurance and shall
4 establish a schedule for the distribution of the publications
5 pursuant to the reinsurance agreement. Topics that shall be
6 addressed shall include but are not limited to:
7 (1) Descriptive information about mine subsidence,
8 and what benefits mine subsidence insurance provides to
9 the property owner.
10 (2) Information that will be useful to a
11 policyholder who has filed a mine subsidence claim, such
12 as information that explains the claim investigation
13 process and claim handling procedures.
14 (h) The Fund shall be empowered to conduct research
15 programs in an effort to improve the administration of the
16 mine subsidence insurance program and help reduce and
17 mitigate mine subsidence losses consistent with the public
18 interest.
19 (i) The Fund may enter into reinsurance agreements with
20 any intergovernmental cooperative that provides joint
21 self-insurance for mine subsidence losses of its members.
22 These reinsurance agreements shall be substantially similar
23 to reinsurance agreements described in Section 810.1.
24 (Source: P.A. 88-379; 89-206, eff. 7-21-95.)
25 Section 93. The Illinois Insurance Code is amended by
26 changing Sections 107.03, 107.05, 107.07, 107.09, 107.13,
27 107.13a, 107.17, and 107.27 and adding Sections 107.15b,
28 107.30, and 107.31 as follows:
29 (215 ILCS 5/107.03) (from Ch. 73, par. 719.03)
30 Sec. 107.03. Kinds of Business. The syndicates of the
31 Exchange may conduct the kind of insurance business listed in
32 Class 2 and Class 3 of Section 4 of this Code when the
33 Exchange is issued a Certificate of Authority.
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1 (Source: P.A. 81-1047.)
2 (215 ILCS 5/107.05) (from Ch. 73, par. 719.05)
3 Sec. 107.05. Transaction of business.
4 (a) Reinsurance may shall be provided by and through
5 syndicates.
6 (b) Only Exchange brokers may present insurance business
7 to the Exchange.
8 (c) Syndicates may reinsure risks with syndicates or
9 other persons subject to the rules of the Exchange.
10 (d) The minimum premium for any insurance presented to
11 the Exchange shall be $50,000. For group insurance, the
12 minimum premium requirements must be met separately by each
13 group member. However, if an Exchange broker by affidavit
14 states that after diligent effort he was unable to procure
15 the policies or contracts required to protect the property or
16 risk described in the affidavit from companies authorized to
17 transact business in this State, an insurance policy may be
18 issued through the Exchange for any amount of premium. This
19 subsection shall apply only to direct coverage of Illinois
20 domiciled risks.
21 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
22 (215 ILCS 5/107.07) (from Ch. 73, par. 719.07)
23 Sec. 107.07. Admission. Capitalization:
24 Syndicate - at least $2,000,000.
25 Subscriber - at least $30,000.
26 Fees: (a) Exchange brokers. An annual fee shall be paid
27 to the Exchange by any person who presents risks to the
28 Exchange. The annual fee established by the Exchange shall
29 not exceed $5,000.
30 (b) The Exchange may establish annual fees for the
31 admission of syndicates, limited syndicates, and subscribers.
32 Standards: The Exchange may establish additional
33 standards for the admission of subscribers and Exchange
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1 brokers.
2 Assessments: The Exchange may make assessments of
3 subscribers or syndicates for the expenses of operating the
4 Exchange.
5 (Source: P.A. 81-1047.)
6 (215 ILCS 5/107.09) (from Ch. 73, par. 719.09)
7 Sec. 107.09. All written policy applications and written
8 policies shall prominently state that the policy is being
9 submitted or issued through the Exchange; that coverage
10 thereunder is provided solely by the underwriting syndicate
11 or syndicates; that the Exchange is not an insurer; and that
12 the Exchange is not a party to the contract and has no
13 liability thereunder.
14 (Source: P.A. 81-1047.)
15 (215 ILCS 5/107.13) (from Ch. 73, par. 719.13)
16 Sec. 107.13. Annual statement. The Department shall by
17 rule may require an annual statement from the Exchange, which
18 shall be an aggregate of all syndicate's and limited
19 syndicate's financial records for the year ending December 31
20 immediately preceding. The statement shall be filed with the
21 Department by June 1 of each year. The rule shall specify
22 the format.
23 (Source: P.A. 81-1047.)
24 (215 ILCS 5/107.13a) (from Ch. 73, par. 719.13a)
25 Sec. 107.13a. (a) Periodic filings Annual Statement of
26 syndicates.
27 (a) Every syndicate doing business on the Exchange shall
28 file with the Board and with the Director of Insurance by
29 March 1st in each year a financial statement for the year
30 ending December 31st immediately preceding on forms
31 prescribed by the Director Board, which shall conform
32 substantially to the form of statement adopted by the
-34- SRS90HB0223MNbmccr2
1 National Association of Insurance Commissioners and in use on
2 the effective date the statement is filed of this amendatory
3 Act of 1981. In the preparation of such annual statement,
4 each syndicate shall compute the combined amount earned
5 during the year from investment income and from underwriting
6 income on the basis of the accounting method incorporated in
7 the underwriting and investment exhibit of such annual
8 statement. The Board shall have power to make such
9 modifications and additions in this form as it may deem
10 desirable or necessary to ascertain the condition and affairs
11 of the syndicate. The Board shall have authority to extend
12 the time for filing any statement by any syndicate for
13 reasons which the Board considers good and sufficient. Such
14 statement shall be verified by oaths of the president and
15 secretary of the syndicate, or, in their absence, by 2 other
16 principal officers. In addition, any syndicate transacting
17 business on the Exchange may be required by the Board, when
18 it considers such action to be necessary and appropriate for
19 the protection of policyholders, creditors, subscribers or
20 claimants, to file, within 60 days after mailing to the
21 syndicate of a notice that such is required, a supplemental
22 summary statement as of the last day of any calendar month
23 occurring during the 100 days next preceding the mailing of
24 such notice designed by the Board on forms prescribed and
25 furnished by the Board. No syndicate shall be required to
26 file more than 4 supplemental summary statements during any
27 consecutive 12-month period. The Board may require
28 supplemental summary statements to be certified by an
29 independent actuary deemed competent by the Board or by an
30 independent certified public accountant.
31 (b) Within 45 days after the end of each quarter, each
32 syndicate shall file with the Director and with the Board
33 quarterly financial statements that conform substantially to
34 the quarterly statement form adopted by the N.A.I.C.
35 (c) By March 1 of each year, each syndicate shall file
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1 with the Director and the Board a certification of loss
2 reserves signed by a fellow or associate of the Casualty
3 Actuary Society, to be followed on or before June 1 of that
4 year by a detailed report prepared by such actuary.
5 (d) By June 1 of each year, each syndicate shall file
6 with the Director and with the Board an annual audited
7 financial report certified by an independent certified public
8 accountant.
9 (e) Each syndicate doing business on the Exchange shall
10 file with the Director and the Board by May 1 of each year an
11 annual Form B Registration Statement in accordance with
12 Sections 131.14 and 131.15 of this Code.
13 (b) For the information of the public generally, the
14 Board shall cause an abstract of the information contained in
15 the annual statement to be made available to the public as
16 soon as practicable after filing with the Exchange, by
17 printing such abstracts in pamphlet tabular form for free
18 general distribution by the Exchange, or by such other
19 publication in the City of Chicago as may be reasonably
20 necessary more fully to inform the public of the financial
21 condition of syndicates transacting business on the Exchange.
22 (Source: P.A. 83-1362.)
23 (215 ILCS 5/107.15b new)
24 Sec. 107.15b. Board rulemaking authority.
25 (a) The Board has the authority to adopt such rules as
26 it deems necessary to carry out its duties under this Article
27 and to maintain a well-regulated marketplace.
28 (b) A rule or modification to an existing rule adopted
29 by the Board after the effective date of this amendatory Act
30 of 1997 shall be filed with the Director not less than 30
31 days before the proposed effective date of the rule or
32 modification. The Director, upon written order, may
33 disapprove the rule or modification, in whole or in part,
34 upon a finding that the rule or modification would cause the
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1 exchange to be operated in a manner that would be hazardous
2 to the public or its policyholders.
3 (c) An order by the Director disapproving a rule or
4 modification shall be deemed to be a final administrative
5 decision and shall be subject to judicial review pursuant to
6 the provisions of the Administrative Review Law.
7 (215 ILCS 5/107.17) (from Ch. 73, par. 719.17)
8 Sec. 107.17. Governance Trustees. The business and
9 affairs of the Exchange shall be managed by an Executive
10 Committee with the advice and consent of the a Board of
11 Trustees.
12 There shall be 2 classes of trustees: Subscriber
13 trustees and public trustees. Both public trustees and
14 subscriber trustees shall be elected by a majority vote of
15 the subscribers. In addition, the public trustees shall be
16 approved by the Director.
17 The trustees shall be 13 in number. There shall be 5
18 public trustees who shall be individual persons who are not
19 insurers, subscribers, exchange brokers, or employees of
20 insurers, subscribers, exchange brokers, syndicates, or
21 affiliates thereof.
22 The Executive Committee shall be composed of 3 public
23 trustees elected by the Board. Members of the Executive
24 Committee shall serve for a term of 3 years, except that of
25 the initial members of the Executive Committee, one member
26 shall serve for a term of one year, one member shall serve
27 for a term of 2 years, and one member shall serve for a term
28 of 3 years. The terms of the initial members of the
29 Executive Committee shall be determined by lot.
30 All decisions of the Executive Committee, except those of
31 a ministerial nature that may be delegated by the Board,
32 shall be subject to the approval of the Board. All action of
33 the Executive Committee shall be approved unless disapproved
34 on a recorded vote by 9 members of the Board.
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1 (Source: P.A. 89-206, eff. 7-21-95; 89-669, eff. 1-1-97.)
2 (215 ILCS 5/107.27) (from Ch. 73, par. 719.27)
3 Sec. 107.27. Syndicate trust account; certificates of
4 guaranty.
5 (a) In addition to any other requirements imposed by
6 this Article the Board may require each syndicate to maintain
7 a trust or custodial account in such amounts as the Board may
8 determine by rule; provided that, except by special order of
9 the Board, no syndicate may be required to maintain in the
10 trust or custodial account an amount in excess of 50% of the
11 amount of its surplus as regards policyholders as shown by
12 its most recent audited report. Any trust or custodial
13 account so established shall be for the benefit of all
14 policyholders and claimants of the syndicate for losses
15 arising out of and within the coverage of insurance risks or
16 obligations underwritten by the syndicate. Upon entry of an
17 Order of Liquidation against a syndicate all amounts in the
18 trust or custodial account shall be immediately transferred
19 to the Association created under Section 107.26 to be used to
20 investigate, negotiate, and satisfy the syndicate's
21 outstanding insurance obligations. Expenses of the
22 Association or the Liquidator in performing these functions
23 may be paid from the insolvent syndicate's trust or custodial
24 account upon application to and approval by the Liquidation
25 Court. The Board shall provide by rule for the establishment
26 and maintenance of such trust or custodial accounts including
27 the investment of funds held in such accounts. Any amounts
28 deposited into a trust or custodial account required to be
29 maintained by this Section shall be an asset of the
30 syndicate.
31 (b) The Board shall determine limitations on the amount
32 of insurance or reinsurance written or assumed by a syndicate
33 under subsection (c) of Section 107.10. In addition to the
34 capitalization requirement under Section 107.07 a syndicate
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1 may proportionately increase its ratio of net premiums to
2 capitalization, pursuant to rules adopted by the Board, by
3 providing security in the form of certificates of guaranty or
4 in the form of direct obligations of a member bank of the
5 Federal Reserve System. Any such certificate of guaranty or
6 bank obligation shall be for the benefit of all policyholders
7 and claimants of the syndicate for losses arising out of and
8 within the coverage of insurance risks or obligations
9 underwritten by the syndicate. Upon entry of an Order of
10 Liquidation against a syndicate, amounts payable under
11 certificates of guaranty or bank obligations shall
12 immediately be paid to the Association created under Section
13 107.26 to be used to satisfy the syndicate's outstanding
14 insurance obligations. The Board by rule shall establish the
15 form and amounts of such certificates or obligations and
16 standards for determining the security necessary to ensure
17 performance under them. The Board may provide for different
18 limitations by line or in the aggregate based on the
19 existence or non-existence of certificates of guaranty or
20 bank obligations and the type of security backing such
21 certificates or obligations.
22 (Source: P.A. 89-97, eff. 7-7-95; 89-206, eff. 7-21-95.)
23 (215 ILCS 5/107.30 new)
24 Sec. 107.30. Letters of credit. If approved by the
25 Board of Trustees, a syndicate may utilize letters of credit
26 that meet the requirements of Section 173.1(2)(c) and Section
27 173.1(3)(A) of this Code.
28 (215 ILCS 5/107.31 new)
29 Sec. 107.31. Information required from applicants.
30 (a) A person desiring to form an insurance company for
31 the purpose of doing business as a syndicate shall apply to
32 the Exchange and provide such information the Exchanges deems
33 necessary. The information shall be submitted on forms
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1 provided by the Exchange. The information required may
2 include, but is not limited to, the information specified in
3 Sections 131.5 and 155.04 of this Code.
4 (b) If, after a review of the application and other
5 relevant information, the Exchange finds the applicant to be
6 a fit and proper person to form a syndicate, the Exchange
7 shall notify the Director of that finding in writing.
8 (215 ILCS 5/107.14 rep.)
9 Section 95. The Illinois Insurance Code is amended by
10 repealing Section 107.14.
11 (215 ILCS 5/493.1 rep.)
12 Section 97. The Illinois Insurance Code is amended by
13 repealing Section 493.1.
14 Section 99. Effective date. This Section and Sections
15 91 and 97 of this Act take effect upon becoming law; Sections
16 1 through 55, 93, and 95 of this Act take effect January 1,
17 1998.".
18 Submitted on , 1997.
19 ______________________________ _____________________________
20 Senator Madigan Representative Mautino
21 ______________________________ _____________________________
22 Senator T. Walsh Representative Woolard
23 ______________________________ _____________________________
24 Senator Lauzen Representative Hannig
25 ______________________________ _____________________________
26 Senator Jacobs Representative Churchill
27 ______________________________ _____________________________
28 Senator Cullerton Representative Brady
29 Committee for the Senate Committee for the House