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| [ House Amendment 001 ] |
92_HB2993
LRB9201507JSpc
1 AN ACT concerning surplus line insurance.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The Illinois Insurance Code is amended by
5 changing Sections 445, 445.1, 445.2, and 445.3 as follows:
6 (215 ILCS 5/445) (from Ch. 73, par. 1057)
7 Sec. 445. Surplus line.
8 (1) Surplus line defined; surplus line insurer
9 requirements. Surplus line insurance is insurance on an
10 Illinois risk of the kinds specified in Classes 2 and 3 of
11 Section 4 of this Code procured from an unauthorized insurer
12 company or a domestic surplus line insurer as defined in
13 Section 445a after the insurance producer representing the
14 insured or the surplus line producer is unable, after
15 diligent effort, to procure said insurance from insurers
16 companies which are authorized to transact business in this
17 State other than domestic surplus line insurers as defined in
18 Section 445a.
19 Insurance producers may procure surplus line insurance
20 only if licensed as a surplus line producer under this
21 Section and may procure that insurance only from an
22 unauthorized insurer company or from a domestic surplus line
23 insurer as defined in Section 445a:
24 (a) that based upon information available to the
25 surplus line producer has a policyholders surplus of not
26 less than $15,000,000 determined in accordance with
27 accounting rules that are applicable to authorized
28 insurers companies; and
29 (b) that has standards of solvency and management
30 that are adequate for the protection of policyholders;
31 and
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1 (c) where an unauthorized insurer company does not
2 meet the standards set forth in (a) and (b) above, a
3 surplus line producer may, if necessary, procure
4 insurance from that insurer company only if prior written
5 warning of such fact or condition is given to the insured
6 by the insurance producer or surplus line producer.
7 (2) Surplus line producer; license. Any licensed
8 producer who is a resident of this State, or any nonresident
9 who qualifies under Section 497.1, may be licensed as a
10 surplus line producer upon:
11 (a) completing a prelicensing course of study
12 passing a written examination. The examination shall
13 reasonably test the knowledge of the applicant concerning
14 the surplus line law and the responsibilities assumed by
15 a surplus line producer thereunder. The course
16 examination provided for by this Section shall be
17 conducted under rules and regulations prescribed by the
18 Director. The Director may administer the course
19 examination or may make arrangements, including
20 contracting with an outside educational testing service,
21 for administering the course and collecting the
22 non-refundable application fee provided for in this
23 subsection such examinations. Any charges assessed by
24 the Director or the educational testing service for
25 administering the course such examinations shall be paid
26 directly by the individual applicants. Each applicant
27 required to take the course an examination shall, at the
28 time of request for examination, enclose with the
29 application a non-refundable $10 application fee payable
30 to the Director plus a separate course an examination
31 administration fee. If the Director administers the
32 examination, the application fee and examination
33 administration fee shall be combined and made payable to
34 the Director. If the Director designates an outside
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1 testing service to administer the examination, the
2 applicant shall make a separate examination
3 administration fee remittance payable to the designated
4 testing service for the total fees the testing service
5 charges for each of the various services being requested
6 by the applicant. An applicant who fails to appear for
7 the course examination as scheduled, or appears but fails
8 to complete the course pass, shall not be entitled to any
9 refund, and shall be required to submit a new request to
10 attend the course for examination together with all the
11 requisite fees before being rescheduled for another
12 course examination at a later date; and
13 (b) payment of an annual license fee of $200; and
14 (c) procurement of the surety bond required in
15 subsection (4) of this Section.
16 A Each surplus line producer so licensed shall keep a
17 separate account of the business transacted thereunder which
18 shall be open at all times to the inspection of the Director
19 or his representative.
20 The prelicensing course of study examination requirement
21 in (a) above shall not apply to insurance producers who were
22 licensed under the Illinois surplus line law or individuals
23 designated to act for a partnership, association or
24 corporation licensed under the Illinois surplus line law on
25 or before effective date of this amendatory Act of the 92nd
26 General Assembly February 27, 1985.
27 (3) Taxes and reports.
28 (a) Surplus line tax and penalty for late payment.
29 A Each surplus line producer shall file with the
30 Director on or before February 1 and August 1 of each
31 year a report in the form prescribed by the Director on
32 all surplus line insurance procured from unauthorized
33 insurers during the preceding 6 month period ending
34 December 31 or June 30 respectively, and on the filing of
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1 such report shall pay to the Director for the use and
2 benefit of the State a sum equal to 3% of the gross
3 premiums less returned premiums upon all surplus line
4 insurance procured or cancelled during the preceding 6
5 months.
6 Any surplus line producer who fails to pay the full
7 amount due under this subsection is liable, in addition
8 to the amount due, for such penalty and interest charges
9 as are provided for under Section 412 of this Code. The
10 Director, through the Attorney General, may institute an
11 action in the name of the People of the State of
12 Illinois, in any court of competent jurisdiction, for the
13 recovery of the amount of such taxes and penalties due,
14 and prosecute the same to final judgment, and take such
15 steps as are necessary to collect the same.
16 (b) Fire Marshal Tax.
17 Each surplus line producer shall file with the
18 Director on or before March 31 of each year a report in
19 the form prescribed by the Director on all fire insurance
20 procured from unauthorized insurers subject to tax under
21 Section 12 of the Fire Investigation Act and shall pay to
22 the Director the fire marshal tax required thereunder.
23 (c) Taxes and fees charged to insured. The taxes
24 imposed under this subsection and the countersigning fees
25 charged by the Surplus Line Association of Illinois may
26 be charged to and collected from surplus line insureds.
27 (4) Bond. Each surplus line producer, as a condition to
28 receiving a surplus line producer's license, shall execute
29 and deliver to the Director a surety bond to the People of
30 the State in the penal sum of $20,000, with a surety which is
31 authorized to transact business in this State, conditioned
32 that the surplus line producer will pay to the Director the
33 tax, interest and penalties levied under subsection (3) of
34 this Section.
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1 (5) Submission of documents to Surplus Line Association
2 of Illinois. A Each surplus line producer shall submit every
3 insurance contract or information on every insurance contract
4 issued under his or her license to the Surplus Line
5 Association of Illinois for recording and countersignature.
6 The submission and countersignature may be effected through
7 electronic means. The submission insurance contracts
8 submitted shall set forth:
9 (a) the name of the insured;
10 (b) (blank) the description and location of the
11 insured property or risk;
12 (c) the amount insured;
13 (d) the gross premiums charged or returned;
14 (e) the name of the unauthorized insurer or
15 domestic surplus line insurer as defined in Section 445a
16 from whom coverage has been procured;
17 (f) the kind or kinds of insurance procured; and
18 (g) amount of premium subject to tax required by
19 Section 12 of the Fire Investigation Act.
20 Proposals, endorsements, and other documents which
21 are incidental to the insurance but which do does not
22 affect the premium charged are exempted from filing and
23 countersignature.
24 The submission of insuring contracts or information
25 on insuring contracts to the Surplus Line Association of
26 Illinois constitutes a certification by the surplus line
27 producer or by the insurance producer who presented the
28 risk to the surplus line producer for placement as a
29 surplus line risk that after diligent effort the required
30 insurance could not be procured from insurers companies
31 which are authorized to transact business in this State
32 other than domestic surplus line insurers as defined in
33 Section 445a and that such procurement was otherwise in
34 accordance with the surplus line law.
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1 (6) Countersignature required. It shall be unlawful for
2 an insurance producer to deliver any unauthorized company
3 insurer insurance contract or domestic surplus line insurer
4 contract unless such insurance contract is countersigned by
5 the Surplus Line Association of Illinois.
6 (7) Inspection of records. A Each surplus line producer
7 shall maintain separate records of the business transacted
8 under his or her license, including complete copies of
9 surplus line insurance contracts maintained on paper or by
10 electronic means, which records shall be open at all times
11 for inspection by the Director and by the Surplus Line
12 Association of Illinois.
13 (8) Violations and penalties. The Director may suspend
14 or revoke or refuse to renew a surplus line producer license
15 for any violation of this Code. In addition to or in lieu of
16 suspension or revocation, the Director may subject a surplus
17 line producer to a civil penalty of up to $1,000 for each
18 cause for suspension or revocation. Such penalty is
19 enforceable under subsection (5) of Section 403A of this
20 Code.
21 (9) Director may declare insurer ineligible. If the
22 Director determines that the further assumption of risks
23 might be hazardous to the policyholders of an unauthorized
24 insurer, the Director may order the Surplus Line Association
25 of Illinois not to countersign insurance contracts evidencing
26 insurance in such insurer and order surplus line producers to
27 cease procuring insurance from such insurer.
28 (10) Service of process upon Director. All Insurance
29 contracts delivered under this Section from unauthorized
30 insurers shall contain a provision designating the Director
31 and his successors in office the true and lawful attorney of
32 the insurer upon whom may be served all lawful process in any
33 action, suit or proceeding arising out of such insurance and
34 further designate the surplus line producer or other resident
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1 of this State an agent of the unauthorized insurer to which a
2 copy of such process shall be forwarded by the Director for
3 delivery to the insurer. Service of process made upon the
4 Director to be valid hereunder must state the name of the
5 insured, the name of the unauthorized insurer and identify
6 the contract of insurance. The Director at his option is
7 authorized to forward a copy of the process to the Surplus
8 Line Association of Illinois for delivery to the unauthorized
9 insurer surplus line producer or other designated resident of
10 this State or the Director may deliver the process to the
11 unauthorized insurer by other means which he considers to be
12 reasonably prompt and certain.
13 (11) The Illinois Surplus Line law does not apply to
14 insurance of property and operations of railroads or aircraft
15 engaged in interstate or foreign commerce, insurance of
16 vessels, crafts or hulls, cargoes, marine builder's risks,
17 marine protection and indemnity, or other risks including
18 strikes and war risks insured under ocean or wet marine forms
19 of policies.
20 (12) Surplus line insurance procured under this Section,
21 including insurance procured from a domestic surplus line
22 insurer, is not subject to the provisions of the Illinois
23 Insurance Code other than Sections 123, 123.1, 401, 401.1,
24 402, 403, 403A, 408, 412, 445, 445.1, 445.2, 445.3, 445.4,
25 and all of the provisions of Article XXXI to the extent that
26 the provisions of Article XXXI are not inconsistent with the
27 terms of this Act.
28 (Source: P.A. 90-794, eff. 8-14-98.)
29 (215 ILCS 5/445.1) (from Ch. 73, par. 1057.1)
30 Sec. 445.1. Surplus Line Association of Illinois. There
31 is hereby created a non-profit association to be known as the
32 Surplus Line Association of Illinois. All surplus line
33 producers shall be and must remain individual members of the
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1 Association as a condition of their holding a license as a
2 surplus line producer in this State. The Association must
3 perform its functions under the plan of operation established
4 and approved under Section 445.3 and must exercise its powers
5 through a board of directors established under Section 445.2
6 of this Code. The Association shall be supervised by the
7 Director and is subject to the applicable provisions of the
8 Illinois Insurance Code. The Association shall be authorized
9 and have the duty to:
10 (1) receive, record and countersign all surplus line
11 insurance contracts or information thereon which surplus line
12 producers are required to file with the Association under
13 subsection (5) of Section 445;
14 (2) prepare monthly reports for the Director on surplus
15 line insurance procured by its members during the preceding
16 month in such form and providing such information as the
17 Director may prescribe;
18 (3) prepare and deliver to each licensee and to the
19 Director the reports of surplus line business prescribed in
20 subsection (3) of Section 445;
21 (4) assess its members for costs of operations in
22 accordance with a schedule adopted by the Board of Directors
23 of the Association and approved by the Director;
24 (5) employ and retain such persons as are necessary to
25 carry out the duties of the Association;
26 (6) borrow money as necessary to effect the purposes of
27 the Association;
28 (7) enter contracts as necessary to effect the purposes
29 of the Association;
30 (8) perform such other acts as will facilitate and
31 encourage compliance by its members with the surplus line law
32 of this State and rules promulgated thereunder; and
33 (9) provide such other services to its members as are
34 incidental or related to the purposes of the Association.
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1 Nothing in this Act shall be construed as giving the
2 Association any discretionary authority to enforce this Act
3 or to withhold countersignature of insurance contracts which
4 meet the requirements of subsection (5) of Section 445.
5 (Source: P.A. 83-1300.)
6 (215 ILCS 5/445.2) (from Ch. 73, par. 1057.2)
7 Sec. 445.2. Board of Directors. The Association shall
8 function through a Board of Directors elected by the
9 Association members, and officers who shall be elected by the
10 Board of Directors.
11 The Board of Directors of the Association shall consist
12 of not less than 5 nor more than 9 persons serving terms as
13 established in the plan of operation. The plan of operation
14 shall provide for the election of a Board of Directors by the
15 members of the Association from its membership. The plan of
16 operation shall fix the manner of voting and may weigh each
17 member's vote to reflect the annual surplus line insurance
18 premium written by the member. Members employed by the same
19 or affiliated employers may consolidate their premiums
20 written and delegate an individual officer or partner to
21 represent the member in the exercise of Association affairs,
22 including service on the Association Board of Directors. The
23 Director shall appoint an interim Board of Directors for the
24 sole purpose of conducting an election of Directors. If no
25 Board of Directors is elected within 90 days after the
26 effective date of this amendatory Act of 1984, the Director
27 shall appoint the initial members of the Board of Directors.
28 The Board of Directors shall elect such officers as may
29 be provided in the plan of operation.
30 (Source: P.A. 83-1300.)
31 (215 ILCS 5/445.3) (from Ch. 73, par. 1057.3)
32 Sec. 445.3. Plan of operation.
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1 (1) The Association shall submit to the Director a plan
2 of operation and any amendments thereto to provide operating
3 procedures for the administration of the Association. The
4 plan of operation and any amendments thereto shall become
5 effective upon approval in writing by the Director.
6 (2) (Blank) If the Association fails to submit a
7 suitable plan of operation within 180 days following the
8 effective date of this amendatory Act of 1984, or if at any
9 time thereafter the Association fails to submit required
10 amendments to the plan of operation, the Director shall,
11 after notice and hearing pursuant to Sections 401, 402 and
12 403 of this Code, adopt and promulgate such rules as are
13 necessary or advisable to effectuate the provisions of this
14 Act. Such rules shall continue in force until modified by
15 the Director or superseded by a plan of operation submitted
16 by the Association and approved by the Director.
17 (3) All Association members must comply with the plan of
18 operation.
19 (Source: P.A. 83-1300.)
20 Section 99. Effective date. This Act takes effect upon
21 becoming law.