Public Act 93-0326

SB1104 Enrolled                      LRB093 03656 LRD 03685 b

    AN ACT in relation to insurance.

    Be it enacted by the People of  the  State  of  Illinois,
represented in the General Assembly:

    Section  5.   The  Illinois  Insurance Code is amended by
changing Section 531.08 as follows:

    (215 ILCS 5/531.08) (from Ch. 73, par. 1065.80-8)
    Sec. 531.08.  Powers and duties of  the  Association.  In
addition  to  the  powers  and  duties  enumerated  in  other
Sections of this Article:
    (1)  If  a  domestic  insurer is an impaired insurer, the
Association may, subject to any  conditions  imposed  by  the
Association  other  than  those  which impair the contractual
obligations of the impaired  insurer,  and  approved  by  the
impaired insurer and the Director:
    (a)  Guarantee  or  reinsure,  or cause to be guaranteed,
assumed or reinsured, any or all of the covered  policies  of
covered persons of the impaired insurer;
    (b)  Provide  such monies, pledges, notes, guarantees, or
other means as are proper to effectuate  paragraph  (a),  and
assure payment of the contractual obligations of the impaired
insurer pending action under paragraph (a);
    (c)  Loan money to the impaired insurer;
    (2)  If  a  domestic,  foreign,  or  alien  insurer is an
insolvent insurer, the  Association  shall,  subject  to  the
approval of the Director;
    (a)(i)  Guarantee,  assume  or  reinsure  or  cause to be
guaranteed, assumed, or reinsured  the  covered  policies  of
covered persons of the insolvent insurer;
    (ii)  Assure  payment  of  the contractual obligations of
the insolvent insurer to covered persons;
    (iii)  Provide such monies, pledges,  notes,  guaranties,
or  other means as are reasonably necessary to discharge such
duties; or
    (b)  with respect  to  only  life  and  health  insurance
policies,  provide  benefits and coverages in accordance with
Section 531.08(3).
    (c)  Provided however that this subsection (2) shall  not
apply  when  the  Director has determined that the foreign or
alien insurers domiciliary jurisdiction  or  state  of  entry
provides,  by  statute,  protection  substantially similar to
that provided by this Article for residents of this State and
such protection will be provided in a timely manner.
    (3)  When proceeding under subparagraph  (2)(b)  of  this
Section  the Association shall, with respect to only life and
health insurance policies:
    (a)  assure payment of benefits for premiums identical to
the premiums and benefits (except for terms of conversion and
renewability) that would have been payable under the policies
of the insolvent insurer, for claims incurred:
    (i)  with respect to group policies, not later  than  the
earlier  of  the  next  renewal  date  under such policies or
contracts or sixty days, but in no  event  less  than  thirty
days,  after  the  date  on  which  the  Association  becomes
obligated with respect to such policies;
    (ii)  with  respect to non-group policies, not later than
the earlier of the next renewal  date  (if  any)  under  such
policies  or one year, but in no event less than thirty days,
from the date on which the Association becomes obligated with
respect to such policies;
    (b)  make diligent efforts to provide all known  insureds
or  group policyholders with respect to group policies thirty
days notice of the termination of the benefits provided; and
    (c)  with respect to non-group policies,  make  available
to  each  known  insured, or owner if other than the insured,
and with respect to an individual formerly  insured  under  a
group  policy  who  is  not  eligible  for  replacement group
coverage, make available substitute coverage on an individual
basis in  accordance  with  the  provisions  of  subparagraph
(3)(d) of this Section, if the insureds had a right under law
or  the  terminated  policy to convert coverage to individual
coverage or to continue a non-group policy in force  until  a
specified  age  or  for  a  specified  time, during which the
insurer has no right unilaterally  to  make  changes  in  any
provision  of  the policy or had a right only to make changes
in premium by class.
    (d)(i)  In providing  the  substitute  coverage  required
under  subparagraph  (3)(c)  of this Section, the Association
may offer either to reissue the  terminated  coverage  or  to
issue an alternative policy.
    (ii)  Alternative  or  reissued policies shall be offered
without requiring evidence of  insurability,  and  shall  not
provide  for  any  waiting period or exclusion that would not
have applied under the terminated policy.
    (iii)  The Association may reinsure  any  alternative  or
reissued policy.
    (e)(i)  Alternative  policies  adopted by the Association
shall be subject  to  the  approval  of  the  Director.   The
Association  may  adopt alternative policies of various types
for  future  insurance  without  regard  to  any   particular
impairment or insolvency.
    (ii)  Alternative  policies  shall  contain  at least the
minimum statutory  provisions  required  in  this  State  and
provide  benefits  that shall not be unreasonable in relation
to the  premium  charged.   The  Association  shall  set  the
premium  in  accordance  with a table of rates which it shall
adopt.  The premium shall reflect the amount of insurance  to
be  provided  and  the age and class of risk of each insured,
but shall not reflect  any  changes  in  the  health  of  the
insured after the original policy was last underwritten.
    (iii)  Any  alternative  policy issued by the Association
shall provide coverage of a  type  similar  to  that  of  the
policy  issued  by  the  impaired  or  insolvent  insurer, as
determined by the Association.
    (f)  If the  Association  elects  to  reissue  terminated
coverage  at a premium rate different from that charged under
the terminated policy,  the  premium  shall  be  set  by  the
Association  in  accordance  with  the  amount  of  insurance
provided  and  the age and class of risk, subject to approval
of the Director or by a court of competent jurisdiction.
    (g)  The  Association's  obligations  with   respect   to
coverage  under  any  policy  of  the  impaired  or insolvent
insurer or under any reissued  or  alternative  policy  shall
cease  on  the  date  such  coverage or policy is replaced by
another similar policy by the policyholder, the  insured,  or
the Association.
    (4)  When  proceeding  under  subparagraph (2)(b) of this
Section with respect  to  any  policy  or  contract  carrying
guaranteed  minimum  interest  rates,  the  Association shall
assure the  payment  or  crediting  of  a  rate  of  interest
consistent   with   subparagraph  (2)(b)(iii)(B)  of  Section
531.03.
    (5)  Nonpayment of premiums  thirty-one  days  after  the
date  required  under  the  terms of any guaranteed, assumed,
alternative or reissued  policy  or  contract  or  substitute
coverage  shall terminate the Association's obligations under
such policy or coverage under this Act with respect  to  such
policy  or  coverage,  except  with  respect  to  any  claims
incurred  or any net cash surrender value which may be due in
accordance with the provisions of this Act.
    (6)  Premiums due for coverage after entry of an order of
liquidation of an insolvent insurer shall belong  to  and  be
payable   at  the  direction  of  the  Association,  and  the
Association shall be liable  for  unearned  premiums  due  to
policy  or  contract  owners  arising after the entry of such
order.
    (7) (a)  In carrying out its duties under subsection (2),
permanent policy liens, or contract liens, may be imposed  in
connection  with  any  guarantee,  assumption  or reinsurance
agreement, if the court:
    (i)  Finds that the amounts which can be  assessed  under
this  Act are less than the amounts needed to assure full and
prompt performance of  the  insolvent  insurer's  contractual
obligations,  or that the economic or financial conditions as
they affect  member  insurers  are  sufficiently  adverse  to
render  the  imposition of policy or contract liens, to be in
the public interest; and
    (ii)  Approves the  specific  policy  liens  or  contract
liens to be used.
    (b)  Before  being  obligated  under  subsection  (2) the
Association may  request  that  there  be  imposed  temporary
moratoriums  or  liens  on payments of cash values and policy
loans in addition to any contractual provisions for  deferral
of cash or policy loan values, and such temporary moratoriums
and liens may be imposed if they are approved by the court.
    (8)  There  shall  be  no liability on the part of and no
cause of  action  shall  arise  against  the  Association  or
against  any  transferee  from  the Association in connection
with the transfer by reinsurance or otherwise of all  or  any
part of an impaired or insolvent insurer's business by reason
of  any action taken or any failure to take any action by the
impaired or insolvent insurer at any time.
    (9)  If the Association fails to act within a  reasonable
period  of time as provided in subsection (2) of this Section
with respect to an insolvent insurer, the Director shall have
the powers and duties of the Association under this Act  with
regard to such insolvent insurers.
    (10)  The  Association  or its designated representatives
may render assistance and advice to the  Director,  upon  his
request,   concerning   rehabilitation,  payment  of  claims,
continuations  of  coverage,  or  the  performance  of  other
contractual obligations of any impaired or insolvent insurer.
    (11)  The Association has standing to appear  before  any
court concerning all matters germane to the powers and duties
of  the Association, including, but not limited to, proposals
for reinsuring or guaranteeing the covered  policies  of  the
impaired  or  insolvent  insurer and the determination of the
covered policies and contractual obligations.
    (12) (a)  Any  person  receiving  benefits   under   this
Article  is  deemed  to  have  assigned  the rights under the
covered policy to  the  Association  to  the  extent  of  the
benefits   received  because  of  this  Article  whether  the
benefits  are  payments   of   contractual   obligations   or
continuation  of  coverage.   The  Association may require an
assignment to it of such  rights  by  any  payee,  policy  or
contract  owner,  beneficiary, insured, certificate holder or
annuitant as a condition precedent  to  the  receipt  of  any
rights  or  benefits  conferred  by  this  Article  upon such
person.   The  Association  is  subrogated  to  these  rights
against the assets of any insolvent insurer.
    (b)  The subrogation rights of the Association under this
subsection have the same priority against the assets  of  the
insolvent insurer as that possessed by the person entitled to
receive benefits under this Article.
    (13)  The Association may:
    (a)  Enter into such contracts as are necessary or proper
to carry out the provisions and purposes of this Article;
    (b)  Sue  or  be sued, including taking any legal actions
necessary or proper for recovery of  any  unpaid  assessments
under  Section  531.09.   The Association shall not be liable
for punitive or exemplary damages;
    (c)  Borrow money to effect the purposes of this Article.
Any  notes  or  other  evidence  of   indebtedness   of   the
Association not in default are legal investments for domestic
insurers and may be carried as admitted assets.
    (d)  Employ  or  retain  such persons as are necessary to
handle the financial transactions of the Association, and  to
perform  such  other  functions as become necessary or proper
under this Article.
    (e)  Negotiate  and   contract   with   any   liquidator,
rehabilitator,  conservator,  or  ancillary receiver to carry
out the powers and duties of the Association.
    (f)  Take such legal action as may be necessary to  avoid
payment of improper claims.
    (g)  Exercise,  for  the  purposes of this Article and to
the extent approved by the Director, the powers of a domestic
life or health insurer, but in no case  may  the  Association
issue  insurance  policies  or  annuity  contracts other than
those issued to perform the contractual  obligations  of  the
impaired or insolvent insurer.
    (h)  Exercise  all  the  rights  of  the  Director  under
Section  193(4) of this Code with respect to covered policies
after the association becomes obligated by statute.
    (14)  With respect to  covered  policies  for  which  the
Association  becomes  obligated after an entry of an order of
liquidation or rehabilitation, the Association may  elect  to
succeed  to the rights of the insolvent insurer arising after
the date of the order of liquidation or rehabilitation  under
any  contract  of  reinsurance to which the insolvent insurer
was a party,  to  the  extent  that  such  contract  provides
coverage  for losses occurring after the date of the order of
liquidation or rehabilitation.  As a condition to making this
election, the Association must pay all  unpaid  premiums  due
under  the  contract  for coverage relating to periods before
and  after  the  date  of  the  order   of   liquidation   or
rehabilitation.
(Source: P.A. 86-753.)