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Public Act 101-0060 | ||||
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AN ACT concerning regulation.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Section 5. The Illinois Insurance Code is amended by | ||||
changing Sections 534.3, 537.6, 537.7, 538.3, 538.4, and 545 | ||||
and by adding Section 538.9 as follows:
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(215 ILCS 5/534.3) (from Ch. 73, par. 1065.84-3)
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Sec. 534.3. Covered claim; unearned premium defined.
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(a) "Covered claim" means an unpaid claim for a loss
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arising out of and within the
coverage of an insurance policy | ||||
to which this Article applies and which
is in force at the time | ||||
of the occurrence giving rise to the unpaid
claim, including | ||||
claims presented during any extended discovery period
which was | ||||
purchased from the company before the entry of a liquidation
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order or which is purchased or obtained from the liquidator | ||||
after the entry
of a liquidation order, made by a person | ||||
insured under such policy or by a
person
suffering injury or | ||||
damage for which a person insured under such policy
is legally | ||||
liable, and for unearned premium, if:
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(i) The company issuing the policy becomes an insolvent
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company as defined in Section 534.4
after the effective | ||||
date of this Article; and
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(ii) The claimant or insured is a resident of this |
State at the time
of the insured occurrence, or the | ||
property from which a first party
claim for damage to | ||
property arises is
permanently located in this State or, in | ||
the case of an unearned premium
claim, the policyholder is | ||
a resident of this State at the time the policy
was issued; | ||
provided, that for entities other than an individual, the
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residence of a claimant, insured, or policyholder is the | ||
state
in which its principal
place of business is located | ||
at the time of the insured event.
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(b) "Covered claim" does not include:
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(i) any amount in excess of the applicable limits of | ||
liability
provided by an insurance policy to which this | ||
Article applies; nor
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(ii) any claim for punitive or exemplary damages or | ||
fines and penalties paid to government authorities ; nor
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(iii) any first party claim by an insured who is an | ||
affiliate of the
insolvent company; nor
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(iv) any first party or third party claim by or against | ||
an insured
whose net worth on December 31
of the year next | ||
preceding the date the insurer becomes an insolvent
insurer | ||
exceeds $25,000,000; provided that an insured's net
worth | ||
on such
date shall be deemed to include the aggregate net | ||
worth of the insured and
all of its affiliates as | ||
calculated on a consolidated basis. However, this
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exclusion shall not apply to third party claims against the | ||
insured where the
insured has applied for or consented to |
the appointment of a receiver, trustee,
or liquidator for | ||
all or a substantial part of its assets, filed a voluntary
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petition in bankruptcy, filed a petition or an answer | ||
seeking a reorganization
or arrangement with creditors or | ||
to take advantage of any insolvency law, or
if an order, | ||
judgment, or decree is entered by a court of competent
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jurisdiction, on the application of a creditor, | ||
adjudicating the insured
bankrupt or insolvent or | ||
approving a petition seeking reorganization of the
insured | ||
or of all or substantial part of its assets; nor
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(v) any claim for any amount due any reinsurer, | ||
insurer,
insurance pool, or underwriting association as | ||
subrogated
recoveries, reinsurance recoverables, | ||
contribution, indemnification or
otherwise. No such claim | ||
held by a reinsurer,
insurer, insurance pool, or | ||
underwriting association may be asserted in any
legal | ||
action
against a person insured under a policy issued by an | ||
insolvent
company other than to the extent such claim | ||
exceeds the Fund
obligation limitations set forth in | ||
Section 537.2 of this Code.
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(c) "Unearned Premium" means the premium for the unexpired | ||
period of a
policy which has been terminated prior to the | ||
expiration of the period for
which premium has been paid and | ||
does not mean premium which is returnable
to the insured for | ||
any other reason.
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(Source: P.A. 89-97, eff. 7-7-95; 90-499, eff. 8-19-97.)
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(215 ILCS 5/537.6) (from Ch. 73, par. 1065.87-6)
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Sec. 537.6. Allocation of claims; assessments. The Fund | ||
shall allocate
covered claims paid and expenses
incurred | ||
between the accounts established by Section 535 separately, and
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assess member companies separately for each
account amounts | ||
necessary to pay the obligations of the Fund under
Section | ||
537.2 subsequent to the entry of an Order of Liquidation | ||
against
an insolvent company, the expenses of handling
covered | ||
claims subsequent to such Order of Liquidation and other | ||
expenses
authorized by this
Article. The assessments of each | ||
member company shall be in the proportion that
the net direct | ||
written premiums of the member company for the calendar
year | ||
immediately preceding the year in which the assessment is | ||
levied on
the kinds of insurance in the account bears to the | ||
net direct written
premiums of all member companies for such | ||
preceding calendar year on the
kinds of insurance in the | ||
account. Each member company shall be notified
of the | ||
assessment not later than 30 days before it is due. Before | ||
January 1,
2002, no member
company may be assessed in any year | ||
on any account an amount greater
than 1% of that member | ||
company's net direct written premiums
on the kinds of insurance | ||
in the account for the calendar
year preceding the assessment. | ||
Beginning January 1, 2002, the amount a
member company may be | ||
assessed in any year on any account shall be a maximum of
2% of | ||
that member company's net direct written premium on the kinds |
of
insurance in the account for the calendar year preceding the | ||
assessment. This
2% maximum shall apply regardless of the date | ||
of any insolvency that gives rise
to the need for the | ||
assessment. If the
maximum assessment, together with the other | ||
assets of the Fund in any
account, does not provide, in any one | ||
year, in any account, an amount
sufficient to make all | ||
necessary payments from that account, the funds
available shall | ||
be paid in the manner determined by the Fund and
approved by | ||
the Director and the unpaid portion shall be paid as
soon | ||
thereafter as funds become available. If requested by a member
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company, the Director may exempt or defer the assessment of any | ||
member
company, if the assessment would cause the member | ||
company's financial
impairment.
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In addition to the other assessment authority provided in | ||
this Section, the board of directors shall also have the | ||
assessment authority to pay off a loan as provided in Section | ||
538.3. If a loan is projected to be outstanding for 3 years or | ||
more, then the board of directors shall have the authority to | ||
increase the assessment to 3% of the net direct written | ||
premiums for the previous year until the loan has been paid in | ||
full. | ||
(Source: P.A. 92-77, eff. 7-12-01.)
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(215 ILCS 5/537.7) (from Ch. 73, par. 1065.87-7)
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Sec. 537.7. Investigation of claims; disposition.
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(a) The Fund shall investigate claims brought against the
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Fund and adjust, compromise, settle, and pay covered claims to | ||
the extent of
the Fund's
obligation and deny all other claims.
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(b) The Fund shall not be bound by a settlement, release, | ||
compromise,
waiver, or final judgment executed or entered | ||
within 12 months prior to an
order of liquidation and shall | ||
have the right to assert all defenses available
to the Fund | ||
including, but not limited to, defenses applicable to | ||
determining
and enforcing its statutory rights and obligations | ||
to any claim. The Fund
shall be bound by a settlement, release, | ||
compromise, waiver, or final judgment
executed or entered more | ||
than 12 months prior to an order of liquidation,
but only | ||
however,
if the
claim is a covered claim and the settlement , | ||
release, compromise, waiver, or final judgment was not a result | ||
of
fraud, collusion, default, or failure to defend. In | ||
addition, with respect to
covered
claims arising from a | ||
judgment under a decision, verdict, or finding based on
the | ||
default of the insolvent insurer or its failure to defend, upon | ||
application
by the Fund, either on its own behalf or on behalf | ||
of an insured, the court
shall set aside the judgment, order, | ||
decision, verdict,
or finding, and the Fund shall be permitted | ||
to defend against the claim on the
merits. The same criteria | ||
determining whether the Fund will be bound, as specified in | ||
this subsection (b), shall apply to any settlement, release, | ||
compromise, waiver, or final judgment entered into by a high | ||
net worth insured before the date on which claims by or against | ||
that insured became non-exempt for reasons specified in |
paragraph (iv) of subsection (b) of Section 534.3.
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(c) The Fund shall have the right to appoint or
approve and | ||
to direct legal counsel
retained under liability insurance | ||
policies for the defense
of covered claims.
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(Source: P.A. 92-77, eff. 7-12-01.)
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(215 ILCS 5/538.3) (from Ch. 73, par. 1065.88-3)
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Sec. 538.3.
The Fund may borrow an amount of money | ||
necessary to effect the purposes
of this Article in accord with | ||
the plan of operation. The board of directors shall have the | ||
authority to pledge all or an appropriate portion of future | ||
assessments as necessary to secure a loan that may be needed to | ||
pay covered claims. Until all loans secured by assessments are | ||
fully satisfied, the board of directors shall assess the | ||
maximum allowable under Section 537.6.
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(Source: P.A. 77-305.)
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(215 ILCS 5/538.4) (from Ch. 73, par. 1065.88-4)
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Sec. 538.4. Legal actions by Fund. The Fund may sue or be | ||
sued, including , but not limited to, taking any legal actions | ||
necessary
or proper for recovery of : (i) any unpaid assessments | ||
under Section Sections 537.1 or 537.6 ; (ii) any amounts due to | ||
the Fund for salvage and subrogation under Section 537.4 or | ||
from insurers described in subsection (a) of Section 546; or | ||
(iii) any amounts due from an insured pursuant to subsections | ||
(a) and (d) of Section 545 .
The Fund's power to sue includes, |
but is not limited to, the
power and right to
intervene as a | ||
party before any court that has jurisdiction over an insolvent
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insurer when the Fund is a creditor or potential creditor of | ||
the insolvent
insurer.
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(Source: P.A. 89-97, eff. 7-7-95; 90-499, eff. 8-19-97.)
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(215 ILCS 5/538.9 new) | ||
Sec. 538.9. Action regarding insolvent company records. | ||
(a) In this Section, "claims information" includes files, | ||
records, and electronic data. | ||
(b) The Fund may bring an action against any third-party | ||
administrator, agent, attorney, or other representative of the | ||
insolvent insurer to obtain custody and control of all claims | ||
information related to an insolvent company that are | ||
appropriate or necessary for the Fund or a similar association | ||
in other states to carry out its duties under this Article. In | ||
such an action, the Fund shall have the absolute right through | ||
emergency equitable relief to obtain custody and control of | ||
such claims information in possession of such third-party | ||
administrator, agent, attorney or other representative of the | ||
insolvent insurer, regardless of where that claims information | ||
may be physically located. In bringing an action under this | ||
Section, the Fund shall not be subject to any defense, lien | ||
(possessory or otherwise), or other legal or equitable ground | ||
whatsoever for refusal to surrender such claims information | ||
that might be asserted against the liquidator of the insolvent |
insurers. To the extent that litigation is required for the | ||
Fund to obtain custody and control of the claims information | ||
requested and it results in the relinquishment of claims | ||
information to the Fund after refusal to provide that | ||
information in response to a written demand, the court shall | ||
award the Fund its costs, expenses, and reasonable attorney's | ||
fees incurred in bringing the action. This Section shall have | ||
the same effect on the rights and remedies that the custodian | ||
of such claims information may have against the insolvent | ||
insurers, so long as these rights and remedies do not conflict | ||
with the rights of the Fund to custody and control of the | ||
claims information under this Article.
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(215 ILCS 5/545) (from Ch. 73, par. 1065.95)
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Sec. 545. Effect of paid claims.
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(a) Every insured or claimant seeking the
protection of | ||
this Article shall cooperate with the Fund to the same
extent | ||
as such person would have been required to cooperate with the
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insolvent company. The Fund shall have all the rights, duties | ||
and
obligations under the policy to the extent of the covered | ||
claim payment,
provided the Fund shall have no cause of action | ||
against the
insured of the insolvent company for any sums it | ||
has paid out except
such causes of action as the insolvent | ||
company would have had if such
sums had been paid by the | ||
insolvent company and except as provided in
subsection | ||
paragraph (d) of this Section. Any person recovering under this |
Article and any insured whose liabilities are satisfied under | ||
this Article shall be deemed to have assigned the person's or | ||
insured's rights under the policy to the Fund to the extent of | ||
his or her recovery or satisfaction obtained from the Fund's | ||
payments.
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(b) The Fund and any similar organization in another state | ||
shall be
recognized as claimants in the liquidation of an | ||
insolvent company for any
amounts paid by them on covered | ||
claims obligations as determined under this
Article or similar | ||
laws in other states and shall receive dividends at the
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priority set forth in paragraph (d) of subsection (1) of | ||
Section
205 of this
Code; provided that if, at the time that | ||
the liquidator issues a cut-off notice to the Fund in | ||
anticipation of closing the estate, a reserve has been | ||
established by the Fund, or any similar organization in another | ||
state, for the amount of their future administrative expenses | ||
and loss development associated with unpaid reported pending | ||
claims, these reserves will be deemed to have been paid as of | ||
the date of the notice and payment shall be made accordingly.
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The liquidator of an insolvent company shall be bound by
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determinations of covered claim eligibility under the Act and | ||
by settlements
of claims made by
the Fund or a similar | ||
organization in
another state on the receipt of certification | ||
of such payments, to the extent
those
determinations or | ||
settlements satisfy obligations of the Fund, but the receiver
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shall not be bound in any way by those determinations or |
settlements to the
extent that there remains a claim in the | ||
estate for amounts in excess of the
payments by the Fund.
In | ||
submitting their claim for covered claim payments the Fund and | ||
any
similar organization in another state shall not be subject | ||
to the
requirements of Sections 208 and 209 of this Code and | ||
shall not be affected
by the failure of the person receiving a | ||
covered claim payment to file a proof
of claim.
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(c) The expenses of the Fund and of any similar
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organization in any other state, other than expenses incurred | ||
in the
performance of
duties under Section 547 or similar | ||
duties under the
statute governing a similar organization in | ||
another state, shall
be accorded priority over all claims
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against the estate, except as provided for in paragraph (a) of | ||
subsection (1) of
Section 205 of this Code. The liquidator | ||
shall make prompt reimbursement
to the Fund and any similar | ||
organization for such expense payments.
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(d) The Fund has the right to recover from the following | ||
persons the amount
of any covered claims (as determined without | ||
regard to the exemption in paragraph (iv) of subsection (b) of | ||
Section 534.3) and allocated claims expenses which the Fund | ||
paid or
incurred on behalf of such person in satisfaction, in | ||
whole or in part, of
liability obligations of such person to | ||
any other person:
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(i) any insured whose net worth on December 31 of the | ||
year next
preceding the date the company becomes an | ||
insolvent company exceeds
$25,000,000; provided that an |
insured's net worth on such date shall be deemed
to include | ||
the aggregate net worth of the insured and all of its | ||
affiliates
as calculated on a consolidated basis.
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(ii) any insured who is an affiliate of the insolvent | ||
company.
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The Fund may also, at its sole discretion and without | ||
assumption of any ongoing duty to do so, pay any workers | ||
compensation claims or any other third-party claims covered by | ||
a policy of an insolvent company on behalf of a high net worth | ||
insured as defined in paragraph (iv) of subsection (b) of | ||
Section 534.3. In that case, the Fund shall recover from the | ||
high net worth insured under this Section for all amounts paid | ||
on its behalf, all allocated claim adjusted expenses related to | ||
such claims, the Fund's attorney's fees, and all court costs in | ||
any action necessary to collect the full amount to the Fund's | ||
reimbursement under this Section. | ||
(Source: P.A. 100-410, eff. 8-25-17.)
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Section 99. Effective date. This Act takes effect upon | ||
becoming law.
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