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Public Act 92-0518
SB1046 Re-enrolled LRB9202778DJcs
AN ACT in relation to property.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Condominium Property Act is amended by
changing Sections 12 and 12.1 as follows:
(765 ILCS 605/12)
Sec. 12. Insurance.
(a) Required coverage. No policy of insurance shall be
issued or delivered to a condominium association, and no
policy of insurance issued to a condominium association shall
be renewed, unless the insurance coverage under the policy
includes the following:
(1) Property insurance. Property insurance (i) on
the common elements and the units, including the limited
common elements and except as otherwise determined by the
board of managers, the bare walls, floors, and ceilings
of the unit, (ii) providing coverage for special form
causes of loss, and (iii) in a total amount of not less
than the full insurable replacement cost of the insured
property, less deductibles, but including coverage for
the increased costs of construction due to building code
requirements, at the time the insurance is purchased and
at each renewal date.
(2) General liability insurance. Commercial general
liability insurance against claims and liabilities
arising in connection with the ownership, existence, use,
or management of the property in a minimum amount of
$1,000,000, or a greater amount deemed sufficient in the
judgment of the board, insuring the board, the
association, the management agent, and their respective
employees and agents and all persons acting as agents.
The developer must be included as an additional insured
in its capacity as a unit owner, manager, board member,
or officer. The unit owners must be included as
additional insured parties but only for claims and
liabilities arising in connection with the ownership,
existence, use, or management of the common elements. The
insurance must cover claims of one or more insured
parties against other insured parties.
(3) Fidelity bond; directors and officers coverage.
(A) An association with 6 or more dwelling
units must obtain and maintain a fidelity bond
covering persons, including the managing agent and
its employees who control or disburse funds of the
association, for the maximum amount of coverage
available to protect funds in the custody or control
of the association, plus the association reserve
fund.
(B) All management companies that are
responsible for the funds held or administered by
the association must be covered by a fidelity bond
for the maximum amount of coverage available to
protect those funds. The association has standing to
make a loss claim against the bond of the managing
agent as a party covered under the bond.
(C) For purposes of paragraphs (A) and (B),
the fidelity bond must be in the full amount of
association funds and reserves in the custody of the
association or the management company.
(D) The board of directors must obtain
directors and officers liability coverage at a level
deemed reasonable by the board, if not otherwise
established by the declaration or bylaws. Directors
and officers liability coverage must extend to all
contracts and other actions taken by the board in
their official capacity as directors and officers,
but this coverage shall exclude actions for which
the directors are not entitled to indemnification
under the General Not For Profit Corporation Act of
1986 or the declaration and bylaws of the
association.
(b) Contiguous units; improvements and betterments. The
insurance maintained under subdivision (a)(1) must include
the units, the limited common elements except as otherwise
determined by the board of managers, and the common elements.
The insurance need not cover improvements and betterments to
the units installed by unit owners, but if improvements and
betterments are covered, any increased cost may be assessed
by the association against the units affected.
Common elements include fixtures located within the
unfinished interior surfaces of the perimeter walls, floors,
and ceilings of the individual units initially installed by
the developer. Common elements exclude floor, wall, and
ceiling coverings. "Improvements and betterments" means all
decorating, fixtures, and furnishings installed or added to
and located within the boundaries of the unit, including
electrical fixtures, appliances, air conditioning and heating
equipment, water heaters, or built-in cabinets installed by
unit owners.
(c) Deductibles. The board of directors of the
association may, in the case of a claim for damage to a unit
or the common elements, (i) pay the deductible amount as a
common expense, (ii) after notice and an opportunity for a
hearing, assess the deductible amount against the owners who
caused the damage or from whose units the damage or cause of
loss originated, or (iii) require the unit owners of the
units affected to pay the deductible amount.
(d) Other coverages. The declaration may require the
association to carry any other insurance, including workers
compensation, employment practices, environmental hazards,
and equipment breakdown, the board of directors considers
appropriate to protect the association, the unit owners, or
officers, directors, or agents of the association.
(e) Insured parties; waiver of subrogation. Insurance
policies carried pursuant to subsections (a) and (b) must
include each of the following provisions:
(1) Each unit owner and secured party is an insured
person under the policy with respect to liability arising
out of the unit owner's interest in the common elements
or membership in the association.
(2) The insurer waives its right to subrogation
under the policy against any unit owner of the
condominium or members of the unit owner's household and
against the association and members of the board of
directors.
(3) The unit owner waives his or her right to
subrogation under the association policy against the
association and the board of directors.
(f) Primary insurance. If at the time of a loss under
the policy there is other insurance in the name of a unit
owner covering the same property covered by the policy, the
association's policy is primary insurance.
(g) Adjustment of losses; distribution of proceeds. Any
loss covered by the property policy under subdivision (a)(1)
must be adjusted by and with the association. The insurance
proceeds for that loss must be payable to the association, or
to an insurance trustee designated by the association for
that purpose. The insurance trustee or the association must
hold any insurance proceeds in trust for unit owners and
secured parties as their interests may appear. The proceeds
must be disbursed first for the repair or restoration of the
damaged common elements, the bare walls, ceilings, and floors
of the units, and then to any improvements and betterments
the association may insure. Unit owners are not entitled to
receive any portion of the proceeds unless there is a surplus
of proceeds after the common elements and units have been
completely repaired or restored or the association has been
terminated as trustee.
(h) Mandatory unit owner coverage. The board of
directors may, under the declaration and bylaws or by rule,
require condominium unit owners to obtain insurance covering
their personal liability and compensatory (but not
consequential) damages to another unit caused by the
negligence of the owner or his or her guests, residents, or
invitees, or regardless of any negligence originating from
the unit. The personal liability of a unit owner or
association member must include the deductible of the owner
whose unit was damaged, any damage not covered by insurance
required by this subsection, as well as the decorating,
painting, wall and floor coverings, trim, appliances,
equipment, and other furnishings.
If the unit owner does not purchase or produce evidence
of insurance requested by the board, the directors may
purchase the insurance coverage and charge the premium cost
back to the unit owner. In no event is the board liable to
any person either with regard to its decision not to purchase
the insurance, or with regard to the timing of its purchase
of the insurance or the amounts or types of coverages
obtained.
(i) Certificates of insurance. Contractors and vendors
(except public utilities) doing business with a condominium
association under contracts exceeding $10,000 per year must
provide certificates of insurance naming the association, its
board of directors, and its managing agent as additional
insured parties.
(j) Non-residential condominiums. The provisions of this
Section may be varied or waived in the case of a condominium
community in which all units are restricted to nonresidential
use.
(k) Settlement of claims. Any insurer defending a
liability claim against a condominium association must notify
the association of the terms of the settlement no less than
10 days before settling the claim. The association may not
veto the settlement unless otherwise provided by contract or
statute. ) (a) (1) The board of managers shall have the
authority to and shall obtain, except as otherwise provided
in Section 12.1, insurance for the property against loss or
damage by fire and such other hazards as are covered under
standard extended coverage provisions for the full insurable
replacement cost of the common elements and the units. Every
insurer issuing a policy against loss or damage by fire and
such other hazards as are covered under standard extended
coverage to a condominium association shall print on or
attach to the premium notice the following statement: "The
Condominium Property Act requires every condominium
association to obtain insurance for the property against loss
or damage by fire and such other hazards as are covered under
the standard extended coverage provisions for the full
insurable replacement costs. This policy may or may not
satisfy this requirement. Please examine your policy
carefully to determine if it complies with these
requirements." The full insurable replacement cost of the
units may include the replacement cost value of betterments
and improvements made in and to a unit by a unit owner if it
is so provided by the condominium declaration, and if it is
so provided in the condominium instruments, any increase
premium charge therefor shall be assessed to that unit owner
under the provisions of Section 9 hereof.
(2) Such insurance coverage shall be written in the name
of, and the proceeds thereof shall be deemed payable to, the
board of managers, as trustee for each of the unit owners in
the percentages established in the declaration. Any insurance
policy obtained for the property pursuant to paragraph (1) of
subsection (a) of this Section, which fails to contain the
trustee provisions required by this paragraph (2), shall be
deemed to incorporate such provisions into the policy by
operation of law.
(3) The board of managers, or the persons acting in such
capacity pursuant to Section 18.2 of this Act, shall have
authority to designate any corporation qualified to accept
and execute trusts in this state to act as agent or trustee
for, or as successor trustee to, said board of managers for
the purpose of collecting and disbursing the proceeds of such
insurance in the manner provided by the declaration, the
bylaws, and this Act. Premiums for such insurance and other
expenses in connection therewith shall be common expenses.
(b) The board of managers shall have the authority and
duty to obtain comprehensive public liability insurance
against claims and liabilities arising in connection with the
ownership, existence, use or management of the property in
amounts, if any, specified by the condominium instruments or
otherwise deemed sufficient in the judgment of the board of
managers, insuring the board of managers, the unit owners'
association, the management agent, and their respective
employees, agents and all persons acting as agents. The
developer shall be included as an additional insured in his
capacity as unit owner and board member. The unit owners
shall be included as additional insureds but only with
respect to that portion of the premises not reserved for
their exclusive use. The insurance shall cover claims of one
or more insured parties against other insured parties. The
insurance shall contain a waiver of any rights to subrogation
by the insuring company against any of the above named
insured persons. Premiums for such insurance shall be common
expenses.
(c) The board of managers shall notify insured persons
concerning the cancellation of insurance obtained pursuant to
the terms of this Section.
(d) Any insurer defending a claim against a condominium
association shall notify the association of the terms of the
settlement before settling the claim. The association shall
not have power to veto such settlement, unless otherwise
provided by contract or statute.
(Source: P.A. 84-1431; 84-1464.)
(765 ILCS 605/12.1) (from Ch. 30, par. 312.1)
Sec. 12.1. Insurance risk pooling trusts.
(a) This Section shall be known and may be cited as the
Condominium and Common Interest Community Risk Pooling Trust
Act.
(b) The boards of managers or boards of directors, as
the case may be, of two or more condominium associations or
common interest community associations, are authorized to
establish, with the unit owners and the condominium or common
interest community associations as the beneficiaries thereof,
a trust fund for the purpose of providing protection of the
participating condominium and common interest community
associations against the risk of financial loss due to damage
to, destruction of or loss of property, or the imposition of
legal liability as required or authorized under this Act or
the declaration of the condominium or common interest
community association. Such trust fund shall initially
assess unit owners an amount actuarially adequate to
establish such fund and shall assess such amounts as are
required to maintain such fund. Such amounts may be treated
as assessments of the condominium or common interest
community association.
(c) The trust fund shall be established and amended only
by a written instrument which shall be filed with and
approved by the Director of Insurance prior to its becoming
effective. The Director of Insurance shall withhold approval
of any instrument if it does not comply with the provisions
of this Section or any rule or regulation of the Director of
Insurance.
(d) No common interest community association shall be a
beneficiary of the trust fund unless it either shall be
incorporated under the laws of this State or shall have first
procured a Certificate of Authority from the Secretary of
State.
(e) The trust fund is authorized to indemnify the
condominium and common interest community association
beneficiaries thereof against the risk of loss due to damage,
destruction or loss to property or imposition of legal
liability as required or authorized under this Act or the
declaration of the condominium or common interest community
association. The trustee of the trust fund may determine and
establish contributions to the trust fund actuarially
required to fund the operations and carry out the purposes of
the trust fund and may enter into contracts in order to carry
out the purposes for which the trust fund was established,
provided however, that any such contracts shall not provide
for compensation or payments in excess of that which is
reasonable in relation to the services actually performed
thereunder.
(f) The trust fund may enter into written agreements
with other trust funds established under this Section whereby
the Risks assumed by the any such trust fund may be pooled
and shared with such other trust funds established under this
Section.
(g) (Blank). The trustees of all trust funds established
under this Act shall be natural persons over the age of 18
who are residents of this State.
(h) (Blank). Every such trust fund shall have no fewer
than 3 nor more than 30 trustees. No less than 2/3 of the
trustees shall be officers, directors, trustees or full time
employees of a condominium or common interest community
association beneficiary of the trust fund.
(i) No trustee of the trust fund shall be paid a salary
or receive other compensation, except that the written trust
instrument may provide for reimbursement for actual expenses
incurred on behalf of the trust fund. No trustee or any
employer or affiliate of any trustee of the trust fund shall
enter into any contract with the trust fund for, or receive
any monies or other compensation or thing of value whatsoever
from, the trust fund for services performed for or on behalf
of such trust fund, except as otherwise provided in this
Section.
(j) (Blank). The trustees shall serve pursuant to the
terms of the written trust instrument except that the written
trust instrument shall set forth the manner in which a
trustee of a trust fund may be removed and the manner in
which vacancies among the trustees of the trust fund may be
filled.
(k) (Blank). No trustee of the trust fund shall serve
for more than 3 consecutive years unless he is reappointed in
the manner provided for in the written trust instrument.
(l) (Blank). The trustees of the trust fund shall have
the powers specified in the written trust instrument which
established the trust fund.
(m) Each trust fund shall by June 1 of each year file
annually with the Director of Insurance a full independently
audited financial statement. as of December 31 of the
preceding year, and by April 1 of each year a report of the
trustees of the trust fund detailing the operations of the
trust fund and including a list of all beneficiaries during
the year and a statement that each beneficiary was not
ineligible except as provided for in this Section. The truth
and accuracy of the financial statement and report shall be
attested to by each trustee. The financial statement shall
include the opinion of an independent certified public
accountant on the financial condition of the trust fund for
the most recent calendar year and the results of its
operations, changes in financial position and changes in
capital and surplus for the year then ended in conformity
with accounting practices permitted or prescribed by the
Illinois Department of Insurance.
(n) (Blank). A beneficiary is ineligible if he or she
ceases to be a unit owner of a condominium or common interest
community association, except where liability of such
beneficiary was incurred at the time he or she was a unit
owner.
(o) (Blank). No beneficiary shall have any cause of
action against any other beneficiary arising solely out of
the insolvency or inability of the trust fund to meet its
obligations, unless such other beneficiary is a trustee of
such trust fund and has breached a fiduciary duty in
connection with such trust fund. This subsection shall not
preclude the assessment and collection of any payments to the
trust fund to correct such insolvency or inability of the
trust fund to meet its obligations.
(p) (Blank). No trust fund established under this
subsection (d) shall grant any power to the trustees of the
trust fund which is inconsistent with this Section or any
other law of this State.
(q) (Blank). Every trust fund established hereunder
shall include in the written trust instrument the basis upon
which payments are made to and from the trust fund.
(r) (Blank). Trust funds established under this Section
and all persons interested therein or dealing therewith shall
be subject to the provisions of Sections 133, 144, 144.1,
149, 401, 401.1, 402, 403, 403A, 412, and all of the
provisions of Articles VII, VIII, VIII 1/2, XII 1/2, and XIII
of the Illinois Insurance Code. Except as otherwise provided
in this Section, trust funds established under and which
fully comply with this Section shall not be subject to any
other provision of the Illinois Insurance Code.
(s) The Director of Insurance shall have with respect to
trust funds established under this Section the powers of
examination conferred upon him relative to insurance
companies by Section Sections 132 through 132.7 of the
Illinois Insurance Code. The cost of any such examination
shall be paid by the trust fund examined.
(t) (Blank). The Director of Insurance shall charge,
collect and give proper acquittances for the payment of the
following fees and charges:
(i) For filing trust instruments, amendments
thereto and financial statement and report of the
trustees, $25.
(ii) For copies of papers or records per page, $1.
(iii) For certificate to copy of paper, $5.
(iv) For filing an application for the licensing of
a condominium risk pooling trust, $500.
(u) (Blank). This Section shall apply regardless of any
contrary provisions of any instrument.
(v) Trust funds established under and which fully comply
with this Section shall not be considered member insurance
companies or to be in the business of insurance nor shall the
provision of Article XXXIV of the Illinois Insurance Code
apply to any such trust fund established under this Section.
(w) (Blank). The provisions of the Administrative Review
Law shall apply to and govern all proceedings for the
judicial review of final administrative decisions under this
Section.
(x) The Director of Insurance shall adopt reasonable
rules pertaining to the standards of coverage and
administration of trust funds authorized under this Section.
(Source: P.A. 89-97, eff. 7-7-95.)
Passed in the General Assembly May 08, 2001.
Governor Amendatory Veto August 03, 2001.
General Assembly Accepts Amendatory Veto November 27, 2001.
Returned to Governor for Certification December 07, 2001.
Governor Certifies Changes January 01, 2002.
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