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Public Act 92-0875
SB1976 Enrolled LRB9214934JSpcA
AN ACT concerning 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 Sections 205 and 226.1 as follows:
(215 ILCS 5/205) (from Ch. 73, par. 817)
Sec. 205. Priority of distribution of general assets.
(1) The priorities of distribution of general assets
from the company's estate is to be as follows:
(a) The costs and expenses of administration,
including the expenses of the Illinois Insurance Guaranty
Fund, the Illinois Life and Health Insurance Guaranty
Association, the Illinois Health Maintenance Organization
Guaranty Association and of any similar organization in
any other state as prescribed in subsection (c) of
Section 545.
(b) Secured claims, including claims for taxes and
debts due the federal or any state or local government,
that are secured by liens perfected prior to the filing
of the complaint.
(c) Claims for wages actually owing to employees
for services rendered within 3 months prior to the date
of the filing of the complaint, not exceeding $1,000 to
each employee unless there are claims due the federal
government under paragraph (f), then the claims for wages
shall have a priority of distribution immediately
following that of federal claims under paragraph (f) and
immediately preceding claims of general creditors under
paragraph (g).
(d) Claims by policyholders, beneficiaries, and
insureds, under insurance policies, annuity contracts,
and funding agreements, and liability claims against
insureds covered under insurance policies and insurance
contracts issued by the company, and claims of the
Illinois Insurance Guaranty Fund, the Illinois Life and
Health Insurance Guaranty Association, the Illinois
Health Maintenance Organization Guaranty Association and
any similar organization in another state as prescribed
in Section 545. For purposes of this Section, "funding
agreement" means an agreement whereby an insurer
authorized to write business under Class 1 of Section 4
of this Code may accept and accumulate funds and make one
or more payments at future dates in amounts that are not
based upon mortality or morbidity contingencies.
(e) Claims by policyholders, beneficiaries, and
insureds, the allowed values of which were determined by
estimation under paragraph (b) of subsection (4) of
Section 209.
(f) Any other claims due the federal government.
(g) All other claims of general creditors not
falling within any other priority under this Section
including claims for taxes and debts due any state or
local government which are not secured claims and claims
for attorneys' fees incurred by the company in contesting
its conservation, rehabilitation, or liquidation.
(h) Claims of guaranty fund certificate holders,
guaranty capital shareholders, capital note holders, and
surplus note holders.
(i) Proprietary claims of shareholders, members, or
other owners.
Every claim under a written agreement, statute, or rule
providing that the assets in a separate account are not
chargeable with the liabilities arising out of any other
business of the insurer shall be satisfied out of the funded
assets in the separate account equal to, but not to exceed,
the reserves maintained in the separate account under the
separate account agreement, and to the extent, if any, the
claim is not fully discharged thereby, the remainder of the
claim shall be treated as a priority level (d) claim under
paragraph (d) of this subsection to the extent that reserves
have been established in the insurer's general account
pursuant to statute, rule, or the separate account agreement.
For purposes of this provision, "separate account
policies, contracts, or agreements" means any policies,
contracts, or agreements that provide for separate accounts
as contemplated by Section 245.21.
To the extent that any assets of an insurer, other than
those assets properly allocated to and maintained in a
separate account, have been used to fund or pay any expenses,
taxes, or policyholder benefits that are attributable to a
separate account policy, contract, or agreement that should
have been paid by a separate account prior to the
commencement of receivership proceedings, then upon the
commencement of receivership proceedings, the separate
accounts that benefited from this payment or funding shall
first be used to repay or reimburse the company's general
assets or account for any unreimbursed net sums due at the
commencement of receivership proceedings prior to the
application of the separate account assets to the
satisfaction of liabilities or the corresponding separate
account policies, contracts, and agreements.
To the extent, if any, reserves or assets maintained in
the separate account are in excess of the amounts needed to
satisfy claims under the separate account contracts, the
excess shall be treated as part of the general assets of the
insurer's estate.
(2) Within 120 days after the issuance of an Order of
Liquidation with a finding of insolvency against a domestic
company, the Director shall make application to the court
requesting authority to disburse funds to the Illinois
Insurance Guaranty Fund, the Illinois Life and Health
Insurance Guaranty Association, the Illinois Health
Maintenance Organization Guaranty Association and similar
organizations in other states from time to time out of the
company's marshaled assets as funds become available in
amounts equal to disbursements made by the Illinois Insurance
Guaranty Fund, the Illinois Life and Health Insurance
Guaranty Association, the Illinois Health Maintenance
Organization Guaranty Association and similar organizations
in other states for covered claims obligations on the
presentation of evidence that such disbursements have been
made by the Illinois Insurance Guaranty Fund, the Illinois
Life and Health Insurance Guaranty Association, the Illinois
Health Maintenance Organization Guaranty Association and
similar organizations in other states.
The Director shall establish procedures for the ratable
allocation and distribution of disbursements to the Illinois
Insurance Guaranty Fund, the Illinois Life and Health
Insurance Guaranty Association, the Illinois Health
Maintenance Organization Guaranty Association and similar
organizations in other states. In determining the amounts
available for disbursement, the Director shall reserve
sufficient assets for the payment of the expenses of
administration described in paragraph (1) (a) of this
Section. All funds available for disbursement after the
establishment of the prescribed reserve shall be promptly
distributed. As a condition to receipt of funds in
reimbursement of covered claims obligations, the Director
shall secure from the Illinois Insurance Guaranty Fund, the
Illinois Life and Health Insurance Guaranty Association, the
Illinois Health Maintenance Organization Guaranty Association
and each similar organization in other states, an agreement
to return to the Director on demand funds previously received
as may be required to pay claims of secured creditors and
claims falling within the priorities established in
paragraphs (a), (b), (c), and (d) of subsection (1) of this
Section in accordance with such priorities.
(3) The provisions of this Section are severable under
Section 1.31 of the Statute on Statutes.
(Source: P.A. 92-65, eff. 7-12-01.)
(215 ILCS 5/226.1) (from Ch. 73, par. 838.1)
Sec. 226.1. Entitled annuity payment options. Annuity
contracts and funding agreements may be issued without a life
contingency annuity payment option in the following
circumstances: (1) to fund benefits under an employee benefit
plan as defined in the Employee Retirement Income Security
Act of 1974, as now or hereafter amended; (2) to fund the
activities of an organization exempt from taxation under
Internal Revenue Code Section 501(c), as now or hereafter
amended; (3) to fund a program of a governmental entity or of
an agency or instrumentality thereof; (4) to fund an
agreement providing for periodic payments entered into in
satisfaction of a claim; or (5) to fund a program of an
institution having assets in excess of $25,000,000.
(Source: P.A. 86-753.)
Section 99. Effective date. This Act takes effect upon
becoming law.
Passed in the General Assembly December 05, 2002.
Approved January 03, 2003.
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