93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
HB5929

 

Introduced 2/6/2004, by Frank J. Mautino

 

SYNOPSIS AS INTRODUCED:
 
215 ILCS 5/531.02   from Ch. 73, par. 1065.80-2
215 ILCS 5/531.02a new
215 ILCS 5/531.03   from Ch. 73, par. 1065.80-3
215 ILCS 5/531.04   from Ch. 73, par. 1065.80-4
215 ILCS 5/531.05   from Ch. 73, par. 1065.80-5
215 ILCS 5/531.06   from Ch. 73, par. 1065.80-6
215 ILCS 5/531.07   from Ch. 73, par. 1065.80-7
215 ILCS 5/531.08   from Ch. 73, par. 1065.80-8
215 ILCS 5/531.09   from Ch. 73, par. 1065.80-9
215 ILCS 5/531.10   from Ch. 73, par. 1065.80-10
215 ILCS 5/531.11   from Ch. 73, par. 1065.80-11
215 ILCS 5/531.12   from Ch. 73, par. 1065.80-12
215 ILCS 5/531.14   from Ch. 73, par. 1065.80-14
215 ILCS 5/531.15   from Ch. 73, par. 1065.80-15
215 ILCS 5/531.17   from Ch. 73, par. 1065.80-17
215 ILCS 5/531.19   from Ch. 73, par. 1065.80-19

    Amends the Life and Health Insurance Guaranty Association Article of the Illinois Insurance Code. Prohibits health care providers from seeking payment from insureds until a final determination of the Association's liability has been made. Excludes from coverage certain variable rate instruments. Excludes from coverage certain self-funded employer and employee benefit plans. Removes authority of the Association to loan money to an impaired insurer. Sets forth conditions under which coverage is provided to residents and nonresidents. Makes changes with respect to the manner assessments are made upon insurers. Limits the liability of the Association and the Director of Insurance with respect to the operation of the Association. Effective January 1, 2005.


LRB093 18698 SAS 44426 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB5929 LRB093 18698 SAS 44426 b

1     AN ACT concerning 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 531.02, 531.03, 531.04, 531.05, 531.06,
6 531.07, 531.08, 531.09, 531.10, 531.11, 531.12, 531.14,
7 531.15, 531.17, and 531.19, and adding Section 531.02a as
8 follows:
 
9     (215 ILCS 5/531.02)  (from Ch. 73, par. 1065.80-2)
10     Sec. 531.02. Purpose. The purpose of this Article is to
11 protect, subject to certain limitations, the persons specified
12 in paragraph (1) of Section 531.03 against failure in the
13 performance of contractual obligations, under life and or
14 health insurance policies, and annuity contracts and health or
15 medical care service contracts specified in paragraph (2) of
16 Section 531.03, due to the impairment or insolvency of the
17 insurer issuing such policies or contracts. To provide this
18 protection, (1) an association of insurers is created to enable
19 the guaranty of payment of benefits and of continuation of
20 coverages as limited by this Article, (2) members of the
21 Association are subject to assessment to provide funds to carry
22 out the purpose of this Article, and (3) the Association is
23 authorized to assist the Director, in the prescribed manner, in
24 the detection and prevention of insurer impairments or
25 insolvencies.
26 (Source: P.A. 86-753.)
 
27     (215 ILCS 5/531.02a new)
28     Sec. 531.02a. Restrictions on recoveries by health care
29 providers. In the event of the insolvency of a member insurer,
30 no provider of health care services shall seek to recover any
31 amount from any insured until a final determination has been

 

 

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1 made as to the Association's liability for such services
2 (including the resolution of any dispute or litigation
3 resulting therefrom).
4     In the event that a provider seeks to recover any such
5 amount before a final determination of the Association's
6 liability (or the resolution of any dispute or litigation
7 resulting therefrom) has been made, the provider shall be
8 liable for all reasonable costs and attorney fees incurred by
9 the Director and the Association in enforcing this provision or
10 any court orders related thereto.
 
11     (215 ILCS 5/531.03)  (from Ch. 73, par. 1065.80-3)
12     Sec. 531.03. Coverage and limitations.
13     (1) This Article shall provide coverage for the policies
14 and contracts specified in paragraph (2) of this Section:
15         (a) to persons who, regardless of where they reside
16     (except for non-resident certificate holders under group
17     policies or contracts), are the beneficiaries, assignees
18     or payees of the persons covered under subparagraph (1)(b),
19     and
20         (b) to persons who are owners of or certificate holders
21     under such policies or contracts (other than unallocated
22     annuity contracts and structured settlement annuities) and
23     in each case ; or, in the case of unallocated annuity
24     contracts, to the persons who are the contract holders, and
25     who:
26             (i) are residents of this State, or
27             (ii) are not residents, but only under all of the
28         following conditions:
29                 (A) the insurer insurers that which issued
30             such policies or contracts is are domiciled in this
31             State;
32                 (B) the states in which such persons reside
33             have associations similar to the association
34             created by this Article such insurers never held a
35             license or certificate of authority in the states

 

 

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1             in which such persons reside; and
2                 (C) the persons are not eligible for coverage
3             by an association in any other state due to the
4             fact that the insurer was not licensed in the state
5             at the time specified in the state's guaranty
6             association law. such states have associations
7             similar to the association created by this Act; and
8                 (D) such persons are not eligible for coverage
9             by such associations.
10         (c) For unallocated annuity contracts specified in
11     paragraph (2) of this Section, subparagraphs (a) and (b) of
12     this paragraph shall not apply, and this Article shall
13     (except as provided in subparagraphs (e) and (f) of this
14     paragraph) provide coverage to:
15             (i) persons who are the owners of the unallocated
16         annuity contracts if the contracts are issued to or in
17         connection with a specific benefit plan whose plan
18         sponsor has its principal place of business is in this
19         State; and
20             (ii) persons who are owners of unallocated annuity
21         contracts issued to or in connection with government
22         lotteries if the owners are residents.
23         (d) For structured settlement annuities specified in
24     paragraph (2) of this Section, subparagraphs (a) and (b) of
25     this paragraph shall not apply, and this Article shall
26     (except as provided in subparagraphs (e) and (f) of this
27     paragraph) provide coverage to a person who is a payee
28     under a structured settlement annuity (or beneficiary of a
29     payee if the payee is deceased), if the payee:
30             (i) is a resident, regardless of where the contract
31         owner resides; or
32             (ii) is not a resident, but only under both of the
33         following conditions:
34                 (A)(1) the contract owner of the structured
35             settlement annuity is a resident, or
36                 (II) the contract owner of the structured

 

 

HB5929 - 4 - LRB093 18698 SAS 44426 b

1             settlement annuity is not a resident, but
2                 the insurer that issued the structured
3             settlement annuity is domiciled in this State; and
4                 the state in which the contract owner resides
5             has an association similar to the association
6             created by this Article; and
7                 (B) neither the payee (or beneficiary) nor the
8             contract owner is eligible for coverage by the
9             association of the state in which the payee or
10             contract owner resides.
11         (e) This Article shall not provide coverage for:
12             (i) a person who is a payee (or beneficiary) of a
13         contract owner resident of this State, if the payee (or
14         beneficiary) is afforded any coverage by the
15         association of another state, or
16             (ii) a person covered under subparagraph (c) of
17         this paragraph, if any coverage is provided by the
18         association of another state to or through the trustee
19         who is the contract owner.
20         (f) This Article is intended to provide coverage to a
21     person who is a resident of this State and, in special
22     circumstances, to a nonresident. In order to avoid
23     duplicate coverage, if a person who would otherwise receive
24     coverage under this Article is provided coverage under the
25     laws of any other state, the person shall not be provided
26     coverage under this Article. In determining the
27     application of the provisions of this paragraph in
28     situations where a person could be covered by the
29     association of more than one state, whether as an owner,
30     payee, beneficiary, or assignee, this Article shall be
31     construed in conjunction with other state laws to result in
32     coverage by only one association.
33     (2)(a) Except as otherwise provided, this Article shall
34 provide coverage to the persons specified in paragraph (l) of
35 this Section for direct, (i) individual or other nongroup life,
36 health, and annuity and supplemental policies, or contracts,

 

 

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1 and supplemental contracts to any of these, (ii) for
2 certificates under direct group policies or contracts, (iii)
3 and for unallocated annuity contracts, in each case issued by
4 member insurers. "Annuity contracts" and "certificates under
5 group annuity contracts" shall have the meaning set forth in
6 subdivision (2) of Section 531.05 and (iv) for contracts to
7 furnish health care services and subscription certificates for
8 medical or health care services issued by persons licensed to
9 transact insurance business in this State under the Illinois
10 Insurance Code. Annuity contracts and certificates under group
11 annuity contracts include but are not limited to guaranteed
12 investment contracts, deposit administration contracts,
13 unallocated funding agreements, allocated funding agreements,
14 structured settlement agreements, lottery contracts and any
15 immediate or deferred annuity contracts.
16     (b) This Article shall not provide coverage for:
17         (i) any that portion or provision part of such policies
18     or contracts not guaranteed by the insurer, or under which
19     the risk is borne by the policy or contract owner
20     policyholder; provided however, that nothing in this
21     subparagraph (2)(b)(i) shall make this Article
22     inapplicable to assessment life and accident and health
23     insurance policies or contracts; or
24         (ii) any such policy or contract or part thereof
25     assumed by the impaired or insolvent insurer under a
26     contract of reinsurance, unless other than reinsurance for
27     which assumption certificates have been issued pursuant to
28     the reinsurance policy or contract by the impaired or
29     insolvent insurer; or
30         (iii) any interest rate, crediting rate, or similar
31     factor employed in calculating returns or changes in value
32     (whether or not determined by use of an index or other
33     external reference stated in the policy or contract), and
34     any portion of a policy or contract to the extent that it
35     is based on such a rate or factor, that any portion of a
36     policy or contract to the extent such portion represents an

 

 

HB5929 - 6 - LRB093 18698 SAS 44426 b

1     accrued value that the rate of interest on which it is
2     accrued
3             (A) averaged over the period of 4 four years prior
4         to the date on which the Association becomes obligated
5         with respect to such policy or contract, exceeds a rate
6         of interest determined by subtracting 2 two percentage
7         points from Moody's Corporate Bond Yield Average
8         averaged for that same 4 four year period or for such
9         lesser period if the policy or contract was issued less
10         than 4 four years before the Association became
11         obligated; and
12             (B) on and after the date on which the Association
13         becomes obligated with respect to such policy or
14         contract, exceeds the rate of interest determined by
15         subtracting 3 three percentage points from Moody's
16         Corporate Bond Yield Average on a month-to-month basis
17         as most recently available; or
18         (iv) any provision or portion of a policy or contract
19     issued to a plan or program of an employer, association, or
20     other person to provide life, health, or annuity benefits
21     to its employees, members, or others, to the extent that
22     the plan or program is self-funded or uninsured, including
23     but not limited to benefits payable by an employer,
24     association, or other person under:
25             (A) a multiple-employer welfare arrangement as
26         defined in 29 U.S.C. 1144;
27             (B) a minimum premium group insurance plan;
28             (C) a stop-loss group insurance plan and any
29         stop-loss insurance, as defined in clause (b) of Class
30         1 or clause (a) of Class 2 of Section 4, and further
31         defined in subsection (d) of Section 352;
32             (D) an administrative services only contract; or
33             (E) a cost-plus contract; or
34         (v) any provision or portion of a policy or contract to
35     the extent that it provides:
36             (A) dividends or experience rating credits which,

 

 

HB5929 - 7 - LRB093 18698 SAS 44426 b

1         in each case, were not paid or credited as of the date
2         of impairment or insolvency, whichever is earlier;
3             (B) voting rights;
4             (C) obligations to report to the policy owner or
5         contract owner more frequently than annually;
6             (D) payment of any fees or allowances to any
7         person, including the policy or contract owner, in
8         connection with the service to or administration of the
9         policy or contract; or
10             (E) other nonmonetary obligations; or
11         (vi) (iv) any unallocated annuity contract issued to or
12     in connection with a an employee benefit plan the
13     beneficiaries of which are protected by protected under the
14     federal Pension Benefit Guaranty Corporation law,
15     regardless of whether the federal Pension Benefit Guaranty
16     Corporation has yet become liable to make any payments with
17     respect to the benefit plan; or
18         (vii) (v) any portion of any unallocated annuity
19     contract which is not issued to or in connection with a
20     specific employee, union or association of natural persons
21     benefit plan or a government lottery; or
22         (viii) (vi) any policy or contract or portion thereof
23     issued by any burial society organized under Article XIX of
24     this Code Act, any fraternal benefit society organized
25     under Article XVII of this Code Act, any mutual benefit
26     association organized under Article XVIII of this Code Act,
27     and any foreign fraternal benefit society licensed under
28     Article VI of this Code Act; or
29         (ix) (vii) any policy or contract or portion thereof
30     issued by any health maintenance organization established
31     pursuant to the Health Maintenance Organization Act
32     including any health maintenance organization business of
33     a member insurer; or
34         (x) (viii) any policy or contract or portion thereof
35     issued by any health services plan corporation established
36     pursuant to the Voluntary Health Services Plans Act; or

 

 

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1         (ix) (blank); or
2         (xi) (x) any policy or contract or portion thereof
3     issued by any dental service plan corporation established
4     pursuant to the Dental Service Plan Act; or
5         (xi) any stop-loss insurance, as defined in clause (b)
6     of Class 1 or clause (a) of Class 2 of Section 4, and
7     further defined in subsection (d) of Section 352; or
8         (xii) any that portion or part of a variable life
9     insurance or variable annuity policy or contract not
10     guaranteed by an insurer; or .
11         (xiii) any policy or contract or portion thereof to the
12     extent that assessments with respect to such policy or
13     contract or portion thereof are prohibited or preempted by
14     federal or state law; or
15         (xiv) any obligation that does not arise under the
16     express written terms of the policy or contract issued by
17     the insurer to the contract owner or policy owner,
18     including without limitation:
19             (A) claims based on marketing materials;
20             (B) claims based on side letters, riders, or other
21         documents that were issued by the insurer without
22         meeting applicable policy or contract form filing or
23         approval requirements;
24             (C) misrepresentations of or regarding policy or
25         contract benefits;
26             (D) extra-contractual claims;
27             (E) a claim for penalties or consequential or
28         incidental damages; or
29         (xv) any contractual agreement that establishes the
30     member insurer's obligations to provide a book value
31     accounting guaranty for defined contribution benefit plan
32     participants by reference to a portfolio of assets that is
33     owned by the benefit plan or its trustee, which in each
34     case is not an affiliate of the member insurer; or
35         (xvi) any portion of a policy or contract that, on the
36     date the Association becomes obligated, exceeds in value

 

 

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1     the maximum benefit levels specified in paragraph (3)(b) of
2     this Section; or
3         (xvii) any portion of a policy or contract to the
4     extent it provides for interest or other changes in value
5     to be determined by the use of an index or other external
6     reference stated in the policy or contract, but which have
7     not been credited to the policy or contract, or as to which
8     the policy or contract owner's rights are subject to
9     forfeiture, as of the date the member insurer becomes an
10     impaired or insolvent insurer under this Article,
11     whichever is earlier. If a policy's or contract's interest
12     or changes in value are credited less frequently than
13     annually, then for purposes of determining the values that
14     have been credited and are not subject to forfeiture under
15     this subdivision 531.03(2)(b)(xvii), the interest or
16     change in value determined by using the procedures defined
17     in the policy or contract shall be credited as if the
18     contractual date of crediting interest or changing values
19     was the date of impairment or insolvency, whichever is
20     earlier, and shall not be subject to forfeiture; or
21         (xviii) a policy or contract issued in this State by a
22     member insurer at a time when it was not licensed or did
23     not have a certificate of authority to issue the policy or
24     contract in this State.
25     (3) The benefits that for which the Association may become
26 obligated to cover liable shall in no event exceed the lesser
27 of:
28         (a) the contractual obligations for which the insurer
29     is liable or would have been liable if it were not an
30     impaired or insolvent insurer, or
31         (b)(i) with respect to any one life, regardless of the
32     number of policies or contracts:
33             (A) $300,000 in life insurance death benefits, but
34         not more than $100,000 in net cash surrender and net
35         cash withdrawal values for life insurance;
36             (B) $300,000 in health insurance benefits,

 

 

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1         including any net cash surrender and net cash
2         withdrawal values;
3             (C) $100,000 in the present value of annuity
4         benefits, including net cash surrender and net cash
5         withdrawal values;
6         (ii) with respect to each individual participating in a
7     governmental retirement benefit plan established under
8     Section 401, 403(b) or 457 of the United States U.S.
9     Internal Revenue Code covered by an unallocated annuity
10     contract or the beneficiaries of each such individual if
11     deceased, in the aggregate, $100,000 in present value
12     annuity benefits, including net cash surrender and net cash
13     withdrawal values; provided, however, that in no event
14     shall the Association be liable to expend more than
15     $300,000 in the aggregate with respect to any one
16     individual under subparagraph (1) and this subparagraph;
17         (iii) with respect to each payee of a structured
18     settlement annuity contract (or the beneficiary or
19     beneficiaries of the payee if deceased), $100,000 in the
20     present value of annuity benefits, in the aggregate
21     including net cash surrender and net cash withdrawal
22     values;
23         (iv) provided, however, that in no event shall the
24     Association be liable to expend more than $300,000 in the
25     aggregate with respect any one life under subparagraphs
26     (3)(b)(i), (ii), and (iii);
27         (v) with respect to one owner of multiple non-group
28     policies or contracts of life insurance, whether the policy
29     owner is an individual, firm, corporation, or other person,
30     and whether the persons insured are officers, managers,
31     employees, or other persons, $5,000,000 in benefits,
32     regardless of the number of policies and contracts held by
33     the owner;
34         (vi) (iii) with respect to either (i) one contract
35     owner provided coverage under subparagraph (1)(c)(ii) of
36     this Section; or (ii) any one plan sponsor whose plans own

 

 

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1     directly or in trust one or more contract holder covered by
2     any unallocated annuity contracts contract not included in
3     subparagraph (3)(b)(ii) of this Section above, $5,000,000
4     in benefits, irrespective of the number of such contracts
5     held by that contract owner or plan sponsor; holder.
6     provided, however, that in the case where one or more
7     unallocated annuity contracts not included in subparagraph
8     (3)(b)(ii) of this Section are covered contracts under this
9     Article and are owned by a trust or other entity for the
10     benefit of 2 or more plan sponsors, coverage shall be
11     afforded by the Association if the largest interest in the
12     trust or entity owning the contract or contracts is held by
13     a plan sponsor whose principal place of business is in this
14     State and in no event shall the Association be obligated to
15     cover more than $5,000,000 in benefits with respect to all
16     these unallocated contracts; and provided further that
17     where one or more unallocated annuity contracts not
18     included in subparagraph (3)(b)(ii) of this Section are
19     owned by a benefit plan, or the trustee of a benefit plan,
20     with fewer than 50 participants, the Association shall not
21     be liable for an amount that in the aggregate is greater
22     than $100,000 times the number of individuals who are
23     participants in the benefit plan;
24         (vii) The limitations set forth in this paragraph (3)
25     are limitations on the coverage for which the Association
26     is obligated before taking into account either its
27     subrogation and assignment rights or the extent to which
28     such coverage could be provided out of the assets of the
29     impaired or insolvent insurer attributable to covered
30     policies or contracts. The costs of the Association's
31     obligations under this Article may be met by the use of
32     assets attributable to covered policies or contracts or
33     reimbursed to the Association pursuant to its subrogation
34     and assignment rights.
35     (4) In performing its obligations to provide coverage under
36 Section 531.08 of this Article, the Association shall not be

 

 

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1 required to guarantee, assume, reinsure, or perform, or cause
2 to be guaranteed, assumed, reinsured, or performed, the
3 contractual obligations of the insolvent or impaired insurer
4 under a covered policy or contract that do not materially
5 affect the economic values or economic benefits of the covered
6 policy or contract.
7 (Source: P.A. 90-177, eff. 7-23-97; 91-357, eff. 7-29-99.)
 
8     (215 ILCS 5/531.04)  (from Ch. 73, par. 1065.80-4)
9     Sec. 531.04. Construction.) This Article is to be liberally
10 construed to effect the purpose established under Section
11 531.02 which constitutes an aid and guide to interpretation.
12 (Source: P.A. 81-899.)
 
13     (215 ILCS 5/531.05)  (from Ch. 73, par. 1065.80-5)
14     Sec. 531.05. Definitions. As used in this Act:
15     (1) "Account" means either of the 2 3 accounts created
16 under Section 531.06.
17     (2) "Annuity contracts" and "certificates under group
18 annuity contracts" include but are not limited to guaranteed
19 investment contracts, deposit administration contracts,
20 unallocated funding agreements, allocated funding agreements,
21 structured settlement annuities, annuities issued to or in
22 connection with government lotteries, and any immediate or
23 deferred annuity contracts.
24     (3) (2) "Association" means the Illinois Life and Health
25 Insurance Guaranty Association created under Section 531.06.
26     (3) "Director" means the Director of Insurance of this
27 State.
28     (4) "Authorized assessment" or the term "authorized" when
29 used in the context of assessments means a resolution by the
30 board of directors has been passed whereby an assessment may be
31 called immediately or in the future from member insurers for a
32 specified amount. An assessment is authorized when the
33 resolution is passed or, where the terms of the resolution
34 specify an effective date, on such effective date.

 

 

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1     (5) "Benefit plan" means a plan for the provision of
2 pension, severance, health, or other benefits sponsored by one
3 or more specific employers, unions, or associations of natural
4 persons.
5     (6) "Board" or "board of directors" means the board of
6 directors of the Association.
7     (7) "Called assessment" or the term "called" when used in
8 the context of assessments means that a notice has been issued
9 by the Association to member insurers requiring that all or
10 part of an authorized assessment be paid at such time and
11 subject to such conditions as are set forth within the notice.
12 An authorized assessment becomes a called assessment when
13 notice is mailed by the Association to member insurers.
14     (8) "Certificates under group annuity contracts" is
15 defined in paragraph (2) of this Section.
16     (9) (4) "Contractual obligation" means any obligation
17 under a policy or contract or certificate under a group policy
18 or contract, or portion thereof for which coverage is provided
19 under Section 531.03.
20     (10) (5) "Covered person" means any person who is entitled
21 to the protection of the Association as described in Section
22 531.02.
23     (11) (6) "Covered policy" means any policy or contract or
24 portion of a policy or contract for which coverage is provided
25 within the scope of this Article under Section 531.03.
26     (12) "Director" means the Director of Insurance of this
27 State.
28     (13) "Extra-contractual claim" includes, for example,
29 claims relating to bad faith in the payment or adjudication of
30 claims, claims for punitive or exemplary damages or attorney's
31 fees and costs, and claims for breaches of statutory or
32 fiduciary duty.
33     (14) (7) "Impaired insurer" means a member insurer
34 determined deemed by the Director in a written notice to the
35 Association after the effective date of this Article to be
36 potentially unable to fulfill its contractual obligations and

 

 

HB5929 - 14 - LRB093 18698 SAS 44426 b

1 not an insolvent insurer.
2     (15) (8) "Insolvent insurer" means (a) a member insurer
3 that is found to be either at the time the policy was issued or
4 when the insured event occurred, or any company which has
5 acquired such direct policy obligations through purchase,
6 merger, consolidation, reinsurance or otherwise, whether or
7 not such acquiring company held a certificate of authority to
8 transact insurance in this State at the time such policy was
9 issued or when the insured event occurred; and (b) becomes
10 insolvent, and is placed under a final order of liquidation,
11 rehabilitation, or conservation by a court of competent
12 jurisdiction.
13     (16) (9) "Member insurer" means any person licensed or that
14 who holds a certificate of authority to transact in this State
15 any kind of insurance business to which this Article applies
16 under Section 531.03. For purposes of this Article "member
17 insurer" includes any person whose certificate of authority may
18 have been suspended pursuant to Section 119, revoked,
19 voluntarily withdrawn, or not renewed subsequent to the date on
20 which a member insurer became an impaired insurer or an
21 insolvent insurer, whichever is earlier. "Member insurer" does
22 not include any of the following: .
23         (a) a mandatory State pooling plan;
24         (b) an insurance exchange;
25         (c) an organization (other than an insurer authorized
26     to transact business in this State) issuing charitable gift
27     annuities; or
28         (d) any entity similar to any of the above.
29     (17) (10) "Moody's Corporate Bond Yield Average" means the
30 Monthly Average Corporates as published by Moody's Investors
31 Service, Inc., or any successor thereto.
32     (18) "Owner" of a policy or contract and "policy owner" and
33 "contract owner" mean the person who is identified as the legal
34 owner under the terms of the policy or contract or who is
35 otherwise vested with legal title to the policy or contract
36 through a valid assignment completed in accordance with the

 

 

HB5929 - 15 - LRB093 18698 SAS 44426 b

1 terms of the policy or contract and properly recorded as the
2 owner on the books of the insurer. The terms "owner", "contract
3 owner", and "policy owner" do not include persons with a mere
4 beneficial interest in a policy or contract.
5     (19) "Person" means any individual, corporation, trust,
6 limited liability company, partnership, association,
7 governmental body or entity, or voluntary organization.
8     (20) "Plan sponsor" means:
9         (a) the employer in the case of a benefit plan
10     established or maintained by a single employer;
11         (b) the employee organization in the case of a benefit
12     plan established or maintained by an employee
13     organization; or
14         (c) in a case of a benefit plan established or
15     maintained by 2 or more employers or jointly by one or more
16     employers and one or more employee organizations, the
17     association, committee, joint board of trustees, or other
18     similar group of representatives of the parties who
19     establish or maintain the benefit plan.
20     (21) (11) "Premiums" means direct gross insurance
21 premiums, or subscriptions, or and annuity considerations (by
22 whatever name called) received on covered policies or
23 contracts, less returned return premiums, and considerations,
24 and deposits thereon and less dividends and experience credits
25 paid or credited to policy or contract owners policyholders on
26 such direct business. "Premiums" do not include premiums and
27 considerations on contracts between insurers and reinsurers.
28 "Premiums" do not include any amounts or considerations
29 received for any policies or contracts or for the portions of
30 any policies or contracts for which coverage is not provided
31 under paragraph (2) of Section 531.03 except that assessable
32 premium shall not be reduced on account of subparagraph
33 (2)(b)(iii) of Section 531.03 relating to interest limitations
34 and subparagraph (3)(b) of Section 531.03 relating to
35 limitations with respect to any one life, any one individual,
36 any one participant, and any one policy or contract owner.

 

 

HB5929 - 16 - LRB093 18698 SAS 44426 b

1 contractholder; provided that "Premiums" shall not include:
2         (a) any premiums in excess of $5,000,000 five million
3     dollars on any unallocated annuity contract not issued
4     under a governmental retirement benefit plan (or its
5     trustee) established under Sections 401, 403(b) or 457 of
6     the United States Internal Revenue Code; or .
7         (b) with respect to multiple non-group policies or
8     contracts of life insurance owned by one owner, whether the
9     policy or contract owner is an individual, firm,
10     corporation, or other person, and whether the persons
11     insured are officers, managers, employees, or other
12     persons, premiums in excess of $5,000,000 with respect to
13     these policies or contracts, regardless of the number of
14     policies or contracts held by the owner.
15     (12) "Person" means any individual, corporation,
16 partnership, association or voluntary organization.
17     (22) "Principal place of business" of a plan sponsor or a
18 person other than a natural person means the single state in
19 which the natural persons who establish policy for the
20 direction, control, and coordination of the operations of the
21 entity as a whole primarily exercise that function, determined
22 by the Association in its reasonable judgment by considering
23 the following factors:
24         (a) the state in which the primary executive and
25     administrative headquarters of the entity are located;
26         (b) the state in which the principal office of the
27     chief executive officer of the entity is located;
28         (c) the state in which the board of directors (or
29     similar governing person or persons) of the entity conducts
30     the majority of its meetings;
31         (d) the state in which the executive or management
32     committee of the board of directors (or similar governing
33     person or persons) of the entity conducts the majority of
34     its meetings;
35         (e) the state from which the management of the overall
36     operations of the entity is directed; and

 

 

HB5929 - 17 - LRB093 18698 SAS 44426 b

1         (f) in the case of a benefit plan sponsored by
2     affiliated companies comprising a consolidated
3     corporation, the state in which the holding company or
4     controlling affiliate has its principal place of business
5     as determined using the above factors.
6     However, in the case of a plan sponsor, if more than 50% of
7 the participants in the benefit plan are employed in a single
8 state, that state shall be deemed to be the principal place of
9 business of the plan sponsor; except that the principal place
10 of business of a plan sponsor of a benefit plan described in
11 paragraph (20)(c) of this Section shall be deemed to be the
12 principal place of business of the association, committee,
13 joint board of trustees, or other similar group of
14 representatives of the parties who establish or maintain the
15 benefit plan; provided, however, that in the absence of a
16 specific or clear designation of such a principal place of
17 business, the principal place of business shall be deemed to be
18 the principal place of business of the employer or employee
19 organization that has the largest investment in the benefit
20 plan in question.
21     (23) "Receivership court" means the court in the insolvent
22 or impaired insurer's state of domicile having jurisdiction
23 over the conservation, rehabilitation, or liquidation of the
24 insurer.
25     (24) (13) "Resident" means any person to whom a contractual
26 obligation is owed and, except in the case of a contract owner
27 of an unallocated annuity contract issued to a benefit plan or
28 trustee of a benefit plan, who resides in this State on the
29 date the Director determines a member insurer to be an impaired
30 insurer or a court order determines a member insurer to be an
31 insolvent insurer, whichever occurs first. In the case of an
32 unallocated annuity contract issued to a benefit plan, or the
33 trustee of a benefit plan, the contract owner shall be a
34 "resident" of the state in which the principal place of
35 business of the plan sponsor was located on such date at the
36 time the insurer is determined to be impaired or insolvent and

 

 

HB5929 - 18 - LRB093 18698 SAS 44426 b

1 to whom contractual obligations are owed. A person may be a
2 resident of only one state which, in the case of a person other
3 than a natural person, shall be its principal place of
4 business. Citizens of the United States that are either (i)
5 residents of foreign countries or (ii) residents of United
6 States possessions, territories, or protectorates that do not
7 have an association similar to the Association shall be deemed
8 residents of the state of domicile of the insurer that issued
9 the policies or contracts.
10     (25) "State" means a state, the District of Columbia,
11 Puerto Rico, and a United States possession, territory, or
12 protectorate.
13     (26) "Structured settlement annuity contract" means an
14 annuity contract purchased in order to fund periodic payments
15 for a plaintiff or other claimant in payment for or with
16 respect to personal injury suffered by the plaintiff or other
17 claimant.
18     (27) "Subaccount" means any of the 3 subaccounts of the
19 life insurance and annuity account created under subdivision
20 (1) of 531.06.
21     (28) (14)"Supplemental contract" means any written
22 agreement entered into for the distribution of proceeds under a
23 life, health, or annuity policy or contract proceeds.
24     (29) (15) "Unallocated annuity contract" means any annuity
25 contract or group annuity certificate which is not issued to
26 and owned by an individual, except to the extent of any annuity
27 benefits guaranteed to an individual by an insurer under such
28 contract or certificate.
29 (Source: P.A. 86-753.)
 
30     (215 ILCS 5/531.06)  (from Ch. 73, par. 1065.80-6)
31     Sec. 531.06. Creation of the Association. There is created
32 a non-profit legal entity to be known as the Illinois Life and
33 Health Insurance Guaranty Association. All member insurers are
34 and must remain members of the Association as a condition of
35 their authority to transact insurance in this State. The

 

 

HB5929 - 19 - LRB093 18698 SAS 44426 b

1 Association must perform its functions under the plan of
2 operation established and approved under Section 531.10 and
3 must exercise its powers through a board of directors
4 established under Section 531.07. For purposes of
5 administration and assessment, the Association must maintain 2
6 accounts:
7     (1) The life insurance and annuity account which includes
8 the following subaccounts:
9     (a) Life insurance account;
10     (b) Annuity account which shall include annuity contracts
11 owned by a governmental retirement plan (or its trustee)
12 established under Section 401, 403(b), or 457 of the United
13 States Internal Revenue Code, but shall otherwise exclude
14 unallocated annuity contracts; and
15     (c) Unallocated annuity account which shall exclude
16 contracts owned by a governmental retirement benefit plan (or
17 its trustee) established under Section 401, 403(b), or 457 of
18 the United States Internal Revenue Code include contracts
19 qualified under Section 403(b) of the United State Internal
20 Revenue Code.
21     (2) The health insurance account.
22     The Association shall be supervised by the Director and is
23 subject to the applicable provisions of the Illinois Insurance
24 Code.
25 (Source: P.A. 86-753.)
 
26     (215 ILCS 5/531.07)  (from Ch. 73, par. 1065.80-7)
27     Sec. 531.07. Board of Directors.) The board of directors of
28 the Association consists of not less than 5 nor more than 9
29 members serving terms as established in the plan of operation.
30 The members of the board are to be selected by member insurers
31 subject to the approval of the Director. Vacancies on the board
32 must be filled for the remaining period of the term in the
33 manner described in the plan of operation. To select the
34 initial board of directors, and initially organize the
35 Association, the Director must give notice to all member

 

 

HB5929 - 20 - LRB093 18698 SAS 44426 b

1 insurers of the time and place of the organizational meeting.
2 In determining voting rights at the organizational meeting each
3 member insurer is entitled to one vote in person or by proxy.
4 If the board of directors is not selected within 60 days after
5 notice of the organizational meeting, the Director may appoint
6 the initial members.
7     In approving selections or in appointing members to the
8 board, the Director must consider, whether all member insurers
9 are fairly represented.
10     Members of the board may be reimbursed from the assets of
11 the Association for expenses incurred by them as members of the
12 board of directors but members of the board may not otherwise
13 be compensated by the Association for their services.
14 (Source: P.A. 81-899.)
 
15     (215 ILCS 5/531.08)  (from Ch. 73, par. 1065.80-8)
16     Sec. 531.08. Powers and duties of the Association. In
17 addition to the powers and duties enumerated in other Sections
18 of this Article:
19         (1) If an a domestic insurer is an impaired insurer,
20     the Association may, in its discretion and subject to any
21     conditions imposed by the Association other than those
22     which impair the contractual obligations of the impaired
23     insurer, and approval approved by the impaired insurer and
24     the Director:
25             (a) Guarantee, assume, or reinsure, or cause to be
26         guaranteed, assumed, or reinsured, any or all of the
27         covered policies of covered persons of the impaired
28         insurer;
29             (b) Provide such monies, pledges, notes,
30         guarantees, or other means as are proper to effectuate
31         subparagraph paragraph (1) (a), and assure payment of
32         the contractual obligations of the impaired insurer
33         pending action under subparagraph paragraph (1) (a). ;
34             (c) Loan money to the impaired insurer;
35         (2) If an a domestic, foreign, or alien insurer is an

 

 

HB5929 - 21 - LRB093 18698 SAS 44426 b

1     insolvent insurer, the Association shall, in its
2     discretion, either subject to the approval of the Director;
3             (a)(i) Guarantee, assume, or reinsure or cause to
4         be guaranteed, assumed, or reinsured the covered
5         policies of covered persons of the insolvent insurer;
6         or
7             (ii) Otherwise assure Assure payment of the
8         contractual obligations of the insolvent insurer to
9         covered persons; and
10             (iii) Provide such monies, pledges, loans, notes,
11         guaranties, or other means as are reasonably necessary
12         to discharge such duties under subparagraphs (2)(a)(i)
13         and (2)(a)(ii); or
14             (b) Provide with respect to only life and health
15         insurance policies, provide benefits and coverages in
16         accordance with Section 531.08(3).
17             (c) Provided however that this paragraph
18         subsection (2) shall not apply when the Director has
19         determined that the foreign or alien insurer's
20         insurers domiciliary jurisdiction or state of entry
21         provides, by statute, protection substantially similar
22         to that provided by this Article for residents of this
23         State and such protection will be provided in a timely
24         manner.
25         (3) When proceeding under subparagraph (2)(b) of this
26     Section the Association shall, with respect to only life
27     and health insurance policies and annuity contracts:
28             (a) assure payment of benefits for premiums
29         identical to the premiums and benefits (except for
30         terms of conversion and renewability) that would have
31         been payable under the policies or contracts of the
32         insolvent insurer, for claims incurred:
33                 (i) with respect to group policies and
34             contracts, not later than the earlier of the next
35             renewal date under such policies or contracts or 60
36             sixty days, but in no event less than 30 thirty

 

 

HB5929 - 22 - LRB093 18698 SAS 44426 b

1             days, after the date on which the Association
2             becomes obligated with respect to such policies
3             and contracts;
4                 (ii) with respect to individual and other
5             non-group policies and contracts, not later than
6             the earlier of the next renewal date (if any) under
7             such policies or contracts or one year, but in no
8             event less than 30 thirty days, from the date on
9             which the Association becomes obligated with
10             respect to such policies or contracts;
11             (b) make diligent efforts to provide all known
12         policy and contract owners 30 insureds or group
13         policyholders with respect to group policies thirty
14         days notice of the termination (pursuant to
15         subparagraph (3)(a)) of the benefits provided; and
16             (c) with respect to individual and other non-group
17         life and health policies and annuity contracts covered
18         by the Association, make available to each known
19         insured, or owner if other than the insured or
20         annuitant, and with respect to an individual formerly
21         insured or formerly an annuitant under a group policy
22         on contract who is not eligible for replacement group
23         coverage, make available substitute coverage on an
24         individual basis in accordance with the provisions of
25         subparagraph (3)(d) of this Section, if the insureds or
26         annuitants had a right under law or the terminated
27         policy or annuity contract to convert coverage to
28         individual coverage or to continue a an individual
29         non-group policy or annuity contract in force until a
30         specified age or for a specified time, during which the
31         insurer has no right unilaterally to make changes in
32         any provision of the policy or annuity contract or had
33         a right only to make changes in premium by class.
34             (d)(i) In providing the substitute coverage
35         required under subparagraph (3)(c) of this Section,
36         the Association may offer either to reissue the

 

 

HB5929 - 23 - LRB093 18698 SAS 44426 b

1         terminated coverage or to issue an alternative policy
2         or contract.
3             (ii) Alternative or reissued policies or contracts
4         shall be offered without requiring evidence of
5         insurability, and shall not provide for any waiting
6         period or exclusion that would not have applied under
7         the terminated policy or contract.
8             (iii) The Association may cause reinsure any
9         alternative or reissued policy or contract to be
10         assumed or reinsured.
11             (e)(i) Alternative policies or contracts adopted
12         by the Association shall be subject to the approval of
13         either (A) the Director or (B) the domiciliary
14         commissioner and the receivership court. The
15         Association may adopt alternative policies or
16         contracts of various types for future issuance
17         insurance without regard to any particular impairment
18         or insolvency.
19             (ii) Alternative policies or contracts shall
20         contain at least the minimum statutory provisions
21         required in this State and provide benefits that shall
22         not be unreasonable in relation to the premium charged.
23         The Association shall set the premium in accordance
24         with a table of rates which it shall adopt. The premium
25         shall reflect the amount of insurance to be provided
26         and the age and class of risk of each insured, but
27         shall not reflect any changes in the health of the
28         insured after the original policy was last
29         underwritten.
30             (iii) Any alternative policy or contract issued by
31         the Association shall provide coverage of a type
32         similar to that of the policy or contract issued by the
33         impaired or insolvent insurer, as determined by the
34         Association.
35             (f) If the Association elects to reissue
36         terminated coverage at a premium rate different from

 

 

HB5929 - 24 - LRB093 18698 SAS 44426 b

1         that charged under the terminated policy or contract,
2         the premium shall be set by the Association in
3         accordance with the amount of insurance provided and
4         the age and class of risk, subject to approval of
5         either (A) the Director or (B) by the domiciliary
6         commissioner and the receivership court by a court of
7         competent jurisdiction.
8             (g) The Association's obligations with respect to
9         coverage under any policy or contract of the impaired
10         or insolvent insurer or under any reissued or
11         alternative policy or contract shall cease on the date
12         such coverage or policy or contract is replaced by
13         another similar policy or contract by the policy owner
14         policyholder, the insured, or the Association.
15         (4) When proceeding under subparagraph (2)(b) of this
16     Section with respect to any policy or contract carrying
17     guaranteed minimum interest rates, the Association shall
18     assure the payment or crediting of a rate of interest
19     consistent with subparagraph (2)(b)(iii)(B) of Section
20     531.03.
21         (5) Nonpayment of premiums 31 thirty-one days after the
22     date required under the terms of any guaranteed, assumed,
23     alternative or reissued policy or contract or substitute
24     coverage shall terminate the Association's obligations
25     under such policy or contract or coverage under this
26     Article Act with respect to such policy or contract or
27     coverage, except with respect to any claims incurred or any
28     net cash surrender value which may be due in accordance
29     with the provisions of this Article Act.
30         (6) Premiums due for coverage after entry of an order
31     of liquidation of an insolvent insurer shall belong to and
32     be payable at the direction of the Association, and the
33     Association shall be liable for unearned premiums due to
34     policy or contract owners arising after the entry of such
35     order.
36         (7) The protection provided by this Article shall not

 

 

HB5929 - 25 - LRB093 18698 SAS 44426 b

1     apply when any guaranty protection is provided to residents
2     of this State by the laws of the domicilary state or
3     jurisdiction of the impaired or insolvent insurer other
4     than this State.
5         (8) (7) (a) In carrying out its duties under paragraph
6     subsection (2) of this Section, the Association may
7     permanent policy liens, or contract liens, may be imposed
8     in connection with any guarantee, assumption or
9     reinsurance agreement, if the court:
10             (a) (i) subject to approval by the receivership
11         court or a court of competent jurisdiction is this
12         State, impose permanent policy or contract liens in
13         connection with a guarantee, assumption, or
14         reinsurance agreement, if the Association finds Finds
15         that the amounts which can be assessed under this
16         Article Act are less than the amounts needed to assure
17         full and prompt performance of the insolvent insurer's
18         contractual obligations, or that the economic or
19         financial conditions as they affect member insurers
20         are sufficiently adverse to render the imposition of
21         policy or contract liens, to be in the public interest;
22         and
23             (b) subject to approval by the receivership court
24         or a court of competent jurisdiction in this State,
25         impose temporary moratoriums or liens on payments of
26         cash values and policy loans, or any other right to
27         withdraw funds held in conjunction with policies or
28         contracts, in addition to any contractual provisions
29         for deferral of cash or policy or contract loan value.
30         In addition, in the event of a temporary moratorium or
31         moratorium charge imposed by the receivership court or
32         a court of competent jurisdiction in this State on
33         payment of cash values or policy or contract loans, or
34         on any other right to withdraw funds held in
35         conjunction with policies or contracts, out of the
36         assets of the impaired or insolvent insurer, the

 

 

HB5929 - 26 - LRB093 18698 SAS 44426 b

1         Association may defer the payment of cash values,
2         policy or contract loans, or other rights by the
3         Association for the period of the moratorium or
4         moratorium charge imposed by the receivership court or
5         a court of competent jurisdiction in this State, except
6         for claims covered by the Association to be paid in
7         accordance with a hardship procedure (i) established
8         by the liquidator or rehabilitator and approved by the
9         receivership court or (ii) approved by a court of
10         competent jurisdiction in this State.
11             (ii) Approves the specific policy liens or
12         contract liens to be used.
13         (b) Before being obligated under subsection (2) the
14     Association may request that there be imposed temporary
15     moratoriums or liens on payments of cash values and policy
16     loans in addition to any contractual provisions for
17     deferral of cash or policy loan values, and such temporary
18     moratoriums and liens may be imposed if they are approved
19     by the court.
20         (9) A deposit in this State, held pursuant to law or
21     required by the Director for the benefit of creditors,
22     including policy and contract owners, not turned over to
23     the domiciliary liquidator upon the entry of a final order
24     of liquidation or order approving a rehabilitation plan of
25     an insurer domiciled in this State or in a reciprocal state
26     shall be promptly paid to the Association. The Association
27     (i) shall be entitled to retain a portion of any amount so
28     paid to it equal to the percentage determined by dividing
29     the aggregate amount of policy and contract owners' claims
30     related to that insolvency for which the Association has
31     provided statutory benefits by the aggregate amount of all
32     policy and contract owners' claims in this State related to
33     that insolvency and (ii) shall remit to the domiciliary
34     receiver the amount so paid to the Association, less the
35     amount retained pursuant to clause (i). Any amount so paid
36     to the Association and retained by it pursuant to clause

 

 

HB5929 - 27 - LRB093 18698 SAS 44426 b

1     (i) shall be treated as a distribution of estate assets
2     pursuant to subsection (2) of Section 205 of this Code or
3     similar provision of the state of domicile of the impaired
4     or insolvent insurer.
5         (10) The Association may fulfill its obligations under
6     paragraph (2) of this Section by providing benefits in
7     connection with policies or contracts of the insolvent
8     insurer whose terms have been modified pursuant to an order
9     of the receivership court or a court of competent
10     jurisdiction in this State, provided that the economic
11     values and economic benefits of such modified policies or
12     contracts, after the Association has acted to fulfill its
13     obligations, are not materially less than the economic
14     values and economic benefits that covered persons would
15     have received after the Association had acted to fulfill
16     its obligations if the terms of such policies or contracts
17     had not been modified. In determining what economic values
18     and economic benefits covered persons would have received
19     after the Association had acted to fulfill its obligations
20     if the terms of the insolvent insurer's policies or
21     contracts had not been modified, the Association shall take
22     into account (i) the coverage limitations set forth in
23     paragraphs (2) and (3) of Section 531.03, (ii) any
24     substitute coverage that the Association would have
25     provided pursuant to paragraphs (3) and (22) of this
26     Section, and (iii) any permanent policy or contract liens
27     and any temporary moratoriums that would have been
28     necessary under paragraph (8) of this Section but for the
29     modifications in terms approved by the court.
30         (11) (8) There shall be no liability on the part of and
31     no cause of action shall arise against the Association or
32     against any transferee from the Association in connection
33     with the transfer by reinsurance or otherwise of all or any
34     part of an impaired or insolvent insurer's business by
35     reason of any action taken or any failure to take any
36     action by the impaired or insolvent insurer at any time.

 

 

HB5929 - 28 - LRB093 18698 SAS 44426 b

1         (12) (9) If the Association fails to act within a
2     reasonable period of time with respect to an insolvent
3     insurer as provided in paragraph subsection (2) of this
4     Section with respect to an insolvent insurer, the Director
5     may assume shall have the powers and duties of the
6     Association under this Article Act with regard to the such
7     insolvent insurer insurers.
8         (13) (10) The Association or its designated
9     representatives may render assistance and advice to the
10     Director, upon his or her request, concerning
11     rehabilitation, payment of claims, continuations of
12     coverage, or the performance of other contractual
13     obligations of any impaired or insolvent insurer.
14         (14) The Association has standing to appear or
15     intervene before any court or agency with jurisdiction over
16     an impaired or insolvent insurer concerning which the
17     Association is or may become obligated under this Article,
18     or with jurisdiction over any person or property against
19     whom or which the Association may have rights through
20     subrogation or otherwise. Such standing extends to all
21     matters germane to the powers and duties of the Association
22     including, but not limited to, proposals for reinsuring,
23     modifying, or guaranteeing the policies or contracts of the
24     impaired or insolvent insurer and the determination of the
25     policies or contracts and contractual obligations.
26         (11) The Association has standing to appear before any
27     court concerning all matters germane to the powers and
28     duties of the Association, including, but not limited to,
29     proposals for reinsuring or guaranteeing the covered
30     policies of the impaired or insolvent insurer and the
31     determination of the covered policies and contractual
32     obligations.
33         (15) (12) (a) Any person receiving benefits under this
34     Article is deemed to have assigned the rights under , and
35     any causes of action against any person for losses arising
36     under, resulting from, or otherwise relating to the covered

 

 

HB5929 - 29 - LRB093 18698 SAS 44426 b

1     policy or contract to the Association to the extent of the
2     benefits received because of this Article whether the
3     benefits are payments of contractual obligations, or
4     continuation of coverage, or provision of substitute
5     coverages. The Association may require an assignment to it
6     of such rights and causes of action by any payee, policy or
7     contract owner, beneficiary, insured, certificate holder,
8     or annuitant as a condition precedent to the receipt of any
9     rights or benefits conferred by this Article upon such
10     person. The Association is subrogated to these rights
11     against the assets of any insolvent insurer.
12         (b) The subrogation rights of the Association under
13     this subsection have the same priority against the assets
14     of the insolvent insurer as that possessed by the person
15     entitled to receive benefits under this Article. The
16     Association's subrogation rights against the assets of the
17     insolvent insurer shall not be reduced by any recoveries
18     from persons other than the estate of the insolvent insurer
19     obtained by the Association pursuant to assignment rights
20     provided under this subsection, except that the
21     Association's subrogation rights against the assets of the
22     insolvent insurer with respect to a covered policy or
23     contract shall be deemed fulfilled where any and all such
24     recoveries from third parties with respect to the covered
25     policy or contract, together with any distributions of
26     estate assets with respect to the covered policy or
27     contract, have made the Association whole, after
28     accounting for any and all legal fees and expenses
29     (including interest) incurred by the Association in
30     achieving such recoveries.
31         (c) In addition to the rights set forth in
32     subparagraphs (15)(a) and (b) of this Section, the
33     Association has all common law rights of subrogation and
34     any other equitable or legal remedy that would have been
35     available to the impaired or insolvent insurer or owner,
36     beneficiary, or payee of a policy or contract with respect

 

 

HB5929 - 30 - LRB093 18698 SAS 44426 b

1     to the policy or contract (including without limitation, in
2     the case of a structured settlement annuity contract, any
3     rights of the owner, beneficiary, or payee of the annuity
4     contract, to the extent of benefits received pursuant to
5     this Article, against a person originally or by succession
6     responsible for the losses arising from the personal injury
7     relating to the annuity contract or payment therefor),
8     excepting any such person responsible by reason of serving
9     as an assignee in respect of a qualified assignment under
10     United States Internal Revenue Code Section 130.
11         (d) If subparagraph (a), (b), or (c) of this paragraph
12     is invalid or ineffective with respect to any person or
13     claim for any reason, the amount payable by the Association
14     with respect to the related covered obligations shall be
15     reduced by the amount realized by any other person with
16     respect to the person or claim that is attributable to the
17     policies and contracts (or portion thereof) covered by the
18     Association.
19         (e) If the Association has provided benefits with
20     respect to a covered obligation and a person recovers
21     amounts as to which the Association has rights as described
22     in subparagraph (a), (b), (c) or (d) of this paragraph, the
23     person shall pay to the Association the portion of the
24     recovery attributable to the policies and contracts (or
25     portion thereof) covered by the Association.
26         (16) (13) In addition to the rights and powers
27     elsewhere in this Article, the The Association may do any
28     of the following:
29             (a) Enter into such contracts as are necessary or
30         proper to carry out the provisions and purposes of this
31         Article. ;
32             (b) Sue or be sued, including taking any legal
33         actions necessary or proper for recovery of any unpaid
34         assessments under Section 531.09and to settle any
35         litigation, any threatened or potential litigation,
36         and any claims or potential claims by or against the

 

 

HB5929 - 31 - LRB093 18698 SAS 44426 b

1         Association. The Association shall not be liable for
2         punitive or exemplary damages;
3             (c) Borrow money to effect the purposes of this
4         Article. Any notes or other evidence of indebtedness of
5         the Association not in default are legal investments
6         for domestic insurers and may be carried as admitted
7         assets.
8             (d) Employ or retain such persons as are necessary
9         or appropriate to handle the financial transactions of
10         the Association, and to perform such other functions as
11         become necessary or proper under this Article.
12             (e) Negotiate and contract with any liquidator,
13         rehabilitator, conservator, or ancillary receiver to
14         carry out the powers and duties of the Association.
15             (f) Take such legal action as may be necessary or
16         appropriate to avoid or recover payment of improper
17         claims.
18             (g) Exercise, for the purposes of this Article and
19         to the extent approved by the Director, the powers of a
20         domestic life or health insurer, but in no case may the
21         Association issue insurance policies or annuity
22         contracts other than those issued to perform the
23         contractual obligations of the impaired or insolvent
24         insurer.
25             (h) Exercise all the rights of the Director under
26         Section 193(4) of this Code with respect to covered
27         policies after the association becomes obligated by
28         statute.
29             (i) Request information from a person seeking
30         coverage from the Association in order to aid the
31         Association in determining its obligations under this
32         Article with respect to the person. The person shall
33         promptly comply with the request as a condition
34         precedent to the receipt of any right or benefit
35         conferred by this Article.
36             (j) Take other necessary or appropriate action to

 

 

HB5929 - 32 - LRB093 18698 SAS 44426 b

1         discharge its duties and obligations under this
2         Article or to exercise its powers under this Article.
3         (17)(a) At any time within one year after the date on
4     which the Association becomes responsible for the
5     obligations of a member insurer (the coverage date), the
6     Association may elect to succeed to the rights and
7     obligations of the member insurer that accrue on or after
8     the coverage date and that relate to policies and contracts
9     covered (in whole or in part) by the Association under any
10     one or more indemnity reinsurance agreements entered into
11     by the member insurer as a ceding insurer and selected by
12     the Association. However, the Association may not exercise
13     an election with respect to a reinsurance agreement if the
14     receiver, rehabilitator, or liquidator of the member
15     insurer has previously and expressly disaffirmed the
16     reinsurance agreement. The election shall be effected by a
17     notice to the receiver, rehabilitator, or liquidator and to
18     the affected reinsurers. If the Association makes an
19     election, subparagraphs (i) through (iv) of this paragraph
20     shall apply with respect to the agreements selected by the
21     Association:
22             (i) The Association shall be responsible for all
23         unpaid premiums due under the agreements (for periods
24         both before and after the coverage date) and shall be
25         responsible for the performance of all other
26         obligations to be performed after the coverage date, in
27         each case which relate to policies and contracts
28         covered (in whole or in part) by the Association. The
29         Association may charge policies and contracts covered
30         in part by the Association, through reasonable
31         allocation methods, the costs for reinsurance in
32         excess of the obligations of the Association.
33             (ii) The Association shall be entitled to any
34         amounts payable by the reinsurer under the agreements
35         with respect to losses or events that occur in periods
36         after the coverage date and that relate to policies and

 

 

HB5929 - 33 - LRB093 18698 SAS 44426 b

1         contracts covered by the Association (in whole or in
2         part), provided that, upon receipt of any such amounts,
3         the Association shall be obliged to pay to the
4         beneficiary under the policy or contract on account of
5         which the amounts were paid a portion of the amount
6         equal to the excess of:
7             (A) the amount received by the Association over
8             (B) the benefits paid by the Association on account
9         of the policy or contract less the retention of the
10         impaired or insolvent member insurer applicable to the
11         loss or event.
12             (iii) Within 30 days following the Association's
13         election, the Association and each indemnity reinsurer
14         shall calculate the net balance due to or from the
15         Association under each reinsurance agreement as of the
16         date of the Association's election, giving full credit
17         to all items paid by either the member insurer (or its
18         receiver, rehabilitator, or liquidator) or the
19         indemnity reinsurer during the period between the
20         coverage date and the date of the Association's
21         election. Either the Association or indemnity
22         reinsurer shall pay the net balance due the other
23         within 5 days after the completion of the calculation.
24         If the receiver, rehabilitator, or liquidator has
25         received any amounts due the Association pursuant to
26         subparagraph (17)(a)(ii), the receiver, rehabilitator,
27         or liquidator shall remit the same to the Association
28         as promptly as practicable.
29             (iv) If the Association, within 60 days of the
30         election, pays the premiums due for periods both before
31         and after the coverage date that relate to policies and
32         contracts covered by the Association (in whole or in
33         part), the reinsurer shall not be entitled to terminate
34         the reinsurance agreements insofar as such agreements
35         relate to policies and contracts covered by the
36         Association (in whole or in part) and shall not be

 

 

HB5929 - 34 - LRB093 18698 SAS 44426 b

1         entitled to set off any unpaid premium due for periods
2         prior to the coverage date against amounts due the
3         Association.
4         (b) In the event the Association transfers its
5     obligations to another insurer, and if the Association and
6     the other insurer agree, the other insurer shall succeed to
7     the rights and obligations of the Association under
8     subparagraph (17)(a) of this Section effective as of the
9     date agreed upon by the Association and the other insurer
10     and regardless of whether the Association has made the
11     election referred to in subparagraph (17)(a) provided
12     that:
13             (i) the indemnity reinsurance agreements shall
14         automatically terminate for new reinsurance unless the
15         indemnity reinsurer and the other insurer agree to the
16         contrary;
17             (ii) the obligations described in the proviso to
18         subparagraph (17)(a)(ii) of this Section shall no
19         longer apply on and after the date the indemnity
20         reinsurance agreement is transferred to the third
21         party insurer; and
22             (iii) this subparagraph (17)(b) shall not apply if
23         the Association has previously expressly determined in
24         writing that it will not exercise the election referred
25         to in subparagraph (17)(a) of this Section.
26         (c) The provisions of this paragraph (17) shall
27     supersede the provisions of any law of this State or of any
28     affected reinsurance agreement that provides for or
29     requires any payment of reinsurance proceeds, on account of
30     losses or events that occur in periods after the coverage
31     date, to the receiver, liquidator, or rehabilitator of the
32     insolvent member insurer. The receiver, rehabilitator, or
33     liquidator shall remain entitled to any amounts payable by
34     the reinsurer under the reinsurance agreement with respect
35     to losses or events that occur in periods prior to the
36     coverage date (subject to applicable setoff provisions).

 

 

HB5929 - 35 - LRB093 18698 SAS 44426 b

1         (d) Except as otherwise expressly provided in this
2     paragraph (17), nothing herein shall alter or modify the
3     terms and conditions of the indemnity reinsurance
4     agreements of the insolvent member insurer. Nothing herein
5     shall abrogate or limit any rights of any reinsurer to
6     claim that it is entitled to rescind a reinsurance
7     agreement.
8         Nothing herein shall give a policy or contract owner or
9     beneficiary an independent cause of action against an
10     indemnity reinsurer that is not otherwise set forth in the
11     indemnity reinsurance agreement.
12         (14) With respect to covered policies for which the
13     Association becomes obligated after an entry of an order of
14     liquidation or rehabilitation, the Association may elect
15     to succeed to the rights of the insolvent insurer arising
16     after the date of the order of liquidation or
17     rehabilitation under any contract of reinsurance to which
18     the insolvent insurer was a party, to the extent that such
19     contract provides coverage for losses occurring after the
20     date of the order of liquidation or rehabilitation. As a
21     condition to making this election, the Association must pay
22     all unpaid premiums due under the contract for coverage
23     relating to periods before and after the date of the order
24     of liquidation or rehabilitation.
25     (18) The Association may join an organization of one or
26 more other state associations of similar purposes to further
27 the purposes and administer the powers and duties of the
28 Association.
29     (19) The board of directors of the Association shall have
30 discretion and may exercise reasonable business judgment to
31 determine the means by which the Association is to provide the
32 benefits of this Article in an economical and efficient manner.
33     (20) Where the Association has arranged or offered to
34 provide the benefits of this Article to a covered person under
35 a plan or arrangement that fulfills the Association's
36 obligations under this Article, the person shall not be

 

 

HB5929 - 36 - LRB093 18698 SAS 44426 b

1 entitled to benefits from the Association in addition to or
2 other than those provided under the plan or arrangement.
3     (21) Venue in a suit against the Association arising under
4 this Article shall be in Cook County. The Association shall not
5 be required to give an appeal bond in any case or proceeding
6 that arises from or is based in whole or in part on claims or
7 other rights asserted under this Article.
8     (22) In carrying out its duties in connection with
9 guaranteeing, assuming, or reinsuring policies or contracts
10 under this Section, the Association may, subject to approval of
11 the Director or the receivership court, issue substitute
12 coverage for a policy or contract that provides an interest
13 rate, crediting rate, or similar factor determined by use of an
14 index or other external reference stated in the policy or
15 contract employed in calculating returns or changes in value by
16 issuing an alternative policy or contract in accordance with
17 the following provisions:
18         (a) in lieu of the index or other external reference
19     provided for in the original policy or contract, the
20     alternative policy or contract provides for (i) a fixed
21     interest rate, (ii) payment of dividends with minimum
22     guarantees, or (iii) a different method for calculating
23     interest or changes in value;
24         (b) there is no requirement for evidence of
25     insurability, waiting period, or other exclusion that
26     would not have applied under the replaced policy or
27     contract; and
28         (c) the alternative policy or contract is
29     substantially similar to the replaced policy or contract in
30     all other material terms.
31 (Source: P.A. 93-326, eff. 1-1-04.)
 
32     (215 ILCS 5/531.09)  (from Ch. 73, par. 1065.80-9)
33     Sec. 531.09. Assessments.
34     (1) For the purpose of providing the funds necessary to
35 carry out the powers and duties of the Association, the board

 

 

HB5929 - 37 - LRB093 18698 SAS 44426 b

1 of directors shall assess the member insurers, separately for
2 each account and subaccount, at such times and for such amounts
3 as the board finds necessary. Assessments shall be due not less
4 than 30 days after written notice to the member insurers and
5 shall accrue interest from the due date the rate of 10% per
6 annum at such adjusted rate as is established under Section
7 6621 of Chapter 26 of the United States Code and such interest
8 shall be compounded daily.
9     (2) There shall be 2 classes of assessments, as follows:
10     (a) Class A assessments shall be authorized and called made
11 for the purpose of meeting administrative costs and other
12 general expenses and examinations conducted under the
13 authority of the Director under subsection (5) of Section
14 531.12. Class A assessments may be authorized and called
15 whether or not related to a particular impaired or insolvent
16 insurer.
17     (b) Class B assessments shall be authorized and called made
18 to the extent necessary to carry out the powers and duties of
19 the Association under Section 531.08 with regard to an impaired
20 or an insolvent domestic insurer or insolvent foreign or alien
21 insurers.
22     (3) (a) The amount of any Class A assessment shall be
23 determined by the board of directors Board and may be
24 authorized and called made on a pro-rata or non-pro rata basis.
25 With respect to any pro rata Class A assessment, the board may
26 provide that no member insurer shall be assessed less than $100
27 as its share of such assessment, notwithstanding that such
28 assessment is pro rata. The board may provide that any pro rata
29 assessment shall be credited against future Class B
30 assessments. The total of all non-pro rata Such assessments
31 shall be in an amount determined by the board, but shall not
32 exceed $500 $200 per company in any one calendar year. The
33 amount of any Class B assessment shall be allocated for
34 assessment purposes among the accounts and subaccounts
35 pursuant to an allocation formula which may be based on the
36 premiums or reserves of the impaired or insolvent insurer or

 

 

HB5929 - 38 - LRB093 18698 SAS 44426 b

1 any other standard deemed by the board in its sole discretion
2 as being fair and reasonable under the circumstances.
3     (b) Class B assessments against member insurers for each
4 account and subaccount shall be in the proportion that the
5 premiums received on business in this State by each assessed
6 member insurer on policies or contracts covered by each account
7 or subaccount for the three most recent calendar years for
8 which information is available preceding the year in which the
9 insurer became impaired or insolvent, as the case may be, bears
10 to such premiums received on business in this State for such
11 calendar years by all assessed member insurers. To the extent
12 that any federal or state law prohibits or preempts the
13 Association from making assessments on the basis of any such
14 premiums, assessments under this subparagraph shall be made on
15 the basis of all such premiums not subject to any prohibitions
16 or preemption, and the assessment method set forth in this
17 subparagraph shall not be rendered invalid by any such
18 prohibitions or preemption.
19     (c) Assessments for funds to meet the requirements of the
20 Association with respect to an impaired or insolvent insurer
21 shall not be authorized or called made until the board in its
22 judgment determines that such authorization or call is
23 necessary to implement the purposes of this Article. When in
24 the judgment of the board an assessment will be necessary to
25 implement the purposes of this Article, the board may authorize
26 a future assessment, to become effective after a member insurer
27 has become an impaired or insolvent insurer, and such
28 assessment shall not be invalid because the member insurer was
29 not an impaired or insolvent insurer at the time the board
30 authorized such future assessment. Classification of
31 assessments under paragraph subsection (2) of this Section and
32 computations of assessments under this paragraph (3)
33 subsection shall be made with a reasonable degree of accuracy,
34 recognizing that exact determinations may not always be
35 possible. The Association shall notify each member insurer of
36 its anticipated pro rata share of an authorized assessment not

 

 

HB5929 - 39 - LRB093 18698 SAS 44426 b

1 yet called within 180 days after the assessment is authorized.
2     (4) The Association may abate or defer, in whole or in
3 part, the assessment of a member insurer if, in the opinion of
4 the board, payment of the assessment would endanger the ability
5 of the member insurer to fulfill its contractual obligations.
6 In the event an assessment against a member insurer is abated
7 or deferred, in whole or in part, because of the limitations
8 set forth in this paragraph (4), the amount by which such
9 assessment is abated or deferred, may be assessed against the
10 other member insurers in a manner consistent with the basis for
11 assessments set forth in this Section 531.09. Once the
12 conditions that caused a deferral have been removed or
13 rectified, the member insurer shall pay all assessments that
14 were deferred pursuant to a repayment plan approved by the
15 Association The total of all assessments upon a member insurer
16 for the life and annuity account and for each subaccount
17 thereunder may not in any one calendar year exceed 2% and for
18 the health account may not in any one calendar year exceed 2%
19 of such insurer's average premiums received in this State on
20 the policies and contracts covered by the account or subaccount
21 during the three calendar years preceding the year in which the
22 insurer became an impaired or insolvent insurer. If a one
23 percent assessment for any subaccount of the life and annuity
24 account in any one year does not provide an amount sufficient
25 to carry out the responsibilities of the Association, then
26 pursuant to subsection 3(b), the board shall access all
27 subaccounts of the life and annuity account for the necessary
28 additional amount, subject to the maximum stated in this
29 subsection.
30     (5)(a)(i) Subject to the provisions of paragraph
31 (5)(a)(ii) of this Section, the total of all assessments upon a
32 member insurer for the life and annuity account and for each
33 subaccount thereunder may not in any one calendar year exceed
34 2%, and for the health account may not in any one calendar year
35 exceed 2%, of such insurer's average premiums received in this
36 State on the policies and contracts covered by the account or

 

 

HB5929 - 40 - LRB093 18698 SAS 44426 b

1 subaccount during the 3 calendar years preceding the year in
2 which the insurer became an impaired or insolvent insurer.
3     (ii) If 2 or more assessments are authorized in one
4 calendar year with respect to insurers that become impaired
5 insurers or insolvent insurers in different calendar years, the
6 average annual premiums for purposes of the aggregate
7 assessment percentage limitation referenced in subparagraph
8 (5)(a)(i) of this Section shall be equal and limited to the
9 higher of the 3-year average annual premiums for the applicable
10 subaccount or account as calculated pursuant to this Section.
11 In the event an assessment against a member insurer is abated,
12 or deferred, in whole or in part, because of the limitations
13 set forth in subsection (4) of this Section the amount by which
14 such assessment is abated or deferred, may be assessed against
15 the other member insurers in a manner consistent with the basis
16 for assessments set forth in this Section.
17     (iii) If funds available from assessments, investment
18 income, recoveries of estate assets, or other recoveries are
19 insufficient to the maximum assessment, together with the other
20 assets of the Association in either account, does not provide
21 in any one year in either account an amount sufficient to carry
22 out the responsibilities of the Association, the necessary
23 additional funds may be assessed as soon thereafter as
24 permitted by this Article.
25     (iv) If the maximum assessment for any subaccount of the
26 life and annuity account in any one year does not provide an
27 amount sufficient to carry out the responsibilities of the
28 Association, then pursuant to subparagraph (3)(b) of this
29 Section 531.09, the board shall access all subaccounts of the
30 life and annuity account for the necessary additional amount,
31 subject to the maximum stated in this paragraph (5).
32     (6) The board may provide in the plan of operation a method
33 of allocating funds among claims, whether relating to one or
34 more impaired or insolvent insurers, when the maximum
35 assessment will be insufficient to cover anticipated claims.
36     (7) (6) The board may, by an equitable method as

 

 

HB5929 - 41 - LRB093 18698 SAS 44426 b

1 established in the plan of operation, refund to member
2 insurers, in proportion to the contribution of each insurer to
3 that account, the amount by which the assets of the account
4 exceed the amount the board finds is necessary to carry out
5 during the coming year the obligations of the Association with
6 regard to that account, including assets accruing from
7 assignment, subrogation, net realized gains, and income from
8 investments. A reasonable amount may be retained in any account
9 to provide funds for the continuing expenses of the Association
10 and for future claims losses if refunds are impractical.
11     (8) (7) Unless otherwise determined by the board pursuant
12 to subdivision 531.09(3)(c), an assessment is deemed to occur
13 on the date upon which the board votes such assessment. The
14 board may defer calling the payment of the assessment or may
15 call for payment in one or more installments.
16     (9) (8) It is proper for any member insurer, in determining
17 its premium rates and policyowner dividends as to any kind of
18 insurance within the scope of this Article, to consider the
19 amount reasonably necessary to meet its assessment obligations
20 under this Article.
21     (10) (9) The Association must issue to each insurer paying
22 an a Class B assessment under this Article, other than a Class
23 A assessment, a certificate of contribution, in a form
24 acceptable to the Director, for the amount of the assessment so
25 paid. All outstanding certificates are of equal dignity and
26 priority without reference to amounts or dates of issue. A
27 certificate of contribution may be shown by the insurer in its
28 financial statement as an asset in such form and for such
29 amount, if any, and period of time as the Director may approve,
30 provided the insurer shall in any event at its option have the
31 right to show a certificate of contribution as an admitted
32 asset at percentages of the original face amount for calendar
33 years as follows:
34     100% for the calendar year after the year of issuance;
35     80% for the second calendar year after the year of
36 issuance;

 

 

HB5929 - 42 - LRB093 18698 SAS 44426 b

1     60% for the third calendar year after the year of issuance;
2     40% for the fourth calendar year after the year of
3 issuance;
4     20% for the fifth calendar year after the year of issuance.
5     (11) The Association may request information from member
6 insurers in order to aid in the exercise of its power under
7 Section 531.09 and member insurers shall promptly comply with
8 such a request.
9 (Source: P.A. 86-753.)
 
10     (215 ILCS 5/531.10)  (from Ch. 73, par. 1065.80-10)
11     Sec. 531.10. Plan of Operation.)
12     (1) (a) The Association must submit to the Director a plan
13 of operation and any amendments thereto necessary or suitable
14 to assure the fair, reasonable, and equitable administration of
15 the Association. The plan of operation and any amendments
16 thereto become effective upon approval in writing by the
17 Director.
18     (b) If the Association fails to submit a suitable plan of
19 operation within 180 days following the effective date of this
20 Article or if at any time thereafter the Association fails to
21 submit suitable amendments to the plan, the Director may, after
22 notice and hearing, adopt and promulgate such reasonable rules
23 as are necessary or advisable to effectuate the provisions of
24 this Article. Such rules are in force until modified by the
25 Director or superseded by a plan submitted by the Association
26 and approved by the Director.
27     (2) All member insurers must comply with the plan of
28 operation.
29     (3) The plan of operation must, in addition to requirements
30 enumerated elsewhere in this Article:
31     (a) Establish procedures for handling the assets of the
32 Association;
33     (b) Establish the amount and method of reimbursing members
34 of the board of directors under Section 531.07;
35     (c) Establish regular places and times for meetings,

 

 

HB5929 - 43 - LRB093 18698 SAS 44426 b

1 including telephone conference calls, of the board of
2 directors;
3     (d) Establish procedures for records to be kept of all
4 financial transactions of the Association, its agents, and the
5 board of directors;
6     (e) Establish the procedures whereby selections for the
7 board of directors will be made and submitted to the Director;
8     (f) Establish any additional procedures for assessments
9 under Section 531.09; and
10     (g) Contain additional provisions necessary or proper for
11 the execution of the powers and duties of the Association.
12     (4) The plan of operation shall establish a procedure for
13 protest by any member insurer of assessments made by the
14 Association pursuant to Section 531.09. Such procedures shall
15 require that:
16     (a) Any member insurer that wishes to protest all or any
17 part of an assessment for any year shall first pay the full
18 amount of the assessment as set forth in the notice provided by
19 the Association. The payment shall be available and may be used
20 to meet Association obligations during the pendency of the
21 protest and any subsequent appeal. Such payments shall be
22 accompanied by a statement in writing that the payment is made
23 under protest, setting forth a brief statement of the ground
24 for the protest. The Association shall hold such payments in a
25 separate interest bearing account.
26     (b) Within 60 30 days following the payment of an
27 assessment under protest by any protesting member insurer, the
28 Association must notify the member insurer in writing of its
29 final decision determination with respect to the protest unless
30 the Association notifies the member that additional time is
31 required to resolve the issues raised by the protest.
32     (c) Within 30 days after a final decision has been made,
33 the Association shall notify the protesting member insurer in
34 writing of that final decision. In the event the Association
35 determines that the protesting member insurer is entitled to a
36 refund, such refund shall be made within 30 days following the

 

 

HB5929 - 44 - LRB093 18698 SAS 44426 b

1 date upon which the Association makes its determination.
2     (d) The final decision of the Association with respect to a
3 protest may be appealed to the Director pursuant to Section
4 531.11(3).
5     (e) In the alternative to rendering a decision with respect
6 to any protest based on a question regarding the assessment
7 base, the Association may refer such protests to the Director
8 for final decision, with or without a recommendation from the
9 Association.
10     (f) In the event the Association determines, or on appeal
11 of the Association's decision it is determined, that the
12 protesting member insurer is entitled to a refund of all or a
13 portion of the amount paid under protest, such refund shall be
14 made to the protesting member insurer. Interest on any refund
15 due a protesting member insurer shall be paid at the rate
16 actually earned by the Association. Interest on any refund due
17 a protesting member insurer shall be paid at the rate actually
18 earned by the Association on the separate account.
19     (5) The plan of operation may provide that any or all
20 powers and duties of the Association, except those under
21 paragraph (c) of subsection (10) subdivision (16)(c) of Section
22 531.08 and Section 531.09 are delegated to a corporation,
23 association or other organization which performs or will
24 perform functions similar to those of this Association, or its
25 equivalent, in 2 or more states. Such a corporation,
26 association or organization shall be reimbursed for any
27 payments made on behalf of the Association and shall be paid
28 for its performance of any function of the Association. A
29 delegation under this subsection shall take effect only with
30 the approval of both the board of directors and the Director,
31 and may be made only to a corporation, association or
32 organization which extends protection not substantially less
33 favorable and effective than that provided by this Article Act.
34 (Source: P.A. 84-1035.)
 
35     (215 ILCS 5/531.11)  (from Ch. 73, par. 1065.80-11)

 

 

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1     Sec. 531.11. Duties and powers of the Director. In addition
2 to the duties and powers enumerated elsewhere in this Article:
3     (1) The Director must:
4         (a) Upon request of the board of directors, provide the
5     Association with a statement of the premiums in the
6     appropriate accounts for each member insurer.
7         (b) notify the board of directors of the existence of
8     an impaired or insolvent insurer not later than 3 days
9     after a determination of impairment or insolvency is made
10     or when the Director receives notice of impairment or
11     insolvency.
12         (c) give notice to an impaired insurer as required by
13     Sections 34 or 60. Notice to the impaired insurer shall
14     constitute notice to its shareholders, if any.
15         (d) In any liquidation or rehabilitation proceeding
16     involving a domestic insurer, be appointed as the
17     liquidator or rehabilitator. If a foreign or alien member
18     insurer is subject to a liquidation proceeding in its
19     domiciliary jurisdiction or state of entry, the Director
20     shall be appointed conservator.
21     (2) The Director may suspend or revoke, after notice and
22 hearing, the certificate of authority to transact insurance in
23 this State of any member insurer which fails to pay an
24 assessment when due or fails to comply with the plan of
25 operation. As an alternative the Director may levy a forfeiture
26 on any member insurer which fails to pay an assessment when
27 due. Such forfeiture may not exceed 5% of the unpaid assessment
28 per month, but no forfeiture may be less than $100 per month.
29     (3) Any final decision or action of the board of directors
30 or the Association may be appealed to the Director by any
31 member insurer or any other person adversely affected by such
32 action if such appeal is taken within 30 days of the decision
33 or action being appealed. Any final action or order of the
34 Director is subject to judicial review in a court of competent
35 jurisdiction. An action or order of the Director may be final
36 and subject to judicial review even if the aggrieved party

 

 

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1 seeking judicial review has not sought reconsideration or
2 rehearing by the Director.
3     (4) The liquidator, rehabilitator, or conservator of any
4 impaired insurer may notify all interested persons of the
5 effect of this Article.
6 (Source: P.A. 89-97, eff. 7-7-95.)
 
7     (215 ILCS 5/531.12)  (from Ch. 73, par. 1065.80-12)
8     Sec. 531.12. Prevention of Insolvencies. To aid in the
9 detection and prevention of insurer insolvencies or
10 impairments:
11     (1) It shall be the duty of the Director:
12     (a) To notify the commissioners of all other states,
13 territories of the United States, and the District of Columbia
14 when he or she takes any of the following actions against a
15 member insurer:
16     (i) revocation of license;
17     (ii) suspension of license;
18     (iii) makes any formal order except for an order issued
19 pursuant to Article XII 1/2 of this Code that such company
20 restrict its premium writing, obtain additional contributions
21 to surplus, withdraw from the State, reinsure all or any part
22 of its business, or increase capital, surplus or any other
23 account for the security of policyholders or creditors.
24     Such notice shall be transmitted to all commissioners
25 within 30 days following the action taken or the date on which
26 the action occurs.
27     (b) To report to the board of directors when he or she has
28 taken any of the actions set forth in subparagraph (a) of this
29 paragraph or has received a report from any other commissioner
30 indicating that any such action has been taken in another
31 state. Such report to the board of directors shall contain all
32 significant details of the action taken or the report received
33 from another commissioner.
34     (2) The Director may seek the advice and recommendations of
35 the board of directors concerning any matter affecting the

 

 

HB5929 - 47 - LRB093 18698 SAS 44426 b

1 Director's his duties and responsibilities regarding the
2 financial condition of member companies and companies seeking
3 admission to transact insurance business in this State.
4     (3) The board of directors may, upon majority vote, make
5 reports and recommendations to the Director upon any matter
6 germane to the liquidation, rehabilitation or conservation of
7 any member insurer. Such reports and recommendations shall not
8 be considered public documents.
9     (4) The board of directors may, upon majority vote, make
10 recommendations to the Director for the detection and
11 prevention of insurer insolvencies.
12     (5) The board of directors may shall, at the conclusion of
13 any insurer insolvency in which the Association was obligated
14 to pay covered claims prepare a report to the Director
15 containing such information as it may have in its possession
16 bearing on the history and causes of such insolvency. The board
17 shall cooperate with the boards of directors of guaranty
18 associations in other states in preparing a report on the
19 history and causes for insolvency of a particular insurer, and
20 may adopt by reference any report prepared by such other
21 associations.
22 (Source: P.A. 86-753.)
 
23     (215 ILCS 5/531.14)  (from Ch. 73, par. 1065.80-14)
24     Sec. 531.14. Miscellaneous Provisions.) (1) Nothing in
25 this Article may be construed to reduce the liability for
26 unpaid assessments of the insured of an impaired or insolvent
27 insurer operating under a plan with assessment liability.
28     (2) No member insurer may voluntarily withdraw from this
29 State or liquidate its property, business, and affairs, and no
30 such voluntary withdrawal or voluntary liquidation shall be
31 effective, until such member insurer has paid all authorized
32 assessments, whether called or uncalled, for which it is liable
33 under this Article.
34     (3) (2) Records must be kept of all meetings of the board
35 of directors negotiations and meetings in which the Association

 

 

HB5929 - 48 - LRB093 18698 SAS 44426 b

1 or its representatives are involved to discuss the activities
2 of the Association in carrying out its powers and duties under
3 Section 531.08. The records of the Association with respect to
4 an impaired or insolvent insurer may be made public only (a)
5 upon the order of the Director or a court of competent
6 jurisdiction or upon a determination by the board, and (b)
7 during the pendency Records of such negotiations or meetings
8 may be made public only upon the termination of a liquidation,
9 rehabilitation, or conservation proceeding involving the
10 impaired or insolvent insurer, upon a showing of compelling
11 circumstances the termination of the impairment or insolvency
12 of the insurer, or upon the order of a court of competent
13 jurisdiction. Nothing in this paragraph (3) (2) limits the duty
14 of the Association to render a report of its activities under
15 Section 531.15.
16     (4) (3) For the purpose of carrying out its obligations
17 under this Article, the Association is deemed to be a creditor
18 of the impaired or insolvent insurer to the extent of assets
19 attributable to covered policies reduced by any amounts to
20 which the Association is entitled as subrogee (under paragraph
21 (15) (8) of Section 531.08). All assets of the impaired or
22 insolvent insurer attributable to covered policies must be used
23 to continue all covered policies and pay all contractual
24 obligations of the impaired insurer as required by this
25 Article. "Assets attributable to covered policies", as used in
26 this paragraph (4) (3), is that proportion of the assets which
27 the reserves that should have been established for such
28 policies bear to the reserves reserve that should have been
29 established for all policies of insurance written by the
30 impaired or insolvent insurer.
31     (5) As a creditor of the impaired or insolvent insurer as
32 established in paragraph (4) of this Section 531.14 and
33 paragraph (15) of Section 531.08 and consistent with paragraph
34 (2) of Section 205 of the Code and similar provisions under the
35 laws of other states, the Association and other similar
36 associations shall be entitled to receive disbursements of

 

 

HB5929 - 49 - LRB093 18698 SAS 44426 b

1 assets out of the marshaled assets from time to time as the
2 assets become available. If the liquidator has not, within 120
3 days of a final determination of insolvency of an insurer by
4 the receivership court, made an application to the court for
5 the approval of a proposal to disburse assets out of marshaled
6 assets to guaranty associations having obligations because of
7 the insolvency, then the Association shall be entitled to make
8 application to the receivership court for approval of its own
9 proposal to disburse these assets.
10     (6) (4) (a) Prior to the termination of any liquidation,
11 rehabilitation, or conservation proceeding, the court may take
12 into consideration the contributions of the respective
13 parties, including the Association, the shareholders and the
14 policy and contract owners policyowners of the impaired or
15 insolvent insurer, and any other party with a bona fide
16 interest, in making an equitable distribution of the ownership
17 rights of such impaired or insolvent insurer. In such a
18 determination, consideration must be given to the welfare of
19 the policy owners and contract owners policyholders of the
20 continuing or successor insurer.
21     (b) No distribution to stockholders, if any, of an impaired
22 or insolvent insurer may be made until and unless the total
23 amount of valid claims of the Association for funds expended in
24 carrying out its powers and duties under Section 531.08, with
25 respect to such insurer have been fully recovered by the
26 Association.
27     (7) (5) (a) If an order for liquidation or rehabilitation
28 of an insurer domiciled in this State has been entered, the
29 receiver appointed under such order has a right to recover on
30 behalf of the insurer, from any affiliate that controlled it,
31 the amount of distributions, other than stock dividends paid by
32 the insurer on its capital stock, made at any time during the 5
33 years preceding the petition for liquidation or rehabilitation
34 subject to the limitations of subparagraphs paragraphs (b) to
35 (d) of this paragraph (7).
36     (b) No such dividend is recoverable if the insurer shows

 

 

HB5929 - 50 - LRB093 18698 SAS 44426 b

1 that when paid the distribution was lawful and reasonable, and
2 that the insurer did not know and could not reasonably have
3 known that the distribution might adversely affect the ability
4 of the insurer to fulfill its contractual obligations.
5     (c) Any person who was as an affiliate that controlled the
6 insurer at the time the distributions were paid is liable up to
7 the amount of distributions the person he received. Any person
8 who was an affiliate that controlled the insurer at the time
9 the distributions were declared, is liable up to the amount of
10 distributions the person he would have received if they had
11 been paid immediately. If 2 or more persons are liable with
12 respect to the same distributions, they are jointly and
13 severally liable.
14     (d) The maximum amount recoverable under this paragraph (7)
15 subsection (5) of this Section is the amount needed in excess
16 of all other available assets of the insolvent insurer to pay
17 the contractual obligations of the insolvent insurer.
18     (e) If any person liable under subparagraph paragraph (c)
19 of this paragraph (7) subsection (5) of this Section is
20 insolvent, all its affiliates that controlled it at the time
21 the dividend was paid are jointly and severally liable for any
22 resulting deficiency in the amount recovered from the insolvent
23 affiliate.
24 (Source: P.A. 81-899.)
 
25     (215 ILCS 5/531.15)  (from Ch. 73, par. 1065.80-15)
26     Sec. 531.15. Examination of the Association. Annual
27 Report. The Association shall be subject to examination and
28 regulation by the Director. The board of directors must submit
29 to the Director, not later than the first day of the fifth
30 month following the end of the Association's fiscal year, a
31 financial report for such fiscal year in a form acceptable to
32 the Director and a report of its activities during such fiscal
33 year. Upon the request of a member insurer, the Association
34 shall provide the member with a copy of the report.
35 (Source: P.A. 86-753.)
 

 

 

HB5929 - 51 - LRB093 18698 SAS 44426 b

1     (215 ILCS 5/531.17)  (from Ch. 73, par. 1065.80-17)
2     Sec. 531.17. Immunity.) There is no liability on the part
3 of and no cause of action of any nature may arise against any
4 member insurer or its agents or employees, the Association or
5 its agents or employees, members of the board of directors or
6 their representatives or alternate representatives, or the
7 Director or the Director's his representatives, for any
8 decision or action taken or omission made by them in the
9 performance of their powers and duties under this Article.
10 Without limitation, the Association shall be immune from any
11 claim that any omission by the Association or any action of the
12 Association, taken separately or in concert with the Director
13 in any of his or her capacities, has caused loss or any other
14 injury to any impaired insurer or any insolvent insurer.
15 Immunity shall extend to the Association's participation in any
16 organization of one or more other state associations of similar
17 purposes and to any such organization and its agents or
18 employees.
19 (Source: P.A. 81-899.)
 
20     (215 ILCS 5/531.19)  (from Ch. 73, par. 1065.80-19)
21     Sec. 531.19. Prohibited advertisement of action of the
22 Insurance Guaranty Association in sale of insurance.
23     (a) No person, including an insurer, agent or affiliate of
24 an insurer shall make, publish, disseminate, circulate, or
25 place before the public, or cause directly or indirectly, to be
26 made, published, disseminated, circulated or placed before the
27 public, in any newspaper, magazine or other publication, or in
28 the form of a notice, circular, pamphlet, letter or poster, or
29 over any radio station or television station, or in any other
30 way, any advertisement, announcement or statement, written or
31 oral, which uses the existence of the Insurance Guaranty
32 Association of this State for the purpose of sales,
33 solicitation or inducement to purchase any form of insurance
34 covered by this Article; provided, however, that this Section

 

 

HB5929 - 52 - LRB093 18698 SAS 44426 b

1 shall not apply to the Illinois Life and Health Guaranty
2 Association or any other entity which does not sell or solicit
3 insurance.
4     (b) Within 180 days of August 16, 1993, the Association
5 shall prepare a summary document describing the general
6 purposes and current limitations of this Article and complying
7 with subsection (c). This document shall be submitted to the
8 Director for approval. Sixty days after receiving approval, no
9 insurer may deliver a policy or contract described in
10 subparagraph (2)(a) of paragraph (2) of Section 531.03 and not
11 excluded under subparagraph (2)(b) of that Section to a policy
12 or contract owner holder unless the document is delivered to
13 the policy or contract owner holder prior to or at the time of
14 delivery of the policy or contract. The document should also be
15 available upon request by a policy or contract owner
16 policyholder. The distribution, delivery, or contents or
17 interpretation of this document shall not mean that either the
18 policy or the contract or the holder thereof would be covered
19 in the event of the impairment or insolvency of a member
20 insurer. The description document shall be revised by the
21 Association as amendments to this Article may require. Failure
22 to receive this document does not give the policy or
23 policyholder, contract owner holder, certificate holder, or
24 insured any greater rights than those stated in this Article.
25     (c) The document prepared under subsection (b) shall
26 contain a clear and conspicuous disclaimer on its face. The
27 Director shall promulgate a rule establishing the form and
28 content of the disclaimer. The disclaimer shall:
29         (1) State the name and address of the Illinois Life and
30     Health Insurance Guaranty Association and of the
31     Department.
32         (2) Prominently warn the policy or contract owner
33     holder that the Illinois Life and Health Insurance Guaranty
34     Association may not cover the policy or contract or, if
35     coverage is available, it will be subject to substantial
36     limitations and exclusions and conditioned on continued

 

 

HB5929 - 53 - LRB093 18698 SAS 44426 b

1     residence in the State.
2         (3) State that the insurer and its agents are
3     prohibited by law from using the existence of the Illinois
4     Life and Health Insurance Guaranty Association for the
5     purpose of sales, solicitation, or inducement to purchase
6     any form of insurance.
7         (4) Emphasize that the policy or contract owner holder
8     should not rely on coverage under the Illinois Life and
9     Health Insurance Guaranty Association Law when selecting
10     an insurer.
11         (5) Set forth the name, address, and a toll-free
12     telephone number of the insurer along with a statement that
13     the policy or contract owner should direct inquiries or
14     comments to the insurer at such address or telephone
15     number.
16         (6) (5) Provide other information as directed by the
17     Director.
18     (d) (Blank).
19 (Source: P.A. 88-364; 88-627, eff. 9-9-94; 89-97, eff. 7-7-95.)
20     Section 99. Effective date. This Act takes effect on
21 January 1, 2005.