(215 ILCS 5/534) (from Ch. 73, par. 1065.84)
Sec. 534. Definitions. For the purposes of this Article, unless the
context requires otherwise, the words and phrases defined in Sections 534.1
through 534.9 have the meanings set forth in those Sections.
(Source: P.A. 103-113, eff. 6-30-23.)
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(215 ILCS 5/534.1) (from Ch. 73, par. 1065.84-1)
Sec. 534.1.
"Fund" means the Illinois Insurance Guaranty Fund created by this
Article.
(Source: P.A. 77-305.)
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(215 ILCS 5/534.2) (from Ch. 73, par. 1065.84-2)
Sec. 534.2.
"Director" means the Director of Insurance of the State of Illinois.
(Source: P.A. 77-305.)
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(215 ILCS 5/534.3) (from Ch. 73, par. 1065.84-3)
Sec. 534.3. Covered claim; unearned premium defined.
(a) "Covered claim" means an unpaid claim for a loss
arising out of and within the
coverage of an insurance policy to which this Article applies and which
is in force at the time of the occurrence giving rise to the unpaid
claim, including claims presented during any extended discovery period
which was purchased from the company before the entry of a liquidation
order or which is purchased or obtained from the liquidator after the entry
of a liquidation order, made by a person insured under such policy or by a
person
suffering injury or damage for which a person insured under such policy
is legally liable, and for unearned premium, if:
(i) The company issuing, assuming, or being allocated | ||
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(ii) The claimant or insured is a resident of this | ||
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(b) "Covered claim" does not include:
(i) any amount in excess of the applicable limits of | ||
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(ii) any claim for punitive or exemplary damages or | ||
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(iii) any first party claim by an insured who is an | ||
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(iv) any first party or third party claim by or | ||
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(v) any claim for any amount due any reinsurer, | ||
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(c) "Unearned Premium" means the premium for the unexpired period of a
policy which has been terminated prior to the expiration of the period for
which premium has been paid and does not mean premium which is returnable
to the insured for any other reason.
(Source: P.A. 101-60, eff. 7-12-19; 102-558, eff. 8-20-21.)
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(215 ILCS 5/534.4) (from Ch. 73, par. 1065.84-4)
Sec. 534.4.
"Insolvent company" means a company
organized as a stock company, mutual company, reciprocal or Lloyds (a)
which holds a certificate of authority to transact insurance
in this State either at the time the policy was issued or when
the insured event occurred, or any company which has assumed or has been allocated
such policy obligation through merger, division, insurance business transfer, consolidation, or
reinsurance, whether or not such assuming company held a
certificate of authority to transact insurance in this State
at the time such policy was issued or when the insured event occurred; and (b)
against which a final Order of Liquidation with a finding of
insolvency to which there is no further right of appeal has been entered by
a court of competent jurisdiction in the company's State of domicile after the
effective date of this Article.
(Source: P.A. 103-75, eff. 6-9-23.)
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(215 ILCS 5/534.5) (from Ch. 73, par. 1065.84-5)
Sec. 534.5.
Member company.
"Member Company" means any insurance
company organized as a
stock company, mutual company, reciprocal or Lloyds, which holds a certificate
of authority to transact
any kind of insurance in this State to
which this Article applies, and which is either:
(a) a domestic insurance company formed before or after the
effective date of this Article; or
(b) a foreign or alien insurance company.
An insurance company shall cease to be a member company effective on the
day following the termination or expiration of its license to transact the
kinds of insurance to which this Article applies; provided, however, that the
insurance company shall remain liable as a member company for any and all
obligations, including obligations for assessments levied before the
termination or expiration of the insurance company's license and assessments
levied after the termination or expiration, based on any insolvency as to which
the determination of insolvency by a court of competent jurisdiction occurs
before the termination or expiration of the insurance company's license.
(Source: P.A. 89-97, eff. 7-7-95.)
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(215 ILCS 5/534.6) (from Ch. 73, par. 1065.84-6)
Sec. 534.6.
"Net direct written premiums" means direct gross premiums
written in this State on insurance policies to which this Article applies, less return
premiums thereon and dividends paid or credited to policyholders on such
direct business. "Net direct written premiums" does not include premiums on
contracts of reinsurance or other contracts between insurers or reinsurers.
(Source: P.A. 85-576.)
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(215 ILCS 5/534.7) (from Ch. 73, par. 1065.84-7)
Sec. 534.7.
Affiliate.
An "affiliate" of a specified person means a
person who directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with the specified person on
December 31 of the year next
preceding the date the insolvent company became an
insolvent company.
(Source: P.A. 89-97, eff. 7-7-95.)
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(215 ILCS 5/534.8) (from Ch. 73, par. 1065.84-8)
Sec. 534.8.
"Control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, the holding of
proxies, by contract other than a commercial contract for goods or
nonmanagement services, or otherwise, unless the power is solely the result
of an official position with or corporate office held by the person.
Control shall be presumed to exist if any person, directly or indirectly,
owns, controls, holds with the power to vote, or holds proxies
representing, 10% or more of the voting securities or voting power of any
other person. This presumption may be rebutted by a showing that control
does not exist in fact.
(Source: P.A. 85-576.)
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(215 ILCS 5/534.9) Sec. 534.9. Cybersecurity insurance. "Cybersecurity insurance" means a type of insurance under Class 2 of Section 4 of this Code that involves first-party and third-party coverage, in a policy or endorsement, written on a direct, admitted basis to cover losses and loss mitigation arising out of or relating to data privacy breaches, unauthorized information network security intrusions, computer viruses, ransomware, cyber extortion, identity theft, and similar exposures.
(Source: P.A. 103-113, eff. 6-30-23.) |
(215 ILCS 5/535) (from Ch. 73, par. 1065.85)
Sec. 535.
Creation of the Fund.
There is created a nonprofit
unincorporated legal entity to be known as the Illinois Insurance
Guaranty Fund. All member companies as defined in Section 534.5 shall be and
remain members of the Fund as a condition of their authority to transact
business in this State. The Fund shall perform its functions under a
plan of operation established and approved under Section 539 and shall
exercise its powers through a board of directors established under
Section 536. For purposes of administration and assessment, the Fund
shall be divided into 2 separate accounts: (a) the automobile insurance
account; and (b) the account for all other insurance to which this
Article applies, including Workers' Compensation.
(Source: P.A. 85-576.)
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(215 ILCS 5/536) (from Ch. 73, par. 1065.86)
Sec. 536. Board of Directors. (a) The board of directors of the Fund shall consist of not less than 5
nor more than 10 persons, with one public member appointed by the Director, serving terms as established in the plan of
operation. The public member shall be a resident of this State, and he or she shall either (1) be a licensed and certified public accountant under the laws of this State or (2) have earned, and maintain in good standing, the Chartered Property and Casualty Underwriter (CPCU) designation from the American Institute for Chartered Property Casualty Underwriters. The plan of operation shall provide that the board of directors
be elected on the basis of one vote for each member company of the Fund. If
more than one company of a group of wholly owned or controlled companies is a
member company of the Fund only one vote will be allowed for the entire
group. The members of the board of directors shall be elected by member companies
subject to the approval of the Director. Vacancies on the board of
directors shall be filled for the remaining period of the term by the board
of directors, subject to the approval of the
Director.
(b) In approving elections to the board of directors, the Director shall consider
among other things whether all member companies are fairly represented.
(c) Members of the board of directors shall receive no compensation, but may be
reimbursed from the assets of the Fund for expenses incurred by them as
members of the board of directors.
(Source: P.A. 98-202, eff. 1-1-14.)
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(215 ILCS 5/537) (from Ch. 73, par. 1065.87)
Sec. 537.
Duties
and obligations of the Fund.
The Fund shall have the duties and obligations enumerated in Sections
537.1 through 537.9.
(Source: P.A. 82-210.)
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(215 ILCS 5/537.1) (from Ch. 73, par. 1065.87-1)
Sec. 537.1.
The Fund may provide for an equal annual fee of all member
companies on a non-pro rata basis to provide for contingent expenses of the
Fund. This fee may not exceed $500 per member company for any one calendar year.
(Source: P.A. 85-576.)
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(215 ILCS 5/537.2) (from Ch. 73, par. 1065.87-2)
Sec. 537.2. Obligation of Fund. The Fund shall be obligated to the
extent of the covered
claims existing prior to the entry of an Order of Liquidation against
an insolvent company and arising within
30 days after the entry of such
Order, or before the policy expiration date if less than 30 days after
the entry of such Order, or before the insured replaces the policy or on
request effects cancellation, if he does so within 30 days after the entry
of such Order. If the entry of an Order of Liquidation occurs on or after
October 1, 1975 and before October 1, 1977, such obligations shall not:
(i) exceed $100,000, or (ii)
include any obligation to refund the first $100 of any unearned premium
claim; and if the entry of an Order of Liquidation occurs on or after October
1, 1977 and before January 1, 1988, such obligations shall
not: (i) exceed
$150,000, except that this limitation shall not apply to any workers compensation
claims, or (ii)
include any obligation to refund the first
$100 of any unearned premium claim; and if the entry of an Order of
Liquidation occurs on or after January 1, 1988 and before January 1, 2011, such obligations shall not:
(i) exceed $300,000, except that this limitation shall not apply to any
workers compensation claims, or (ii) include any obligation to refund the
first $100 of any unearned premium claim or to refund any unearned premium
over $10,000 under any one policy. If the entry of an Order of Liquidation occurs on or after January 1, 2011, then such obligations shall not: (i) exceed $500,000, except that this limitation shall not apply to any workers compensation claims or (ii) include any obligation to refund the first $100 of any unearned premium claim or refund any unearned premium over $10,000 under any one policy. If the entry of an Order of Liquidation occurs on or after January 1, 2023, then such obligations shall not: (i) exceed $500,000, except that this limitation shall not apply to any workers compensation claims, or (ii) exceed without any deduction $50,000 for any unearned premium claim or refund under any one policy. In no event shall the Fund be
obligated to a policyholder or claimant in an amount in excess
of the face amount of the policy from which the claim arises, including, but not limited to, any applicable specific or aggregate limits. For purposes of this Article, obligations arising under an insurance policy written to indemnify a permissibly self-insured employer under subsection (a) of Section 4 of the Workers' Compensation Act for its liability to pay workers' compensation benefits in excess of a specific or aggregate retention shall be subject to the applicable per-claim limits set forth in this Section. In no event shall the Fund be obligated to pay an amount in excess of $500,000 in the aggregate for all first-party and third-party claims under a policy or endorsement providing cybersecurity insurance as defined in Section 534.9 and arising out of or related to a single insured event, regardless of the number of claims made or number of claimants.
In no event
shall the Fund be liable for any interest on
any
judgment entered against the insured or the insolvent company, or for any
other
interest claim against the insured or the insolvent company, regardless of
whether the insolvent company would have been obligated to pay such interest
under the terms of its policy. The Fund shall be liable for interest at the
statutory rate on money judgments entered against the Fund until the judgment
is satisfied.
Any obligation of the Fund to defend an insured shall cease upon the
Fund's payment or tender of an amount equal to the lesser of the Fund's
covered claim obligation limit or the applicable policy limit.
(Source: P.A. 103-113, eff. 6-30-23.)
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(215 ILCS 5/537.3) (from Ch. 73, par. 1065.87-3)
Sec. 537.3.
Access to insolvent company records.
The liquidator of an insolvent company shall
permit access by the Fund or its authorized
representatives, and by any similar organization in another state or its
authorized representatives, to such of the
insolvent company's records which are necessary for the
Fund or such similar organization in carrying
out its functions under this Article or similar laws in other states
with regard to covered claims. In
addition, the liquidator shall provide the Fund or its representative, or
such similar organization, with
copies of such records upon the request
and at the expense of
the Fund or such similar organization.
(Source: P.A. 85-576.)
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(215 ILCS 5/537.4) (from Ch. 73, par. 1065.87-4)
Sec. 537.4. Fund assumes obligations of insolvent companies. The Fund
shall be deemed the insolvent company to the extent
of the Fund's obligation for covered claims and to such extent
shall have all
rights, duties, and obligations of the insolvent company, subject to the
limitations provided in this Article, as if the company had not become
insolvent, with the
exception that the liquidator shall retain the sole right
to recover any reinsurance proceeds.
The Fund's rights under this Section include, but are not limited to, the
right to pursue and retain salvage and subrogation recoveries on paid covered
claim obligations to the extent paid by the Fund. The extent of the Fund's subrogation rights and any other rights of reimbursement with respect to its covered claims payments shall not be limited as if the Fund were the insolvent company, but shall be determined independently by taking into account the Fund's rights under Section 546 of this Article.
(Source: P.A. 99-387, eff. 8-17-15.)
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(215 ILCS 5/537.6) (from Ch. 73, par. 1065.87-6)
Sec. 537.6. Allocation of claims; assessments. The Fund shall allocate
covered claims paid and expenses
incurred between the accounts established by Section 535 separately, and
assess member companies separately for each
account amounts necessary to pay the obligations of the Fund under
Section 537.2 subsequent to the entry of an Order of Liquidation against
an insolvent company, the expenses of handling
covered claims subsequent to such Order of Liquidation and other expenses
authorized by this
Article. The assessments of each member company shall be in the proportion that
the net direct written premiums of the member company for the calendar
year immediately preceding the year in which the assessment is levied on
the kinds of insurance in the account bears to the net direct written
premiums of all member companies for such preceding calendar year on the
kinds of insurance in the account. Each member company shall be notified
of the assessment not later than 30 days before it is due. Before January 1,
2002, no member
company may be assessed in any year on any account an amount greater
than 1% of that member company's net direct written premiums
on the kinds of insurance in the account for the calendar
year preceding the assessment. Beginning January 1, 2002, the amount a
member company may be assessed in any year on any account shall be a maximum of
2% of that member company's net direct written premium on the kinds of
insurance in the account for the calendar year preceding the assessment. This
2% maximum shall apply regardless of the date of any insolvency that gives rise
to the need for the assessment. If the
maximum assessment, together with the other assets of the Fund in any
account, does not provide, in any one year, in any account, an amount
sufficient to make all necessary payments from that account, the funds
available shall be paid in the manner determined by the Fund and
approved by the Director and the unpaid portion shall be paid as
soon thereafter as funds become available. If requested by a member
company, the Director may exempt or defer the assessment of any member
company, if the assessment would cause the member company's financial
impairment.
In addition to the other assessment authority provided in this Section, the board of directors shall also have the assessment authority to pay off a loan as provided in Section 538.3. If a loan is projected to be outstanding for 3 years or more, then the board of directors shall have the authority to increase the assessment to 3% of the net direct written premiums for the previous year until the loan has been paid in full. (Source: P.A. 101-60, eff. 7-12-19.)
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(215 ILCS 5/537.7) (from Ch. 73, par. 1065.87-7)
Sec. 537.7. Investigation of claims; disposition.
(a) The Fund shall investigate claims brought against the
Fund and adjust, compromise, settle, and pay covered claims to the extent of
the Fund's
obligation and deny all other claims.
(b) The Fund shall not be bound by a settlement, release, compromise,
waiver, or final judgment executed or entered within 12 months prior to an
order of liquidation and shall have the right to assert all defenses available
to the Fund including, but not limited to, defenses applicable to determining
and enforcing its statutory rights and obligations to any claim. The Fund
shall be bound by a settlement, release, compromise, waiver, or final judgment
executed or entered more than 12 months prior to an order of liquidation,
but only
if the
claim is a covered claim and the settlement, release, compromise, waiver, or final judgment was not a result of
fraud, collusion, default, or failure to defend. In addition, with respect to
covered
claims arising from a judgment under a decision, verdict, or finding based on
the default of the insolvent insurer or its failure to defend, upon application
by the Fund, either on its own behalf or on behalf of an insured, the court
shall set aside the judgment, order, decision, verdict,
or finding, and the Fund shall be permitted to defend against the claim on the
merits. The same criteria determining whether the Fund will be bound, as specified in this subsection (b), shall apply to any settlement, release, compromise, waiver, or final judgment entered into by a high net worth insured before the date on which claims by or against that insured became non-exempt for reasons specified in paragraph (iv) of subsection (b) of Section 534.3.
(c) The Fund shall have the right to appoint or
approve and to direct legal counsel
retained under liability insurance policies for the defense
of covered claims as well as the right to appoint or approve and to direct legal counsel and other service providers under any other insurance policies subject to this Article, regardless of any limitations in the policy.
(Source: P.A. 103-113, eff. 6-30-23.)
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(215 ILCS 5/537.9) (from Ch. 73, par. 1065.87-9)
Sec. 537.9.
The Fund shall handle claims through its employees or
through one or more companies or other persons employed as servicing facilities.
(Source: P.A. 85-576.)
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(215 ILCS 5/538) (from Ch. 73, par. 1065.88)
Sec. 538. Powers
of the Fund. The Fund shall have the powers enumerated in the Sections following this Section and preceding Section 539.
(Source: P.A. 102-396, eff. 8-16-21.)
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(215 ILCS 5/538.1) (from Ch. 73, par. 1065.88-1)
Sec. 538.1.
The Fund may appear in, defend and appeal any action on a claim brought
against it on a covered claim.
(Source: P.A. 77-305.)
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(215 ILCS 5/538.2) (from Ch. 73, par. 1065.88-2)
Sec. 538.2.
The Fund may employ or retain such persons as are necessary to handle
claims, provide policy benefits and services, and perform other duties of the Fund.
(Source: P.A. 103-113, eff. 6-30-23.)
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(215 ILCS 5/538.3) (from Ch. 73, par. 1065.88-3)
Sec. 538.3.
The Fund may borrow an amount of money necessary to effect the purposes
of this Article in accord with the plan of operation. The board of directors shall have the authority to pledge all or an appropriate portion of future assessments as necessary to secure a loan that may be needed to pay covered claims. Until all loans secured by assessments are fully satisfied, the board of directors shall assess the maximum allowable under Section 537.6.
(Source: P.A. 101-60, eff. 7-12-19.)
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(215 ILCS 5/538.4) (from Ch. 73, par. 1065.88-4)
Sec. 538.4. Legal actions by Fund. The Fund may sue or be sued, including, but not limited to, taking any legal actions necessary
or proper for recovery of: (i) any unpaid assessments under Section 537.1 or 537.6; (ii) any amounts due to the Fund for salvage and subrogation under Section 537.4 or from insurers described in subsection (a) of Section 546; or (iii) any amounts due from an insured pursuant to subsections (a) and (d) of Section 545.
The Fund's power to sue includes, but is not limited to, the
power and right to
intervene as a party before any court that has jurisdiction over an insolvent
insurer when the Fund is a creditor or potential creditor of the insolvent
insurer.
(Source: P.A. 101-60, eff. 7-12-19.)
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(215 ILCS 5/538.5) (from Ch. 73, par. 1065.88-5)
Sec. 538.5.
The Fund may negotiate and become a party to such contracts as are
necessary to carry out the purposes of this Article.
(Source: P.A. 82-210.)
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