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Public Act 92-0077
SB941 Enrolled LRB9208018JSpc
AN ACT concerning insurance.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Insurance Code is amended by
changing Sections 537.2, 537.6, 537.7, and 551 as follows:
(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, 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. 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.
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. 85-576; 86-1155; 86-1156; 86-1475.)
(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.
(Source: P.A. 85-576.)
(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 and may review settlements, releases and
judgments to which the insolvent company or its insureds were
parties to determine the extent to which such settlements,
releases and judgments may be properly contested.
(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, however, if the claim is a covered claim and the
settlement or 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.
(c)(b) 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.
(Source: P.A. 85-576.)
(215 ILCS 5/551) (from Ch. 73, par. 1065.101)
Sec. 551. Stay of proceedings. All proceedings arising
out of a claim under a policy of insurance written by an
insolvent company shall be stayed for 120 days from the date
of the entry of the Order of Liquidation to permit proper
defense by the Fund of all such pending causes of action. As
to any covered claims arising from a judgment under any
decision, verdict or finding based on the default of the
insolvent company or its failure to defend an insured, upon
application of the Fund, either on its own behalf or on
behalf of such insured, the court or administrator that made
such judgment, order, decision, verdict or finding shall set
aside such judgment, order, decision, verdict or finding and
the Fund shall be permitted to defend against such claim on
the merits.
(Source: P.A. 85-576.)
Section 99. Effective date. This Act takes effect upon
becoming law.
Passed in the General Assembly April 19, 2001.
Approved July 12, 2001.
Effective July 12, 2001.
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