093_HB2469

 
                                     LRB093 08006 JLS 08204 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
12    specified  in paragraph (1) of Section 531.03 against failure
13    in the performance of contractual obligations, under life and
14    or health  insurance  policies,  and  annuity  contracts  and
15    health   or  medical  care  service  contracts  specified  in
16    paragraph (2) of Section 531.03, due  to  the  impairment  or
17    insolvency of the insurer issuing such policies or contracts.
18    To provide this protection, (1) an association of insurers is
19    created  to enable the guaranty of payment of benefits and of
20    continuation of coverages as limited  by  this  Article,  (2)
21    members  of  the  Association  are  subject  to assessment to
22    provide funds to carry out the purpose of this  Article,  and
23    (3)  the Association is authorized to assist the Director, in
24    the prescribed manner, in the  detection  and  prevention  of
25    insurer impairments or insolvencies.
26    (Source: P.A. 86-753.)

27        (215 ILCS 5/531.02a new)
28        Sec.  513.02a.  Restrictions on recoveries by health care
29    providers.  In the  event  of  the  insolvency  of  a  member
30    insurer,  no  provider  of health care services shall seek to
 
                            -2-      LRB093 08006 JLS 08204 b
 1    recover  any  amount  from  any   insured   until   a   final
 2    determination has been made as to the Association's liability
 3    for such services (including the resolution of any dispute or
 4    litigation resulting therefrom).
 5        In  the  event  that a provider seeks to recover any such
 6    amount before a  final  determination  of  the  Association's
 7    liability  (or  the  resolution  of any dispute or litigation
 8    resulting therefrom) has been made,  the  provider  shall  be
 9    liable for all reasonable costs and attorney fees incurred by
10    the  Director and the Association in enforcing this provision
11    or any court orders related thereto.

12        (215 ILCS 5/531.03) (from Ch. 73, par. 1065.80-3)
13        Sec. 531.03.  Coverage and limitations.
14        (1)  This Article shall provide coverage for the policies
15    and contracts specified in paragraph (2) of this Section:
16             (a)  to persons who, regardless of where they reside
17        (except for non-resident certificate holders under  group
18        policies  or contracts), are the beneficiaries, assignees
19        or payees  of  the  persons  covered  under  subparagraph
20        (1)(b), and
21             (b)  to  persons  who  are  owners of or certificate
22        holders under such  policies  or  contracts  (other  than
23        unallocated  annuity  contracts and structured settlement
24        annuities) and  in  each  case  ;  or,  in  the  case  of
25        unallocated annuity contracts, to the persons who are the
26        contract holders, and who:
27                  (i)  are residents of this State, or
28                  (ii)  are  not residents, but only under all of
29             the following conditions:
30                       (A)  the  insurer  insurers   that   which
31                  issued   such  policies  or  contracts  is  are
32                  domiciled in this State;
33                       (B)  the  states  in  which  such  persons
 
                            -3-      LRB093 08006 JLS 08204 b
 1                  reside  have  associations   similar   to   the
 2                  association   created   by  this  Article  such
 3                  insurers never held a license or certificate of
 4                  authority in the states in which  such  persons
 5                  reside; and
 6                       (C)  the  persons  are  not  eligible  for
 7                  coverage  by  an association in any other state
 8                  due to  the  fact  that  the  insurer  was  not
 9                  licensed  in the state at the time specified in
10                  the  state's  guaranty  association  law.  such
11                  states  have  associations   similar   to   the
12                  association created by this Act; and
13                       (D)  such  persons  are  not  eligible for
14                  coverage by such associations.
15             (c)  For unallocated annuity contracts specified  in
16        paragraph  (2) of this Section, subparagraphs (a) and (b)
17        of this paragraph shall not apply, and this Article shall
18        (except as provided in subparagraphs (e) and (f) of  this
19        paragraph) provide coverage to:
20                  (i)  persons   who   are   the  owners  of  the
21             unallocated annuity contracts if the  contracts  are
22             issued  to  or in connection with a specific benefit
23             plan whose plan sponsor has its principal  place  of
24             business is in this State; and
25                  (ii)  persons  who  are  owners  of unallocated
26             annuity contracts issued to or  in  connection  with
27             government lotteries if the owners are residents.
28             (d)  For  structured  settlement annuities specified
29        in paragraph (2) of this Section, subparagraphs  (a)  and
30        (b)  of  this paragraph shall not apply, and this Article
31        shall (except as provided in subparagraphs (e) and (f) of
32        this paragraph) provide coverage to a  person  who  is  a
33        payee   under   a   structured   settlement  annuity  (or
34        beneficiary of a payee if the payee is deceased), if  the
 
                            -4-      LRB093 08006 JLS 08204 b
 1        payee:
 2                  (i)  is  a  resident,  regardless  of where the
 3             contract owner resides; or
 4                  (ii)  is not a resident, but only under both of
 5             the following conditions:
 6                       (A)(1)  the   contract   owner   of    the
 7                  structured settlement annuity is a resident, or
 8                       (II)  the contract owner of the structured
 9                  settlement annuity is not a resident, but
10                       the  insurer  that  issued  the structured
11                  settlement annuity is domiciled in this  State;
12                  and
13                       the  state  in  which  the  contract owner
14                  resides  has  an  association  similar  to  the
15                  association created by this Article; and
16                       (B)  neither the  payee  (or  beneficiary)
17                  nor the contract owner is eligible for coverage
18                  by  the  association  of the state in which the
19                  payee or contract owner resides.
20             (e)  This Article shall not provide coverage for:
21                  (i)  a person who is a payee  (or  beneficiary)
22             of  a  contract owner resident of this State, if the
23             payee (or beneficiary) is afforded any  coverage  by
24             the association of another state, or
25                  (ii)  a  person  covered under subparagraph (c)
26             of this paragraph, if any coverage  is  provided  by
27             the  association  of another state to or through the
28             trustee who is the contract owner.
29             (f)  This Article is intended to provide coverage to
30        a person who is a resident of this State and, in  special
31        circumstances,  to  a  nonresident.  In  order  to  avoid
32        duplicate  coverage,  if  a  person  who  would otherwise
33        receive coverage under this Article is provided  coverage
34        under  the  laws of any other state, the person shall not
 
                            -5-      LRB093 08006 JLS 08204 b
 1        be provided coverage under this Article.  In  determining
 2        the  application  of  the provisions of this paragraph in
 3        situations  where  a  person  could  be  covered  by  the
 4        association of more than one state, whether as an  owner,
 5        payee,  beneficiary,  or  assignee, this Article shall be
 6        construed in conjunction with other state laws to  result
 7        in coverage by only one association.
 8        (2)(a)  Except  as otherwise provided, this Article shall
 9    provide coverage to the persons specified in paragraph (l) of
10    this Section for direct, (i)  individual  or  other  nongroup
11    life,  health,  and  annuity  and  supplemental  policies, or
12    contracts, and supplemental contracts to any of  these,  (ii)
13    for  certificates  under  direct group policies or contracts,
14    (iii) and for unallocated annuity  contracts,  in  each  case
15    issued   by   member   insurers.    "Annuity  contracts"  and
16    "certificates under group annuity contracts" shall  have  the
17    meaning  set  forth  in subdivision (2) of Section 531.05 and
18    (iv) for  contracts  to  furnish  health  care  services  and
19    subscription certificates for medical or health care services
20    issued  by persons licensed to transact insurance business in
21    this  State  under  the  Illinois  Insurance  Code.   Annuity
22    contracts  and  certificates  under  group  annuity contracts
23    include  but  are  not  limited  to   guaranteed   investment
24    contracts,   deposit  administration  contracts,  unallocated
25    funding agreements, allocated funding agreements,  structured
26    settlement agreements, lottery contracts and any immediate or
27    deferred annuity contracts.
28        (b)  This Article shall not provide coverage for:
29             (i)  any  that  portion  or  provision  part of such
30        policies or contracts not guaranteed by the  insurer,  or
31        under  which  the risk is borne by the policy or contract
32        owner policyholder; provided  however,  that  nothing  in
33        this  subparagraph  (2)(b)(i)  shall  make  this  Article
34        inapplicable  to  assessment life and accident and health
 
                            -6-      LRB093 08006 JLS 08204 b
 1        insurance policies or contracts; or
 2             (ii)  any such policy or contract  or  part  thereof
 3        assumed  by  the  impaired  or  insolvent insurer under a
 4        contract of reinsurance, unless  other  than  reinsurance
 5        for   which  assumption  certificates  have  been  issued
 6        pursuant to the reinsurance policy  or  contract  by  the
 7        impaired or insolvent insurer; or
 8             (iii)  any interest rate, crediting rate, or similar
 9        factor  employed  in  calculating  returns  or changes in
10        value (whether or not determined by use of  an  index  or
11        other   external   reference  stated  in  the  policy  or
12        contract), and any portion of a policy or contract to the
13        extent that it is based on such a rate  or  factor,  that
14        any  portion  of  a policy or contract to the extent such
15        portion represents an accrued  value  that  the  rate  of
16        interest on which it is accrued
17                  (A)  averaged  over  the period of 4 four years
18             prior to the date on which the  Association  becomes
19             obligated  with  respect to such policy or contract,
20             exceeds a rate of interest determined by subtracting
21             2 two percentage points from Moody's Corporate  Bond
22             Yield  Average  averaged  for  that same 4 four year
23             period or for such lesser period if  the  policy  or
24             contract  was  issued  less than 4 four years before
25             the Association became obligated; and
26                  (B)  on  and  after  the  date  on  which   the
27             Association  becomes  obligated with respect to such
28             policy or contract, exceeds  the  rate  of  interest
29             determined  by subtracting 3 three percentage points
30             from Moody's  Corporate  Bond  Yield  Average  on  a
31             month-to-month basis as most recently available; or
32             (iv)  any  provision  or  portion  of  a  policy  or
33        contract  issued  to  a  plan  or program of an employer,
34        association, or other person to provide life, health,  or
 
                            -7-      LRB093 08006 JLS 08204 b
 1        annuity benefits to its employees, members, or others, to
 2        the  extent  that  the  plan or program is self-funded or
 3        uninsured, including but not limited to benefits  payable
 4        by an employer, association, or other person under:
 5                  (A)  a multiple-employer welfare arrangement as
 6             defined in 29 U.S.C. 1144;
 7                  (B)  a minimum premium group insurance plan;
 8                  (C)  a  stop-loss  group insurance plan and any
 9             stop-loss insurance, as defined  in  clause  (b)  of
10             Class  1  or clause (a) of Class 2 of Section 4, and
11             further defined in subsection (d) of Section 352;
12                  (D)  an administrative services only  contract;
13             or
14                  (E)  a cost-plus contract; or
15             (v)  any   provision  or  portion  of  a  policy  or
16        contract to the extent that it provides:
17                  (A)  dividends  or  experience  rating  credits
18             which, in each case, were not paid or credited as of
19             the date of impairment or insolvency,  whichever  is
20             earlier;
21                  (B)  voting rights;
22                  (C)  obligations  to report to the policy owner
23             or contract owner more frequently than annually;
24                  (D)  payment of any fees or allowances  to  any
25             person,  including  the policy or contract owner, in
26             connection with the service to or administration  of
27             the policy or contract; or
28                  (E)  other nonmonetary obligations; or
29             (vi) (iv)  any  unallocated  annuity contract issued
30        to or in connection with a an employee benefit  plan  the
31        beneficiaries  of  which are protected by protected under
32        the federal Pension  Benefit  Guaranty  Corporation  law,
33        regardless   of   whether  the  federal  Pension  Benefit
34        Guaranty Corporation has yet become liable  to  make  any
 
                            -8-      LRB093 08006 JLS 08204 b
 1        payments with respect to the benefit plan; or
 2             (vii) (v)  any  portion  of  any unallocated annuity
 3        contract which is not issued to or in connection  with  a
 4        specific   employee,  union  or  association  of  natural
 5        persons benefit plan or a government lottery; or
 6             (viii) (vi)  any  policy  or  contract  or   portion
 7        thereof  issued  by  any  burial  society organized under
 8        Article XIX of  this  Code  Act,  any  fraternal  benefit
 9        society  organized  under  Article XVII of this Code Act,
10        any mutual benefit association  organized  under  Article
11        XVIII of this Code Act, and any foreign fraternal benefit
12        society licensed under Article VI of this Code Act; or
13             (ix) (vii)  any   policy   or  contract  or  portion
14        thereof issued by  any  health  maintenance  organization
15        established    pursuant   to   the   Health   Maintenance
16        Organization  Act  including   any   health   maintenance
17        organization business of a member insurer; or
18             (x) (viii)  any   policy   or  contract  or  portion
19        thereof issued by any health  services  plan  corporation
20        established  pursuant  to  the  Voluntary Health Services
21        Plans Act; or
22             (ix)  (blank); or
23             (xi) (x)  any policy or contract or portion  thereof
24        issued by any dental service plan corporation established
25        pursuant to the Dental Service Plan Act; or
26             (xi)  any  stop-loss insurance, as defined in clause
27        (b) of Class 1 or clause (a) of Class 2 of Section 4, and
28        further defined in subsection (d) of Section 352; or
29             (xii)  any that portion or part of a  variable  life
30        insurance  or  variable  annuity  policy  or contract not
31        guaranteed by an insurer; or.
32             (xiii)  any policy or contract or portion thereof to
33        the extent that assessments with respect to  such  policy
34        or   contract   or  portion  thereof  are  prohibited  or
 
                            -9-      LRB093 08006 JLS 08204 b
 1        preempted by federal or state law; or
 2             (xiv)  any obligation that does not arise under  the
 3        express written terms of the policy or contract issued by
 4        the  insurer  to  the  contract  owner  or  policy owner,
 5        including without limitation:
 6                  (A)  claims based on marketing materials;
 7                  (B)  claims based on side letters,  riders,  or
 8             other  documents  that  were  issued  by the insurer
 9             without meeting applicable policy or  contract  form
10             filing or approval requirements;
11                  (C)  misrepresentations  of or regarding policy
12             or contract benefits;
13                  (D)  extra-contractual claims;
14                  (E)  a claim for penalties or consequential  or
15             incidental damages; or
16             (xv)  any contractual agreement that establishes the
17        member  insurer's  obligations  to  provide  a book value
18        accounting guaranty for defined contribution benefit plan
19        participants by reference to a portfolio of  assets  that
20        is  owned  by  the  benefit plan or its trustee, which in
21        each case is not an affiliate of the member insurer; or
22             (xvi)  any portion of a policy or contract that,  on
23        the  date  the  Association becomes obligated, exceeds in
24        value the maximum benefit levels specified  in  paragraph
25        (3)(b) of this Section; or
26             (xvii)  any  portion  of a policy or contract to the
27        extent it provides for interest or other changes in value
28        to be determined by the use of an index or other external
29        reference stated in the policy  or  contract,  but  which
30        have  not  been credited to the policy or contract, or as
31        to which  the  policy  or  contract  owner's  rights  are
32        subject  to forfeiture, as of the date the member insurer
33        becomes an  impaired  or  insolvent  insurer  under  this
34        Article,   whichever   is   earlier.  If  a  policy's  or
 
                            -10-     LRB093 08006 JLS 08204 b
 1        contract's interest or changes in value are credited less
 2        frequently  than   annually,   then   for   purposes   of
 3        determining  the  values  that have been credited and are
 4        not  subject  to  forfeiture   under   this   subdivision
 5        531.03(2)(b)(xvii),  the  interest  or  change  in  value
 6        determined  by using the procedures defined in the policy
 7        or contract shall be credited as if the contractual  date
 8        of  crediting interest or changing values was the date of
 9        impairment or insolvency, whichever is earlier, and shall
10        not be subject to forfeiture; or
11             (xviii)  a policy or contract issued in  this  State
12        by a member insurer at a time when it was not licensed or
13        did  not  have  a  certificate  of authority to issue the
14        policy or contract in this State.
15        (3)  The benefits that  for  which  the  Association  may
16    become obligated to cover liable shall in no event exceed the
17    lesser of:
18             (a)  the   contractual  obligations  for  which  the
19        insurer is liable or would have been liable  if  it  were
20        not an impaired or insolvent insurer, or
21             (b)(i)  with  respect to any one life, regardless of
22        the number of policies or contracts:
23                  (A)  $300,000 in life insurance death benefits,
24             but not more than $100,000 in net cash surrender and
25             net cash withdrawal values for life insurance;
26                  (B)  $300,000  in  health  insurance  benefits,
27             including  any  net  cash  surrender  and  net  cash
28             withdrawal values;
29                  (C)  $100,000 in the present value  of  annuity
30             benefits,  including net cash surrender and net cash
31             withdrawal values;
32             (ii)  with respect to each individual  participating
33        in  a  governmental  retirement  benefit plan established
34        under Section 401, 403(b) or 457  of  the  United  States
 
                            -11-     LRB093 08006 JLS 08204 b
 1        U.S.  Internal  Revenue  Code  covered  by an unallocated
 2        annuity  contract  or  the  beneficiaries  of  each  such
 3        individual if deceased, in  the  aggregate,  $100,000  in
 4        present   value  annuity  benefits,  including  net  cash
 5        surrender  and  net  cash  withdrawal  values;  provided,
 6        however, that in no event shall the Association be liable
 7        to expend  more  than  $300,000  in  the  aggregate  with
 8        respect  to any one individual under subparagraph (1) and
 9        this subparagraph;
10             (iii)  with respect to each payee  of  a  structured
11        settlement   annuity  contract  (or  the  beneficiary  or
12        beneficiaries of the payee if deceased), $100,000 in  the
13        present  value  of  annuity  benefits,  in  the aggregate
14        including net cash  surrender  and  net  cash  withdrawal
15        values;
16             (iv)  provided,  however, that in no event shall the
17        Association be liable to expend more than $300,000 in the
18        aggregate with respect any one life  under  subparagraphs
19        (3)(b)(i), (ii), and (iii).
20             (v)  with respect to one owner of multiple non-group
21        policies  or  contracts  of  life  insurance, whether the
22        policy owner is  an  individual,  firm,  corporation,  or
23        other   person,  and  whether  the  persons  insured  are
24        officers,  managers,   employees,   or   other   persons,
25        $5,000,000  in  benefits,  regardless  of  the  number of
26        policies and contracts held by the owner.
27             (vi) (iii)  with respect to either (i) one  contract
28        owner  provided coverage under subparagraph (1)(c)(ii) of
29        this Section; or (ii) any one plan  sponsor  whose  plans
30        own  directly  or  in  trust  one or more contract holder
31        covered by any unallocated annuity contracts contract not
32        included  in  subparagraph  (3)(b)(ii)  of  this  Section
33        above, $5,000,000 in benefits, irrespective of the number
34        of such contracts held by that  contract  owner  or  plan
 
                            -12-     LRB093 08006 JLS 08204 b
 1        sponsor;  holder.  provided,  however,  that  in the case
 2        where one  or  more  unallocated  annuity  contracts  not
 3        included  in  subparagraph (3)(b)(ii) of this Section are
 4        covered contracts under this Article and are owned  by  a
 5        trust  or  other entity for the benefit of 2 or more plan
 6        sponsors, coverage shall be afforded by  the  Association
 7        if the largest interest in the trust or entity owning the
 8        contract  or  contracts  is  held by a plan sponsor whose
 9        principal place of business is in this State  and  in  no
10        event  shall  the  Association be obligated to cover more
11        than $5,000,000 in benefits with  respect  to  all  these
12        unallocated  contracts;  and  provided further that where
13        one or more unallocated annuity contracts not included in
14        subparagraph (3)(b)(ii) of this Section are  owned  by  a
15        benefit  plan,  or  the  trustee  of a benefit plan, with
16        fewer than 50 participants, the Association shall not  be
17        liable  for  an  amount  that in the aggregate is greater
18        than $100,000 times the number  of  individuals  who  are
19        participants in the benefit plan.
20             (vii)  The  limitations  set forth in this paragraph
21        (3)  are  limitations  on  the  coverage  for  which  the
22        Association  is  obligated  before  taking  into  account
23        either its  subrogation  and  assignment  rights  or  the
24        extent  to  which  such coverage could be provided out of
25        the  assets  of  the  impaired   or   insolvent   insurer
26        attributable  to covered policies or contracts. The costs
27        of the Association's obligations under this  Article  may
28        be  met  by  the  use  of  assets attributable to covered
29        policies or contracts or reimbursed  to  the  Association
30        pursuant to its subrogation and assignment rights.
31        (4)  In  performing  its  obligations to provide coverage
32    under Section 531.08 of this Article, the  Association  shall
33    not  be  required to guarantee, assume, reinsure, or perform,
34    or cause to be guaranteed, assumed, reinsured, or  performed,
 
                            -13-     LRB093 08006 JLS 08204 b
 1    the  contractual  obligations  of  the  insolvent or impaired
 2    insurer under a  covered  policy  or  contract  that  do  not
 3    materially affect the economic values or economic benefits of
 4    the covered policy or contract.
 5    (Source: P.A. 90-177, eff. 7-23-97; 91-357, eff. 7-29-99.)

 6        (215 ILCS 5/531.04) (from Ch. 73, par. 1065.80-4)
 7        Sec.  531.04.  Construction.)   This  Article  is  to  be
 8    liberally  construed  to effect the purpose established under
 9    Section  531.02  which  constitutes  an  aid  and  guide   to
10    interpretation.
11    (Source: P.A. 81-899.)

12        (215 ILCS 5/531.05) (from Ch. 73, par. 1065.80-5)
13        Sec. 531.05.  Definitions.  As used in this Act:
14        (1)  "Account"  means  either of the 2 3 accounts created
15    under Section 531.06.
16        (2)  "Annuity contracts" and  "certificates  under  group
17    annuity  contracts" include but are not limited to guaranteed
18    investment  contracts,  deposit   administration   contracts,
19    unallocated funding agreements, allocated funding agreements,
20    structured  settlement  annuities,  annuities issued to or in
21    connection with government lotteries, and  any  immediate  or
22    deferred annuity contracts.
23        (3) (2)  "Association" means the Illinois Life and Health
24    Insurance Guaranty Association created under Section 531.06.
25        (3)  "Director"  means  the Director of Insurance of this
26    State.
27        (4)  "Authorized assessment"  or  the  term  "authorized"
28    when used in the context of assessments means a resolution by
29    the  board of directors has been passed whereby an assessment
30    may be called  immediately  or  in  the  future  from  member
31    insurers  for a specified amount. An assessment is authorized
32    when the resolution is passed or,  where  the  terms  of  the
 
                            -14-     LRB093 08006 JLS 08204 b
 1    resolution specify an effective date, on such effective date.
 2        (5)  "Benefit  plan"  means  a  plan for the provision of
 3    pension, severance, health, or other  benefits  sponsored  by
 4    one  or  more  specific employers, unions, or associations of
 5    natural persons.
 6        (6)  "Board" or "board of directors" means the  board  of
 7    directors of the Association.
 8        (7)  "Called  assessment"  or the term "called" when used
 9    in the context of assessments means that a  notice  has  been
10    issued  by  the Association to member insurers requiring that
11    all or part of an authorized assessment be paid at such  time
12    and  subject  to  such conditions as are set forth within the
13    notice. An authorized assessment becomes a called  assessment
14    when notice is mailed by the Association to member insurers.
15        (8)  "Certificates  under  group  annuity  contracts"  is
16    defined in paragraph (2) of this Section.
17        (9) (4)  "Contractual  obligation"  means  any obligation
18    under a policy or  contract  or  certificate  under  a  group
19    policy  or contract, or portion thereof for which coverage is
20    provided under Section 531.03.
21        (10) (5)  "Covered  person"  means  any  person  who   is
22    entitled to the protection of the Association as described in
23    Section 531.02.
24        (11) (6)  "Covered  policy"  means any policy or contract
25    or portion of a policy or  contract  for  which  coverage  is
26    provided  within  the  scope  of  this  Article under Section
27    531.03.
28        (12)  "Director" means the Director of Insurance of  this
29    State.
30        (13)  "Extra-contractual  claim"  includes,  for example,
31    claims relating to bad faith in the payment  or  adjudication
32    of  claims,  claims  for  punitive  or  exemplary  damages or
33    attorney's  fees  and  costs,  and  claims  for  breaches  of
34    statutory or fiduciary duty.
 
                            -15-     LRB093 08006 JLS 08204 b
 1        (14) (7)  "Impaired  insurer"  means  a  member   insurer
 2    determined  deemed by the Director in a written notice to the
 3    Association after the effective date of this  Article  to  be
 4    potentially unable to fulfill its contractual obligations and
 5    not an insolvent insurer.
 6        (15) (8)  "Insolvent  insurer" means (a) a member insurer
 7    that is found to be either at the time the policy was  issued
 8    or  when the insured event occurred, or any company which has
 9    acquired such direct  policy  obligations  through  purchase,
10    merger,  consolidation,  reinsurance or otherwise, whether or
11    not such acquiring company held a certificate of authority to
12    transact insurance in this State at the time such policy  was
13    issued  or  when  the insured event occurred; and (b) becomes
14    insolvent, and is placed under a final order of  liquidation,
15    rehabilitation,  or  conservation  by  a  court  of competent
16    jurisdiction.
17        (16) (9)  "Member insurer" means any person  licensed  or
18    that who holds a certificate of authority to transact in this
19    State  any  kind  of insurance business to which this Article
20    applies under Section 531.03. For purposes  of  this  Article
21    "member  insurer"  includes  any  person whose certificate of
22    authority may have been suspended pursuant  to  Section  119,
23    revoked,  voluntarily withdrawn, or not renewed subsequent to
24    the date on which a member insurer became an impaired insurer
25    or an  insolvent  insurer,  whichever  is  earlier.   "Member
26    insurer" does not include any of the following:.
27             (a)  a mandatory State pooling plan;
28             (b)  an insurance exchange;
29             (c)  an   organization   (other   than   an  insurer
30        authorized to transact business in  this  State)  issuing
31        charitable gift annuities; or
32             (d)  any entity similar to any of the above.
33        (17) (10)  "Moody's  Corporate  Bond Yield Average" means
34    the  Monthly  Average  Corporates  as  published  by  Moody's
 
                            -16-     LRB093 08006 JLS 08204 b
 1    Investors Service, Inc., or any successor thereto.
 2        (18)  "Owner" of a policy or contract and "policy  owner"
 3    and "contract owner" mean the person who is identified as the
 4    legal  owner under the terms of the policy or contract or who
 5    is otherwise  vested  with  legal  title  to  the  policy  or
 6    contract  through  a valid assignment completed in accordance
 7    with the  terms  of  the  policy  or  contract  and  properly
 8    recorded  as the owner on the books of the insurer. The terms
 9    "owner", "contract owner", and "policy owner" do not  include
10    persons  with  a  mere  beneficial  interest  in  a policy or
11    contract.
12        (19)  "Person" means any individual, corporation,  trust,
13    limited    liability   company,   partnership,   association,
14    governmental body or entity, or voluntary organization.
15        (20)  "Plan sponsor" means:
16             (a)  the employer in the  case  of  a  benefit  plan
17        established or maintained by a single employer;
18             (b)  the  employee  organization  in  the  case of a
19        benefit plan established or  maintained  by  an  employee
20        organization; or
21             (c)  in  a  case  of  a  benefit plan established or
22        maintained by 2 or more employers or jointly  by  one  or
23        more  employers  and  one or more employee organizations,
24        the association, committee, joint board of  trustees,  or
25        other similar group of representatives of the parties who
26        establish or maintain the benefit plan.
27        (21) (11)  "Premiums"   means   direct   gross  insurance
28    premiums, or subscriptions, or and annuity considerations (by
29    whatever  name  called)  received  on  covered  policies   or
30    contracts, less returned return premiums, and considerations,
31    and  deposits  thereon  and  less  dividends  and  experience
32    credits  paid  or  credited  to  policy  or  contract  owners
33    policyholders  on  such  direct  business.  "Premiums" do not
34    include premiums  and  considerations  on  contracts  between
 
                            -17-     LRB093 08006 JLS 08204 b
 1    insurers  and  reinsurers.  "Premiums"  do  not  include  any
 2    amounts  or  considerations  received  for  any  policies  or
 3    contracts  or  for  the portions of any policies or contracts
 4    for which coverage is not provided  under  paragraph  (2)  of
 5    Section  531.03  except  that assessable premium shall not be
 6    reduced on account of  subparagraph  (2)(b)(iii)  of  Section
 7    531.03  relating  to  interest  limitations  and subparagraph
 8    (3)(b) of Section 531.03 relating to limitations with respect
 9    to any one life, any one individual, any one participant, and
10    any one policy or contract  owner.  contractholder;  provided
11    that "Premiums" shall not include:
12             (a)  any  premiums  in  excess  of  $5,000,000  five
13        million  dollars  on any unallocated annuity contract not
14        issued under a governmental retirement benefit  plan  (or
15        its  trustee)  established  under Sections 401, 403(b) or
16        457 of the United States Internal Revenue Code; or.
17             (b)  with respect to multiple non-group policies  or
18        contracts  of  life insurance owned by one owner, whether
19        the policy or contract  owner  is  an  individual,  firm,
20        corporation,  or  other  person,  and whether the persons
21        insured  are  officers,  managers,  employees,  or  other
22        persons, premiums in excess of $5,000,000 with respect to
23        these policies or contracts, regardless of the number  of
24        policies or contracts held by the owner.
25        (12)  "Person"   means   any   individual,   corporation,
26    partnership, association or voluntary organization.
27        (22)  "Principal  place of business" of a plan sponsor or
28    a person other than a natural person means the  single  state
29    in  which  the  natural  persons who establish policy for the
30    direction, control, and coordination of the operations of the
31    entity  as  a  whole  primarily   exercise   that   function,
32    determined  by  the Association in its reasonable judgment by
33    considering the following factors:
34             (a)  the state in which the  primary  executive  and
 
                            -18-     LRB093 08006 JLS 08204 b
 1        administrative headquarters of the entity are located;
 2             (b)  the  state in which the principal office of the
 3        chief executive officer of the entity is located;
 4             (c)  the state in which the board of  directors  (or
 5        similar  governing  person  or  persons)  of  the  entity
 6        conducts the majority of its meetings;
 7             (d)  the  state in which the executive or management
 8        committee of the board of directors (or similar governing
 9        person or persons) of the entity conducts the majority of
10        its meetings;
11             (e)  the state from  which  the  management  of  the
12        overall operations of the entity is directed; and
13             (f)  in  the  case  of  a  benefit plan sponsored by
14        affiliated   companies    comprising    a    consolidated
15        corporation,  the  state  in which the holding company or
16        controlling affiliate has its principal place of business
17        as determined using the above factors.
18        However, in the case of a plan sponsor, if more than  50%
19    of  the  participants  in  the benefit plan are employed in a
20    single state, that state shall be deemed to be the  principal
21    place  of  business  of  the  plan  sponsor;  except that the
22    principal place of business of a plan sponsor  of  a  benefit
23    plan  described in paragraph (20)(c) of this Section shall be
24    deemed  to  be  the  principal  place  of  business  of   the
25    association,  committee,  joint  board  of trustees, or other
26    similar group of representatives of the parties who establish
27    or maintain the benefit plan; provided, however, that in  the
28    absence  of  a  specific  or  clear  designation  of  such  a
29    principal  place of business, the principal place of business
30    shall be deemed to be the principal place of business of  the
31    employer  or  employee  organization  that  has  the  largest
32    investment in the benefit plan in question.
33        (23)  "Receivership   court"   means  the  court  in  the
34    insolvent or impaired  insurer's  state  of  domicile  having
 
                            -19-     LRB093 08006 JLS 08204 b
 1    jurisdiction   over   the  conservation,  rehabilitation,  or
 2    liquidation of the insurer.
 3        (24) (13)  "Resident"  means  any  person   to   whom   a
 4    contractual  obligation  is owed and, except in the case of a
 5    contract owner of an unallocated annuity contract issued to a
 6    benefit plan or trustee of a benefit  plan,  who  resides  in
 7    this  State  on  the  date  the  Director determines a member
 8    insurer to be an impaired insurer or a court order determines
 9    a member insurer to be an insolvent insurer, whichever occurs
10    first. In the case of an unallocated annuity contract  issued
11    to  a  benefit  plan,  or  the trustee of a benefit plan, the
12    contract owner shall be a "resident" of the  state  in  which
13    the  principal  place  of  business  of  the plan sponsor was
14    located on such date at the time the insurer is determined to
15    be impaired or insolvent and to whom contractual  obligations
16    are owed. A person may be a resident of only one state which,
17    in the case of a person other than a natural person, shall be
18    its  principal  place  of  business.   Citizens of the United
19    States that are either (i) residents of foreign countries  or
20    (ii)  residents of United States possessions, territories, or
21    protectorates that do not have an association similar to  the
22    Association  shall  be  deemed  residents  of  the  state  of
23    domicile   of   the  insurer  that  issued  the  policies  or
24    contracts.
25        (25)  "State" means a state, the  District  of  Columbia,
26    Puerto  Rico,  and  a United States possession, territory, or
27    protectorate.
28        (26)  "Structured settlement annuity contract"  means  an
29    annuity contract purchased in order to fund periodic payments
30    for  a  plaintiff  or  other  claimant in payment for or with
31    respect to personal injury suffered by the plaintiff or other
32    claimant.
33        (27)  "Subaccount" means any of the 3 subaccounts of  the
34    life  insurance and annuity account created under subdivision
 
                            -20-     LRB093 08006 JLS 08204 b
 1    (1) of 531.06.
 2        (28) (14)"Supplemental  contract"   means   any   written
 3    agreement entered into for the distribution of proceeds under
 4    a life, health, or annuity policy or contract proceeds.
 5        (29) (15)  "Unallocated   annuity   contract"  means  any
 6    annuity contract or group annuity certificate  which  is  not
 7    issued to and owned by an individual, except to the extent of
 8    any  annuity  benefits  guaranteed  to  an  individual  by an
 9    insurer under such contract or certificate.
10    (Source: P.A. 86-753.)

11        (215 ILCS 5/531.06) (from Ch. 73, par. 1065.80-6)
12        Sec. 531.06.  Creation  of  the  Association.   There  is
13    created a non-profit legal entity to be known as the Illinois
14    Life  and  Health Insurance Guaranty Association.  All member
15    insurers are and must remain members of the Association as  a
16    condition  of  their  authority to transact insurance in this
17    State.  The Association must perform its functions under  the
18    plan  of  operation  established  and  approved under Section
19    531.10 and must  exercise  its  powers  through  a  board  of
20    directors  established under Section 531.07.  For purposes of
21    administration and assessment, the Association must  maintain
22    2 accounts:
23        (1)  The   life   insurance  and  annuity  account  which
24    includes the following subaccounts:
25        (a)  Life insurance account;
26        (b)  Annuity  account   which   shall   include   annuity
27    contracts  owned  by  a  governmental retirement plan (or its
28    trustee) established under Section 401, 403(b), or 457 of the
29    United States Internal  Revenue  Code,  but  shall  otherwise
30    exclude unallocated annuity contracts; and
31        (c)  Unallocated  annuity  account  which  shall  exclude
32    contracts owned by a governmental retirement benefit plan (or
33    its trustee) established under Section 401, 403(b), or 457 of
 
                            -21-     LRB093 08006 JLS 08204 b
 1    the  United  States  Internal  Revenue Code include contracts
 2    qualified under Section 403(b) of the United  State  Internal
 3    Revenue Code.
 4        (2)  The health insurance account.
 5        The  Association  shall be supervised by the Director and
 6    is subject to  the  applicable  provisions  of  the  Illinois
 7    Insurance Code.
 8    (Source: P.A. 86-753.)

 9        (215 ILCS 5/531.07) (from Ch. 73, par. 1065.80-7)
10        Sec.   531.07.  Board   of   Directors.)   The  board  of
11    directors of the Association consists of not less than 5  nor
12    more  than 9 members serving terms as established in the plan
13    of operation.  The members of the board are to be selected by
14    member insurers subject to  the  approval  of  the  Director.
15    Vacancies  on  the  board  must  be  filled for the remaining
16    period of the term in the manner described  in  the  plan  of
17    operation.   To  select  the  initial board of directors, and
18    initially organize the Association, the  Director  must  give
19    notice  to  all  member insurers of the time and place of the
20    organizational meeting.  In determining voting rights at  the
21    organizational meeting each member insurer is entitled to one
22    vote in person or by proxy.  If the board of directors is not
23    selected  within  60  days after notice of the organizational
24    meeting, the Director may appoint the initial members.
25        In approving selections or in appointing members  to  the
26    board,   the  Director  must  consider,  whether  all  member
27    insurers are fairly represented.
28        Members of the board may be reimbursed from the assets of
29    the Association for expenses incurred by them as  members  of
30    the  board  of  directors  but  members  of the board may not
31    otherwise  be  compensated  by  the  Association  for   their
32    services.
33    (Source: P.A. 81-899.)
 
                            -22-     LRB093 08006 JLS 08204 b
 1        (215 ILCS 5/531.08) (from Ch. 73, par. 1065.80-8)
 2        Sec.  531.08.  Powers  and  duties of the Association. In
 3    addition  to  the  powers  and  duties  enumerated  in  other
 4    Sections of this Article:
 5        (1)  If an a domestic insurer is an impaired insurer, the
 6    Association  may,  in  its  discretion  and  subject  to  any
 7    conditions imposed by the Association other than those  which
 8    impair  the  contractual obligations of the impaired insurer,
 9    and  approval  approved  by  the  impaired  insurer  and  the
10    Director:
11        (a)  Guarantee, assume,  or  reinsure,  or  cause  to  be
12    guaranteed,  assumed, or reinsured, any or all of the covered
13    policies of covered persons of the impaired insurer;
14        (b)  Provide such monies, pledges, notes, guarantees,  or
15    other   means   as  are  proper  to  effectuate  subparagraph
16    paragraph (1)(a),  and  assure  payment  of  the  contractual
17    obligations  of  the  impaired  insurer  pending action under
18    subparagraph paragraph (1)(a).;
19        (c)  Loan money to the impaired insurer;
20        (2)  If an a domestic, foreign, or alien  insurer  is  an
21    insolvent  insurer, the Association shall, in its discretion,
22    either subject to the approval of the Director;
23        (a)(i)  Guarantee, assume, or reinsure  or  cause  to  be
24    guaranteed,  assumed,  or  reinsured  the covered policies of
25    covered persons of the insolvent insurer; or
26        (ii)  Otherwise assure Assure payment of the  contractual
27    obligations of the insolvent insurer to covered persons; and
28        (iii)  Provide   such   monies,  pledges,  loans,  notes,
29    guaranties, or other means as  are  reasonably  necessary  to
30    discharge  such  duties  under  subparagraphs  (2)(a)(i)  and
31    (2)(a)(ii); or
32        (b)  Provide   with  respect  to  only  life  and  health
33    insurance  policies,  provide  benefits  and   coverages   in
34    accordance with Section 531.08(3).
 
                            -23-     LRB093 08006 JLS 08204 b
 1        (c)  Provided  however that this paragraph subsection (2)
 2    shall not apply when the Director  has  determined  that  the
 3    foreign  or alien insurer's insurers domiciliary jurisdiction
 4    or  state  of  entry   provides,   by   statute,   protection
 5    substantially  similar  to  that provided by this Article for
 6    residents of this State and such protection will be  provided
 7    in a timely manner.
 8        (3)  When  proceeding  under  subparagraph (2)(b) of this
 9    Section the Association shall, with respect to only life  and
10    health insurance policies and annuity contracts:
11        (a)  assure payment of benefits for premiums identical to
12    the premiums and benefits (except for terms of conversion and
13    renewability) that would have been payable under the policies
14    or contracts of the insolvent insurer, for claims incurred:
15        (i)  with  respect  to  group policies and contracts, not
16    later than the earlier of the next renewal  date  under  such
17    policies  or contracts or 60 sixty days, but in no event less
18    than 30 thirty days, after the date on which the  Association
19    becomes   obligated   with   respect  to  such  policies  and
20    contracts;
21        (ii)  with respect  to  individual  and  other  non-group
22    policies  and  contracts,  not  later than the earlier of the
23    next renewal date (if any) under such policies  or  contracts
24    or  one  year, but in no event less than 30 thirty days, from
25    the date on which  the  Association  becomes  obligated  with
26    respect to such policies or contracts;
27        (b)  make  diligent  efforts  to provide all known policy
28    and contract owners 30 insureds or group  policyholders  with
29    respect   to   group  policies  thirty  days  notice  of  the
30    termination (pursuant to subparagraph (3)(a)) of the benefits
31    provided; and
32        (c)  with respect to individual and other non-group  life
33    and  health  policies  and  annuity  contracts covered by the
34    Association, make available to each known insured,  or  owner
 
                            -24-     LRB093 08006 JLS 08204 b
 1    if  other  than the insured or annuitant, and with respect to
 2    an individual formerly insured or formerly an annuitant under
 3    a  group  policy  on  contract  who  is  not   eligible   for
 4    replacement   group   coverage,   make  available  substitute
 5    coverage on  an  individual  basis  in  accordance  with  the
 6    provisions  of  subparagraph  (3)(d)  of this Section, if the
 7    insureds  or  annuitants  had  a  right  under  law  or   the
 8    terminated  policy or annuity contract to convert coverage to
 9    individual coverage or to continue a an individual  non-group
10    policy  or annuity contract in force until a specified age or
11    for a specified time, during which the insurer has  no  right
12    unilaterally  to  make changes in any provision of the policy
13    or annuity contract or had a right only to  make  changes  in
14    premium by class.
15        (d)(i)  In  providing  the  substitute  coverage required
16    under subparagraph (3)(c) of this  Section,  the  Association
17    may  offer  either  to  reissue the terminated coverage or to
18    issue an alternative policy or contract.
19        (ii)  Alternative or reissued policies or contracts shall
20    be offered without requiring evidence  of  insurability,  and
21    shall  not  provide  for any waiting period or exclusion that
22    would  not  have  applied  under  the  terminated  policy  or
23    contract.
24        (iii)  The Association may cause reinsure any alternative
25    or reissued policy or contract to be assumed or reinsured.
26        (e)(i)  Alternative policies or contracts adopted by  the
27    Association  shall  be  subject to the approval of either (A)
28    the Director or (B)  the  domiciliary  commissioner  and  the
29    receivership  court.   The  Association may adopt alternative
30    policies or contracts of various types  for  future  issuance
31    insurance  without  regard  to  any  particular impairment or
32    insolvency.
33        (ii)  Alternative policies or contracts shall contain  at
34    least the minimum statutory provisions required in this State
 
                            -25-     LRB093 08006 JLS 08204 b
 1    and  provide  benefits  that  shall  not  be  unreasonable in
 2    relation to the premium charged.  The Association  shall  set
 3    the  premium  in  accordance  with  a table of rates which it
 4    shall  adopt.   The  premium  shall  reflect  the  amount  of
 5    insurance to be provided and the age and  class  of  risk  of
 6    each insured, but shall not reflect any changes in the health
 7    of   the   insured   after   the  original  policy  was  last
 8    underwritten.
 9        (iii)  Any alternative policy or contract issued  by  the
10    Association  shall provide coverage of a type similar to that
11    of the policy or contract issued by the impaired or insolvent
12    insurer, as determined by the Association.
13        (f)  If the  Association  elects  to  reissue  terminated
14    coverage  at a premium rate different from that charged under
15    the terminated policy or contract, the premium shall  be  set
16    by the Association in accordance with the amount of insurance
17    provided  and  the age and class of risk, subject to approval
18    of  either  (A)  the  Director   or   (B)   the   domiciliary
19    commissioner  and  the  receivership  court  by  a  court  of
20    competent jurisdiction.
21        (g)  The   Association's   obligations  with  respect  to
22    coverage under any policy or  contract  of  the  impaired  or
23    insolvent insurer or under any reissued or alternative policy
24    or  contract  shall cease on the date such coverage or policy
25    or contract is replaced by another similar policy or contract
26    by  the  policy  owner  policyholder,  the  insured,  or  the
27    Association.
28        (4)  When proceeding under subparagraph  (2)(b)  of  this
29    Section  with  respect  to  any  policy  or contract carrying
30    guaranteed minimum  interest  rates,  the  Association  shall
31    assure  the  payment  or  crediting  of  a  rate  of interest
32    consistent with subparagraph  (2)(b)(iii)  (2)(b)(iii)(B)  of
33    Section 531.03.
34        (5)  Nonpayment  of premiums 31 thirty-one days after the
 
                            -26-     LRB093 08006 JLS 08204 b
 1    date required under the terms  of  any  guaranteed,  assumed,
 2    alternative  or  reissued  policy  or  contract or substitute
 3    coverage shall terminate the Association's obligations  under
 4    such  policy  or  contract or coverage under this Article Act
 5    with respect to such policy or contract or  coverage,  except
 6    with respect to any claims incurred or any net cash surrender
 7    value  which  may be due in accordance with the provisions of
 8    this Article Act.
 9        (6)  Premiums due for coverage after entry of an order of
10    liquidation of an insolvent insurer shall belong  to  and  be
11    payable   at  the  direction  of  the  Association,  and  the
12    Association shall be liable  for  unearned  premiums  due  to
13    policy  or  contract  owners  arising after the entry of such
14    order.
15        (7)  The protection provided by this  Article  shall  not
16    apply  when  any guaranty protection is provided to residents
17    of this  State  by  the  laws  of  the  domicilary  state  or
18    jurisdiction  of the impaired or insolvent insurer other than
19    this State.
20        (8) (7)(a)  In carrying out its  duties  under  paragraph
21    subsection (2) of this Section, the Association may permanent
22    policy liens, or contract liens, may be imposed in connection
23    with  any  guarantee, assumption or reinsurance agreement, if
24    the court:
25        (a) (i)  subject to approval by the receivership court or
26    a court of  competent  jurisdiction  is  this  State,  impose
27    permanent  policy  or  contract  liens  in  connection with a
28    guarantee,  assumption,  or  reinsurance  agreement,  if  the
29    Association finds that the  amounts  which  can  be  assessed
30    under  this  Article  Act are less than the amounts needed to
31    assure full and prompt performance of the insolvent insurer's
32    contractual obligations, or that the  economic  or  financial
33    conditions  as  they  affect member insurers are sufficiently
34    adverse to render the imposition of policy or contract liens,
 
                            -27-     LRB093 08006 JLS 08204 b
 1    to be in the public interest; and
 2        (b)  subject to approval by the receivership court  or  a
 3    court   of  competent  jurisdiction  in  this  State,  impose
 4    temporary moratoriums or liens on payments of cash values and
 5    policy loans, or any other right to withdraw  funds  held  in
 6    conjunction  with  policies  or contracts, in addition to any
 7    contractual provisions for deferral  of  cash  or  policy  or
 8    contract loan value. In addition, in the event of a temporary
 9    moratorium  or  moratorium charge imposed by the receivership
10    court or a court of competent jurisdiction in this  State  on
11    payment of cash values or policy or contract loans, or on any
12    other  right  to  withdraw  funds  held  in  conjunction with
13    policies or contracts, out of the assets of the  impaired  or
14    insolvent  insurer,  the Association may defer the payment of
15    cash values, policy or contract loans, or other rights by the
16    Association for the period of the  moratorium  or  moratorium
17    charge  imposed  by  the  receivership  court  or  a court of
18    competent jurisdiction  in  this  State,  except  for  claims
19    covered  by  the  Association to be paid in accordance with a
20    hardship procedure  (i)  established  by  the  liquidator  or
21    rehabilitator  and approved by the receivership court or (ii)
22    approved by a court of competent jurisdiction in this State.
23        (ii)  Approves the  specific  policy  liens  or  contract
24    liens to be used.
25        (b)  Before  being  obligated  under  subsection  (2) the
26    Association may  request  that  there  be  imposed  temporary
27    moratoriums  or  liens  on payments of cash values and policy
28    loans in addition to any contractual provisions for  deferral
29    of cash or policy loan values, and such temporary moratoriums
30    and liens may be imposed if they are approved by the court.
31        (9)  A  deposit  in  this  State, held pursuant to law or
32    required by  the  Director  for  the  benefit  of  creditors,
33    including  policy and contract owners, not turned over to the
34    domiciliary liquidator upon the entry of  a  final  order  of
 
                            -28-     LRB093 08006 JLS 08204 b
 1    liquidation  or  order  approving a rehabilitation plan of an
 2    insurer domiciled in this State  or  in  a  reciprocal  state
 3    shall  be  promptly  paid to the Association. The Association
 4    (i) shall be entitled to retain a portion of  any  amount  so
 5    paid to it equal to the percentage determined by dividing the
 6    aggregate  amount  of  policy  and  contract  owners'  claims
 7    related  to  that  insolvency  for  which the Association has
 8    provided statutory benefits by the aggregate  amount  of  all
 9    policy  and  contract owners' claims in this State related to
10    that insolvency and  (ii)  shall  remit  to  the  domiciliary
11    receiver  the  amount  so  paid  to the Association, less the
12    amount retained pursuant to clause (i). Any amount so paid to
13    the Association and retained by it  pursuant  to  clause  (i)
14    shall  be treated as a distribution of estate assets pursuant
15    to subsection (2) of Section 205  of  this  Code  or  similar
16    provision  of  the  state  of  domicile  of  the  impaired or
17    insolvent insurer.
18        (10)  The Association may fulfill its  obligations  under
19    paragraph  (2)  of  this  Section  by  providing  benefits in
20    connection  with  policies  or  contracts  of  the  insolvent
21    insurer whose terms have been modified pursuant to  an  order
22    of   the   receivership   court   or  a  court  of  competent
23    jurisdiction in this State, provided that the economic values
24    and economic benefits of such modified policies or contracts,
25    after the Association has acted to fulfill  its  obligations,
26    are not materially less than the economic values and economic
27    benefits  that  covered persons would have received after the
28    Association had acted to fulfill its obligations if the terms
29    of such policies or  contracts  had  not  been  modified.  In
30    determining   what  economic  values  and  economic  benefits
31    covered persons would have received after the Association had
32    acted  to  fulfill  its  obligations  if  the  terms  of  the
33    insolvent  insurer's  policies  or  contracts  had  not  been
34    modified, the Association shall take  into  account  (i)  the
 
                            -29-     LRB093 08006 JLS 08204 b
 1    coverage  limitations  set forth in paragraphs (2) and (3) of
 2    Section  531.03,  (ii)  any  substitute  coverage  that   the
 3    Association  would  have  provided pursuant to paragraphs (3)
 4    and (22) of this Section, and (iii) any permanent  policy  or
 5    contract  liens and any temporary moratoriums that would have
 6    been necessary under paragraph (8) of this  Section  but  for
 7    the modifications in terms approved by the court.
 8        (11) (8)  There  shall be no liability on the part of and
 9    no cause of action shall arise  against  the  Association  or
10    against  any  transferee  from  the Association in connection
11    with the transfer by reinsurance or otherwise of all  or  any
12    part of an impaired or insolvent insurer's business by reason
13    of  any action taken or any failure to take any action by the
14    impaired or insolvent insurer at any time.
15        (12) (9)  If  the  Association  fails  to  act  within  a
16    reasonable period  of  time  with  respect  to  an  insolvent
17    insurer  as  provided  in  paragraph  subsection  (2) of this
18    Section with respect to an insolvent  insurer,  the  Director
19    may   assume   shall  have  the  powers  and  duties  of  the
20    Association under this Article Act with regard  to  the  such
21    insolvent insurer insurers.
22        (13) (10)  The     Association    or    its    designated
23    representatives may  render  assistance  and  advice  to  the
24    Director, upon his or her request, concerning rehabilitation,
25    payment   of   claims,  continuations  of  coverage,  or  the
26    performance of other contractual obligations of any  impaired
27    or insolvent insurer.
28        (14)  The Association has standing to appear or intervene
29    before any court or agency with jurisdiction over an impaired
30    or  insolvent  insurer concerning which the Association is or
31    may become obligated under this Article, or with jurisdiction
32    over any  person  or  property  against  whom  or  which  the
33    Association may have rights through subrogation or otherwise.
34    Such  standing  extends  to all matters germane to the powers
 
                            -30-     LRB093 08006 JLS 08204 b
 1    and duties of the Association including, but not limited  to,
 2    proposals  for  reinsuring,  modifying,  or  guaranteeing the
 3    policies or contracts of the impaired  or  insolvent  insurer
 4    and  the  determination  of  the  policies  or  contracts and
 5    contractual obligations (11)  The Association has standing to
 6    appear before any court concerning all matters germane to the
 7    powers and duties of  the  Association,  including,  but  not
 8    limited  to,  proposals  for  reinsuring  or guaranteeing the
 9    covered policies of the impaired or insolvent insurer and the
10    determination  of  the  covered  policies   and   contractual
11    obligations.
12        (15) (12) (a)  Any  person  receiving benefits under this
13    Article is deemed to have assigned the rights under, and  any
14    causes of action against any person for losses arising under,
15    resulting  from,  or otherwise relating to the covered policy
16    or contract to the Association to the extent of the  benefits
17    received  because  of  this  Article whether the benefits are
18    payments  of  contractual  obligations,  or  continuation  of
19    coverage,  or  provision  of   substitute   coverages.    The
20    Association  may  require  an assignment to it of such rights
21    and causes of action by any payee, policy or contract  owner,
22    beneficiary,  insured,  certificateholder,  or annuitant as a
23    condition precedent to the receipt of any rights or  benefits
24    conferred  by this Article upon such person.  The Association
25    is subrogated to these  rights  against  the  assets  of  any
26    insolvent insurer.
27        (b)  The subrogation rights of the Association under this
28    subsection  have  the same priority against the assets of the
29    insolvent insurer as that possessed by the person entitled to
30    receive  benefits  under  this  Article.   The  Association's
31    subrogation  rights  against  the  assets  of  the  insolvent
32    insurer shall not be reduced by any recoveries  from  persons
33    other  than  the  estate of the insolvent insurer obtained by
34    the Association pursuant to assignment rights provided  under
 
                            -31-     LRB093 08006 JLS 08204 b
 1    this  subsection,  except  that the Association's subrogation
 2    rights against the  assets  of  the  insolvent  insurer  with
 3    respect  to  a  covered  policy  or  contract shall be deemed
 4    fulfilled where  any  and  all  such  recoveries  from  third
 5    parties  with  respect  to  the  covered  policy or contract,
 6    together with any distributions of estate assets with respect
 7    to the covered policy or contract, have made the  Association
 8    whole,  after  accounting  for  any  and  all  legal fees and
 9    expenses (including interest) incurred by the Association  in
10    achieving such recoveries.
11        (c)  In addition to the rights set forth in subparagraphs
12    (15)(a)  and  (b)  of  this  Section, the Association has all
13    common law rights of subrogation and any other  equitable  or
14    legal  remedy  that would have been available to the impaired
15    or insolvent insurer or owner, beneficiary,  or  payee  of  a
16    policy  or  contract  with  respect to the policy or contract
17    (including without limitation, in the case  of  a  structured
18    settlement   annuity  contract,  any  rights  of  the  owner,
19    beneficiary, or payee of the annuity contract, to the  extent
20    of  benefits  received  pursuant  to  this Article, against a
21    person originally or by succession responsible for the losses
22    arising from the personal  injury  relating  to  the  annuity
23    contract  or  payment  therefor),  excepting  any such person
24    responsible by reason of serving as an assignee in respect of
25    a qualified assignment under United States  Internal  Revenue
26    Code Section 130.
27        (d)  If  subparagraph  (a), (b), or (c) of this paragraph
28    is invalid or ineffective with respect to any person or claim
29    for any reason, the amount payable by  the  Association  with
30    respect  to  the related covered obligations shall be reduced
31    by the amount realized by any other person  with  respect  to
32    the  person or claim that is attributable to the policies and
33    contracts (or portion thereof) covered by the Association.
34        (e)  If  the  Association  has  provided  benefits   with
 
                            -32-     LRB093 08006 JLS 08204 b
 1    respect to a covered obligation and a person recovers amounts
 2    as  to  which  the  Association  has  rights  as described in
 3    subparagraph (a), (b), (c) or  (d)  of  this  paragraph,  the
 4    person  shall  pay  to  the  Association  the  portion of the
 5    recovery attributable  to  the  policies  and  contracts  (or
 6    portion thereof) covered by the Association.
 7        (16) (13)  In addition to the rights and powers elsewhere
 8    in this Article, the Association may do any of the following:
 9        (a)  Enter into such contracts as are necessary or proper
10    to carry out the provisions and purposes of this Article.;
11        (b)  Sue  or  be sued, including taking any legal actions
12    necessary or proper for recovery of  any  unpaid  assessments
13    under  Section  531.09  and  to  settle  any  litigation, any
14    threatened  or  potential  litigation,  and  any  claims   or
15    potential   claims   by  or  against  the  Association.   The
16    Association shall not be liable  for  punitive  or  exemplary
17    damages.;
18        (c)  Borrow money to effect the purposes of this Article.
19    Any   notes   or   other  evidence  of  indebtedness  of  the
20    Association not in default are legal investments for domestic
21    insurers and may be carried as admitted assets.
22        (d)  Employ or retain such persons as  are  necessary  or
23    appropriate  to  handle  the  financial  transactions  of the
24    Association, and to perform such other  functions  as  become
25    necessary or proper under this Article.
26        (e)  Negotiate   and   contract   with   any  liquidator,
27    rehabilitator, conservator, or ancillary  receiver  to  carry
28    out the powers and duties of the Association.
29        (f)  Take  such  legal  action  as  may  be  necessary or
30    appropriate to avoid or recover payment of improper claims.
31        (g)  Exercise, for the purposes of this  Article  and  to
32    the extent approved by the Director, the powers of a domestic
33    life  or  health  insurer, but in no case may the Association
34    issue insurance policies  or  annuity  contracts  other  than
 
                            -33-     LRB093 08006 JLS 08204 b
 1    those  issued  to  perform the contractual obligations of the
 2    impaired or insolvent insurer.
 3        (h)  Exercise  all  the  rights  of  the  Director  under
 4    Section 193(4) of this Code with respect to covered  policies
 5    after the Association becomes obligated by statute.
 6        (i)  Request  information  from a person seeking coverage
 7    from the Association in  order  to  aid  the  Association  in
 8    determining  its  obligations under this Article with respect
 9    to the person. The person  shall  promptly  comply  with  the
10    request  as a condition precedent to the receipt of any right
11    or benefit conferred by this Article.
12        (j)  Take  other  necessary  or  appropriate  action   to
13    discharge its duties and obligations under this Article or to
14    exercise its powers under this Article.
15        (17)(a)  At  any  time  within one year after the date on
16    which the Association becomes responsible for the obligations
17    of a member insurer (the coverage date), the Association  may
18    elect  to succeed to the rights and obligations of the member
19    insurer that accrue on or after the coverage  date  and  that
20    relate  to  policies  and  contracts  covered (in whole or in
21    part) by the Association under  any  one  or  more  indemnity
22    reinsurance  agreements entered into by the member insurer as
23    a ceding insurer and selected by  the  Association.  However,
24    the  Association may not exercise an election with respect to
25    a reinsurance agreement if the  receiver,  rehabilitator,  or
26    liquidator of the member insurer has previously and expressly
27    disaffirmed  the reinsurance agreement. The election shall be
28    effected by a  notice  to  the  receiver,  rehabilitator,  or
29    liquidator and to the affected reinsurers. If the Association
30    makes  an  election,  subparagraphs  (i) through (iv) of this
31    paragraph shall apply with respect to the agreements selected
32    by the Association:
33        (i)  The Association shall be responsible for all  unpaid
34    premiums  due  under  the agreements (for periods both before
 
                            -34-     LRB093 08006 JLS 08204 b
 1    and after the coverage date) and shall be responsible for the
 2    performance of all other obligations to  be  performed  after
 3    the  coverage date, in each case which relate to policies and
 4    contracts covered (in whole or in part) by  the  Association.
 5    The  Association may charge policies and contracts covered in
 6    part  by  the  Association,  through  reasonable   allocation
 7    methods,   the   costs  for  reinsurance  in  excess  of  the
 8    obligations of the Association.
 9        (ii)  The Association shall be entitled  to  any  amounts
10    payable by the reinsurer under the agreements with respect to
11    losses  or  events  that  occur in periods after the coverage
12    date and that relate to policies and contracts covered by the
13    Association (in  whole  or  in  part),  provided  that,  upon
14    receipt of any such amounts, the Association shall be obliged
15    to  pay  to  the  beneficiary under the policy or contract on
16    account of which the amounts  were  paid  a  portion  of  the
17    amount equal to the excess of:
18             (A)  the amount received by the Association over
19             (B)  the benefits paid by the Association on account
20        of  the  policy  or  contract  less  the retention of the
21        impaired or insolvent member insurer  applicable  to  the
22        loss or event.
23        (iii)  Within   30   days   following  the  Association's
24    election, the Association and each indemnity reinsurer  shall
25    calculate  the  net  balance  due  to or from the Association
26    under each reinsurance  agreement  as  of  the  date  of  the
27    Association's  election, giving full credit to all items paid
28    by either the member insurer (or its receiver, rehabilitator,
29    or liquidator) or the indemnity reinsurer during  the  period
30    between  the  coverage date and the date of the Association's
31    election. Either the Association or indemnity reinsurer shall
32    pay the net balance due the other within  5  days  after  the
33    completion    of    the   calculation.   If   the   receiver,
34    rehabilitator, or liquidator has received any amounts due the
 
                            -35-     LRB093 08006 JLS 08204 b
 1    Association  pursuant  to   subparagraph   (17)(a)(ii),   the
 2    receiver,  rehabilitator,  or liquidator shall remit the same
 3    to the Association as promptly as practicable.
 4        (iv)  If the Association, within 60 days of the election,
 5    pays the premiums due for periods both before and  after  the
 6    coverage  date  that relate to policies and contracts covered
 7    by the Association (in whole or in part), the reinsurer shall
 8    not be  entitled  to  terminate  the  reinsurance  agreements
 9    insofar  as  such agreements relate to policies and contracts
10    covered by the Association (in whole or in  part)  and  shall
11    not be entitled to set off any unpaid premium due for periods
12    prior   to   the   coverage  date  against  amounts  due  the
13    Association.
14        (b)  In  the  event   the   Association   transfers   its
15    obligations  to  another  insurer, and if the Association and
16    the other insurer agree, the other insurer shall  succeed  to
17    the   rights   and   obligations  of  the  Association  under
18    subparagraph (17)(a) of this Section effective as of the date
19    agreed upon by the Association  and  the  other  insurer  and
20    regardless  of  whether the Association has made the election
21    referred to in subparagraph (17)(a) provided that:
22        (i)  the   indemnity   reinsurance    agreements    shall
23    automatically   terminate  for  new  reinsurance  unless  the
24    indemnity reinsurer  and  the  other  insurer  agree  to  the
25    contrary;
26        (ii)  the   obligations   described  in  the  proviso  to
27    subparagraph (17)(a)(ii) of  this  Section  shall  no  longer
28    apply  on  and  after  the  date  the  indemnity  reinsurance
29    agreement is transferred to the third party insurer; and
30        (iii)  this  subparagraph  (17)(b) shall not apply if the
31    Association has previously expressly  determined  in  writing
32    that  it  will  not  exercise  the  election  referred  to in
33    subparagraph (17)(a) of this Section.
34        (c)  The  provisions  of  this   paragraph   (17)   shall
 
                            -36-     LRB093 08006 JLS 08204 b
 1    supersede  the  provisions of any law of this State or of any
 2    affected reinsurance agreement that provides for or  requires
 3    any  payment of reinsurance proceeds, on account of losses or
 4    events that occur in periods after the coverage date, to  the
 5    receiver,  liquidator,  or  rehabilitator  of  the  insolvent
 6    member  insurer.  The  receiver, rehabilitator, or liquidator
 7    shall remain entitled to any amounts payable by the reinsurer
 8    under the reinsurance agreement with  respect  to  losses  or
 9    events  that  occur  in  periods  prior  to the coverage date
10    (subject to applicable setoff provisions).
11        (d)  Except  as  otherwise  expressly  provided  in  this
12    paragraph (17), nothing herein  shall  alter  or  modify  the
13    terms  and conditions of the indemnity reinsurance agreements
14    of  the  insolvent  member  insurer.  Nothing  herein   shall
15    abrogate  or  limit any rights of any reinsurer to claim that
16    it is entitled to rescind a reinsurance agreement.
17        Nothing herein shall give a policy or contract  owner  or
18    beneficiary   an  independent  cause  of  action  against  an
19    indemnity reinsurer that is not otherwise set  forth  in  the
20    indemnity   reinsurance   agreement.  (14)  With  respect  to
21    covered policies for which the Association becomes  obligated
22    after  an entry of an order of liquidation or rehabilitation,
23    the Association may elect to succeed to  the  rights  of  the
24    insolvent  insurer  arising  after  the  date of the order of
25    liquidation  or  rehabilitation   under   any   contract   of
26    reinsurance  to  which  the insolvent insurer was a party, to
27    the extent that such contract provides  coverage  for  losses
28    occurring  after  the  date  of  the  order of liquidation or
29    rehabilitation.  As a condition to making this election,  the
30    Association  must  pay  premiums  for  coverage  relating  to
31    periods  after  the  date  of  the  order  of  liquidation or
32    rehabilitation.
33        (18)  The Association may join an organization of one  or
34    more  other state associations of similar purposes to further
 
                            -37-     LRB093 08006 JLS 08204 b
 1    the purposes and administer the  powers  and  duties  of  the
 2    Association.
 3        (19)  The  board  of  directors  of the Association shall
 4    have discretion and may exercise reasonable business judgment
 5    to determine the means by which the Association is to provide
 6    the benefits of this Article in an economical  and  efficient
 7    manner.
 8        (20)  Where  the  Association  has arranged or offered to
 9    provide the benefits of this  Article  to  a  covered  person
10    under  a  plan or arrangement that fulfills the Association's
11    obligations under this  Article,  the  person  shall  not  be
12    entitled  to  benefits from the Association in addition to or
13    other than those provided under the plan or arrangement.
14        (21)  Venue in a suit  against  the  Association  arising
15    under  this  Article shall be in Cook County. The Association
16    shall not be required to give an appeal bond in any  case  or
17    proceeding  that  arises from or is based in whole or in part
18    on claims or other rights asserted under this Article.
19        (22)  In carrying  out  its  duties  in  connection  with
20    guaranteeing,  assuming,  or reinsuring policies or contracts
21    under this Section, the Association may, subject to  approval
22    of  the  Director or the receivership court, issue substitute
23    coverage for a policy or contract that provides  an  interest
24    rate,  crediting rate, or similar factor determined by use of
25    an index or other external reference stated in the policy  or
26    contract  employed in calculating returns or changes in value
27    by issuing an alternative policy or  contract  in  accordance
28    with the following provisions:
29        (a)  in  lieu  of  the  index or other external reference
30    provided  for  in  the  original  policy  or  contract,   the
31    alternative  policy  or  contract  provides  for  (i) a fixed
32    interest  rate,  (ii)  payment  of  dividends  with   minimum
33    guarantees,  or  (iii)  a  different  method  for calculating
34    interest or changes in value;
 
                            -38-     LRB093 08006 JLS 08204 b
 1        (b)  there   is   no   requirement   for   evidence    of
 2    insurability,  waiting  period, or other exclusion that would
 3    not have applied under the replaced policy or contract; and
 4        (c)  the alternative policy or contract is  substantially
 5    similar  to  the  replaced  policy  or  contract in all other
 6    material terms.
 7    (Source: P.A. 86-753.)

 8        (215 ILCS 5/531.09) (from Ch. 73, par. 1065.80-9)
 9        Sec. 531.09.  Assessments.
10        (1)  For the purpose of providing the funds necessary  to
11    carry out the powers and duties of the Association, the board
12    of directors shall assess the member insurers, separately for
13    each  account  and  subaccount,  at  such  times and for such
14    amounts as the board finds necessary.  Assessments  shall  be
15    due  not less than 30 days after written notice to the member
16    insurers and shall accrue interest from the due date the rate
17    of 10% per annum at such  adjusted  rate  as  is  established
18    under  Section  6621  of Chapter 26 of the United States Code
19    and such interest shall be compounded daily.
20        (2)  There shall be 2 classes of assessments, as follows:
21        (a)  Class A assessments shall be authorized  and  called
22    made  for  the  purpose  of  meeting administrative costs and
23    other general expenses and examinations conducted  under  the
24    authority  of  the  Director  under subsection (5) of Section
25    531.12.  Class A assessments may  be  authorized  and  called
26    whether  or not related to a particular impaired or insolvent
27    insurer.
28        (b)  Class B assessments shall be authorized  and  called
29    made  to  the  extent  necessary  to carry out the powers and
30    duties of the Association under Section 531.08 with regard to
31    an impaired or an insolvent  domestic  insurer  or  insolvent
32    foreign or alien insurers.
33        (3) (a)  The  amount  of  any Class A assessment shall be
 
                            -39-     LRB093 08006 JLS 08204 b
 1    determined by  the  board  of  directors  Board  and  may  be
 2    authorized  and  called  made  on  a pro-rata or non-pro rata
 3    basis.  With respect to any pro rata Class A assessment,  the
 4    board  may  provide  that no member insurer shall be assessed
 5    less  than  $100   as   its   share   of   such   assessment,
 6    notwithstanding  that such assessment is pro rata.  The board
 7    may provide that any pro rata assessment  shall  be  credited
 8    against future Class B assessments.  The total of all non-pro
 9    rata Such assessments shall be in an amount determined by the
10    board,  but shall not exceed $500 $200 per company in any one
11    calendar year.  The amount of any Class B assessment shall be
12    allocated for assessment  purposes  among  the  accounts  and
13    subaccounts  pursuant  to  an allocation formula which may be
14    based  on  the  premiums  or  reserves  of  the  impaired  or
15    insolvent insurer or any other standard deemed by  the  board
16    in its sole discretion as being fair and reasonable under the
17    circumstances.
18        (b)  Class B assessments against member insurers for each
19    account  and  subaccount  shall be in the proportion that the
20    premiums received on business in this State by each  assessed
21    member  insurer  on  policies  or  contracts  covered by each
22    account or subaccount for  the  three  most  recent  calendar
23    years  for  which information is available preceding the year
24    in which the insurer became impaired  or  insolvent,  as  the
25    case  may  be, bears to such premiums received on business in
26    this State for such calendar years  by  all  assessed  member
27    insurers.   To  the  extent  that  any  federal  or state law
28    prohibits or preempts the Association from making assessments
29    on the basis of any such  premiums,  assessments  under  this
30    subparagraph  shall be made on the basis of all such premiums
31    not subject  to  any  prohibitions  or  preemption,  and  the
32    assessment method set forth in this subparagraph shall not be
33    rendered invalid by any such prohibitions or preemption.
34        (c)  Assessments  for  funds  to meet the requirements of
 
                            -40-     LRB093 08006 JLS 08204 b
 1    the Association with respect  to  an  impaired  or  insolvent
 2    insurer  shall  not  be  authorized  or called made until the
 3    board in its judgment determines that such  authorization  or
 4    call  is necessary to implement the purposes of this Article.
 5    When in the judgment of  the  board  an  assessment  will  be
 6    necessary  to  implement  the  purposes  of this Article, the
 7    board may authorize a future assessment, to become  effective
 8    after  a  member  insurer has become an impaired or insolvent
 9    insurer, and such assessment shall not be invalid because the
10    member insurer was not an impaired or  insolvent  insurer  at
11    the   time  the  board  authorized  such  future  assessment.
12    Classification of assessments under paragraph subsection  (2)
13    of  this  Section  and computations of assessments under this
14    paragraph (3) subsection shall  be  made  with  a  reasonable
15    degree of accuracy, recognizing that exact determinations may
16    not  always  be  possible.  The Association shall notify each
17    member insurer of  its  anticipated  pro  rata  share  of  an
18    authorized  assessment  not  yet called within 180 days after
19    the assessment is authorized.
20        (4)  The Association may abate or defer, in whole  or  in
21    part,  the  assessment of a member insurer if, in the opinion
22    of the board, payment of the assessment  would  endanger  the
23    ability  of  the  member  insurer  to fulfill its contractual
24    obligations.  In the event an  assessment  against  a  member
25    insurer  is  abated or deferred, in whole or in part, because
26    of the limitations set  forth  in  this  paragraph  (4),  the
27    amount by which such assessment is abated or deferred, may be
28    assessed  against  the  other  member  insurers  in  a manner
29    consistent with the basis for assessments set forth  in  this
30    Section  531.09.  Once  the conditions that caused a deferral
31    have been removed or rectified, the member insurer shall  pay
32    all  assessments  that  were deferred pursuant to a repayment
33    plan  approved  by  the  Association   The   total   of   all
34    assessments  upon  a  member insurer for the life and annuity
 
                            -41-     LRB093 08006 JLS 08204 b
 1    account and for each subaccount thereunder may not in any one
 2    calendar year exceed 2% and for the health account may not in
 3    any one calendar year exceed 2%  of  such  insurer's  average
 4    premiums received in this State on the policies and contracts
 5    covered  by  the  account  or  subaccount  during  the  three
 6    calendar years preceding the year in which the insurer became
 7    an   impaired   or  insolvent  insurer.   If  a  one  percent
 8    assessment for any subaccount of the life and annuity account
 9    in any one year does not  provide  an  amount  sufficient  to
10    carry  out  the  responsibilities  of  the  Association, then
11    pursuant to subsection  3(b),  the  board  shall  access  all
12    subaccounts of the life and annuity account for the necessary
13    additional  amount,  subject  to  the  maximum stated in this
14    subsection.
15        (5)  (a)(i)  Subject  to  the  provisions  of   paragraph
16    (5)(a)(ii) of this Section, the total of all assessments upon
17    a  member  insurer  for  the life and annuity account and for
18    each subaccount thereunder may not in any one  calendar  year
19    exceed  2%,  and  for  the  health account may not in any one
20    calendar year exceed 2%, of such insurer's  average  premiums
21    received  in this State on the policies and contracts covered
22    by the account or subaccount  during  the  3  calendar  years
23    preceding the year in which the insurer became an impaired or
24    insolvent insurer.
25        (ii)  If  2  or  more  assessments  are authorized in one
26    calendar year with respect to insurers that  become  impaired
27    insurers  or  insolvent insurers in different calendar years,
28    the average annual premiums for  purposes  of  the  aggregate
29    assessment  percentage  limitation referenced in subparagraph
30    (5)(a)(i) of this Section shall be equal and limited  to  the
31    higher   of  the  3-year  average  annual  premiums  for  the
32    applicable subaccount or account as  calculated  pursuant  to
33    this  Section.  In  the  event an assessment against a member
34    insurer is abated, or deferred, in whole or in part,  because
 
                            -42-     LRB093 08006 JLS 08204 b
 1    of  the  limitations  set  forth  in  subsection  (4) of this
 2    Section the amount by which  such  assessment  is  abated  or
 3    deferred,  may  be assessed against the other member insurers
 4    in a manner consistent with the  basis  for  assessments  set
 5    forth in this Section.
 6        (iii)  If  funds  available  from assessments, investment
 7    income, recoveries of estate assets, or other recoveries  are
 8    insufficient  to  the  maximum  assessment, together with the
 9    other assets of the Association in either account,  does  not
10    provide   in  any  one  year  in  either  account  an  amount
11    sufficient  to  carry  out  the   responsibilities   of   the
12    Association,  the  necessary additional funds may be assessed
13    as soon thereafter as permitted by this Article.
14        (iv)  If the maximum assessment for any subaccount of the
15    life and annuity account in any one year does not provide  an
16    amount  sufficient  to  carry out the responsibilities of the
17    Association, then pursuant to  subparagraph  (3)(b)  of  this
18    Section 531.09, the board shall access all subaccounts of the
19    life and annuity account for the necessary additional amount,
20    subject to the maximum stated in this paragraph (5).
21        (6)  The  board  may  provide  in the plan of operation a
22    method of allocating funds among claims, whether relating  to
23    one  or more impaired or insolvent insurers, when the maximum
24    assessment will be insufficient to cover anticipated claims.
25        (7) (6)  The  board  may,  by  an  equitable  method   as
26    established  in  the  plan  of  operation,  refund  to member
27    insurers, in proportion to the contribution of  each  insurer
28    to  that  account,  the  amount  by  which  the assets of the
29    account exceed the amount the board  finds  is  necessary  to
30    carry  out  during  the  coming  year  the obligations of the
31    Association with regard to  that  account,  including  assets
32    accruing  from  assignment,  subrogation, net realized gains,
33    and income from investments.  A   reasonable  amount  may  be
34    retained  in  any account to provide funds for the continuing
 
                            -43-     LRB093 08006 JLS 08204 b
 1    expenses of the Association and for future claims  losses  if
 2    refunds are impractical.
 3        (8) (7)  Unless   otherwise   determined   by  the  board
 4    pursuant to subdivision 531.09(3)(c), an assessment is deemed
 5    to occur  on  the  date  upon  which  the  board  votes  such
 6    assessment.   The  board may defer calling the payment of the
 7    assessment  or  may  call  for  payment  in   one   or   more
 8    installments.
 9        (9) (8)  It   is   proper  for  any  member  insurer,  in
10    determining its premium rates and policyowner dividends as to
11    any kind of insurance within the scope of  this  Article,  to
12    consider   the   amount  reasonably  necessary  to  meet  its
13    assessment obligations under this Article.
14        (10) (9)  The Association  must  issue  to  each  insurer
15    paying an a Class B assessment under this Article, other than
16    a  Class  A  assessment,  a certificate of contribution, in a
17    form acceptable to  the  Director,  for  the  amount  of  the
18    assessment  so  paid.   All  outstanding  certificates are of
19    equal dignity and priority without reference  to  amounts  or
20    dates  of  issue.  A certificate of contribution may be shown
21    by the insurer in its financial statement as an asset in such
22    form and for such amount, if any, and period of time  as  the
23    Director may approve, provided the insurer shall in any event
24    at  its  option  have  the  right  to  show  a certificate of
25    contribution as an  admitted  asset  at  percentages  of  the
26    original face amount for calendar years as follows:
27        100% for the calendar year after the year of issuance;
28        80%  for  the  second  calendar  year  after  the year of
29    issuance;
30        60% for  the  third  calendar  year  after  the  year  of
31    issuance;
32        40%  for  the  fourth  calendar  year  after  the year of
33    issuance;
34        20% for  the  fifth  calendar  year  after  the  year  of
 
                            -44-     LRB093 08006 JLS 08204 b
 1    issuance.
 2        (11)  The Association may request information from member
 3    insurers  in  order to aid in the exercise of its power under
 4    Section 531.09 and member insurers shall promptly comply with
 5    such a request.
 6    (Source: P.A. 86-753.)

 7        (215 ILCS 5/531.10) (from Ch. 73, par. 1065.80-10)
 8        Sec. 531.10.  Plan of Operation.)
 9        (1) (a)  The Association must submit to  the  Director  a
10    plan  of  operation  and  any amendments thereto necessary or
11    suitable  to  assure  the  fair,  reasonable,  and  equitable
12    administration of the Association.  The plan of operation and
13    any amendments thereto  become  effective  upon  approval  in
14    writing by the Director.
15        (b)  If  the  Association fails to submit a suitable plan
16    of operation within 180 days following the effective date  of
17    this  Article  or  if  at any time thereafter the Association
18    fails to submit suitable amendments to the plan, the Director
19    may, after notice and  hearing,  adopt  and  promulgate  such
20    reasonable  rules as are necessary or advisable to effectuate
21    the provisions of this Article. Such rules are in force until
22    modified by the Director or superseded by a plan submitted by
23    the Association and approved by the Director.
24        (2)  All member insurers must comply  with  the  plan  of
25    operation.
26        (3)  The   plan   of   operation  must,  in  addition  to
27    requirements enumerated elsewhere in this Article:
28        (a)  Establish procedures for handling the assets of  the
29    Association;
30        (b)  Establish  the  amount  and  method  of  reimbursing
31    members of the board of directors under Section 531.07;
32        (c)  Establish  regular  places  and  times for meetings,
33    including  telephone  conference  calls,  of  the  board   of
 
                            -45-     LRB093 08006 JLS 08204 b
 1    directors;
 2        (d)  Establish  procedures  for records to be kept of all
 3    financial transactions of the Association,  its  agents,  and
 4    the board of directors;
 5        (e)  Establish  the procedures whereby selections for the
 6    board  of  directors  will  be  made  and  submitted  to  the
 7    Director;
 8        (f)  Establish any additional procedures for  assessments
 9    under Section 531.09; and
10        (g)  Contain  additional  provisions  necessary or proper
11    for  the  execution  of  the  powers  and   duties   of   the
12    Association.
13        (4)  The  plan  of  operation shall establish a procedure
14    for protest by any member insurer of assessments made by  the
15    Association  pursuant  to  Section  531.09.   Such procedures
16    shall require that:
17        (a)  Any member insurer that wishes to protest all or any
18    part of an assessment for any year shall first pay  the  full
19    amount  of the assessment as set forth in the notice provided
20    by the Association.  The payment shall be available  and  may
21    be  used  to meet Association obligations during the pendency
22    of the protest and  any  subsequent  appeal.   Such  payments
23    shall  be  accompanied  by  a  statement  in writing that the
24    payment  is  made  under  protest,  setting  forth  a   brief
25    statement  of  the  ground  for the protest.  The Association
26    shall hold such  payments  in  a  separate  interest  bearing
27    account.
28        (b)  Within  60  30  days  following  the  payment  of an
29    assessment under protest by any  protesting  member  insurer,
30    the  Association must notify the member insurer in writing of
31    its final decision determination with respect to the  protest
32    unless  the  Association  notifies the member that additional
33    time is required to resolve the issues raised by the protest.
34        (c)  Within 30 days after a final decision has been made,
 
                            -46-     LRB093 08006 JLS 08204 b
 1    the Association shall notify the protesting member insurer in
 2    writing of that final decision.  In the event the Association
 3    determines that the protesting member insurer is entitled  to
 4    a  refund, such refund shall be made within 30 days following
 5    the date upon which the Association makes its determination.
 6        (d)  The final decision of the Association  with  respect
 7    to  a  protest  may  be  appealed to the Director pursuant to
 8    Section 531.11(3).
 9        (e)  In the alternative  to  rendering  a  decision  with
10    respect  to  any  protest  based  on a question regarding the
11    assessment base, the Association may refer such  protests  to
12    the   Director   for   final  decision,  with  or  without  a
13    recommendation from the Association.
14        (f)  In the  event  the  Association  determines,  or  on
15    appeal  of  the Association's decision it is determined, that
16    the protesting member insurer is entitled to a refund of  all
17    or  a  portion  of the amount paid under protest, such refund
18    shall be made to the protesting member insurer.  Interest  on
19    any  refund  due a protesting member insurer shall be paid at
20    the rate actually earned by the Association.  Interest on any
21    refund due a protesting member insurer shall be paid  at  the
22    rate  actually  earned  by  the  Association  on the separate
23    account.
24        (5)  The plan of operation may provide that  any  or  all
25    powers  and  duties  of  the  Association, except those under
26    paragraph (c)  of  subsection  (10)  subdivision  (16)(c)  of
27    Section   531.08  and  Section  531.09  are  delegated  to  a
28    corporation,  association   or   other   organization   which
29    performs  or  will perform functions similar to those of this
30    Association, or its equivalent, in 2 or more states.  Such  a
31    corporation,  association or organization shall be reimbursed
32    for any payments made on behalf of the Association and  shall
33    be   paid   for  its  performance  of  any  function  of  the
34    Association.  A delegation under this subsection  shall  take
 
                            -47-     LRB093 08006 JLS 08204 b
 1    effect  only with the approval of both the board of directors
 2    and the Director, and may be  made  only  to  a  corporation,
 3    association  or  organization  which  extends  protection not
 4    substantially less favorable and effective than that provided
 5    by this Article Act.
 6    (Source: P.A. 84-1035.)

 7        (215 ILCS 5/531.11) (from Ch. 73, par. 1065.80-11)
 8        Sec. 531.11.  Duties and  powers  of  the  Director.   In
 9    addition  to  the  duties  and powers enumerated elsewhere in
10    this Article:
11        (1)  The Director must:
12             (a)  Upon request of the board of directors, provide
13        the Association with a statement of the premiums  in  the
14        appropriate accounts for each member insurer.
15             (b)  notify  the board of directors of the existence
16        of an impaired or insolvent insurer not later than 3 days
17        after a determination of impairment or insolvency is made
18        or when the Director receives  notice  of  impairment  or
19        insolvency.
20             (c)  give  notice to an impaired insurer as required
21        by Sections 34 or 60.  Notice  to  the  impaired  insurer
22        shall constitute notice to its shareholders, if any.
23             (d)  In any liquidation or rehabilitation proceeding
24        involving   a  domestic  insurer,  be  appointed  as  the
25        liquidator or  rehabilitator.   If  a  foreign  or  alien
26        member  insurer is subject to a liquidation proceeding in
27        its domiciliary  jurisdiction  or  state  of  entry,  the
28        Director shall be appointed conservator.
29        (2)  The Director may suspend or revoke, after notice and
30    hearing,  the  certificate of authority to transact insurance
31    in this State of any member insurer which  fails  to  pay  an
32    assessment  when  due  or  fails  to  comply with the plan of
33    operation.   As  an  alternative  the  Director  may  levy  a
 
                            -48-     LRB093 08006 JLS 08204 b
 1    forfeiture on any  member  insurer  which  fails  to  pay  an
 2    assessment  when  due.   Such forfeiture may not exceed 5% of
 3    the unpaid assessment per month, but  no  forfeiture  may  be
 4    less than $100 per month.
 5        (3)  Any  final  decision  or  action  of  the  board  of
 6    directors  or the Association may be appealed to the Director
 7    by any member insurer or any other person adversely  affected
 8    by  such action if such appeal is taken within 30 days of the
 9    decision or action being appealed.  Any final action or order
10    of the Director is subject to judicial review in a  court  of
11    competent  jurisdiction.   An action or order of the Director
12    may be final and subject  to  judicial  review  even  if  the
13    aggrieved  party  seeking  judicial  review  has  not  sought
14    reconsideration or rehearing by the Director.
15        (4)  The liquidator, rehabilitator, or conservator of any
16    impaired  insurer  may  notify  all interested persons of the
17    effect of this Article.
18    (Source: P.A. 89-97, eff. 7-7-95.)

19        (215 ILCS 5/531.12) (from Ch. 73, par. 1065.80-12)
20        Sec. 531.12.  Prevention of Insolvencies.  To aid in  the
21    detection   and   prevention   of   insurer  insolvencies  or
22    impairments:
23        (1)  It shall be the duty of the Director:
24        (a)  To notify the commissioners  of  all  other  states,
25    territories  of  the  United  States,  and  the  District  of
26    Columbia  when  he  or she takes any of the following actions
27    against a member insurer:
28        (i)  revocation of license;
29        (ii)  suspension of license;
30        (iii)  makes any formal order except for an order  issued
31    pursuant  to  Article  XII 1/2 of this Code that such company
32    restrict its premium writing, obtain additional contributions
33    to surplus, withdraw from the State, reinsure all or any part
 
                            -49-     LRB093 08006 JLS 08204 b
 1    of its business, or increase capital, surplus  or  any  other
 2    account for the security of policyholders or creditors.
 3        Such  notice  shall  be  transmitted to all commissioners
 4    within 30 days following the action  taken  or  the  date  on
 5    which the action occurs.
 6        (b)  To  report  to the board of directors when he or she
 7    has taken any of the actions set forth in subparagraph (a) of
 8    this paragraph or  has  received  a  report  from  any  other
 9    commissioner  indicating  that any such action has been taken
10    in another state.  Such report  to  the  board  of  directors
11    shall  contain all significant details of the action taken or
12    the report received from another commissioner.
13        (2)  The Director may seek the advice and recommendations
14    of the board of directors concerning any matter affecting the
15    Director's his  duties  and  responsibilities  regarding  the
16    financial condition of member companies and companies seeking
17    admission to transact insurance business in this State.
18        (3)  The board of directors may, upon majority vote, make
19    reports  and  recommendations to the Director upon any matter
20    germane to the liquidation, rehabilitation or conservation of
21    any member insurer.  Such reports and  recommendations  shall
22    not be considered public documents.
23        (4)  The board of directors may, upon majority vote, make
24    recommendations   to  the  Director  for  the  detection  and
25    prevention of insurer insolvencies.
26        (5)  The board of directors may shall, at the  conclusion
27    of  any  insurer  insolvency  in  which  the  Association was
28    obligated to pay covered  claims  prepare  a  report  to  the
29    Director  containing  such  information as it may have in its
30    possession  bearing  on  the  history  and  causes  of   such
31    insolvency.   The  board  shall  cooperate with the boards of
32    directors  of  guaranty  associations  in  other  states   in
33    preparing  a  report on the history and causes for insolvency
34    of a particular insurer,  and  may  adopt  by  reference  any
 
                            -50-     LRB093 08006 JLS 08204 b
 1    report prepared by such other associations.
 2    (Source: P.A. 86-753.)

 3        (215 ILCS 5/531.14) (from Ch. 73, par. 1065.80-14)
 4        Sec. 531.14.  Miscellaneous Provisions.)  (1)  Nothing in
 5    this  Article  may  be  construed to reduce the liability for
 6    unpaid assessments of the insured of an impaired or insolvent
 7    insurer operating under a plan with assessment liability.
 8        (2)  No member insurer may voluntarily withdraw from this
 9    State or liquidate its property, business, and  affairs,  and
10    no  such  voluntary withdrawal or voluntary liquidation shall
11    be  effective,  until  such  member  insurer  has  paid   all
12    authorized assessments, whether called or uncalled, for which
13    it is liable under this Article.
14        (3) (2)  Records  must  be  kept  of  all meetings of the
15    board of directors negotiations and  meetings  in  which  the
16    Association  or  its  representatives are involved to discuss
17    the activities of the Association in carrying out its  powers
18    and  duties  under  Section  531.08.    The  records  of  the
19    Association  with respect to an impaired or insolvent insurer
20    may be made public only (a) upon the order of the Director or
21    a court of competent jurisdiction or upon a determination  by
22    the  board,  and  (b)  during  the  pendency  Records of such
23    negotiations or meetings may be made  public  only  upon  the
24    termination of a liquidation, rehabilitation, or conservation
25    proceeding  involving the impaired or insolvent insurer, upon
26    a showing of compelling circumstances the termination of  the
27    impairment  or  insolvency of the insurer, or  upon the order
28    of a  court  of  competent  jurisdiction.   Nothing  in  this
29    paragraph  (3)  (2)  limits  the  duty  of the Association to
30    render a report of its activities under Section 531.15.
31        (4) (3)  For the purpose of carrying out its  obligations
32    under  this  Article,  the  Association  is  deemed  to  be a
33    creditor of the impaired or insolvent insurer to  the  extent
 
                            -51-     LRB093 08006 JLS 08204 b
 1    of  assets  attributable  to  covered policies reduced by any
 2    amounts to which the  Association  is  entitled  as  subrogee
 3    (under  paragraph (15) (8) of Section 531.08).  All assets of
 4    the impaired or insolvent  insurer  attributable  to  covered
 5    policies  must  be  used to continue all covered policies and
 6    pay all contractual obligations of the  impaired  insurer  as
 7    required  by  this  Article.  "Assets attributable to covered
 8    policies", as  used  in  this  paragraph  (4)  (3),  is  that
 9    proportion  of the assets which the reserves that should have
10    been established for  such  policies  bear  to  the  reserves
11    reserve that should have been established for all policies of
12    insurance written by the impaired or insolvent insurer.
13        (5)  As  a  creditor of the impaired or insolvent insurer
14    as established in paragraph (4) of this  Section  531.14  and
15    paragraph   (15)   of  Section  531.08  and  consistent  with
16    paragraph  (2)  of  Section  205  of  the  Code  and  similar
17    provisions under the laws of other  states,  the  Association
18    and  other  similar associations shall be entitled to receive
19    disbursements of assets out of the marshaled assets from time
20    to time as the assets become available.   If  the  liquidator
21    has  not,  within  120  days  of  a  final  determination  of
22    insolvency  of  an insurer by the receivership court, made an
23    application to the court for the approval of  a  proposal  to
24    disburse   assets   out   of  marshaled  assets  to  guaranty
25    associations having obligations because  of  the  insolvency,
26    then the Association shall be entitled to make application to
27    the  receivership  court  for approval of its own proposal to
28    disburse these assets.
29        (6) (4) (a)  Prior to the termination of any liquidation,
30    rehabilitation, or conservation  proceeding,  the  court  may
31    take  into  consideration the contributions of the respective
32    parties, including the Association, the shareholders and  the
33    policy  and  contract  owners policyowners of the impaired or
34    insolvent insurer, and any  other  party  with  a  bona  fide
 
                            -52-     LRB093 08006 JLS 08204 b
 1    interest,   in   making  an  equitable  distribution  of  the
 2    ownership rights of such impaired or insolvent  insurer.   In
 3    such  a  determination,  consideration  must  be given to the
 4    welfare  of   the   policy   owners   and   contract   owners
 5    policyholders of the continuing or successor insurer.
 6        (b)  No  distribution  to  stockholders,  if  any,  of an
 7    impaired or insolvent insurer may be made  until  and  unless
 8    the total amount of valid claims of the Association for funds
 9    expended  in carrying out its powers and duties under Section
10    531.08,  with  respect  to  such  insurer  have  been   fully
11    recovered by the Association.
12        (7) (5) (a)  If    an    order    for    liquidation   or
13    rehabilitation of an insurer domiciled in this State has been
14    entered, the receiver appointed under such order has a  right
15    to  recover on behalf of the insurer, from any affiliate that
16    controlled it, the amount of distributions, other than  stock
17    dividends  paid  by the insurer on its capital stock, made at
18    any time during  the  5  years  preceding  the  petition  for
19    liquidation  or  rehabilitation subject to the limitations of
20    subparagraphs paragraphs (b) to (d) of this paragraph (7).
21        (b)  No such dividend is recoverable if the insurer shows
22    that when paid the distribution was  lawful  and  reasonable,
23    and  that  the  insurer did not know and could not reasonably
24    have known that the distribution might adversely  affect  the
25    ability   of   the   insurer   to   fulfill  its  contractual
26    obligations.
27        (c)  Any person who was as an affiliate  that  controlled
28    the insurer at the time the distributions were paid is liable
29    up  to  the  amount of distributions such person he received.
30    Any person who was an affiliate that controlled  the  insurer
31    at  the time the distributions were declared, is liable up to
32    the  amount  of  distributions  such  person  he  would  have
33    received if they had been paid immediately.   If  2  or  more
34    persons  are  liable  with respect to the same distributions,
 
                            -53-     LRB093 08006 JLS 08204 b
 1    they are jointly and severally liable.
 2        (d)  The maximum amount recoverable under this  paragraph
 3    (7)  subsection  (5)  of this Section is the amount needed in
 4    excess of all other available assets of the insolvent insurer
 5    to pay the contractual obligations of the insolvent insurer.
 6        (e)  If any person liable  under  subparagraph  paragraph
 7    (c)  of  this paragraph (7) subsection (5) of this Section is
 8    insolvent, all its affiliates that controlled it at the  time
 9    the  dividend  was  paid are jointly and severally liable for
10    any resulting deficiency in the  amount  recovered  from  the
11    insolvent affiliate.
12    (Source: P.A. 81-899.)

13        (215 ILCS 5/531.15) (from Ch. 73, par. 1065.80-15)
14        Sec.  531.15.  Examination  of  the  Association.  Annual
15    Report.  The Association shall be subject to examination  and
16    regulation  by  the  Director.  The  board  of directors must
17    submit to the Director, not later than the first day  of  the
18    fifth  month  following  the  end of the Association's fiscal
19    year, a financial report for  such  fiscal  year  in  a  form
20    acceptable  to  the  Director  and a report of its activities
21    during such fiscal  year.   Upon  the  request  of  a  member
22    insurer, the Association shall provide the member with a copy
23    of the report.
24    (Source: P.A. 86-753.)

25        (215 ILCS 5/531.17) (from Ch. 73, par. 1065.80-17)
26        Sec.  531.17.   Immunity.)   There is no liability on the
27    part of and no cause  of  action  of  any  nature  may  arise
28    against  any  member  insurer or its agents or employees, the
29    Association or its agents or employees, members of the  board
30    of   directors   or   their   representatives   or  alternate
31    representatives,  or  the  Director  or  the  Director's  his
32    representatives, for any decision or action taken or omission
 
                            -54-     LRB093 08006 JLS 08204 b
 1    made by them in the performance of their  powers  and  duties
 2    under  this  Article.   Without  limitation,  the Association
 3    shall be immune from any  claim  that  any  omission  by  the
 4    Association   or   any   action  of  the  Association,  taken
 5    separately or in concert with the Director in any of  his  or
 6    her  capacities,  has  caused loss or any other injury to any
 7    impaired insurer or any  insolvent  insurer.  Immunity  shall
 8    extend to the Association's participation in any organization
 9    of  one  or more other state associations of similar purposes
10    and to any such organization and its agents or employees.
11    (Source: P.A. 81-899.)

12        (215 ILCS 5/531.19) (from Ch. 73, par. 1065.80-19)
13        Sec. 531.19.  Prohibited advertisement of action  of  the
14    Insurance Guaranty Association in sale of insurance.
15        (a)  No  person, including an insurer, agent or affiliate
16    of an insurer shall make, publish, disseminate, circulate, or
17    place before the public, or cause directly or indirectly,  to
18    be made, published, disseminated, circulated or placed before
19    the  public, in any newspaper, magazine or other publication,
20    or in the form of a notice,  circular,  pamphlet,  letter  or
21    poster,  or  over any radio station or television station, or
22    in  any  other  way,  any  advertisement,   announcement   or
23    statement,  written  or oral, which uses the existence of the
24    Insurance Guaranty Association of this State for the  purpose
25    of  sales, solicitation or inducement to purchase any form of
26    insurance covered by this Article;  provided,  however,  that
27    this  Section shall not apply to the Illinois Life and Health
28    Guaranty Association or any other entity which does not  sell
29    or solicit insurance.
30        (b)  Within  180 days of August 16, 1993, the Association
31    shall prepare  a  summary  document  describing  the  general
32    purposes   and   current  limitations  of  this  Article  and
33    complying  with  subsection  (c).   This  document  shall  be
 
                            -55-     LRB093 08006 JLS 08204 b
 1    submitted to the Director for  approval.   Sixty  days  after
 2    receiving  approval,  no  insurer  may  deliver  a  policy or
 3    contract described in subparagraph (2)(a) of paragraph (2) of
 4    Section 531.03 and not excluded under subparagraph (2)(b)  of
 5    that  Section to a policy or contract owner holder unless the
 6    document is delivered to the policy or contract owner  holder
 7    prior  to  or  at  the  time  of  delivery  of  the policy or
 8    contract.  The document should also be available upon request
 9    by  a   policy   or   contract   owner   policyholder.    The
10    distribution, delivery, or contents or interpretation of this
11    document  shall  not  mean  that  either  the  policy  or the
12    contract or the holder thereof would be covered in the  event
13    of  the  impairment  or  insolvency of a member insurer.  The
14    description document shall be revised by the  Association  as
15    amendments  to  this Article may require.  Failure to receive
16    this document does  not  give  the  policy  or  policyholder,
17    contract  owner  holder,  certificate  holder, or insured any
18    greater rights than those stated in this Article.
19        (c)  The document prepared  under  subsection  (b)  shall
20    contain  a clear and conspicuous disclaimer on its face.  The
21    Director shall promulgate a rule establishing  the  form  and
22    content of the disclaimer.  The disclaimer shall:
23             (1)  State the name and address of the Illinois Life
24        and  Health  Insurance  Guaranty  Association  and of the
25        Department.
26             (2)  Prominently warn the policy or  contract  owner
27        holder  that  the  Illinois  Life  and  Health  Insurance
28        Guaranty Association may not cover the policy or contract
29        or,  if  coverage  is  available,  it  will be subject to
30        substantial limitations and exclusions and conditioned on
31        continued residence in the State.
32             (3)  State that  the  insurer  and  its  agents  are
33        prohibited  by  law  from  using  the  existence  of  the
34        Illinois  Life  and Health Insurance Guaranty Association
 
                            -56-     LRB093 08006 JLS 08204 b
 1        for the purpose of sales, solicitation, or inducement  to
 2        purchase any form of insurance.
 3             (4)  Emphasize  that  the  policy  or contract owner
 4        holder should not rely on  coverage  under  the  Illinois
 5        Life  and  Health Insurance Guaranty Association Law when
 6        selecting an insurer.
 7             (5)  Set forth the name, address,  and  a  toll-free
 8        telephone  number  of  the insurer along with a statement
 9        that the policy or contract owner should direct inquiries
10        or comments to the insurer at such address  or  telephone
11        number.
12             (6) (5)  Provide  other  information  as directed by
13        the Director.
14        (d)  (Blank).
15    (Source:  P.A.  88-364;  88-627,  eff.  9-9-94;  89-97,  eff.
16    7-7-95.)

17        Section 99.  Effective date.  This Act  takes  effect  on
18    January 1, 2004.