SB3324 EnrolledLRB098 18518 RPM 53655 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Insurance Code is amended by
5changing Sections 121-2.08, 412, 445, 445.1, and 445.4 as
6follows:
 
7    (215 ILCS 5/121-2.08)  (from Ch. 73, par. 733-2.08)
8    Sec. 121-2.08. Transactions in this State involving
9contracts of insurance independently procured directly from an
10unauthorized insurer by issued to one or more industrial
11insureds.
12    (a) As used in this Section:
13    "Exempt commercial purchaser" means exempt commercial
14purchaser as the term is defined in subsection (1) of Section
15445 of this Code.
16    "Home state" means home state as the term is defined in
17subsection (1) of Section 445 of this Code.
18    "Industrial For purposes of this Section "industrial
19insured" means is an insured:
20        (i) that (a) which procures the insurance of any risk
21    or risks of the kinds specified in Classes 2 and 3 of
22    Section 4 of this Code other than life and annuity
23    contracts by use of the services of a full-time full time

 

 

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1    employee who is a qualified risk manager acting as an
2    insurance manager or buyer or the services of a regularly
3    and continuously retained qualified insurance consultant
4    who is a qualified risk manager;
5        (ii) that procures the insurance directly from an
6    unauthorized insurer without the services of an
7    intermediary insurance producer (b) whose aggregate annual
8    premiums for insurance on all risks, except for life and
9    accident and health insurance, total at least $100,000; and
10        (iii) that is an exempt commercial purchaser whose home
11    state is Illinois (c) which either (i) has at least 25 full
12    time employees, (ii) has gross assets in excess of
13    $3,000,000, or (iii) has annual gross revenues in excess of
14    $5,000,000.
15    "Insurance producer" means insurance producer as the term
16is defined in Section 500-10 of this Code.
17    "Qualified risk manager" means qualified risk manager as
18the term is defined in subsection (1) of Section 445 of this
19Code.
20    "Unauthorized insurer" means unauthorized insurer as the
21term is defined in subsection (1) of Section 445 of this Code.
22    (b) For contracts of insurance effective January 1, 2015 or
23later, within 90 days after the effective date of each contract
24of insurance issued under this Section, the insured shall file
25a report with the Director by submitting the report to the
26Surplus Line Association of Illinois in writing or in a

 

 

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1computer readable format and provide information as designated
2by the Surplus Line Association of Illinois. The information in
3the report shall be substantially similar to that required for
4surplus line submissions as described in subsection (5) of
5Section 445 of this Code. Where applicable, the report shall
6satisfy, with respect to the subject insurance, the reporting
7requirement of Section 12 of the Fire Investigation Act.
8    (c) For contracts of insurance effective January 1, 2015 or
9later, within 30 days after filing the report, the insured
10shall pay to the Director for the use and benefit of the State
11a sum equal to the gross premium of the contract of insurance
12multiplied by the surplus line tax rate, as described in
13paragraph (3) of subsection (a) of Section 445 of this Code,
14and shall pay the fire marshal tax that would otherwise be due
15annually in March for insurance subject to tax under Section 12
16of the Fire Investigation Act. For contracts of insurance
17effective January 1, 2015 or later, within 30 days after filing
18the report, the insured shall pay to the Surplus Line
19Association of Illinois a countersigning fee that shall be
20assessed at the same rate charged to members pursuant to
21subsection (4) of Section 445.1 of this Code.
22    (d) For contracts of insurance effective January 1, 2015 or
23later, the insured shall withhold the amount of the taxes and
24countersignature fee from the amount of premium charged by and
25otherwise payable to the insurer for the insurance. If the
26insured fails to withhold the tax and countersignature fee from

 

 

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1the premium, then the insured shall be liable for the amounts
2thereof and shall pay the amounts as prescribed in subsection
3(c) of this Section.
4(Source: P.A. 90-794, eff. 8-14-98.)
 
5    (215 ILCS 5/412)  (from Ch. 73, par. 1024)
6    Sec. 412. Refunds; penalties; collection.
7    (1)(a) Whenever it appears to the satisfaction of the
8Director that because of some mistake of fact, error in
9calculation, or erroneous interpretation of a statute of this
10or any other state, any authorized company, surplus line
11producer, or industrial insured has paid to him, pursuant to
12any provision of law, taxes, fees, or other charges in excess
13of the amount legally chargeable against it, during the 6 year
14period immediately preceding the discovery of such
15overpayment, he shall have power to refund to such company,
16surplus line producer, or industrial insured the amount of the
17excess or excesses by applying the amount or amounts thereof
18toward the payment of taxes, fees, or other charges already
19due, or which may thereafter become due from that company until
20such excess or excesses have been fully refunded, or upon a
21written request from the authorized company, surplus line
22producer, or industrial insured, the Director shall provide a
23cash refund within 120 days after receipt of the written
24request if all necessary information has been filed with the
25Department in order for it to perform an audit of the tax

 

 

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1report for the transaction or period or annual return for the
2year in which the overpayment occurred or within 120 days after
3the date the Department receives all the necessary information
4to perform such audit. The Director shall not provide a cash
5refund if there are insufficient funds in the Insurance Premium
6Tax Refund Fund to provide a cash refund, if the amount of the
7overpayment is less than $100, or if the amount of the
8overpayment can be fully offset against the taxpayer's
9estimated liability for the year following the year of the cash
10refund request. Any cash refund shall be paid from the
11Insurance Premium Tax Refund Fund, a special fund hereby
12created in the State treasury.
13    (b) Beginning January 1, 2000 and thereafter, the
14Department shall deposit a percentage of the amounts collected
15under Sections 409, 444, and 444.1 of this Code into the
16Insurance Premium Tax Refund Fund. The percentage deposited
17into the Insurance Premium Tax Refund Fund shall be the annual
18percentage. The annual percentage shall be calculated as a
19fraction, the numerator of which shall be the amount of cash
20refunds approved by the Director for payment and paid during
21the preceding calendar year as a result of overpayment of tax
22liability under Sections 121-2.08, 409, 444, and 444.1, and 445
23of this Code and the denominator of which shall be the amounts
24collected pursuant to Sections 121-2.08, 409, 444, and 444.1,
25and 445 of this Code during the preceding calendar year.
26However, if there were no cash refunds paid in a preceding

 

 

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1calendar year, the Department shall deposit 5% of the amount
2collected in that preceding calendar year pursuant to Sections
3121-2.08, 409, 444, and 444.1, and 445 of this Code into the
4Insurance Premium Tax Refund Fund instead of an amount
5calculated by using the annual percentage.
6    (c) Beginning July 1, 1999, moneys in the Insurance Premium
7Tax Refund Fund shall be expended exclusively for the purpose
8of paying cash refunds resulting from overpayment of tax
9liability under Sections 121-2.08, 409, 444, and 444.1, and 445
10of this Code as determined by the Director pursuant to
11subsection 1(a) of this Section. Cash refunds made in
12accordance with this Section may be made from the Insurance
13Premium Tax Refund Fund only to the extent that amounts have
14been deposited and retained in the Insurance Premium Tax Refund
15Fund.
16    (d) This Section shall constitute an irrevocable and
17continuing appropriation from the Insurance Premium Tax Refund
18Fund for the purpose of paying cash refunds pursuant to the
19provisions of this Section.
20    (2)(a) When any insurance company or any surplus line
21producer fails to file any tax return required under Sections
22408.1, 409, 444, and 444.1 and 445 of this Code or Section 12
23of the Fire Investigation Act on the date prescribed, including
24any extensions, there shall be added as a penalty $400 or 10%
25of the amount of such tax, whichever is greater, for each month
26or part of a month of failure to file, the entire penalty not

 

 

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1to exceed $2,000 or 50% of the tax due, whichever is greater.
2    (b) When any industrial insured or surplus line producer
3fails to file any tax return or report required under Sections
4121-2.08 and 445 of this Code or Section 12 of the Fire
5Investigation Act on the date prescribed, including any
6extensions, there shall be added:
7        (i) as a late fee, if the return or report is received
8    at least one day but not more than 7 days after the
9    prescribed due date, $400 or 10% of the tax due, whichever
10    is greater, the entire fee not to exceed $1,000;
11        (ii) as a late fee, if the return or report is received
12    at least 8 days but not more than 14 days after the
13    prescribed due date, $400 or 10% of the tax due, whichever
14    is greater, the entire fee not to exceed $1,500;
15        (iii) as a late fee, if the return or report is
16    received at least 15 days but not more than 21 days after
17    the prescribed due date, $400 or 10% of the tax due,
18    whichever is greater, the entire fee not to exceed $2,000;
19    or
20        (iv) as a penalty, if the return or report is received
21    more than 21 days after the prescribed due date, $400 or
22    10% of the tax due, whichever is greater, for each month or
23    part of a month of failure to file, the entire penalty not
24    to exceed $2,000 or 50% of the tax due, whichever is
25    greater.
26    A tax return or report shall be deemed received as of the

 

 

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1date mailed as evidenced by a postmark, proof of mailing on a
2recognized United States Postal Service form or a form
3acceptable to the United States Postal Service or other
4commercial mail delivery service, or other evidence acceptable
5to the Director.
6    (3)(a) When any insurance company or any surplus line
7producer fails to pay the full amount due under the provisions
8of this Section, Sections 408.1, 409, 444, or 444.1 or 445 of
9this Code, or Section 12 of the Fire Investigation Act, there
10shall be added to the amount due as a penalty an amount equal
11to 10% of the deficiency.
12    (a-5) When any industrial insured or surplus line producer
13fails to pay the full amount due under the provisions of this
14Section, Sections 121-2.08 or 445 of this Code, or Section 12
15of the Fire Investigation Act on the date prescribed, there
16shall be added:
17        (i) as a late fee, if the payment is received at least
18    one day but not more than 7 days after the prescribed due
19    date, 10% of the tax due, the entire fee not to exceed
20    $1,000;
21        (ii) as a late fee, if the payment is received at least
22    8 days but not more than 14 days after the prescribed due
23    date, 10% of the tax due, the entire fee not to exceed
24    $1,500;
25        (iii) as a late fee, if the payment is received at
26    least 15 days but not more than 21 days after the

 

 

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1    prescribed due date, 10% of the tax due, the entire fee not
2    to exceed $2,000; or
3        (iv) as a penalty, if the return or report is received
4    more than 21 days after the prescribed due date, 10% of the
5    tax due.
6    A tax payment shall be deemed received as of the date
7mailed as evidenced by a postmark, proof of mailing on a
8recognized United States Postal Service form or a form
9acceptable to the United States Postal Service or other
10commercial mail delivery service, or other evidence acceptable
11to the Director.
12    (b) If such failure to pay is determined by the Director to
13be wilful, after a hearing under Sections 402 and 403, there
14shall be added to the tax as a penalty an amount equal to the
15greater of 50% of the deficiency or 10% of the amount due and
16unpaid for each month or part of a month that the deficiency
17remains unpaid commencing with the date that the amount becomes
18due. Such amount shall be in lieu of any determined under
19paragraph (a) or (a-5).
20    (4) Any insurance company, industrial insured, or any
21surplus line producer that which fails to pay the full amount
22due under this Section or Sections 121-2.08, 408.1, 409, 444,
23444.1, or 445 of this Code, or Section 12 of the Fire
24Investigation Act is liable, in addition to the tax and any
25late fees and penalties, for interest on such deficiency at the
26rate of 12% per annum, or at such higher adjusted rates as are

 

 

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1or may be established under subsection (b) of Section 6621 of
2the Internal Revenue Code, from the date that payment of any
3such tax was due, determined without regard to any extensions,
4to the date of payment of such amount.
5    (5) The Director, through the Attorney General, may
6institute an action in the name of the People of the State of
7Illinois, in any court of competent jurisdiction, for the
8recovery of the amount of such taxes, fees, and penalties due,
9and prosecute the same to final judgment, and take such steps
10as are necessary to collect the same.
11    (6) In the event that the certificate of authority of a
12foreign or alien company is revoked for any cause or the
13company withdraws from this State prior to the renewal date of
14the certificate of authority as provided in Section 114, the
15company may recover the amount of any such tax paid in advance.
16Except as provided in this subsection, no revocation or
17withdrawal excuses payment of or constitutes grounds for the
18recovery of any taxes or penalties imposed by this Code.
19    (7) When an insurance company or domestic affiliated group
20fails to pay the full amount of any fee of $200 or more due
21under Section 408 of this Code, there shall be added to the
22amount due as a penalty the greater of $100 or an amount equal
23to 10% of the deficiency for each month or part of a month that
24the deficiency remains unpaid.
25    (8) The Department shall have a lien for the taxes, fees,
26charges, fines, penalties, interest, other charges, or any

 

 

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1portion thereof, imposed or assessed pursuant to this Code,
2upon all the real and personal property of any company or
3person to whom the assessment or final order has been issued or
4whenever a tax return is filed without payment of the tax or
5penalty shown therein to be due, including all such property of
6the company or person acquired after receipt of the assessment,
7issuance of the order, or filing of the return. The company or
8person is liable for the filing fee incurred by the Department
9for filing the lien and the filing fee incurred by the
10Department to file the release of that lien. The filing fees
11shall be paid to the Department in addition to payment of the
12tax, fee, charge, fine, penalty, interest, other charges, or
13any portion thereof, included in the amount of the lien.
14However, where the lien arises because of the issuance of a
15final order of the Director or tax assessment by the
16Department, the lien shall not attach and the notice referred
17to in this Section shall not be filed until all administrative
18proceedings or proceedings in court for review of the final
19order or assessment have terminated or the time for the taking
20thereof has expired without such proceedings being instituted.
21    Upon the granting of Department review after a lien has
22attached, the lien shall remain in full force except to the
23extent to which the final assessment may be reduced by a
24revised final assessment following the rehearing or review. The
25lien created by the issuance of a final assessment shall
26terminate, unless a notice of lien is filed, within 3 years

 

 

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1after the date all proceedings in court for the review of the
2final assessment have terminated or the time for the taking
3thereof has expired without such proceedings being instituted,
4or (in the case of a revised final assessment issued pursuant
5to a rehearing or review by the Department) within 3 years
6after the date all proceedings in court for the review of such
7revised final assessment have terminated or the time for the
8taking thereof has expired without such proceedings being
9instituted. Where the lien results from the filing of a tax
10return without payment of the tax or penalty shown therein to
11be due, the lien shall terminate, unless a notice of lien is
12filed, within 3 years after the date when the return is filed
13with the Department.
14    The time limitation period on the Department's right to
15file a notice of lien shall not run during any period of time
16in which the order of any court has the effect of enjoining or
17restraining the Department from filing such notice of lien. If
18the Department finds that a company or person is about to
19depart from the State, to conceal himself or his property, or
20to do any other act tending to prejudice or to render wholly or
21partly ineffectual proceedings to collect the amount due and
22owing to the Department unless such proceedings are brought
23without delay, or if the Department finds that the collection
24of the amount due from any company or person will be
25jeopardized by delay, the Department shall give the company or
26person notice of such findings and shall make demand for

 

 

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1immediate return and payment of the amount, whereupon the
2amount shall become immediately due and payable. If the company
3or person, within 5 days after the notice (or within such
4extension of time as the Department may grant), does not comply
5with the notice or show to the Department that the findings in
6the notice are erroneous, the Department may file a notice of
7jeopardy assessment lien in the office of the recorder of the
8county in which any property of the company or person may be
9located and shall notify the company or person of the filing.
10The jeopardy assessment lien shall have the same scope and
11effect as the statutory lien provided for in this Section. If
12the company or person believes that the company or person does
13not owe some or all of the tax for which the jeopardy
14assessment lien against the company or person has been filed,
15or that no jeopardy to the revenue in fact exists, the company
16or person may protest within 20 days after being notified by
17the Department of the filing of the jeopardy assessment lien
18and request a hearing, whereupon the Department shall hold a
19hearing in conformity with the provisions of this Code and,
20pursuant thereto, shall notify the company or person of its
21findings as to whether or not the jeopardy assessment lien will
22be released. If not, and if the company or person is aggrieved
23by this decision, the company or person may file an action for
24judicial review of the final determination of the Department in
25accordance with the Administrative Review Law. If, pursuant to
26such hearing (or after an independent determination of the

 

 

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1facts by the Department without a hearing), the Department
2determines that some or all of the amount due covered by the
3jeopardy assessment lien is not owed by the company or person,
4or that no jeopardy to the revenue exists, or if on judicial
5review the final judgment of the court is that the company or
6person does not owe some or all of the amount due covered by
7the jeopardy assessment lien against them, or that no jeopardy
8to the revenue exists, the Department shall release its
9jeopardy assessment lien to the extent of such finding of
10nonliability for the amount, or to the extent of such finding
11of no jeopardy to the revenue. The Department shall also
12release its jeopardy assessment lien against the company or
13person whenever the amount due and owing covered by the lien,
14plus any interest which may be due, are paid and the company or
15person has paid the Department in cash or by guaranteed
16remittance an amount representing the filing fee for the lien
17and the filing fee for the release of that lien. The Department
18shall file that release of lien with the recorder of the county
19where that lien was filed.
20    Nothing in this Section shall be construed to give the
21Department a preference over the rights of any bona fide
22purchaser, holder of a security interest, mechanics
23lienholder, mortgagee, or judgment lien creditor arising prior
24to the filing of a regular notice of lien or a notice of
25jeopardy assessment lien in the office of the recorder in the
26county in which the property subject to the lien is located.

 

 

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1For purposes of this Section, "bona fide" shall not include any
2mortgage of real or personal property or any other credit
3transaction that results in the mortgagee or the holder of the
4security acting as trustee for unsecured creditors of the
5company or person mentioned in the notice of lien who executed
6such chattel or real property mortgage or the document
7evidencing such credit transaction. The lien shall be inferior
8to the lien of general taxes, special assessments, and special
9taxes levied by any political subdivision of this State. In
10case title to land to be affected by the notice of lien or
11notice of jeopardy assessment lien is registered under the
12provisions of the Registered Titles (Torrens) Act, such notice
13shall be filed in the office of the Registrar of Titles of the
14county within which the property subject to the lien is
15situated and shall be entered upon the register of titles as a
16memorial or charge upon each folium of the register of titles
17affected by such notice, and the Department shall not have a
18preference over the rights of any bona fide purchaser,
19mortgagee, judgment creditor, or other lienholder arising
20prior to the registration of such notice. The regular lien or
21jeopardy assessment lien shall not be effective against any
22purchaser with respect to any item in a retailer's stock in
23trade purchased from the retailer in the usual course of the
24retailer's business.
25(Source: P.A. 98-158, eff. 8-2-13.)
 

 

 

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1    (215 ILCS 5/445)  (from Ch. 73, par. 1057)
2    Sec. 445. Surplus line.
3    (1) Definitions. For the purposes of this Section:
4    "Affiliate" means, with respect to an insured, any entity
5that controls, is controlled by, or is under common control
6with the insured. For the purpose of this definition, an entity
7has control over another entity if:
8        (A) the entity directly or indirectly or acting through
9    one or more other persons owns, controls, or has the power
10    to vote 25% or more of any class of voting securities of
11    the other entity; or
12        (B) the entity controls in any manner the election of a
13    majority of the directors or trustees of the other entity.
14    "Affiliated group" means any group of entities that are all
15affiliated.
16    "Authorized insurer" means an insurer that holds a
17certificate of authority issued by the Director but, for the
18purposes of this Section, does not include a domestic surplus
19line insurer as defined in Section 445a or any residual market
20mechanism.
21    "Exempt commercial purchaser" means any person purchasing
22commercial insurance that, at the time of placement, meets the
23following requirements:
24        (A) The person employs or retains a qualified risk
25    manager to negotiate insurance coverage.
26        (B) The person has paid aggregate nationwide

 

 

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1    commercial property and casualty insurance premiums in
2    excess of $100,000 in the immediately preceding 12 months.
3        (C) The person meets at least one of the following
4    criteria:
5            (I) The person possesses a net worth in excess of
6        $20,000,000, as such amount is adjusted pursuant to the
7        provision in this definition concerning percentage
8        change.
9            (II) The person generates annual revenues in
10        excess of $50,000,000, as such amount is adjusted
11        pursuant to the provision in this definition
12        concerning percentage change.
13            (III) The person employs more than 500 full-time or
14        full-time equivalent employees per individual insured
15        or is a member of an affiliated group employing more
16        than 1,000 employees in the aggregate.
17            (IV) The person is a not-for-profit organization
18        or public entity generating annual budgeted
19        expenditures of at least $30,000,000, as such amount is
20        adjusted pursuant to the provision in this definition
21        concerning percentage change.
22            (V) The person is a municipality with a population
23        in excess of 50,000 persons.
24    Effective on January 1, 2015 and each fifth January 1
25occurring thereafter, the amounts in subitems (I), (II), and
26(IV) of item (C) of this definition shall be adjusted to

 

 

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1reflect the percentage change for such 5-year period in the
2Consumer Price Index for All Urban Consumers published by the
3Bureau of Labor Statistics of the Department of Labor.
4    "Home state" means the following:
5        (A) With respect to an insured, except as provided in
6    item (B) of this definition:
7            (I) the state in which an insured maintains its
8        principal place of business or, in the case of an
9        individual, the individual's principal residence; or
10            (II) if 100% of the insured risk is located out of
11        the state referred to in subitem (I), the state to
12        which the greatest percentage of the insured's taxable
13        premium for that insurance contract is allocated.
14        (B) If more than one insured from an affiliated group
15    are named insureds on a single surplus line insurance
16    contract, then "home state" means the home state, as
17    determined pursuant to item (A) of this definition, of the
18    member of the affiliated group that has the largest
19    percentage of premium attributed to it under such insurance
20    contract.
21        If more than one insured from a group that is not
22    affiliated are named insureds on a single surplus line
23    insurance contract, then:
24            (I) if individual group members pay 100% of the
25        premium for the insurance from their own funds, "home
26        state" means the home state, as determined pursuant to

 

 

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1        item (A) of this definition, of each individual group
2        member; each individual group member's coverage under
3        the surplus line insurance contract shall be treated as
4        a separate surplus line contract for the purposes of
5        this Section;
6            (II) otherwise, "home state" means the home state,
7        as determined pursuant to item (A) of this definition,
8        of the group.
9    Nothing in this definition shall be construed to alter the
10terms of the surplus line insurance contract.
11    "Multi-State risk" means a risk with insured exposures in
12more than one State.
13    "NAIC" means the National Association of Insurance
14Commissioners or any successor entity.
15    "Qualified risk manager" means, with respect to a
16policyholder of commercial insurance, a person who meets all of
17the following requirements:
18        (A) The person is an employee of, or third-party
19    consultant retained by, the commercial policyholder.
20        (B) The person provides skilled services in loss
21    prevention, loss reduction, or risk and insurance coverage
22    analysis, and purchase of insurance.
23        (C) With regard to the person:
24            (I) the person has:
25                (a) a bachelor's degree or higher from an
26            accredited college or university in risk

 

 

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1            management, business administration, finance,
2            economics, or any other field determined by the
3            Director or his designee to demonstrate minimum
4            competence in risk management; and
5                (b) the following:
6                    (i) three years of experience in risk
7                financing, claims administration, loss
8                prevention, risk and insurance analysis, or
9                purchasing commercial lines of insurance; or
10                    (ii) alternatively has:
11                        (AA) a designation as a Chartered
12                    Property and Casualty Underwriter (in this
13                    subparagraph (ii) referred to as "CPCU")
14                    issued by the American Institute for
15                    CPCU/Insurance Institute of America;
16                        (BB) a designation as an Associate in
17                    Risk Management (ARM) issued by the
18                    American Institute for CPCU/Insurance
19                    Institute of America;
20                        (CC) a designation as Certified Risk
21                    Manager (CRM) issued by the National
22                    Alliance for Insurance Education &
23                    Research;
24                        (DD) a designation as a RIMS Fellow
25                    (RF) issued by the Global Risk Management
26                    Institute; or

 

 

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1                        (EE) any other designation,
2                    certification, or license determined by
3                    the Director or his designee to
4                    demonstrate minimum competency in risk
5                    management;
6            (II) the person has:
7                (a) at least 7 years of experience in risk
8            financing, claims administration, loss prevention,
9            risk and insurance coverage analysis, or
10            purchasing commercial lines of insurance; and
11                (b) has any one of the designations specified
12            in subparagraph (ii) of paragraph (b);
13            (III) the person has at least 10 years of
14        experience in risk financing, claims administration,
15        loss prevention, risk and insurance coverage analysis,
16        or purchasing commercial lines of insurance; or
17            (IV) the person has a graduate degree from an
18        accredited college or university in risk management,
19        business administration, finance, economics, or any
20        other field determined by the Director or his or her
21        designee to demonstrate minimum competence in risk
22        management.
23    "Residual market mechanism" means an association,
24organization, or other entity described in Article XXXIII of
25this Code or Section 7-501 of the Illinois Vehicle Code or any
26similar association, organization, or other entity.

 

 

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1    "State" means any state of the United States, the District
2of Columbia, the Commonwealth of Puerto Rico, Guam, the
3Northern Mariana Islands, the Virgin Islands, and American
4Samoa.
5    "Surplus line insurance" means insurance on a risk:
6        (A) of the kinds specified in Classes 2 and 3 of
7    Section 4 of this Code; and
8        (B) that is procured from an unauthorized insurer after
9    the insurance producer representing the insured or the
10    surplus line producer is unable, after diligent effort, to
11    procure the insurance from authorized insurers; and
12        (C) where Illinois is the home state of the insured,
13    for policies effective, renewed or extended on July 21,
14    2011 or later and for multiyear policies upon the policy
15    anniversary that falls on or after July 21, 2011; and
16        (D) that is located in Illinois, for policies effective
17    prior to July 21, 2011.
18    "Unauthorized insurer" means an insurer that does not hold
19a valid certificate of authority issued by the Director but,
20for the purposes of this Section, shall also include a domestic
21surplus line insurer as defined in Section 445a.
22    (1.5) Procuring surplus line insurance; surplus line
23insurer requirements.
24        (a) Insurance producers may procure surplus line
25    insurance only if licensed as a surplus line producer under
26    this Section.

 

 

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1        (b) Licensed surplus line producers may procure
2    surplus line insurance from an unauthorized insurer
3    domiciled in the United States only if the insurer:
4            (i) is permitted in its domiciliary jurisdiction
5        to write the type of insurance involved; and
6             (ii) has, based upon information available to the
7        surplus line producer, a policyholders surplus of not
8        less than $15,000,000 determined in accordance with
9        the laws of its domiciliary jurisdiction; and
10             (iii) has standards of solvency and management
11        that are adequate for the protection of policyholders.
12         Where an unauthorized insurer does not meet the
13    standards set forth in (ii) and (iii) above, a surplus line
14    producer may, if necessary, procure insurance from that
15    insurer only if prior written warning of such fact or
16    condition is given to the insured by the insurance producer
17    or surplus line producer.
18        (c) Licensed surplus line producers may procure
19    surplus line insurance from an unauthorized insurer
20    domiciled outside of the United States only if the insurer
21    meets the standards for unauthorized insurers domiciled in
22    the United States in paragraph (b) of this subsection (1.5)
23    or is listed on the Quarterly Listing of Alien Insurers
24    maintained by the International Insurers Department of the
25    NAIC. The Director shall make the Quarterly Listing of
26    Alien Insurers available to surplus line producers without

 

 

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1    charge.
2        (d) Insurance producers shall not procure from an
3    unauthorized insurer an insurance policy:
4            (i) that is designed to satisfy the proof of
5        financial responsibility and insurance requirements in
6        any Illinois law where the law requires that the proof
7        of insurance is issued by an authorized insurer or
8        residual market mechanism;
9            (ii) that covers the risk of accidental injury to
10        employees arising out of and in the course of
11        employment according to the provisions of the Workers'
12        Compensation Act; or
13            (iii) that insures any Illinois personal lines
14        risk, as defined in subsection (a), (b), or (c) of
15        Section 143.13 of this Code, that is eligible for
16        residual market mechanism coverage, unless the insured
17        or prospective insured requests limits of liability
18        greater than the limits provided by the residual market
19        mechanism. In the course of making a diligent effort to
20        procure insurance from authorized insurers, an
21        insurance producer shall not be required to submit a
22        risk to a residual market mechanism when the risk is
23        not eligible for coverage or exceeds the limits
24        available in the residual market mechanism.
25        Where there is an insurance policy issued by an
26    authorized insurer or residual market mechanism insuring a

 

 

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1    risk described in item (i), (ii), or (iii) above, nothing
2    in this paragraph shall be construed to prohibit a surplus
3    line producer from procuring from an unauthorized insurer a
4    policy insuring the risk on an excess or umbrella basis
5    where the excess or umbrella policy is written over one or
6    more underlying policies.
7        (e) Licensed surplus line producers may procure
8    surplus line insurance from an unauthorized insurer for an
9    exempt commercial purchaser without making the required
10    diligent effort to procure the insurance from authorized
11    insurers if:
12            (i) the producer has disclosed to the exempt
13        commercial purchaser that such insurance may or may not
14        be available from authorized insurers that may provide
15        greater protection with more regulatory oversight; and
16            (ii) the exempt commercial purchaser has
17        subsequently in writing requested the producer to
18        procure such insurance from an unauthorized insurer.
19    (2) Surplus line producer; license. Any licensed producer
20who is a resident of this State, or any nonresident who
21qualifies under Section 500-40, may be licensed as a surplus
22line producer upon payment of an annual license fee of $400.
23    A surplus line producer so licensed shall keep a separate
24account of the business transacted thereunder for 7 years from
25the policy effective date which shall be open at all times to
26the inspection of the Director or his representative.

 

 

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1    No later than July 21, 2012, the State of Illinois shall
2participate in the national insurance producer database of the
3NAIC, or any other equivalent uniform national database, for
4the licensure of surplus line producers and the renewal of such
5licenses.
6    (3) Taxes and reports.
7        (a) Surplus line tax and penalty for late payment. The
8    surplus line tax rate for a surplus line insurance policy
9    or contract is determined as follows:
10            (i) 3% for policies or contracts with an effective
11        date prior to July 1, 2003;
12            (ii) 3.5% for policies or contracts with an
13        effective date of July 1, 2003 or later.
14        A surplus line producer shall file with the Director on
15    or before February 1 and August 1 of each year a report in
16    the form prescribed by the Director on all surplus line
17    insurance procured from unauthorized insurers and
18    submitted to the Surplus Line Association of Illinois
19    during the preceding 6 month period ending December 31 or
20    June 30 respectively, and on the filing of such report
21    shall pay to the Director for the use and benefit of the
22    State a sum equal to the surplus line tax rate multiplied
23    by the gross premiums less returned premiums upon all
24    surplus line insurance submitted to the Surplus Line
25    Association of Illinois during the preceding 6 months.
26        Any surplus line producer who fails to pay the full

 

 

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1    amount due under this subsection is liable, in addition to
2    the amount due, for such late fee, penalty, and interest
3    charges as are provided for under Section 412 of this Code.
4    The Director, through the Attorney General, may institute
5    an action in the name of the People of the State of
6    Illinois, in any court of competent jurisdiction, for the
7    recovery of the amount of such taxes, late fees, interest,
8    and penalties due, and prosecute the same to final
9    judgment, and take such steps as are necessary to collect
10    the same.
11        (b) Fire Marshal Tax. Each surplus line producer shall
12    file with the Director on or before March 31 of each year a
13    report in the form prescribed by the Director on all fire
14    insurance procured from unauthorized insurers and
15    submitted to the Surplus Line Association of Illinois
16    subject to tax under Section 12 of the Fire Investigation
17    Act and shall pay to the Director the fire marshal tax
18    required thereunder.
19        (c) Taxes and fees charged to insured. The taxes
20    imposed under this subsection and the countersigning fees
21    charged by the Surplus Line Association of Illinois may be
22    charged to and collected from surplus line insureds.
23    (4) (Blank).
24    (5) Submission of documents to Surplus Line Association of
25Illinois. A surplus line producer shall submit every insurance
26contract issued under his or her license to the Surplus Line

 

 

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1Association of Illinois for recording and countersignature.
2The submission and countersignature may be effected through
3electronic means. The submission shall set forth:
4        (a) the name of the insured;
5        (b) the description and location of the insured
6    property or risk;
7        (c) the amount insured;
8        (d) the gross premiums charged or returned;
9        (e) the name of the unauthorized insurer from whom
10    coverage has been procured;
11        (f) the kind or kinds of insurance procured; and
12        (g) amount of premium subject to tax required by
13    Section 12 of the Fire Investigation Act.
14    Proposals, endorsements, and other documents which are
15incidental to the insurance but which do not affect the premium
16charged are exempted from filing and countersignature.
17    The submission of insuring contracts to the Surplus Line
18Association of Illinois constitutes a certification by the
19surplus line producer or by the insurance producer who
20presented the risk to the surplus line producer for placement
21as a surplus line risk that after diligent effort the required
22insurance could not be procured from authorized insurers and
23that such procurement was otherwise in accordance with the
24surplus line law.
25    (6) Countersignature required. It shall be unlawful for an
26insurance producer to deliver any unauthorized insurer

 

 

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1contract unless such insurance contract is countersigned by the
2Surplus Line Association of Illinois.
3    (7) Inspection of records. A surplus line producer shall
4maintain separate records of the business transacted under his
5or her license for 7 years from the policy effective date,
6including complete copies of surplus line insurance contracts
7maintained on paper or by electronic means, which records shall
8be open at all times for inspection by the Director and by the
9Surplus Line Association of Illinois.
10    (8) Violations and penalties. The Director may suspend or
11revoke or refuse to renew a surplus line producer license for
12any violation of this Code. In addition to or in lieu of
13suspension or revocation, the Director may subject a surplus
14line producer to a civil penalty of up to $2,000 for each cause
15for suspension or revocation. Such penalty is enforceable under
16subsection (5) of Section 403A of this Code.
17    (9) Director may declare insurer ineligible. If the
18Director determines that the further assumption of risks might
19be hazardous to the policyholders of an unauthorized insurer,
20the Director may order the Surplus Line Association of Illinois
21not to countersign insurance contracts evidencing insurance in
22such insurer and order surplus line producers to cease
23procuring insurance from such insurer.
24    (10) Service of process upon Director. Insurance contracts
25delivered under this Section from unauthorized insurers, other
26than domestic surplus line insurers as defined in Section 445a,

 

 

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1shall contain a provision designating the Director and his
2successors in office the true and lawful attorney of the
3insurer upon whom may be served all lawful process in any
4action, suit or proceeding arising out of such insurance.
5Service of process made upon the Director to be valid hereunder
6must state the name of the insured, the name of the
7unauthorized insurer and identify the contract of insurance.
8The Director at his option is authorized to forward a copy of
9the process to the Surplus Line Association of Illinois for
10delivery to the unauthorized insurer or the Director may
11deliver the process to the unauthorized insurer by other means
12which he considers to be reasonably prompt and certain.
13    (10.5) Insurance contracts delivered under this Section
14from unauthorized insurers, other than domestic surplus line
15insurers as defined in Section 445a, shall have stamped or
16imprinted on the first page thereof in not less than 12-pt.
17bold face type the following legend: "Notice to Policyholder:
18This contract is issued, pursuant to Section 445 of the
19Illinois Insurance Code, by a company not authorized and
20licensed to transact business in Illinois and as such is not
21covered by the Illinois Insurance Guaranty Fund." Insurance
22contracts delivered under this Section from domestic surplus
23line insurers as defined in Section 445a shall have stamped or
24imprinted on the first page thereof in not less than 12-pt.
25bold face type the following legend: "Notice to Policyholder:
26This contract is issued by a domestic surplus line insurer, as

 

 

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1defined in Section 445a of the Illinois Insurance Code,
2pursuant to Section 445, and as such is not covered by the
3Illinois Insurance Guaranty Fund."
4    (11) The Illinois Surplus Line law does not apply to
5insurance of property and operations of railroads or aircraft
6engaged in interstate or foreign commerce, insurance of
7vessels, crafts or hulls, cargoes, marine builder's risks,
8marine protection and indemnity, or other risks including
9strikes and war risks insured under ocean or wet marine forms
10of policies.
11    (12) Surplus line insurance procured under this Section,
12including insurance procured from a domestic surplus line
13insurer, is not subject to the provisions of the Illinois
14Insurance Code other than Sections 123, 123.1, 401, 401.1, 402,
15403, 403A, 408, 412, 445, 445.1, 445.2, 445.3, 445.4, and all
16of the provisions of Article XXXI to the extent that the
17provisions of Article XXXI are not inconsistent with the terms
18of this Act.
19(Source: P.A. 97-955, eff. 8-14-12.)
 
20    (215 ILCS 5/445.1)  (from Ch. 73, par. 1057.1)
21    Sec. 445.1. Surplus Line Association of Illinois. There is
22hereby created a non-profit association to be known as the
23Surplus Line Association of Illinois. All surplus line
24producers shall be and must remain individual members of the
25Association as a condition of their holding a license as a

 

 

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1surplus line producer in this State. The Association must
2perform its functions under the plan of operation established
3and approved under Section 445.3 and must exercise its powers
4through a board of directors established under Section 445.2 of
5this Code. The Association shall be supervised by the Director
6and is subject to the applicable provisions of the Illinois
7Insurance Code. The Association shall be authorized and have
8the duty to:
9    (1) receive, record and countersign all surplus line
10insurance contracts which surplus line producers are required
11to file with the Association under subsection (5) of Section
12445;
13    (2) prepare monthly reports for the Director on surplus
14line insurance procured by its members during the preceding
15month in such form and providing such information as the
16Director may prescribe;
17    (3) prepare and deliver to the Director and, at the
18discretion of the Director, to each licensee and to the
19Director the reports of surplus line business prescribed in
20subsection (3) of Section 445;
21    (4) assess its members for costs of operations in
22accordance with a schedule adopted by the Board of Directors of
23the Association and approved by the Director;
24    (5) employ and retain such persons as are necessary to
25carry out the duties of the Association;
26    (6) borrow money as necessary to effect the purposes of the

 

 

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1Association;
2    (7) enter contracts as necessary to effect the purposes of
3the Association;
4    (8) perform such other acts as will facilitate and
5encourage compliance by its members with the surplus line law
6of this State and rules promulgated thereunder; and
7    (9) provide such other services to its members as are
8incidental or related to the purposes of the Association.
9Nothing in this Act shall be construed as giving the
10Association any discretionary authority to enforce this Act or
11to withhold countersignature of insurance contracts which meet
12the requirements of subsection (5) of Section 445.
13(Source: P.A. 83-1300.)
 
14    (215 ILCS 5/445.4)  (from Ch. 73, par. 1057.4)
15    Sec. 445.4. Examination. The Director shall, at such times
16as he deems necessary, make or cause to be made an examination
17of the Association. The reasonable cost of any such examination
18shall be paid by the Association upon presentation to it by the
19Director of a detailed account of such cost. During the course
20of such examination, the directors, officers, members, agents
21and employees of the Association may be examined under oath
22regarding the operation of the Association and shall make
23available all books, records, accounts, documents and
24agreements pertaining thereto. The Director shall furnish a
25copy of the examination report to the Association. Within 20

 

 

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1days after receipt of the report, the Association may request a
2hearing on the report or any facts or recommendations therein.
3If the Director finds the Association or any of its members to
4be in violation of this Act, he may issue an order requiring
5discontinuance of such violation. The Association shall
6annually provide for an independent financial audit of the
7books and records of the Association by a certified public
8accountant and shall provide a copy of the audit report to the
9Director.
10(Source: P.A. 83-1300.)