98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
SB3404

 

Introduced 2/14/2014, by Sen. William R. Haine

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Amends the Illinois Insurance Code in relation to fraternal benefit societies. Adds the Fraternal Benefit Society Guaranty Association Law to the Code as a new Article to provide for the protection of members of fraternal benefit societies in the event of impairment or insolvency. Provides that a fraternal benefit society must be governed by a board of directors and managed by qualified officers. Sets the permissible number of directors and establishes certain qualifications. Authorizes the Director of Insurance to take action when a society is or may become insolvent. Creates the Illinois Fraternal Benefit Society Guaranty Association and requires participation by societies and others authorized to transact business in Illinois. Sets forth the powers and duties of the Association. Defines terms.


LRB098 19017 RPM 54167 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB3404LRB098 19017 RPM 54167 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 286.1, 294.1, 297.1, 300.1, 307.1, and 315.6
6and by adding Section 295.2 and Article XVII 1/2 as follows:
 
7    (215 ILCS 5/286.1)  (from Ch. 73, par. 898.1)
8    (Section scheduled to be repealed on January 1, 2017)
9    Sec. 286.1. Purposes and Powers.
10    (a) A society shall operate for the benefit of members and
11their beneficiaries by:
12        (1) Providing benefits as specified in Section 297.1 of
13    this amendatory Act; and
14        (2) Operating for one or more social, intellectual,
15    educational, charitable, benevolent, moral, fraternal,
16    patriotic or religious purposes for the benefit of its
17    members, which may also be extended to others. Such
18    purposes may be carried out directly by the society or
19    indirectly through subsidiary corporations or affiliated
20    organizations.
21    (b) Every society shall have the power to adopt laws and
22rules for the government of the society, the admission of its
23members and the management of its affairs. It shall have the

 

 

SB3404- 2 -LRB098 19017 RPM 54167 b

1power to change, alter, add to or amend such laws and rules and
2shall have such other powers as are necessary and incidental to
3carrying into effect the objects and purposes of the society.
4    (c) A society that provides any of the benefits specified
5in Section 297.1 of this Code must be governed by a board of
6directors and managed by qualified officers. The directors
7shall have the powers and perform the duties ordinarily
8possessed and exercised by a board of directors under this
9Code. A board of directors shall be composed of not less than 3
10nor more than 21 natural persons who are members of the society
11holding covered benefit certificates and who are at least 18
12years of age and at least 3 of whom are residents and citizens
13of this State. After the effective date of this amendatory Act
14of the 98th General Assembly, at least 20%, but not fewer than
15one, of the directors shall be persons who are not officers or
16employees of the society. A person convicted of a felony may
17not be a director or an officer, and all directors and officers
18shall be of good character and known professional,
19administrative, or business ability. The known business
20ability shall include a practical knowledge of insurance,
21finance, or investment. The board of directors shall be elected
22annually by the holders of covered benefit certificates.
23Notwithstanding the foregoing, the Director may replace any
24society director or officer if that individual does not meet
25the standards and qualifications described in this subsection
26(c) or it is deemed to be in the best interests of the

 

 

SB3404- 3 -LRB098 19017 RPM 54167 b

1society's members.
2(Source: P.A. 84-303.)
 
3    (215 ILCS 5/294.1)  (from Ch. 73, par. 906.1)
4    (Section scheduled to be repealed on January 1, 2017)
5    Sec. 294.1. Reinsurance.
6    (a) A domestic society may enter into reinsurance
7transactions only in accordance with Article XI of this Code.
8    (b) A domestic society may reinsure the risks of another
9society in connection with a merger transaction with approval
10by the Director.
11(Source: P.A. 84-303.)
 
12    (215 ILCS 5/295.2 new)
13    Sec. 295.2. Maintenance of solvency. If a domestic society
14has an authorized control level event described in Section
1535A-25 of this Code under circumstances the Director determines
16will not be promptly remedied, the Director may, in addition to
17all other actions required or permitted by subsection (b) of
18Section 35A-25 of this Code, issue an order declaring the
19domestic society to be in hazardous condition and ordering that
20all steps be taken to remedy the condition pursuant to this
21Section. In such event:
22        (1) The domestic society may negotiate an agreement to
23    transfer all members, certificates, and other assets and
24    liabilities of the society to another organization through

 

 

SB3404- 4 -LRB098 19017 RPM 54167 b

1    merger, consolidation, assumption, or other means. The
2    transfer shall be concluded within the timeframe
3    established by the Director and subject to approval by the
4    Director. The transfer agreement shall be deemed fully
5    approved by the domestic society upon a majority vote of
6    its board of directors. The transfer shall be effective
7    notwithstanding the provisions of Section 295.1 of this
8    Code or any other law or rule, or laws of the domestic
9    society requiring another form of notice to or approval by
10    members, which shall be superseded by this Section.
11        (2) In the event of a transfer under this Section to an
12    organization without a certificate of authority in this
13    State, the Director may grant a limited certificate of
14    authority to the organization, upon request, if the
15    organization does not apply for and obtain a certificate of
16    authority to transact business in this State. The limited
17    certificate of authority shall grant the organization the
18    authority to service the certificates following the
19    transfer and fulfill all obligations owed to certificate
20    holders but not the authority to otherwise transact
21    insurance business in this State.
22        (3) The board of directors of a domestic society may
23    suspend or modify its qualifications for membership as
24    necessary or appropriate to facilitate a transfer under
25    this Section, notwithstanding the laws of the society or
26    any other law or rule to the contrary.
 

 

 

SB3404- 5 -LRB098 19017 RPM 54167 b

1    (215 ILCS 5/297.1)  (from Ch. 73, par. 909.1)
2    (Section scheduled to be repealed on January 1, 2017)
3    Sec. 297.1. Benefits.
4    (a) A society may provide the following contractual
5benefits in any form:
6        (1) Death benefits;
7        (2) Endowment benefits;
8        (3) Annuity benefits;
9        (4) Temporary or permanent disability benefits;
10        (5) Hospital, medical or nursing benefits;
11        (6) Monument or tombstone benefits to the memory of
12    deceased members; and
13        (7) Such other benefits as authorized for life insurers
14    and which are not inconsistent with this amendatory Act.
15    (b) A society shall specify in its rules those persons who
16may be issued, or covered by, the contractual benefits in
17subsection (a), consistent with providing benefits to members
18and their dependents. A society may provide benefits on the
19lives of children under the minimum age for adult membership
20upon application of an adult person.
21    (c) A society must provide written notice to its members
22and obtain a signed acknowledgement of receipt in connection
23with the provision or issuance of any benefits not subject to
24guaranty association coverage that such benefits do not qualify
25for protection by a guaranty association. The form of such

 

 

SB3404- 6 -LRB098 19017 RPM 54167 b

1notice is subject to the prior approval of the Director.
2(Source: P.A. 84-303.)
 
3    (215 ILCS 5/300.1)  (from Ch. 73, par. 912.1)
4    (Section scheduled to be repealed on January 1, 2017)
5    Sec. 300.1. The Benefit Contract.
6    (a) Every society authorized to do business in this State
7shall issue to each owner of a benefit contract a certificate
8specifying the amount of benefits provided thereby. The
9certificate, together with any riders or endorsements attached
10thereto, the laws of the society, the application for
11membership, the application for insurance and declaration of
12insurability, if any, signed by the applicant and all
13amendments to each thereof shall constitute the benefit
14contract, as of the date of issuance, between the society and
15the owner, and the certificate shall so state. A copy of the
16application for insurance and declaration of insurability, if
17any, shall be endorsed upon or attached to the certificate. All
18statements on the application shall be representations and not
19warranties. Any waiver of this provision shall be void.
20    (b) Any changes, additions or amendments to the laws of the
21society duly made or enacted subsequent to the issuance of the
22certificate shall bind the owner and the beneficiaries and
23shall govern and control the benefit contract in all respects
24the same as though such changes, additions or amendments had
25been made prior to and were in force at the time of the

 

 

SB3404- 7 -LRB098 19017 RPM 54167 b

1application for insurance, except that no change, addition or
2amendment shall destroy or diminish benefits which the society
3contracted to give the owner as of the date of issuance.
4    (c) Any person upon whose life a benefit contract is issued
5prior to attaining the age of majority shall be bound by the
6terms of the application and certificate and by all the laws
7and rules of the society to the same extent as though the age
8of majority had been attained at the time of application.
9    (d) A society shall provide in its laws and its
10certificates that, if its reserves as to all or any class of
11certificates become impaired, its board of directors or
12corresponding body may require that there shall be paid by the
13owner to the society an assessment in the amount of the owner's
14equitable proportion of such deficiency as ascertained by its
15board, and that, if the payment is not made, either (1) it
16shall stand as an indebtedness against the certificate and draw
17interest not to exceed the rate specified for certificate loans
18under the certificates; or (2) in lieu of or in combination
19with (1), the owner may accept a proportionate reduction in
20benefits under the certificate. In no event, however, may an
21assessment obligation be forgiven by the society in lieu of
22collection or reduction in benefits. The society may specify
23the manner of the election and which alternative is to be
24presumed if no election is made. No such assessment shall take
25effect unless a 30-day notification has been provided to the
26Director, who shall have the ability to disapprove the

 

 

SB3404- 8 -LRB098 19017 RPM 54167 b

1assessment only if the Director finds that the assessment is
2not in the best interests of the benefit members of the
3domestic society. Disapproval by the Director shall be made
4within 30 days after receipt of notice and shall be in writing
5and mailed to the domestic society. If the Director disapproves
6the assessment, the reasons therefore shall be stated in the
7written notice.
8    (e) Copies of any of the documents mentioned in this
9Section, certified by the secretary or corresponding officer of
10the society, shall be received in evidence of the terms and
11conditions thereof.
12    (f) No certificate shall be delivered or issued for
13delivery in this State unless a copy of the form has been filed
14with the Director in the manner provided for like policies
15issued by life insurers in this State. Every life, accident,
16health or disability insurance certificate and every annuity
17certificate issued on or after one year from the effective date
18of this amendatory Act shall meet the standard contract
19provision requirements not inconsistent with this amendatory
20Act for like policies issued by life insurers in this State
21except that a society may provide for a grace period for
22payment of premiums of one full month in its certificates. The
23certificate shall also contain a provision stating the amount
24of premiums which are payable under the certificate and a
25provision reciting or setting forth the substance of any
26sections of the society's laws or rules in force at the time of

 

 

SB3404- 9 -LRB098 19017 RPM 54167 b

1issuance of the certificate which, if violated, will result in
2the termination or reduction of benefits payable under the
3certificate. If the laws of the society provide for expulsion
4or suspension of a member, the certificate shall also contain a
5provision that any member so expelled or suspended, except for
6nonpayment of a premium or within the contestable period for
7material misrepresentation in the application for membership
8or insurance, shall have the privilege of maintaining the
9certificate in force by continuing payment of the required
10premium.
11    (g) Benefit contracts issued on the lives of persons below
12the society's minimum age for adult membership may provide for
13transfer of control or ownership to the insured at an age
14specified in the certificate. A society may require approval of
15an application for membership in order to effect this transfer
16and may provide in all other respect for the regulation,
17government and control of such certificates and all rights,
18obligations and liabilities incident thereto and connected
19therewith. Ownership rights prior to such transfer shall be
20specified in the certificate.
21    (h) A society may specify the terms and conditions on which
22benefit contracts may be assigned.
23(Source: P.A. 84-303.)
 
24    (215 ILCS 5/307.1)  (from Ch. 73, par. 919.1)
25    (Section scheduled to be repealed on January 1, 2017)

 

 

SB3404- 10 -LRB098 19017 RPM 54167 b

1    Sec. 307.1. Annual License. Societies which were
2authorized to transact business in this State prior to the
3effective date of this amendatory Act may continue such
4business until the first day of July next succeeding the
5effective date of this amendatory Act. The authority of such
6societies and all societies hereafter issued certificates of
7authority may thereafter be renewed annually, but in all cases
8to terminate on the first day of the succeeding July. A
9certified copy or duplicate of such certificate of authority
10shall be prima facie evidence that the licensee is a fraternal
11benefit society within the meaning of this amendatory Act. No
12new certificates of authority to provide benefits specified in
13Section 297.1 of this Code shall be issued after the effective
14date of this amendatory Act of the 98th General Assembly.
15(Source: P.A. 84-303.)
 
16    (215 ILCS 5/315.6)  (from Ch. 73, par. 927.6)
17    (Section scheduled to be repealed on January 1, 2017)
18    Sec. 315.6. Application of other Code provisions. Unless
19otherwise provided in this amendatory Act, every fraternal
20benefit society shall be governed by this amendatory Act and
21shall be exempt from all other provisions of the insurance laws
22of this State not only in governmental relations with the State
23but for every other purpose, except for those provisions
24specified in this amendatory Act and except as follows:
25        (a) Sections 1, 2, 2.1, 3.1, 117, 118, 132, 132.1,

 

 

SB3404- 11 -LRB098 19017 RPM 54167 b

1    132.2, 132.3, 132.4, 132.5, 132.6, 132.7, 133, 134, 136,
2    138, 139, 140, 141, 141.01, 141.1, 141.2, 141.3, 143, 143c,
3    144.1, 147, 148, 149, 150, 151, 152, 153, 154.5, 154.6,
4    154.7, 154.8, 155, 155.04, 155.05, 155.06, 155.07, 155.08
5    and 408 of this Code; and
6        (b) Articles VIII 1/2, XII, XII 1/2, XIII, XIII 1/2,
7    XXIV, and XXVIII of this Code.
8(Source: P.A. 88-364; 89-97, eff. 7-7-95.)
 
9    (215 ILCS 5/Art. XVII.5 heading new)
10
ARTICLE XVII 1/2. FRATERNAL BENEFIT SOCIETY GUARANTY
11
ASSOCIATION

 
12    (215 ILCS 5/315a.1 new)
13    Sec. 315a.1. Short title. This Article may be cited as the
14Fraternal Benefit Society Guaranty Association Law.
 
15    (215 ILCS 5/315a.5 new)
16    Sec. 315a.5. Purpose. The purpose of this Article is to
17protect members of fraternal benefit societies who reside in
18this State and their beneficiaries, payees, and assignees,
19subject to certain limitations, against failure in the
20performance of contractual obligations due to the impairment or
21insolvency of their society. Nonresident members of such
22societies shall be protected by the Association established
23under this Article if: (1) they reside in states that have an

 

 

SB3404- 12 -LRB098 19017 RPM 54167 b

1association similar to the Association created by this Article;
2(2) they are not eligible for coverage by such association; (3)
3such society never held a license or certificate of authority
4in such states; and (4) such society was domiciled in this
5State. To provide this protection, (i) an association of
6fraternal benefit societies is created to enable the guaranty
7of payment of benefits and of continuation of coverages, (ii)
8members of the Association are subject to assessment to provide
9funds to carry out the purpose of this Article, and (iii) the
10Association is authorized to assist the Director, in the
11prescribed manner, in the detection and prevention of fraternal
12benefit society impairments or insolvencies.
 
13    (215 ILCS 5/315a.10 new)
14    Sec. 315a.10. Scope. This Article applies to any benefits
15issued under Article XVII of this Code.
 
16    (215 ILCS 5/315a.15 new)
17    Sec. 315a.15. Construction. This Article shall be
18construed to effect the purpose set forth in Section 315a.5 of
19this Code.
 
20    (215 ILCS 5/315a.20 new)
21    Sec. 315a.20. Definitions. As used in this Article:
22    "Association" means the Illinois Fraternal Benefit Society
23Guaranty Association created under Section 315a.25 of this

 

 

SB3404- 13 -LRB098 19017 RPM 54167 b

1Code.
2    "Director" means the Director of Insurance.
3    "Contractual obligation" means an obligation of the member
4fraternal benefit society under benefit contracts issued under
5Article XVII of this Code.
6    "Covered person" means a fraternal benefit society member
7who is entitled to the protection of the Association as
8described in Section 315a.5 of this Code.
9    "Covered benefit certificate" means any benefit
10certificate, contract, or other evidence of coverage within the
11scope of this Article under Section 315a.10 of this Code.
12    "Fund" means the fund created under Section 315a.25 of this
13Code.
14    "Impaired organization" means a member organization deemed
15by the Director after the effective date of this amendatory Act
16of the 98th General Assembly to be potentially unable to
17fulfill its contractual obligations, and not an insolvent
18organization.
19    "Insolvent organization" means a member organization that
20becomes insolvent and is placed under a final order of
21liquidation or rehabilitation by a court of competent
22jurisdiction.
23    "Member" means a person who is licensed or holds a
24certificate of authority to transact in this State any kind of
25business to which this Article applies under Section 315a.10 of
26this Code. "Member" includes a person whose certificate of

 

 

SB3404- 14 -LRB098 19017 RPM 54167 b

1authority may have been suspended pursuant to any provision of
2this Code.
3    "Premiums" mean direct gross premiums received on covered
4benefit contracts.
5    "Person" means an individual, corporation, partnership,
6association, fraternal benefit society, or voluntary
7organization.
8    "Resident" means a person who resides in this State at the
9time the organization is issued a notice of impairment by the
10Director or at the time a complaint for liquidation or
11rehabilitation is filed and to whom contractual obligations are
12owed. A person may be a resident of only one state which, in
13the case of a person other than a natural person, shall be its
14principal place of business.
 
15    (215 ILCS 5/315a.25 new)
16    Sec. 315a.25. Creation of the Association. There is created
17a not-for-profit legal entity to be known as the Illinois
18Fraternal Benefit Society Guaranty Association. All member
19organizations are and must remain members of the Association as
20a condition of their authority to transact business in this
21State. The Association must perform its functions under the
22plan of operation established and approved under Section
23315a.45 of this Code and must exercise its powers through a
24board of directors established under Section 315a.30 of this
25Code. For purposes of administration and assessment, the

 

 

SB3404- 15 -LRB098 19017 RPM 54167 b

1Association must maintain the Fraternal Benefit Society Fund.
2The Association shall be supervised by the Director and is
3subject to this Article and any other applicable provisions of
4this Code.
 
5    (215 ILCS 5/315a.30 new)
6    Sec. 315a.30. Board of directors.
7    The board of directors of the Association shall consist of
8not fewer than 7 nor more than 11 members serving terms as
9established in the plan of operation. The Director shall name 2
10members to the board and the member organizations, subject to
11the approval of the Director, shall select the remaining
12members of the board. Vacancies on the board must be filled for
13the remaining period of the term in the manner described in the
14plan of operation. To select the initial board of directors and
15initially organize the Association, the Director must give
16notice to all member organizations of the time and place of the
17organizational meeting. In determining voting rights at the
18organizational meeting, each member organization is entitled
19to one vote in person or by proxy. If the board of directors is
20not selected at the organizational meeting, then the Director
21may appoint the initial members.
22    In approving selections or in appointing members to the
23board, the Director must consider whether all member
24organizations are fairly represented.
25    Members of the board may be reimbursed from the assets of

 

 

SB3404- 16 -LRB098 19017 RPM 54167 b

1the Association for expenses incurred by them as members of the
2board of directors, but members of the board may not otherwise
3be compensated by the Association for their services.
 
4    (215 ILCS 5/315A.35 new)
5    Sec. 315A.35. Powers and duties of the Association.
6    (a) In addition to the powers and duties enumerated in
7other Sections of this Article, the Association shall have the
8powers set forth in this Section.
9    (b) If a domestic society is impaired, the Association may,
10subject to any conditions imposed by the Association other than
11those that impair the contractual obligations of the impaired
12society:
13        (1) guarantee, assume, or reinsure or cause to be
14    guaranteed, assumed, or reinsured any or all of the
15    contractual obligations to covered persons of the impaired
16    organization;
17        (2) provide such moneys, pledges, notes, guarantees,
18    or other means as are proper to effectuate paragraph (1) of
19    this subsection (b) and ensure payment of the contractual
20    obligations of the impaired organization pending action
21    under paragraph (1) of this subsection (b); and
22        (3) loan money to the impaired organization.
23    (c) If a domestic, foreign, or alien organization is an
24insolvent organization, then the Association shall, subject to
25the approval of the Director:

 

 

SB3404- 17 -LRB098 19017 RPM 54167 b

1        (1) guarantee, assume, indemnify, or reinsure or cause
2    to be guaranteed, assumed, indemnified, or reinsured the
3    contractual obligations to covered persons of the
4    insolvent organization;
5        (2) ensure payment of the contractual obligations of
6    the insolvent organization to covered persons;
7        (3) provide such moneys, pledges, notes, guaranties,
8    or other means necessary to discharge such duties.
9    (d) There shall be no liability on the part of and no cause
10of action shall arise against the Association or against any
11transferee from the Association in connection with the transfer
12by reinsurance or otherwise of all or any part of an impaired
13or insolvent organization's business by reason of any action
14taken or any failure to take any action by the impaired or
15insolvent organization at any time.
16    (e) If the Association fails to act within a reasonable
17period of time as provided in subsection (c) of this Section
18with respect to an insolvent organization, then the Director
19shall have the powers and duties of the Association under this
20Article with regard to such insolvent organization.
21    (f) The Association or its designated representatives may
22render assistance and advice to the Director upon his or her
23request concerning rehabilitation, payment of claims,
24continuations of coverage, or the performance of other
25contractual obligations of any impaired or insolvent
26organization.

 

 

SB3404- 18 -LRB098 19017 RPM 54167 b

1    (g) The Association has standing to appear before any court
2concerning all matters germane to the powers and duties of the
3Association, including, but not limited to, proposals for
4reinsuring or guaranteeing the covered health care plan
5certificates of the impaired or insolvent organization and the
6determination of the covered health care plan certificates and
7contractual obligations.
8    (h) Any person receiving benefits under this Article is
9deemed to have assigned the rights under their covered benefit
10certificates to the Association to the extent of the benefits
11received because of this Article, whether the benefits are
12payments of contractual obligations or continuation of
13coverage. The Association may require an assignment to it of
14such rights by any payee, covered person, or beneficiary as a
15condition precedent to the receipt of any rights or benefits
16conferred by this Article upon such person. The Association is
17subrogated to these rights against the assets of any insolvent
18organization and against any other party who may be liable to
19such payee, covered person, or beneficiary.
20    The subrogation rights of the Association under this
21subsection (h) have the same priority against the assets of the
22insolvent organization as that possessed by the person entitled
23to receive benefits under this Article.
24    (i) The contractual obligations of the insolvent
25organization for which the Association becomes or may become
26liable are as great as, but no greater than, the contractual

 

 

SB3404- 19 -LRB098 19017 RPM 54167 b

1obligations of the insolvent organization would have been in
2the absence of an insolvency unless those obligations are
3reduced as permitted by subsection (d) of this Section, but the
4aggregate liability of the Association shall not exceed
5$250,000 with respect to any one natural person.
6    (j) The Association may do all of the following:
7        (1) Enter into such contracts as are necessary or
8    proper to carry out the provisions and purposes of this
9    Article.
10        (2) Sue or be sued, including taking any legal actions
11    necessary or proper for recovery of any unpaid assessments
12    under Section 315a.40 of this Code. The Association shall
13    not be liable for punitive or exemplary damages.
14        (3) Borrow money to effect the purposes of this
15    Article. Any notes or other evidence of indebtedness of the
16    Association not in default are legal investments for
17    domestic organizations and may be carried as admitted
18    assets.
19        (4) Employ or retain such persons as are necessary to
20    handle the financial transactions of the Association and to
21    perform such other functions as become necessary or proper
22    under this Article.
23        (5) Negotiate and contract with any liquidator,
24    rehabilitator, conservator, or ancillary receiver to carry
25    out the powers and duties of the Association.
26        (6) Take such legal action as may be necessary to avoid

 

 

SB3404- 20 -LRB098 19017 RPM 54167 b

1    payment of improper claims.
2        (7) Exercise, for the purposes of this Article and to
3    the extent approved by the Director, the powers of a
4    domestic organization, but in no case may the Association
5    issue evidence of coverage other than that issued to
6    perform the contractual obligations of the impaired or
7    insolvent organization.
8        (8) Exercise all the rights of the Director under
9    subsection (4) Section 193 of this Code with respect to
10    covered benefit certificates after the association becomes
11    obligated by statute.
12        (9) Request information from a person seeking coverage
13    from the Association in order to aid the Association in
14    determining its obligations under this Article with
15    respect to the person, and the person shall promptly comply
16    with the request.
17        (10) Take other necessary or appropriate action to
18    discharge its duties and obligations under this Article or
19    to exercise its powers under this Article.
20    (k) The obligations of the Association under this Article
21shall not relieve any reinsurer, insurer, or other person of
22its obligations to the insolvent organization (or its
23conservator, rehabilitator, liquidator, or similar official)
24or its covered benefit certificate holder, including without
25limitation any reinsurer, insurer, or other person liable to
26the insolvent insurer (or its conservator, rehabilitator,

 

 

SB3404- 21 -LRB098 19017 RPM 54167 b

1liquidator, or similar official).
2    (l) The Association shall be entitled to collect premiums
3due under or with respect to covered benefit certificates for a
4period from the date on which the domestic, foreign, or alien
5organization became an insolvent organization until the
6Association no longer has obligations under subsection (c) of
7this Section with respect to such certificates. The
8Association's obligations under subsection (c) of this Section
9with respect to any covered benefit certificates shall
10terminate in the event that all such premiums due under or with
11respect to such covered benefit certificates are not paid to
12the Association (1) within 30 days after the Association's
13demand therefor or (2) in the event that such certificates
14provide for a longer grace period for payment of premiums after
15notice of non-payment or demand therefor, within the lesser of
16(i) the period provided for in such certificates or (ii) 60
17days.
18    (m) The board of directors of the Association shall have
19discretion and may exercise reasonable business judgment to
20determine the means by which the Association is to provide the
21benefits of this Article in an economical and efficient manner.
22    (n) When the Association has arranged or offered to provide
23the benefits of this Article to a covered person under a plan
24or arrangement that fulfills the Association's obligations
25under this Article, the person shall not be entitled to
26benefits from the Association in addition to or other than

 

 

SB3404- 22 -LRB098 19017 RPM 54167 b

1those provided under the plan or arrangement.
2    (o) Venue in a suit against the Association arising under
3the Article shall be in Cook County, Illinois. The Association
4shall not be required to give any appeal bond in an appeal that
5relates to a cause of action arising under this Article.
 
6    (215 ILCS 5/315A.40 new)
7    Sec. 315A.40. Assessments.
8    (a) For the purpose of providing the funds necessary to
9carry out the powers and duties of the Association, the board
10of directors shall assess the members, at such times and for
11such amounts as the board finds necessary. Assessments shall be
12due no later than 30 days after written notice to the members
13and shall accrue interest from the due date at such adjusted
14rate as is established under Section 531.09 of this Code, and
15such interest shall be compounded daily.
16    (b) There shall be 2 classes of assessments, as follows:
17        (1) Class A assessments shall be made for the purpose
18    of meeting administrative costs and other general expenses
19    and examinations conducted under the authority of the
20    Director.
21        (2) Class B assessments shall be made to the extent
22    necessary to carry out the powers and duties of the
23    Association under Section 315a.35 of this Code with regard
24    to an impaired or insolvent domestic organization or
25    insolvent foreign or alien organizations.

 

 

SB3404- 23 -LRB098 19017 RPM 54167 b

1    (c) The amount of any Class A assessment shall be
2determined by the Board and may be made on a non-pro rata
3basis.
4    Class B assessments against members shall be in the
5proportion that the premiums received on covered benefit
6certificates issued in this State by each assessed member on
7covered benefit certificates for the calendar year preceding
8the assessment bears to such premiums received on covered
9benefit certificates issued in this State for the calendar year
10preceding the assessment by all assessed members.
11    Assessments to meet the requirements of the Association
12with respect to an impaired or insolvent organization shall not
13be made until necessary to implement the purposes of this
14Article. Classification of assessments under subsection (b) of
15this Section and computations of assessments under this
16subsection (c) shall be made with a reasonable degree of
17accuracy, recognizing that exact determinations may not always
18be possible.
19    (d) The Association may abate or defer, in whole or in
20part, the assessment of a member if in the opinion of the board
21payment of the assessment would endanger the ability of the
22member to fulfill its contractual obligations.
23    The total of all assessments upon a member organization may
24not in any one calendar year exceed 2% of the organization's
25premiums in this State during the calendar year preceding the
26assessment on the covered benefit certificates.

 

 

SB3404- 24 -LRB098 19017 RPM 54167 b

1    (e) If an assessment against a member organization is
2abated or deferred, in whole or in part, because of the
3limitations set forth in subsection (d) of this Section, the
4amount by which such assessment is abated or deferred may be
5assessed against the other member organizations in a manner
6consistent with the basis for assessments set forth in this
7Section. If the maximum assessment, together with the other
8assets of the Association, does not provide in any one year an
9amount sufficient to carry out the responsibilities of the
10Association, then the necessary additional funds may be
11assessed as soon thereafter as permitted by this Article.
12    (f) The board may, by an equitable method as established in
13the plan of operation, refund to members in proportion to the
14contribution of each organization, the amount by which the
15assets of the fund exceed the amount the board finds is
16necessary to carry out during the coming year the obligations
17of the Association, including assets accruing from net realized
18gains and income from investments. A reasonable amount may be
19retained in the fund to provide moneys for the continuing
20expenses of the Association and for future losses.
21    (g) An assessment is deemed to occur on the date upon which
22the board votes the assessment. The board may defer calling the
23payment of the assessment or may call for payment in one or
24more installments.
25    (h) It is proper for a member, in determining its rates, to
26consider the amount reasonably necessary to meet its assessment

 

 

SB3404- 25 -LRB098 19017 RPM 54167 b

1obligations under this Article.
2    (i) The Association must issue to each organization paying
3a Class B assessment under this Article a certificate of
4contribution, in a form prescribed by the Director, for the
5amount of the assessment so paid. All outstanding certificates
6are of equal dignity and priority without reference to amounts
7or dates of issue. A certificate of contribution may be shown
8by the organization in its financial statement as an admitted
9asset in such form and for such amount, if any, and period of
10time as the Director may approve, provided the organization
11shall in any event at its option have the right to show a
12certificate of contribution as an asset at percentages of the
13original face amount for calendar years as follows:
14        (1) 100% for the calendar year after the year of
15    issuance;
16        (2) 80% for the second calendar year after the year of
17    issuance;
18        (3) 60% for the third calendar year after the year of
19    issuance;
20        (4) 40% for the fourth calendar year after the year of
21    issuance;
22        (5) 20% for the fifth calendar year after the year of
23    issuance.
24    (j) The Association may request information of members in
25order to aid in the exercise of its power under this Section,
26and member organizations shall promptly comply with a request.
 

 

 

SB3404- 26 -LRB098 19017 RPM 54167 b

1    (215 ILCS 5/315A.45 new)
2    Sec. 315A.45. Plan of operation.
3    (a) The Association must submit to the Director a plan of
4operation and any amendments thereto necessary or suitable to
5ensure the fair, reasonable, and equitable administration of
6the Association. The plan of operation and any amendments
7thereto become effective upon approval in writing by the
8Director.
9    (b) If the Association fails to submit a suitable plan of
10operation within 120 days following the effective date of this
11amendatory Act of the 98th General Assembly or if at any time
12thereafter the Association fails to submit suitable amendments
13to the plan, then the Director may, after notice and hearing,
14adopt such reasonable rules as are necessary or advisable to
15effectuate the provisions of this Article. The rules shall be
16in force until modified by the Director or superseded by a plan
17submitted by the Association and approved by the Director.
18    (c) All members must comply with the plan of operation. In
19addition to requirements enumerated elsewhere in this Article
20the plan of operation must:
21        (1) establish procedures for handling the assets of the
22    Association;
23        (2) establish the amount and method of reimbursing
24    members of the board of directors under Section 315a.30 of
25    this Code;

 

 

SB3404- 27 -LRB098 19017 RPM 54167 b

1        (3) establish regular places and times for meetings of
2    the board of directors;
3        (4) establish procedures for keeping records of all
4    financial transactions of the Association, its agents, and
5    the board of directors;
6        (5) establish the procedures whereby selections for
7    the board of directors shall be made and submitted to the
8    Director;
9        (6) establish any additional procedures for
10    assessments under Section 315a.40 of this Code; and
11        (7) contain additional provisions necessary or proper
12    for the execution of the powers and duties of the
13    Association.
14    (d) The plan of operation shall establish a procedure for
15protest by any member of assessments made by the Association
16pursuant to Section 315a.40 of this Code. Such procedures shall
17require that:
18        (1) A member that wishes to protest all or part of an
19    assessment shall pay when due the full amount of the
20    assessment as set forth in the notice provided by the
21    Association. The payment shall be available to meet
22    Association obligations during the pendency of the protest
23    or any subsequent appeal. Payment shall be accompanied by a
24    statement in writing that the payment is made under protest
25    and setting forth a brief statement of the grounds for the
26    protest.

 

 

SB3404- 28 -LRB098 19017 RPM 54167 b

1        (2) Within 30 days following the payment of an
2    assessment under protest by any protesting member, the
3    Association must notify the member in writing of its
4    determination with respect to the protest unless the
5    Association notifies the member that additional time is
6    required to resolve the issues raised by the protest.
7        (3) In the event the Association determines that the
8    protesting member is entitled to a refund, the refund shall
9    be made within 30 days following the date upon which the
10    Association makes its determination.
11        (4) The decision of the Association with respect to a
12    protest may be appealed to the Director.
13        (5) In the alternative to rendering a decision with
14    respect to any protest based on a question regarding the
15    assessment base, the Association may refer the protests to
16    the Director for final decision with or without a
17    recommendation from the Association.
18        (6) Interest on any refund due a protesting member
19    shall be paid at the rate actually earned by the
20    Association.
21    (e) The plan of operation may provide that any or all
22powers and duties of the Association, except those under
23Section 315a.35 and Section 315a.40, may be delegated to a
24corporation, association, or other organization that performs
25or will perform functions similar to those of the Association
26or its equivalent in 2 or more states. Such a corporation,

 

 

SB3404- 29 -LRB098 19017 RPM 54167 b

1association, or organization shall be reimbursed for any
2payments made on behalf of the Association and shall be paid
3for its performance of any function of the Association. A
4delegation under this subsection (e) shall take effect only
5with the approval of both the board of directors and the
6Director and may be made only to a corporation, association, or
7organization that extends protection not substantially less
8favorable and effective than that provided by this Article.
 
9    (215 ILCS 5/315A.50 new)
10    Sec. 315A.50. Voluntary dissolution. Upon application to
11the Director, a domestic society may request that it be
12dissolved and that its existence be terminated. The application
13shall demonstrate that the applicant has satisfied its members'
14certificate obligations or that it has transferred such
15obligations to another organization, domestic or foreign, by
16means of assumption or bulk reinsurance or otherwise, and that
17the domestic society's supreme governing body has approved the
18termination and dissolution. The application shall contain any
19other information required by the Director. Any limitation
20related to reinsurance by a domestic society shall not apply to
21reinsurance entered into in conjunction with the transfer of
22members' certificate obligations as a part of a voluntary
23dissolution. Upon approval of the application by the Director,
24the domestic society shall be deemed dissolved and its
25existence terminated as of the date set forth in the

 

 

SB3404- 30 -LRB098 19017 RPM 54167 b

1application.
 
2    (215 ILCS 5/310.1 rep.)
3    (215 ILCS 5/311.1 rep.)
4    Section 10. The Illinois Insurance Code is amended by
5repealing Sections 310.1 and 311.1.

 

 

SB3404- 31 -LRB098 19017 RPM 54167 b

1 INDEX
2 Statutes amended in order of appearance
3    215 ILCS 5/286.1from Ch. 73, par. 898.1
4    215 ILCS 5/294.1from Ch. 73, par. 906.1
5    215 ILCS 5/295.2 new
6    215 ILCS 5/297.1from Ch. 73, par. 909.1
7    215 ILCS 5/300.1from Ch. 73, par. 912.1
8    215 ILCS 5/307.1from Ch. 73, par. 919.1
9    215 ILCS 5/315.6from Ch. 73, par. 927.6
10    215 ILCS 5/Art. XVII.5
11    heading new
12    215 ILCS 5/315a.1 new
13    215 ILCS 5/315a.5 new
14    215 ILCS 5/315a.10 new
15    215 ILCS 5/315a.15 new
16    215 ILCS 5/315a.20 new
17    215 ILCS 5/315a.25 new
18    215 ILCS 5/315a.30 new
19    215 ILCS 5/315A.35 new
20    215 ILCS 5/315A.40 new
21    215 ILCS 5/315A.45 new
22    215 ILCS 5/315A.50 new
23    215 ILCS 5/310.1 rep.
24    215 ILCS 5/311.1 rep.