SB2883 93RD GENERAL ASSEMBLY

LRB093 18703 SAS 44431 b

93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
SB2883

Introduced 2/6/2004, by Denny Jacobs

SYNOPSIS AS INTRODUCED:

215 ILCS 5/531.02	from Ch. 73, par. 1065.80-2
215 ILCS 5/531.02a new
215 ILCS 5/531.03	from Ch. 73, par. 1065.80-3
215 ILCS 5/531.04	from Ch. 73, par. 1065.80-4
215 ILCS 5/531.05	from Ch. 73, par. 1065.80-5
215 ILCS 5/531.06	from Ch. 73, par. 1065.80-6
215 ILCS 5/531.07	from Ch. 73, par. 1065.80-7
215 ILCS 5/531.08	from Ch. 73, par. 1065.80-8
215 ILCS 5/531.09	from Ch. 73, par. 1065.80-9
215 ILCS 5/531.10	from Ch. 73, par. 1065.80-10
215 ILCS 5/531.11	from Ch. 73, par. 1065.80-11
215 ILCS 5/531.12	from Ch. 73, par. 1065.80-12
215 ILCS 5/531.14	from Ch. 73, par. 1065.80-14
215 ILCS 5/531.15	from Ch. 73, par. 1065.80-15
215 ILCS 5/531.17	from Ch. 73, par. 1065.80-17
215 ILCS 5/531.19	from Ch. 73, par. 1065.80-19

Amends the Life and Health Insurance Guaranty Association Article of the Illinois Insurance Code. Prohibits health care providers from seeking payment from insureds until a final determination of the Association's liability has been made. Excludes from coverage certain variable rate instruments. Excludes from coverage certain self-funded employer and employee benefit plans. Removes authority of the Association to loan money to an impaired insurer. Sets forth conditions under which coverage is provided to residents and nonresidents. Makes changes with respect to the manner assessments are made upon insurers. Limits the liability of the Association and the Director of Insurance with respect to the operation of the Association. Effective January 1, 2005.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning insurance.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

4		Section 5. The Illinois Insurance Code is amended by
5		changing Sections 531.02, 531.03, 531.04, 531.05, 531.06,
6		531.07, 531.08, 531.09, 531.10, 531.11, 531.12, 531.14,
7		531.15, 531.17, and 531.19, and adding Section 531.02a as
8		follows:
9		(215 ILCS 5/531.02) (from Ch. 73, par. 1065.80-2)
10		Sec. 531.02. Purpose. The purpose of this Article is to
11		protect, subject to certain limitations, the persons specified
12		in paragraph (1) of Section 531.03 against failure in the
13		performance of contractual obligations, under life and or
14		health insurance policies, and annuity contracts and health or
15		medical care service contracts specified in paragraph (2) of
16		Section 531.03, due to the impairment or insolvency of the
17		insurer issuing such policies or contracts. To provide this
18		protection, (1) an association of insurers is created to enable
19		the guaranty of payment of benefits and of continuation of
20		coverages as limited by this Article, (2) members of the
21		Association are subject to assessment to provide funds to carry
22		out the purpose of this Article, and (3) the Association is
23		authorized to assist the Director, in the prescribed manner, in
24		the detection and prevention of insurer impairments or
25		insolvencies.
26		(Source: P.A. 86-753.)
27		(215 ILCS 5/531.02a new)
28		Sec. 531.02a. Restrictions on recoveries by health care
29		providers. In the event of the insolvency of a member insurer,
30		no provider of health care services shall seek to recover any
31		amount from any insured until a final determination has been

1		made as to the Association's liability for such services
2		(including the resolution of any dispute or litigation
3		resulting therefrom).
4		In the event that a provider seeks to recover any such
5		amount before a final determination of the Association's
6		liability (or the resolution of any dispute or litigation
7		resulting therefrom) has been made, the provider shall be
8		liable for all reasonable costs and attorney fees incurred by
9		the Director and the Association in enforcing this provision or
10		any court orders related thereto.
11		(215 ILCS 5/531.03) (from Ch. 73, par. 1065.80-3)
12		Sec. 531.03. Coverage and limitations.
13		(1) This Article shall provide coverage for the policies
14		and contracts specified in paragraph (2) of this Section:
15		(a) to persons who, regardless of where they reside
16		(except for non-resident certificate holders under group
17		policies or contracts), are the beneficiaries, assignees
18		or payees of the persons covered under subparagraph (1)(b),
19		and
20		(b) to persons who are owners of or certificate holders
21		under such policies or contracts (other than unallocated
22		annuity contracts and structured settlement annuities) and
23		in each case ; or, in the case of unallocated annuity
24		contracts, to the persons who are the contract holders, and
25		who:
26		(i) are residents of this State, or
27		(ii) are not residents, but only under all of the
28		following conditions:
29		(A) the insurer insurers that which issued
30		such policies or contracts is are domiciled in this
31		State;
32		(B) the states in which such persons reside
33		have associations similar to the association
34		created by this Article such insurers never held a
35		license or certificate of authority in the states

1		in which such persons reside; and
2		(C) the persons are not eligible for coverage
3		by an association in any other state due to the
4		fact that the insurer was not licensed in the state
5		at the time specified in the state's guaranty
6		association law. such states have associations
7		similar to the association created by this Act; and
8		(D) such persons are not eligible for coverage
9		by such associations.
10		(c) For unallocated annuity contracts specified in
11		paragraph (2) of this Section, subparagraphs (a) and (b) of
12		this paragraph shall not apply, and this Article shall
13		(except as provided in subparagraphs (e) and (f) of this
14		paragraph) provide coverage to:
15		(i) persons who are the owners of the unallocated
16		annuity contracts if the contracts are issued to or in
17		connection with a specific benefit plan whose plan
18		sponsor has its principal place of business is in this
19		State; and
20		(ii) persons who are owners of unallocated annuity
21		contracts issued to or in connection with government
22		lotteries if the owners are residents.
23		(d) For structured settlement annuities specified in
24		paragraph (2) of this Section, subparagraphs (a) and (b) of
25		this paragraph shall not apply, and this Article shall
26		(except as provided in subparagraphs (e) and (f) of this
27		paragraph) provide coverage to a person who is a payee
28		under a structured settlement annuity (or beneficiary of a
29		payee if the payee is deceased), if the payee:
30		(i) is a resident, regardless of where the contract
31		owner resides; or
32		(ii) is not a resident, but only under both of the
33		following conditions:
34		(A)(1) the contract owner of the structured
35		settlement annuity is a resident, or
36		(II) the contract owner of the structured

1		settlement annuity is not a resident, but
2		the insurer that issued the structured
3		settlement annuity is domiciled in this State; and
4		the state in which the contract owner resides
5		has an association similar to the association
6		created by this Article; and
7		(B) neither the payee (or beneficiary) nor the
8		contract owner is eligible for coverage by the
9		association of the state in which the payee or
10		contract owner resides.
11		(e) This Article shall not provide coverage for:
12		(i) a person who is a payee (or beneficiary) of a
13		contract owner resident of this State, if the payee (or
14		beneficiary) is afforded any coverage by the
15		association of another state, or
16		(ii) a person covered under subparagraph (c) of
17		this paragraph, if any coverage is provided by the
18		association of another state to or through the trustee
19		who is the contract owner.
20		(f) This Article is intended to provide coverage to a
21		person who is a resident of this State and, in special
22		circumstances, to a nonresident. In order to avoid
23		duplicate coverage, if a person who would otherwise receive
24		coverage under this Article is provided coverage under the
25		laws of any other state, the person shall not be provided
26		coverage under this Article. In determining the
27		application of the provisions of this paragraph in
28		situations where a person could be covered by the
29		association of more than one state, whether as an owner,
30		payee, beneficiary, or assignee, this Article shall be
31		construed in conjunction with other state laws to result in
32		coverage by only one association.
33		(2)(a) Except as otherwise provided, this Article shall
34		provide coverage to the persons specified in paragraph (l) of
35		this Section for direct, (i) individual or other nongroup life,
36		health, and annuity and supplemental policies, or contracts,

1		and supplemental contracts to any of these, (ii) for
2		certificates under direct group policies or contracts, (iii)
3		and for unallocated annuity contracts, in each case issued by
4		member insurers. "Annuity contracts" and "certificates under
5		group annuity contracts" shall have the meaning set forth in
6		subdivision (2) of Section 531.05 and (iv) for contracts to
7		furnish health care services and subscription certificates for
8		medical or health care services issued by persons licensed to
9		transact insurance business in this State under the Illinois
10		Insurance Code. Annuity contracts and certificates under group
11		annuity contracts include but are not limited to guaranteed
12		investment contracts, deposit administration contracts,
13		unallocated funding agreements, allocated funding agreements,
14		structured settlement agreements, lottery contracts and any
15		immediate or deferred annuity contracts.
16		(b) This Article shall not provide coverage for:
17		(i) any that portion or provision part of such policies
18		or contracts not guaranteed by the insurer, or under which
19		the risk is borne by the policy or contract owner
20		policyholder; provided however, that nothing in this
21		subparagraph (2)(b)(i) shall make this Article
22		inapplicable to assessment life and accident and health
23		insurance policies or contracts; or
24		(ii) any such policy or contract or part thereof
25		assumed by the impaired or insolvent insurer under a
26		contract of reinsurance, unless other than reinsurance for
27		which assumption certificates have been issued pursuant to
28		the reinsurance policy or contract by the impaired or
29		insolvent insurer; or
30		(iii) any interest rate, crediting rate, or similar
31		factor employed in calculating returns or changes in value
32		(whether or not determined by use of an index or other
33		external reference stated in the policy or contract), and
34		any portion of a policy or contract to the extent that it
35		is based on such a rate or factor, that any portion of a
36		policy or contract to the extent such portion represents an

1		accrued value that the rate of interest on which it is
2		accrued
3		(A) averaged over the period of 4 four years prior
4		to the date on which the Association becomes obligated
5		with respect to such policy or contract, exceeds a rate
6		of interest determined by subtracting 2 two percentage
7		points from Moody's Corporate Bond Yield Average
8		averaged for that same 4 four year period or for such
9		lesser period if the policy or contract was issued less
10		than 4 four years before the Association became
11		obligated; and
12		(B) on and after the date on which the Association
13		becomes obligated with respect to such policy or
14		contract, exceeds the rate of interest determined by
15		subtracting 3 three percentage points from Moody's
16		Corporate Bond Yield Average on a month-to-month basis
17		as most recently available; or
18		(iv) any provision or portion of a policy or contract
19		issued to a plan or program of an employer, association, or
20		other person to provide life, health, or annuity benefits
21		to its employees, members, or others, to the extent that
22		the plan or program is self-funded or uninsured, including
23		but not limited to benefits payable by an employer,
24		association, or other person under:
25		(A) a multiple-employer welfare arrangement as
26		defined in 29 U.S.C. 1144;
27		(B) a minimum premium group insurance plan;
28		(C) a stop-loss group insurance plan and any
29		stop-loss insurance, as defined in clause (b) of Class
30		1 or clause (a) of Class 2 of Section 4, and further
31		defined in subsection (d) of Section 352;
32		(D) an administrative services only contract; or
33		(E) a cost-plus contract; or
34		(v) any provision or portion of a policy or contract to
35		the extent that it provides:
36		(A) dividends or experience rating credits which,

1		in each case, were not paid or credited as of the date
2		of impairment or insolvency, whichever is earlier;
3		(B) voting rights;
4		(C) obligations to report to the policy owner or
5		contract owner more frequently than annually;
6		(D) payment of any fees or allowances to any
7		person, including the policy or contract owner, in
8		connection with the service to or administration of the
9		policy or contract; or
10		(E) other nonmonetary obligations; or
11		(vi) (iv) any unallocated annuity contract issued to or
12		in connection with a an employee benefit plan the
13		beneficiaries of which are protected by protected under the
14		federal Pension Benefit Guaranty Corporation law,
15		regardless of whether the federal Pension Benefit Guaranty
16		Corporation has yet become liable to make any payments with
17		respect to the benefit plan; or
18		(vii) (v) any portion of any unallocated annuity
19		contract which is not issued to or in connection with a
20		specific employee, union or association of natural persons
21		benefit plan or a government lottery; or
22		(viii) (vi) any policy or contract or portion thereof
23		issued by any burial society organized under Article XIX of
24		this Code Act, any fraternal benefit society organized
25		under Article XVII of this Code Act, any mutual benefit
26		association organized under Article XVIII of this Code Act,
27		and any foreign fraternal benefit society licensed under
28		Article VI of this Code Act; or
29		(ix) (vii) any policy or contract or portion thereof
30		issued by any health maintenance organization established
31		pursuant to the Health Maintenance Organization Act
32		including any health maintenance organization business of
33		a member insurer; or
34		(x) (viii) any policy or contract or portion thereof
35		issued by any health services plan corporation established
36		pursuant to the Voluntary Health Services Plans Act; or

1		(ix) (blank); or
2		(xi) (x) any policy or contract or portion thereof
3		issued by any dental service plan corporation established
4		pursuant to the Dental Service Plan Act; or
5		(xi) any stop-loss insurance, as defined in clause (b)
6		of Class 1 or clause (a) of Class 2 of Section 4, and
7		further defined in subsection (d) of Section 352; or
8		(xii) any that portion or part of a variable life
9		insurance or variable annuity policy or contract not
10		guaranteed by an insurer; or .
11		(xiii) any policy or contract or portion thereof to the
12		extent that assessments with respect to such policy or
13		contract or portion thereof are prohibited or preempted by
14		federal or state law; or
15		(xiv) any obligation that does not arise under the
16		express written terms of the policy or contract issued by
17		the insurer to the contract owner or policy owner,
18		including without limitation:
19		(A) claims based on marketing materials;
20		(B) claims based on side letters, riders, or other
21		documents that were issued by the insurer without
22		meeting applicable policy or contract form filing or
23		approval requirements;
24		(C) misrepresentations of or regarding policy or
25		contract benefits;
26		(D) extra-contractual claims;
27		(E) a claim for penalties or consequential or
28		incidental damages; or
29		(xv) any contractual agreement that establishes the
30		member insurer's obligations to provide a book value
31		accounting guaranty for defined contribution benefit plan
32		participants by reference to a portfolio of assets that is
33		owned by the benefit plan or its trustee, which in each
34		case is not an affiliate of the member insurer; or
35		(xvi) any portion of a policy or contract that, on the
36		date the Association becomes obligated, exceeds in value

1		the maximum benefit levels specified in paragraph (3)(b) of
2		this Section; or
3		(xvii) any portion of a policy or contract to the
4		extent it provides for interest or other changes in value
5		to be determined by the use of an index or other external
6		reference stated in the policy or contract, but which have
7		not been credited to the policy or contract, or as to which
8		the policy or contract owner's rights are subject to
9		forfeiture, as of the date the member insurer becomes an
10		impaired or insolvent insurer under this Article,
11		whichever is earlier. If a policy's or contract's interest
12		or changes in value are credited less frequently than
13		annually, then for purposes of determining the values that
14		have been credited and are not subject to forfeiture under
15		this subdivision 531.03(2)(b)(xvii), the interest or
16		change in value determined by using the procedures defined
17		in the policy or contract shall be credited as if the
18		contractual date of crediting interest or changing values
19		was the date of impairment or insolvency, whichever is
20		earlier, and shall not be subject to forfeiture; or
21		(xviii) a policy or contract issued in this State by a
22		member insurer at a time when it was not licensed or did
23		not have a certificate of authority to issue the policy or
24		contract in this State.
25		(3) The benefits that for which the Association may become
26		obligated to cover liable shall in no event exceed the lesser
27		of:
28		(a) the contractual obligations for which the insurer
29		is liable or would have been liable if it were not an
30		impaired or insolvent insurer, or
31		(b)(i) with respect to any one life, regardless of the
32		number of policies or contracts:
33		(A) $300,000 in life insurance death benefits, but
34		not more than $100,000 in net cash surrender and net
35		cash withdrawal values for life insurance;
36		(B) $300,000 in health insurance benefits,

1		including any net cash surrender and net cash
2		withdrawal values;
3		(C) $100,000 in the present value of annuity
4		benefits, including net cash surrender and net cash
5		withdrawal values;
6		(ii) with respect to each individual participating in a
7		governmental retirement benefit plan established under
8		Section 401, 403(b) or 457 of the United States U.S.
9		Internal Revenue Code covered by an unallocated annuity
10		contract or the beneficiaries of each such individual if
11		deceased, in the aggregate, $100,000 in present value
12		annuity benefits, including net cash surrender and net cash
13		withdrawal values; provided, however, that in no event
14		shall the Association be liable to expend more than
15		$300,000 in the aggregate with respect to any one
16		individual under subparagraph (1) and this subparagraph;
17		(iii) with respect to each payee of a structured
18		settlement annuity contract (or the beneficiary or
19		beneficiaries of the payee if deceased), $100,000 in the
20		present value of annuity benefits, in the aggregate
21		including net cash surrender and net cash withdrawal
22		values;
23		(iv) provided, however, that in no event shall the
24		Association be liable to expend more than $300,000 in the
25		aggregate with respect any one life under subparagraphs
26		(3)(b)(i), (ii), and (iii);
27		(v) with respect to one owner of multiple non-group
28		policies or contracts of life insurance, whether the policy
29		owner is an individual, firm, corporation, or other person,
30		and whether the persons insured are officers, managers,
31		employees, or other persons, $5,000,000 in benefits,
32		regardless of the number of policies and contracts held by
33		the owner;
34		(vi) (iii) with respect to either (i) one contract
35		owner provided coverage under subparagraph (1)(c)(ii) of
36		this Section; or (ii) any one plan sponsor whose plans own

1		directly or in trust one or more contract holder covered by
2		any unallocated annuity contracts contract not included in
3		subparagraph (3)(b)(ii) of this Section above, $5,000,000
4		in benefits, irrespective of the number of such contracts
5		held by that contract owner or plan sponsor; holder.
6		provided, however, that in the case where one or more
7		unallocated annuity contracts not included in subparagraph
8		(3)(b)(ii) of this Section are covered contracts under this
9		Article and are owned by a trust or other entity for the
10		benefit of 2 or more plan sponsors, coverage shall be
11		afforded by the Association if the largest interest in the
12		trust or entity owning the contract or contracts is held by
13		a plan sponsor whose principal place of business is in this
14		State and in no event shall the Association be obligated to
15		cover more than $5,000,000 in benefits with respect to all
16		these unallocated contracts; and provided further that
17		where one or more unallocated annuity contracts not
18		included in subparagraph (3)(b)(ii) of this Section are
19		owned by a benefit plan, or the trustee of a benefit plan,
20		with fewer than 50 participants, the Association shall not
21		be liable for an amount that in the aggregate is greater
22		than $100,000 times the number of individuals who are
23		participants in the benefit plan;
24		(vii) The limitations set forth in this paragraph (3)
25		are limitations on the coverage for which the Association
26		is obligated before taking into account either its
27		subrogation and assignment rights or the extent to which
28		such coverage could be provided out of the assets of the
29		impaired or insolvent insurer attributable to covered
30		policies or contracts. The costs of the Association's
31		obligations under this Article may be met by the use of
32		assets attributable to covered policies or contracts or
33		reimbursed to the Association pursuant to its subrogation
34		and assignment rights.
35		(4) In performing its obligations to provide coverage under
36		Section 531.08 of this Article, the Association shall not be

1		required to guarantee, assume, reinsure, or perform, or cause
2		to be guaranteed, assumed, reinsured, or performed, the
3		contractual obligations of the insolvent or impaired insurer
4		under a covered policy or contract that do not materially
5		affect the economic values or economic benefits of the covered
6		policy or contract.
7		(Source: P.A. 90-177, eff. 7-23-97; 91-357, eff. 7-29-99.)
8		(215 ILCS 5/531.04) (from Ch. 73, par. 1065.80-4)
9		Sec. 531.04. Construction.) This Article is to be liberally
10		construed to effect the purpose established under Section
11		531.02 which constitutes an aid and guide to interpretation.
12		(Source: P.A. 81-899.)
13		(215 ILCS 5/531.05) (from Ch. 73, par. 1065.80-5)
14		Sec. 531.05. Definitions. As used in this Act:
15		(1) "Account" means either of the 2 3 accounts created
16		under Section 531.06.
17		(2) "Annuity contracts" and "certificates under group
18		annuity contracts" include but are not limited to guaranteed
19		investment contracts, deposit administration contracts,
20		unallocated funding agreements, allocated funding agreements,
21		structured settlement annuities, annuities issued to or in
22		connection with government lotteries, and any immediate or
23		deferred annuity contracts.
24		(3) (2) "Association" means the Illinois Life and Health
25		Insurance Guaranty Association created under Section 531.06.
26		(3) "Director" means the Director of Insurance of this
27		State.
28		(4) "Authorized assessment" or the term "authorized" when
29		used in the context of assessments means a resolution by the
30		board of directors has been passed whereby an assessment may be
31		called immediately or in the future from member insurers for a
32		specified amount. An assessment is authorized when the
33		resolution is passed or, where the terms of the resolution
34		specify an effective date, on such effective date.

1		(5) "Benefit plan" means a plan for the provision of
2		pension, severance, health, or other benefits sponsored by one
3		or more specific employers, unions, or associations of natural
4		persons.
5		(6) "Board" or "board of directors" means the board of
6		directors of the Association.
7		(7) "Called assessment" or the term "called" when used in
8		the context of assessments means that a notice has been issued
9		by the Association to member insurers requiring that all or
10		part of an authorized assessment be paid at such time and
11		subject to such conditions as are set forth within the notice.
12		An authorized assessment becomes a called assessment when
13		notice is mailed by the Association to member insurers.
14		(8) "Certificates under group annuity contracts" is
15		defined in paragraph (2) of this Section.
16		(9) (4) "Contractual obligation" means any obligation
17		under a policy or contract or certificate under a group policy
18		or contract, or portion thereof for which coverage is provided
19		under Section 531.03.
20		(10) (5) "Covered person" means any person who is entitled
21		to the protection of the Association as described in Section
22		531.02.
23		(11) (6) "Covered policy" means any policy or contract or
24		portion of a policy or contract for which coverage is provided
25		within the scope of this Article under Section 531.03.
26		(12) "Director" means the Director of Insurance of this
27		State.
28		(13) "Extra-contractual claim" includes, for example,
29		claims relating to bad faith in the payment or adjudication of
30		claims, claims for punitive or exemplary damages or attorney's
31		fees and costs, and claims for breaches of statutory or
32		fiduciary duty.
33		(14) (7) "Impaired insurer" means a member insurer
34		determined deemed by the Director in a written notice to the
35		Association after the effective date of this Article to be
36		potentially unable to fulfill its contractual obligations and

1		not an insolvent insurer.
2		(15) (8) "Insolvent insurer" means (a) a member insurer
3		that is found to be either at the time the policy was issued or
4		when the insured event occurred, or any company which has
5		acquired such direct policy obligations through purchase,
6		merger, consolidation, reinsurance or otherwise, whether or
7		not such acquiring company held a certificate of authority to
8		transact insurance in this State at the time such policy was
9		issued or when the insured event occurred; and (b) becomes
10		insolvent, and is placed under a final order of liquidation,
11		rehabilitation, or conservation by a court of competent
12		jurisdiction.
13		(16) (9) "Member insurer" means any person licensed or that
14		who holds a certificate of authority to transact in this State
15		any kind of insurance business to which this Article applies
16		under Section 531.03. For purposes of this Article "member
17		insurer" includes any person whose certificate of authority may
18		have been suspended pursuant to Section 119, revoked,
19		voluntarily withdrawn, or not renewed subsequent to the date on
20		which a member insurer became an impaired insurer or an
21		insolvent insurer, whichever is earlier. "Member insurer" does
22		not include any of the following: .
23		(a) a mandatory State pooling plan;
24		(b) an insurance exchange;
25		(c) an organization (other than an insurer authorized
26		to transact business in this State) issuing charitable gift
27		annuities; or
28		(d) any entity similar to any of the above.
29		(17) (10) "Moody's Corporate Bond Yield Average" means the
30		Monthly Average Corporates as published by Moody's Investors
31		Service, Inc., or any successor thereto.
32		(18) "Owner" of a policy or contract and "policy owner" and
33		"contract owner" mean the person who is identified as the legal
34		owner under the terms of the policy or contract or who is
35		otherwise vested with legal title to the policy or contract
36		through a valid assignment completed in accordance with the

1		terms of the policy or contract and properly recorded as the
2		owner on the books of the insurer. The terms "owner", "contract
3		owner", and "policy owner" do not include persons with a mere
4		beneficial interest in a policy or contract.
5		(19) "Person" means any individual, corporation, trust,
6		limited liability company, partnership, association,
7		governmental body or entity, or voluntary organization.
8		(20) "Plan sponsor" means:
9		(a) the employer in the case of a benefit plan
10		established or maintained by a single employer;
11		(b) the employee organization in the case of a benefit
12		plan established or maintained by an employee
13		organization; or
14		(c) in a case of a benefit plan established or
15		maintained by 2 or more employers or jointly by one or more
16		employers and one or more employee organizations, the
17		association, committee, joint board of trustees, or other
18		similar group of representatives of the parties who
19		establish or maintain the benefit plan.
20		(21) (11) "Premiums" means direct gross insurance
21		premiums, or subscriptions, or and annuity considerations (by
22		whatever name called) received on covered policies or
23		contracts, less returned return premiums, and considerations,
24		and deposits thereon and less dividends and experience credits
25		paid or credited to policy or contract owners policyholders on
26		such direct business. "Premiums" do not include premiums and
27		considerations on contracts between insurers and reinsurers.
28		"Premiums" do not include any amounts or considerations
29		received for any policies or contracts or for the portions of
30		any policies or contracts for which coverage is not provided
31		under paragraph (2) of Section 531.03 except that assessable
32		premium shall not be reduced on account of subparagraph
33		(2)(b)(iii) of Section 531.03 relating to interest limitations
34		and subparagraph (3)(b) of Section 531.03 relating to
35		limitations with respect to any one life, any one individual,
36		any one participant, and any one policy or contract owner.

1		contractholder; provided that "Premiums" shall not include:
2		(a) any premiums in excess of $5,000,000 five million
3		dollars on any unallocated annuity contract not issued
4		under a governmental retirement benefit plan (or its
5		trustee) established under Sections 401, 403(b) or 457 of
6		the United States Internal Revenue Code; or .
7		(b) with respect to multiple non-group policies or
8		contracts of life insurance owned by one owner, whether the
9		policy or contract owner is an individual, firm,
10		corporation, or other person, and whether the persons
11		insured are officers, managers, employees, or other
12		persons, premiums in excess of $5,000,000 with respect to
13		these policies or contracts, regardless of the number of
14		policies or contracts held by the owner.
15		(12) "Person" means any individual, corporation,
16		partnership, association or voluntary organization.
17		(22) "Principal place of business" of a plan sponsor or a
18		person other than a natural person means the single state in
19		which the natural persons who establish policy for the
20		direction, control, and coordination of the operations of the
21		entity as a whole primarily exercise that function, determined
22		by the Association in its reasonable judgment by considering
23		the following factors:
24		(a) the state in which the primary executive and
25		administrative headquarters of the entity are located;
26		(b) the state in which the principal office of the
27		chief executive officer of the entity is located;
28		(c) the state in which the board of directors (or
29		similar governing person or persons) of the entity conducts
30		the majority of its meetings;
31		(d) the state in which the executive or management
32		committee of the board of directors (or similar governing
33		person or persons) of the entity conducts the majority of
34		its meetings;
35		(e) the state from which the management of the overall
36		operations of the entity is directed; and

1		(f) in the case of a benefit plan sponsored by
2		affiliated companies comprising a consolidated
3		corporation, the state in which the holding company or
4		controlling affiliate has its principal place of business
5		as determined using the above factors.
6		However, in the case of a plan sponsor, if more than 50% of
7		the participants in the benefit plan are employed in a single
8		state, that state shall be deemed to be the principal place of
9		business of the plan sponsor; except that the principal place
10		of business of a plan sponsor of a benefit plan described in
11		paragraph (20)(c) of this Section shall be deemed to be the
12		principal place of business of the association, committee,
13		joint board of trustees, or other similar group of
14		representatives of the parties who establish or maintain the
15		benefit plan; provided, however, that in the absence of a
16		specific or clear designation of such a principal place of
17		business, the principal place of business shall be deemed to be
18		the principal place of business of the employer or employee
19		organization that has the largest investment in the benefit
20		plan in question.
21		(23) "Receivership court" means the court in the insolvent
22		or impaired insurer's state of domicile having jurisdiction
23		over the conservation, rehabilitation, or liquidation of the
24		insurer.
25		(24) (13) "Resident" means any person to whom a contractual
26		obligation is owed and, except in the case of a contract owner
27		of an unallocated annuity contract issued to a benefit plan or
28		trustee of a benefit plan, who resides in this State on the
29		date the Director determines a member insurer to be an impaired
30		insurer or a court order determines a member insurer to be an
31		insolvent insurer, whichever occurs first. In the case of an
32		unallocated annuity contract issued to a benefit plan, or the
33		trustee of a benefit plan, the contract owner shall be a
34		"resident" of the state in which the principal place of
35		business of the plan sponsor was located on such date at the
36		time the insurer is determined to be impaired or insolvent and

1		to whom contractual obligations are owed. A person may be a
2		resident of only one state which, in the case of a person other
3		than a natural person, shall be its principal place of
4		business. Citizens of the United States that are either (i)
5		residents of foreign countries or (ii) residents of United
6		States possessions, territories, or protectorates that do not
7		have an association similar to the Association shall be deemed
8		residents of the state of domicile of the insurer that issued
9		the policies or contracts.
10		(25) "State" means a state, the District of Columbia,
11		Puerto Rico, and a United States possession, territory, or
12		protectorate.
13		(26) "Structured settlement annuity contract" means an
14		annuity contract purchased in order to fund periodic payments
15		for a plaintiff or other claimant in payment for or with
16		respect to personal injury suffered by the plaintiff or other
17		claimant.
18		(27) "Subaccount" means any of the 3 subaccounts of the
19		life insurance and annuity account created under subdivision
20		(1) of 531.06.
21		(28) (14)"Supplemental contract" means any written
22		agreement entered into for the distribution of proceeds under a
23		life, health, or annuity policy or contract proceeds.
24		(29) (15) "Unallocated annuity contract" means any annuity
25		contract or group annuity certificate which is not issued to
26		and owned by an individual, except to the extent of any annuity
27		benefits guaranteed to an individual by an insurer under such
28		contract or certificate.
29		(Source: P.A. 86-753.)
30		(215 ILCS 5/531.06) (from Ch. 73, par. 1065.80-6)
31		Sec. 531.06. Creation of the Association. There is created
32		a non-profit legal entity to be known as the Illinois Life and
33		Health Insurance Guaranty Association. All member insurers are
34		and must remain members of the Association as a condition of
35		their authority to transact insurance in this State. The

1		Association must perform its functions under the plan of
2		operation established and approved under Section 531.10 and
3		must exercise its powers through a board of directors
4		established under Section 531.07. For purposes of
5		administration and assessment, the Association must maintain 2
6		accounts:
7		(1) The life insurance and annuity account which includes
8		the following subaccounts:
9		(a) Life insurance account;
10		(b) Annuity account which shall include annuity contracts
11		owned by a governmental retirement plan (or its trustee)
12		established under Section 401, 403(b), or 457 of the United
13		States Internal Revenue Code, but shall otherwise exclude
14		unallocated annuity contracts; and
15		(c) Unallocated annuity account which shall exclude
16		contracts owned by a governmental retirement benefit plan (or
17		its trustee) established under Section 401, 403(b), or 457 of
18		the United States Internal Revenue Code include contracts
19		qualified under Section 403(b) of the United State Internal
20		Revenue Code.
21		(2) The health insurance account.
22		The Association shall be supervised by the Director and is
23		subject to the applicable provisions of the Illinois Insurance
24		Code.
25		(Source: P.A. 86-753.)
26		(215 ILCS 5/531.07) (from Ch. 73, par. 1065.80-7)
27		Sec. 531.07. Board of Directors.) The board of directors of
28		the Association consists of not less than 5 nor more than 9
29		members serving terms as established in the plan of operation.
30		The members of the board are to be selected by member insurers
31		subject to the approval of the Director. Vacancies on the board
32		must be filled for the remaining period of the term in the
33		manner described in the plan of operation. To select the
34		initial board of directors, and initially organize the
35		Association, the Director must give notice to all member

1		insurers of the time and place of the organizational meeting.
2		In determining voting rights at the organizational meeting each
3		member insurer is entitled to one vote in person or by proxy.
4		If the board of directors is not selected within 60 days after
5		notice of the organizational meeting, the Director may appoint
6		the initial members.
7		In approving selections or in appointing members to the
8		board, the Director must consider, whether all member insurers
9		are fairly represented.
10		Members of the board may be reimbursed from the assets of
11		the Association for expenses incurred by them as members of the
12		board of directors but members of the board may not otherwise
13		be compensated by the Association for their services.
14		(Source: P.A. 81-899.)
15		(215 ILCS 5/531.08) (from Ch. 73, par. 1065.80-8)
16		Sec. 531.08. Powers and duties of the Association. In
17		addition to the powers and duties enumerated in other Sections
18		of this Article:
19		(1) If an a domestic insurer is an impaired insurer,
20		the Association may, in its discretion and subject to any
21		conditions imposed by the Association other than those
22		which impair the contractual obligations of the impaired
23		insurer, and approval approved by the impaired insurer and
24		the Director:
25		(a) Guarantee, assume, or reinsure, or cause to be
26		guaranteed, assumed, or reinsured, any or all of the
27		covered policies of covered persons of the impaired
28		insurer;
29		(b) Provide such monies, pledges, notes,
30		guarantees, or other means as are proper to effectuate
31		subparagraph paragraph (1) (a), and assure payment of
32		the contractual obligations of the impaired insurer
33		pending action under subparagraph paragraph (1) (a). ;
34		(c) Loan money to the impaired insurer;
35		(2) If an a domestic, foreign, or alien insurer is an

1		insolvent insurer, the Association shall, in its
2		discretion, either subject to the approval of the Director;
3		(a)(i) Guarantee, assume, or reinsure or cause to
4		be guaranteed, assumed, or reinsured the covered
5		policies of covered persons of the insolvent insurer;
6		or
7		(ii) Otherwise assure Assure payment of the
8		contractual obligations of the insolvent insurer to
9		covered persons; and
10		(iii) Provide such monies, pledges, loans, notes,
11		guaranties, or other means as are reasonably necessary
12		to discharge such duties under subparagraphs (2)(a)(i)
13		and (2)(a)(ii); or
14		(b) Provide with respect to only life and health
15		insurance policies, provide benefits and coverages in
16		accordance with Section 531.08(3).
17		(c) Provided however that this paragraph
18		subsection (2) shall not apply when the Director has
19		determined that the foreign or alien insurer's
20		insurers domiciliary jurisdiction or state of entry
21		provides, by statute, protection substantially similar
22		to that provided by this Article for residents of this
23		State and such protection will be provided in a timely
24		manner.
25		(3) When proceeding under subparagraph (2)(b) of this
26		Section the Association shall, with respect to only life
27		and health insurance policies and annuity contracts:
28		(a) assure payment of benefits for premiums
29		identical to the premiums and benefits (except for
30		terms of conversion and renewability) that would have
31		been payable under the policies or contracts of the
32		insolvent insurer, for claims incurred:
33		(i) with respect to group policies and
34		contracts, not later than the earlier of the next
35		renewal date under such policies or contracts or 60
36		sixty days, but in no event less than 30 thirty

1		days, after the date on which the Association
2		becomes obligated with respect to such policies
3		and contracts;
4		(ii) with respect to individual and other
5		non-group policies and contracts, not later than
6		the earlier of the next renewal date (if any) under
7		such policies or contracts or one year, but in no
8		event less than 30 thirty days, from the date on
9		which the Association becomes obligated with
10		respect to such policies or contracts;
11		(b) make diligent efforts to provide all known
12		policy and contract owners 30 insureds or group
13		policyholders with respect to group policies thirty
14		days notice of the termination (pursuant to
15		subparagraph (3)(a)) of the benefits provided; and
16		(c) with respect to individual and other non-group
17		life and health policies and annuity contracts covered
18		by the Association, make available to each known
19		insured, or owner if other than the insured or
20		annuitant, and with respect to an individual formerly
21		insured or formerly an annuitant under a group policy
22		on contract who is not eligible for replacement group
23		coverage, make available substitute coverage on an
24		individual basis in accordance with the provisions of
25		subparagraph (3)(d) of this Section, if the insureds or
26		annuitants had a right under law or the terminated
27		policy or annuity contract to convert coverage to
28		individual coverage or to continue a an individual
29		non-group policy or annuity contract in force until a
30		specified age or for a specified time, during which the
31		insurer has no right unilaterally to make changes in
32		any provision of the policy or annuity contract or had
33		a right only to make changes in premium by class.
34		(d)(i) In providing the substitute coverage
35		required under subparagraph (3)(c) of this Section,
36		the Association may offer either to reissue the

1		terminated coverage or to issue an alternative policy
2		or contract.
3		(ii) Alternative or reissued policies or contracts
4		shall be offered without requiring evidence of
5		insurability, and shall not provide for any waiting
6		period or exclusion that would not have applied under
7		the terminated policy or contract.
8		(iii) The Association may cause reinsure any
9		alternative or reissued policy or contract to be
10		assumed or reinsured.
11		(e)(i) Alternative policies or contracts adopted
12		by the Association shall be subject to the approval of
13		either (A) the Director or (B) the domiciliary
14		commissioner and the receivership court. The
15		Association may adopt alternative policies or
16		contracts of various types for future issuance
17		insurance without regard to any particular impairment
18		or insolvency.
19		(ii) Alternative policies or contracts shall
20		contain at least the minimum statutory provisions
21		required in this State and provide benefits that shall
22		not be unreasonable in relation to the premium charged.
23		The Association shall set the premium in accordance
24		with a table of rates which it shall adopt. The premium
25		shall reflect the amount of insurance to be provided
26		and the age and class of risk of each insured, but
27		shall not reflect any changes in the health of the
28		insured after the original policy was last
29		underwritten.
30		(iii) Any alternative policy or contract issued by
31		the Association shall provide coverage of a type
32		similar to that of the policy or contract issued by the
33		impaired or insolvent insurer, as determined by the
34		Association.
35		(f) If the Association elects to reissue
36		terminated coverage at a premium rate different from

1		that charged under the terminated policy or contract,
2		the premium shall be set by the Association in
3		accordance with the amount of insurance provided and
4		the age and class of risk, subject to approval of
5		either (A) the Director or (B) by the domiciliary
6		commissioner and the receivership court by a court of
7		competent jurisdiction.
8		(g) The Association's obligations with respect to
9		coverage under any policy or contract of the impaired
10		or insolvent insurer or under any reissued or
11		alternative policy or contract shall cease on the date
12		such coverage or policy or contract is replaced by
13		another similar policy or contract by the policy owner
14		policyholder, the insured, or the Association.
15		(4) When proceeding under subparagraph (2)(b) of this
16		Section with respect to any policy or contract carrying
17		guaranteed minimum interest rates, the Association shall
18		assure the payment or crediting of a rate of interest
19		consistent with subparagraph (2)(b)(iii)(B) of Section
20		531.03.
21		(5) Nonpayment of premiums 31 thirty-one days after the
22		date required under the terms of any guaranteed, assumed,
23		alternative or reissued policy or contract or substitute
24		coverage shall terminate the Association's obligations
25		under such policy or contract or coverage under this
26		Article Act with respect to such policy or contract or
27		coverage, except with respect to any claims incurred or any
28		net cash surrender value which may be due in accordance
29		with the provisions of this Article Act.
30		(6) Premiums due for coverage after entry of an order
31		of liquidation of an insolvent insurer shall belong to and
32		be payable at the direction of the Association, and the
33		Association shall be liable for unearned premiums due to
34		policy or contract owners arising after the entry of such
35		order.
36		(7) The protection provided by this Article shall not

1		apply when any guaranty protection is provided to residents
2		of this State by the laws of the domicilary state or
3		jurisdiction of the impaired or insolvent insurer other
4		than this State.
5		(8) (7) (a) In carrying out its duties under paragraph
6		subsection (2) of this Section, the Association may
7		permanent policy liens, or contract liens, may be imposed
8		in connection with any guarantee, assumption or
9		reinsurance agreement, if the court:
10		(a) (i) subject to approval by the receivership
11		court or a court of competent jurisdiction is this
12		State, impose permanent policy or contract liens in
13		connection with a guarantee, assumption, or
14		reinsurance agreement, if the Association finds Finds
15		that the amounts which can be assessed under this
16		Article Act are less than the amounts needed to assure
17		full and prompt performance of the insolvent insurer's
18		contractual obligations, or that the economic or
19		financial conditions as they affect member insurers
20		are sufficiently adverse to render the imposition of
21		policy or contract liens, to be in the public interest;
22		and
23		(b) subject to approval by the receivership court
24		or a court of competent jurisdiction in this State,
25		impose temporary moratoriums or liens on payments of
26		cash values and policy loans, or any other right to
27		withdraw funds held in conjunction with policies or
28		contracts, in addition to any contractual provisions
29		for deferral of cash or policy or contract loan value.
30		In addition, in the event of a temporary moratorium or
31		moratorium charge imposed by the receivership court or
32		a court of competent jurisdiction in this State on
33		payment of cash values or policy or contract loans, or
34		on any other right to withdraw funds held in
35		conjunction with policies or contracts, out of the
36		assets of the impaired or insolvent insurer, the

1		Association may defer the payment of cash values,
2		policy or contract loans, or other rights by the
3		Association for the period of the moratorium or
4		moratorium charge imposed by the receivership court or
5		a court of competent jurisdiction in this State, except
6		for claims covered by the Association to be paid in
7		accordance with a hardship procedure (i) established
8		by the liquidator or rehabilitator and approved by the
9		receivership court or (ii) approved by a court of
10		competent jurisdiction in this State.
11		(ii) Approves the specific policy liens or
12		contract liens to be used.
13		(b) Before being obligated under subsection (2) the
14		Association may request that there be imposed temporary
15		moratoriums or liens on payments of cash values and policy
16		loans in addition to any contractual provisions for
17		deferral of cash or policy loan values, and such temporary
18		moratoriums and liens may be imposed if they are approved
19		by the court.
20		(9) A deposit in this State, held pursuant to law or
21		required by the Director for the benefit of creditors,
22		including policy and contract owners, not turned over to
23		the domiciliary liquidator upon the entry of a final order
24		of liquidation or order approving a rehabilitation plan of
25		an insurer domiciled in this State or in a reciprocal state
26		shall be promptly paid to the Association. The Association
27		(i) shall be entitled to retain a portion of any amount so
28		paid to it equal to the percentage determined by dividing
29		the aggregate amount of policy and contract owners' claims
30		related to that insolvency for which the Association has
31		provided statutory benefits by the aggregate amount of all
32		policy and contract owners' claims in this State related to
33		that insolvency and (ii) shall remit to the domiciliary
34		receiver the amount so paid to the Association, less the
35		amount retained pursuant to clause (i). Any amount so paid
36		to the Association and retained by it pursuant to clause

1		(i) shall be treated as a distribution of estate assets
2		pursuant to subsection (2) of Section 205 of this Code or
3		similar provision of the state of domicile of the impaired
4		or insolvent insurer.
5		(10) The Association may fulfill its obligations under
6		paragraph (2) of this Section by providing benefits in
7		connection with policies or contracts of the insolvent
8		insurer whose terms have been modified pursuant to an order
9		of the receivership court or a court of competent
10		jurisdiction in this State, provided that the economic
11		values and economic benefits of such modified policies or
12		contracts, after the Association has acted to fulfill its
13		obligations, are not materially less than the economic
14		values and economic benefits that covered persons would
15		have received after the Association had acted to fulfill
16		its obligations if the terms of such policies or contracts
17		had not been modified. In determining what economic values
18		and economic benefits covered persons would have received
19		after the Association had acted to fulfill its obligations
20		if the terms of the insolvent insurer's policies or
21		contracts had not been modified, the Association shall take
22		into account (i) the coverage limitations set forth in
23		paragraphs (2) and (3) of Section 531.03, (ii) any
24		substitute coverage that the Association would have
25		provided pursuant to paragraphs (3) and (22) of this
26		Section, and (iii) any permanent policy or contract liens
27		and any temporary moratoriums that would have been
28		necessary under paragraph (8) of this Section but for the
29		modifications in terms approved by the court.
30		(11) (8) There shall be no liability on the part of and
31		no cause of action shall arise against the Association or
32		against any transferee from the Association in connection
33		with the transfer by reinsurance or otherwise of all or any
34		part of an impaired or insolvent insurer's business by
35		reason of any action taken or any failure to take any
36		action by the impaired or insolvent insurer at any time.

1		(12) (9) If the Association fails to act within a
2		reasonable period of time with respect to an insolvent
3		insurer as provided in paragraph subsection (2) of this
4		Section with respect to an insolvent insurer, the Director
5		may assume shall have the powers and duties of the
6		Association under this Article Act with regard to the such
7		insolvent insurer insurers.
8		(13) (10) The Association or its designated
9		representatives may render assistance and advice to the
10		Director, upon his or her request, concerning
11		rehabilitation, payment of claims, continuations of
12		coverage, or the performance of other contractual
13		obligations of any impaired or insolvent insurer.
14		(14) The Association has standing to appear or
15		intervene before any court or agency with jurisdiction over
16		an impaired or insolvent insurer concerning which the
17		Association is or may become obligated under this Article,
18		or with jurisdiction over any person or property against
19		whom or which the Association may have rights through
20		subrogation or otherwise. Such standing extends to all
21		matters germane to the powers and duties of the Association
22		including, but not limited to, proposals for reinsuring,
23		modifying, or guaranteeing the policies or contracts of the
24		impaired or insolvent insurer and the determination of the
25		policies or contracts and contractual obligations.
26		(11) The Association has standing to appear before any
27		court concerning all matters germane to the powers and
28		duties of the Association, including, but not limited to,
29		proposals for reinsuring or guaranteeing the covered
30		policies of the impaired or insolvent insurer and the
31		determination of the covered policies and contractual
32		obligations.
33		(15) (12) (a) Any person receiving benefits under this
34		Article is deemed to have assigned the rights under , and
35		any causes of action against any person for losses arising
36		under, resulting from, or otherwise relating to the covered

1		policy or contract to the Association to the extent of the
2		benefits received because of this Article whether the
3		benefits are payments of contractual obligations, or
4		continuation of coverage, or provision of substitute
5		coverages. The Association may require an assignment to it
6		of such rights and causes of action by any payee, policy or
7		contract owner, beneficiary, insured, certificate holder,
8		or annuitant as a condition precedent to the receipt of any
9		rights or benefits conferred by this Article upon such
10		person. The Association is subrogated to these rights
11		against the assets of any insolvent insurer.
12		(b) The subrogation rights of the Association under
13		this subsection have the same priority against the assets
14		of the insolvent insurer as that possessed by the person
15		entitled to receive benefits under this Article. The
16		Association's subrogation rights against the assets of the
17		insolvent insurer shall not be reduced by any recoveries
18		from persons other than the estate of the insolvent insurer
19		obtained by the Association pursuant to assignment rights
20		provided under this subsection, except that the
21		Association's subrogation rights against the assets of the
22		insolvent insurer with respect to a covered policy or
23		contract shall be deemed fulfilled where any and all such
24		recoveries from third parties with respect to the covered
25		policy or contract, together with any distributions of
26		estate assets with respect to the covered policy or
27		contract, have made the Association whole, after
28		accounting for any and all legal fees and expenses
29		(including interest) incurred by the Association in
30		achieving such recoveries.
31		(c) In addition to the rights set forth in
32		subparagraphs (15)(a) and (b) of this Section, the
33		Association has all common law rights of subrogation and
34		any other equitable or legal remedy that would have been
35		available to the impaired or insolvent insurer or owner,
36		beneficiary, or payee of a policy or contract with respect

1		to the policy or contract (including without limitation, in
2		the case of a structured settlement annuity contract, any
3		rights of the owner, beneficiary, or payee of the annuity
4		contract, to the extent of benefits received pursuant to
5		this Article, against a person originally or by succession
6		responsible for the losses arising from the personal injury
7		relating to the annuity contract or payment therefor),
8		excepting any such person responsible by reason of serving
9		as an assignee in respect of a qualified assignment under
10		United States Internal Revenue Code Section 130.
11		(d) If subparagraph (a), (b), or (c) of this paragraph
12		is invalid or ineffective with respect to any person or
13		claim for any reason, the amount payable by the Association
14		with respect to the related covered obligations shall be
15		reduced by the amount realized by any other person with
16		respect to the person or claim that is attributable to the
17		policies and contracts (or portion thereof) covered by the
18		Association.
19		(e) If the Association has provided benefits with
20		respect to a covered obligation and a person recovers
21		amounts as to which the Association has rights as described
22		in subparagraph (a), (b), (c) or (d) of this paragraph, the
23		person shall pay to the Association the portion of the
24		recovery attributable to the policies and contracts (or
25		portion thereof) covered by the Association.
26		(16) (13) In addition to the rights and powers
27		elsewhere in this Article, the The Association may do any
28		of the following:
29		(a) Enter into such contracts as are necessary or
30		proper to carry out the provisions and purposes of this
31		Article. ;
32		(b) Sue or be sued, including taking any legal
33		actions necessary or proper for recovery of any unpaid
34		assessments under Section 531.09and to settle any
35		litigation, any threatened or potential litigation,
36		and any claims or potential claims by or against the

1		Association. The Association shall not be liable for
2		punitive or exemplary damages;
3		(c) Borrow money to effect the purposes of this
4		Article. Any notes or other evidence of indebtedness of
5		the Association not in default are legal investments
6		for domestic insurers and may be carried as admitted
7		assets.
8		(d) Employ or retain such persons as are necessary
9		or appropriate to handle the financial transactions of
10		the Association, and to perform such other functions as
11		become necessary or proper under this Article.
12		(e) Negotiate and contract with any liquidator,
13		rehabilitator, conservator, or ancillary receiver to
14		carry out the powers and duties of the Association.
15		(f) Take such legal action as may be necessary or
16		appropriate to avoid or recover payment of improper
17		claims.
18		(g) Exercise, for the purposes of this Article and
19		to the extent approved by the Director, the powers of a
20		domestic life or health insurer, but in no case may the
21		Association issue insurance policies or annuity
22		contracts other than those issued to perform the
23		contractual obligations of the impaired or insolvent
24		insurer.
25		(h) Exercise all the rights of the Director under
26		Section 193(4) of this Code with respect to covered
27		policies after the association becomes obligated by
28		statute.
29		(i) Request information from a person seeking
30		coverage from the Association in order to aid the
31		Association in determining its obligations under this
32		Article with respect to the person. The person shall
33		promptly comply with the request as a condition
34		precedent to the receipt of any right or benefit
35		conferred by this Article.
36		(j) Take other necessary or appropriate action to

1		discharge its duties and obligations under this
2		Article or to exercise its powers under this Article.
3		(17)(a) At any time within one year after the date on
4		which the Association becomes responsible for the
5		obligations of a member insurer (the coverage date), the
6		Association may elect to succeed to the rights and
7		obligations of the member insurer that accrue on or after
8		the coverage date and that relate to policies and contracts
9		covered (in whole or in part) by the Association under any
10		one or more indemnity reinsurance agreements entered into
11		by the member insurer as a ceding insurer and selected by
12		the Association. However, the Association may not exercise
13		an election with respect to a reinsurance agreement if the
14		receiver, rehabilitator, or liquidator of the member
15		insurer has previously and expressly disaffirmed the
16		reinsurance agreement. The election shall be effected by a
17		notice to the receiver, rehabilitator, or liquidator and to
18		the affected reinsurers. If the Association makes an
19		election, subparagraphs (i) through (iv) of this paragraph
20		shall apply with respect to the agreements selected by the
21		Association:
22		(i) The Association shall be responsible for all
23		unpaid premiums due under the agreements (for periods
24		both before and after the coverage date) and shall be
25		responsible for the performance of all other
26		obligations to be performed after the coverage date, in
27		each case which relate to policies and contracts
28		covered (in whole or in part) by the Association. The
29		Association may charge policies and contracts covered
30		in part by the Association, through reasonable
31		allocation methods, the costs for reinsurance in
32		excess of the obligations of the Association.
33		(ii) The Association shall be entitled to any
34		amounts payable by the reinsurer under the agreements
35		with respect to losses or events that occur in periods
36		after the coverage date and that relate to policies and

1		contracts covered by the Association (in whole or in
2		part), provided that, upon receipt of any such amounts,
3		the Association shall be obliged to pay to the
4		beneficiary under the policy or contract on account of
5		which the amounts were paid a portion of the amount
6		equal to the excess of:
7		(A) the amount received by the Association over
8		(B) the benefits paid by the Association on account
9		of the policy or contract less the retention of the
10		impaired or insolvent member insurer applicable to the
11		loss or event.
12		(iii) Within 30 days following the Association's
13		election, the Association and each indemnity reinsurer
14		shall calculate the net balance due to or from the
15		Association under each reinsurance agreement as of the
16		date of the Association's election, giving full credit
17		to all items paid by either the member insurer (or its
18		receiver, rehabilitator, or liquidator) or the
19		indemnity reinsurer during the period between the
20		coverage date and the date of the Association's
21		election. Either the Association or indemnity
22		reinsurer shall pay the net balance due the other
23		within 5 days after the completion of the calculation.
24		If the receiver, rehabilitator, or liquidator has
25		received any amounts due the Association pursuant to
26		subparagraph (17)(a)(ii), the receiver, rehabilitator,
27		or liquidator shall remit the same to the Association
28		as promptly as practicable.
29		(iv) If the Association, within 60 days of the
30		election, pays the premiums due for periods both before
31		and after the coverage date that relate to policies and
32		contracts covered by the Association (in whole or in
33		part), the reinsurer shall not be entitled to terminate
34		the reinsurance agreements insofar as such agreements
35		relate to policies and contracts covered by the
36		Association (in whole or in part) and shall not be

1		entitled to set off any unpaid premium due for periods
2		prior to the coverage date against amounts due the
3		Association.
4		(b) In the event the Association transfers its
5		obligations to another insurer, and if the Association and
6		the other insurer agree, the other insurer shall succeed to
7		the rights and obligations of the Association under
8		subparagraph (17)(a) of this Section effective as of the
9		date agreed upon by the Association and the other insurer
10		and regardless of whether the Association has made the
11		election referred to in subparagraph (17)(a) provided
12		that:
13		(i) the indemnity reinsurance agreements shall
14		automatically terminate for new reinsurance unless the
15		indemnity reinsurer and the other insurer agree to the
16		contrary;
17		(ii) the obligations described in the proviso to
18		subparagraph (17)(a)(ii) of this Section shall no
19		longer apply on and after the date the indemnity
20		reinsurance agreement is transferred to the third
21		party insurer; and
22		(iii) this subparagraph (17)(b) shall not apply if
23		the Association has previously expressly determined in
24		writing that it will not exercise the election referred
25		to in subparagraph (17)(a) of this Section.
26		(c) The provisions of this paragraph (17) shall
27		supersede the provisions of any law of this State or of any
28		affected reinsurance agreement that provides for or
29		requires any payment of reinsurance proceeds, on account of
30		losses or events that occur in periods after the coverage
31		date, to the receiver, liquidator, or rehabilitator of the
32		insolvent member insurer. The receiver, rehabilitator, or
33		liquidator shall remain entitled to any amounts payable by
34		the reinsurer under the reinsurance agreement with respect
35		to losses or events that occur in periods prior to the
36		coverage date (subject to applicable setoff provisions).

1		(d) Except as otherwise expressly provided in this
2		paragraph (17), nothing herein shall alter or modify the
3		terms and conditions of the indemnity reinsurance
4		agreements of the insolvent member insurer. Nothing herein
5		shall abrogate or limit any rights of any reinsurer to
6		claim that it is entitled to rescind a reinsurance
7		agreement.
8		Nothing herein shall give a policy or contract owner or
9		beneficiary an independent cause of action against an
10		indemnity reinsurer that is not otherwise set forth in the
11		indemnity reinsurance agreement.
12		(14) With respect to covered policies for which the
13		Association becomes obligated after an entry of an order of
14		liquidation or rehabilitation, the Association may elect
15		to succeed to the rights of the insolvent insurer arising
16		after the date of the order of liquidation or
17		rehabilitation under any contract of reinsurance to which
18		the insolvent insurer was a party, to the extent that such
19		contract provides coverage for losses occurring after the
20		date of the order of liquidation or rehabilitation. As a
21		condition to making this election, the Association must pay
22		all unpaid premiums due under the contract for coverage
23		relating to periods before and after the date of the order
24		of liquidation or rehabilitation.
25		(18) The Association may join an organization of one or
26		more other state associations of similar purposes to further
27		the purposes and administer the powers and duties of the
28		Association.
29		(19) The board of directors of the Association shall have
30		discretion and may exercise reasonable business judgment to
31		determine the means by which the Association is to provide the
32		benefits of this Article in an economical and efficient manner.
33		(20) Where the Association has arranged or offered to
34		provide the benefits of this Article to a covered person under
35		a plan or arrangement that fulfills the Association's
36		obligations under this Article, the person shall not be

1		entitled to benefits from the Association in addition to or
2		other than those provided under the plan or arrangement.
3		(21) Venue in a suit against the Association arising under
4		this Article shall be in Cook County. The Association shall not
5		be required to give an appeal bond in any case or proceeding
6		that arises from or is based in whole or in part on claims or
7		other rights asserted under this Article.
8		(22) In carrying out its duties in connection with
9		guaranteeing, assuming, or reinsuring policies or contracts
10		under this Section, the Association may, subject to approval of
11		the Director or the receivership court, issue substitute
12		coverage for a policy or contract that provides an interest
13		rate, crediting rate, or similar factor determined by use of an
14		index or other external reference stated in the policy or
15		contract employed in calculating returns or changes in value by
16		issuing an alternative policy or contract in accordance with
17		the following provisions:
18		(a) in lieu of the index or other external reference
19		provided for in the original policy or contract, the
20		alternative policy or contract provides for (i) a fixed
21		interest rate, (ii) payment of dividends with minimum
22		guarantees, or (iii) a different method for calculating
23		interest or changes in value;
24		(b) there is no requirement for evidence of
25		insurability, waiting period, or other exclusion that
26		would not have applied under the replaced policy or
27		contract; and
28		(c) the alternative policy or contract is
29		substantially similar to the replaced policy or contract in
30		all other material terms.
31		(Source: P.A. 93-326, eff. 1-1-04.)
32		(215 ILCS 5/531.09) (from Ch. 73, par. 1065.80-9)
33		Sec. 531.09. Assessments.
34		(1) For the purpose of providing the funds necessary to
35		carry out the powers and duties of the Association, the board

1		of directors shall assess the member insurers, separately for
2		each account and subaccount, at such times and for such amounts
3		as the board finds necessary. Assessments shall be due not less
4		than 30 days after written notice to the member insurers and
5		shall accrue interest from the due date the rate of 10% per
6		annum at such adjusted rate as is established under Section
7		6621 of Chapter 26 of the United States Code and such interest
8		shall be compounded daily.
9		(2) There shall be 2 classes of assessments, as follows:
10		(a) Class A assessments shall be authorized and called made
11		for the purpose of meeting administrative costs and other
12		general expenses and examinations conducted under the
13		authority of the Director under subsection (5) of Section
14		531.12. Class A assessments may be authorized and called
15		whether or not related to a particular impaired or insolvent
16		insurer.
17		(b) Class B assessments shall be authorized and called made
18		to the extent necessary to carry out the powers and duties of
19		the Association under Section 531.08 with regard to an impaired
20		or an insolvent domestic insurer or insolvent foreign or alien
21		insurers.
22		(3) (a) The amount of any Class A assessment shall be
23		determined by the board of directors Board and may be
24		authorized and called made on a pro-rata or non-pro rata basis.
25		With respect to any pro rata Class A assessment, the board may
26		provide that no member insurer shall be assessed less than $100
27		as its share of such assessment, notwithstanding that such
28		assessment is pro rata. The board may provide that any pro rata
29		assessment shall be credited against future Class B
30		assessments. The total of all non-pro rata Such assessments
31		shall be in an amount determined by the board, but shall not
32		exceed $500 $200 per company in any one calendar year. The
33		amount of any Class B assessment shall be allocated for
34		assessment purposes among the accounts and subaccounts
35		pursuant to an allocation formula which may be based on the
36		premiums or reserves of the impaired or insolvent insurer or

1		any other standard deemed by the board in its sole discretion
2		as being fair and reasonable under the circumstances.
3		(b) Class B assessments against member insurers for each
4		account and subaccount shall be in the proportion that the
5		premiums received on business in this State by each assessed
6		member insurer on policies or contracts covered by each account
7		or subaccount for the three most recent calendar years for
8		which information is available preceding the year in which the
9		insurer became impaired or insolvent, as the case may be, bears
10		to such premiums received on business in this State for such
11		calendar years by all assessed member insurers. To the extent
12		that any federal or state law prohibits or preempts the
13		Association from making assessments on the basis of any such
14		premiums, assessments under this subparagraph shall be made on
15		the basis of all such premiums not subject to any prohibitions
16		or preemption, and the assessment method set forth in this
17		subparagraph shall not be rendered invalid by any such
18		prohibitions or preemption.
19		(c) Assessments for funds to meet the requirements of the
20		Association with respect to an impaired or insolvent insurer
21		shall not be authorized or called made until the board in its
22		judgment determines that such authorization or call is
23		necessary to implement the purposes of this Article. When in
24		the judgment of the board an assessment will be necessary to
25		implement the purposes of this Article, the board may authorize
26		a future assessment, to become effective after a member insurer
27		has become an impaired or insolvent insurer, and such
28		assessment shall not be invalid because the member insurer was
29		not an impaired or insolvent insurer at the time the board
30		authorized such future assessment. Classification of
31		assessments under paragraph subsection (2) of this Section and
32		computations of assessments under this paragraph (3)
33		subsection shall be made with a reasonable degree of accuracy,
34		recognizing that exact determinations may not always be
35		possible. The Association shall notify each member insurer of
36		its anticipated pro rata share of an authorized assessment not

1		yet called within 180 days after the assessment is authorized.
2		(4) The Association may abate or defer, in whole or in
3		part, the assessment of a member insurer if, in the opinion of
4		the board, payment of the assessment would endanger the ability
5		of the member insurer to fulfill its contractual obligations.
6		In the event an assessment against a member insurer is abated
7		or deferred, in whole or in part, because of the limitations
8		set forth in this paragraph (4), the amount by which such
9		assessment is abated or deferred, may be assessed against the
10		other member insurers in a manner consistent with the basis for
11		assessments set forth in this Section 531.09. Once the
12		conditions that caused a deferral have been removed or
13		rectified, the member insurer shall pay all assessments that
14		were deferred pursuant to a repayment plan approved by the
15		Association The total of all assessments upon a member insurer
16		for the life and annuity account and for each subaccount
17		thereunder may not in any one calendar year exceed 2% and for
18		the health account may not in any one calendar year exceed 2%
19		of such insurer's average premiums received in this State on
20		the policies and contracts covered by the account or subaccount
21		during the three calendar years preceding the year in which the
22		insurer became an impaired or insolvent insurer. If a one
23		percent assessment for any subaccount of the life and annuity
24		account in any one year does not provide an amount sufficient
25		to carry out the responsibilities of the Association, then
26		pursuant to subsection 3(b), the board shall access all
27		subaccounts of the life and annuity account for the necessary
28		additional amount, subject to the maximum stated in this
29		subsection.
30		(5)(a)(i) Subject to the provisions of paragraph
31		(5)(a)(ii) of this Section, the total of all assessments upon a
32		member insurer for the life and annuity account and for each
33		subaccount thereunder may not in any one calendar year exceed
34		2%, and for the health account may not in any one calendar year
35		exceed 2%, of such insurer's average premiums received in this
36		State on the policies and contracts covered by the account or

1		subaccount during the 3 calendar years preceding the year in
2		which the insurer became an impaired or insolvent insurer.
3		(ii) If 2 or more assessments are authorized in one
4		calendar year with respect to insurers that become impaired
5		insurers or insolvent insurers in different calendar years, the
6		average annual premiums for purposes of the aggregate
7		assessment percentage limitation referenced in subparagraph
8		(5)(a)(i) of this Section shall be equal and limited to the
9		higher of the 3-year average annual premiums for the applicable
10		subaccount or account as calculated pursuant to this Section.
11		In the event an assessment against a member insurer is abated,
12		or deferred, in whole or in part, because of the limitations
13		set forth in subsection (4) of this Section the amount by which
14		such assessment is abated or deferred, may be assessed against
15		the other member insurers in a manner consistent with the basis
16		for assessments set forth in this Section.
17		(iii) If funds available from assessments, investment
18		income, recoveries of estate assets, or other recoveries are
19		insufficient to the maximum assessment, together with the other
20		assets of the Association in either account, does not provide
21		in any one year in either account an amount sufficient to carry
22		out the responsibilities of the Association, the necessary
23		additional funds may be assessed as soon thereafter as
24		permitted by this Article.
25		(iv) If the maximum assessment for any subaccount of the
26		life and annuity account in any one year does not provide an
27		amount sufficient to carry out the responsibilities of the
28		Association, then pursuant to subparagraph (3)(b) of this
29		Section 531.09, the board shall access all subaccounts of the
30		life and annuity account for the necessary additional amount,
31		subject to the maximum stated in this paragraph (5).
32		(6) The board may provide in the plan of operation a method
33		of allocating funds among claims, whether relating to one or
34		more impaired or insolvent insurers, when the maximum
35		assessment will be insufficient to cover anticipated claims.
36		(7) (6) The board may, by an equitable method as

1		established in the plan of operation, refund to member
2		insurers, in proportion to the contribution of each insurer to
3		that account, the amount by which the assets of the account
4		exceed the amount the board finds is necessary to carry out
5		during the coming year the obligations of the Association with
6		regard to that account, including assets accruing from
7		assignment, subrogation, net realized gains, and income from
8		investments. A reasonable amount may be retained in any account
9		to provide funds for the continuing expenses of the Association
10		and for future claims losses if refunds are impractical.
11		(8) (7) Unless otherwise determined by the board pursuant
12		to subdivision 531.09(3)(c), an assessment is deemed to occur
13		on the date upon which the board votes such assessment. The
14		board may defer calling the payment of the assessment or may
15		call for payment in one or more installments.
16		(9) (8) It is proper for any member insurer, in determining
17		its premium rates and policyowner dividends as to any kind of
18		insurance within the scope of this Article, to consider the
19		amount reasonably necessary to meet its assessment obligations
20		under this Article.
21		(10) (9) The Association must issue to each insurer paying
22		an a Class B assessment under this Article, other than a Class
23		A assessment, a certificate of contribution, in a form
24		acceptable to the Director, for the amount of the assessment so
25		paid. All outstanding certificates are of equal dignity and
26		priority without reference to amounts or dates of issue. A
27		certificate of contribution may be shown by the insurer in its
28		financial statement as an asset in such form and for such
29		amount, if any, and period of time as the Director may approve,
30		provided the insurer shall in any event at its option have the
31		right to show a certificate of contribution as an admitted
32		asset at percentages of the original face amount for calendar
33		years as follows:
34		100% for the calendar year after the year of issuance;
35		80% for the second calendar year after the year of
36		issuance;

1		60% for the third calendar year after the year of issuance;
2		40% for the fourth calendar year after the year of
3		issuance;
4		20% for the fifth calendar year after the year of issuance.
5		(11) The Association may request information from member
6		insurers in order to aid in the exercise of its power under
7		Section 531.09 and member insurers shall promptly comply with
8		such a request.
9		(Source: P.A. 86-753.)
10		(215 ILCS 5/531.10) (from Ch. 73, par. 1065.80-10)
11		Sec. 531.10. Plan of Operation.)
12		(1) (a) The Association must submit to the Director a plan
13		of operation and any amendments thereto necessary or suitable
14		to assure the fair, reasonable, and equitable administration of
15		the Association. The plan of operation and any amendments
16		thereto become effective upon approval in writing by the
17		Director.
18		(b) If the Association fails to submit a suitable plan of
19		operation within 180 days following the effective date of this
20		Article or if at any time thereafter the Association fails to
21		submit suitable amendments to the plan, the Director may, after
22		notice and hearing, adopt and promulgate such reasonable rules
23		as are necessary or advisable to effectuate the provisions of
24		this Article. Such rules are in force until modified by the
25		Director or superseded by a plan submitted by the Association
26		and approved by the Director.
27		(2) All member insurers must comply with the plan of
28		operation.
29		(3) The plan of operation must, in addition to requirements
30		enumerated elsewhere in this Article:
31		(a) Establish procedures for handling the assets of the
32		Association;
33		(b) Establish the amount and method of reimbursing members
34		of the board of directors under Section 531.07;
35		(c) Establish regular places and times for meetings,

1		including telephone conference calls, of the board of
2		directors;
3		(d) Establish procedures for records to be kept of all
4		financial transactions of the Association, its agents, and the
5		board of directors;
6		(e) Establish the procedures whereby selections for the
7		board of directors will be made and submitted to the Director;
8		(f) Establish any additional procedures for assessments
9		under Section 531.09; and
10		(g) Contain additional provisions necessary or proper for
11		the execution of the powers and duties of the Association.
12		(4) The plan of operation shall establish a procedure for
13		protest by any member insurer of assessments made by the
14		Association pursuant to Section 531.09. Such procedures shall
15		require that:
16		(a) Any member insurer that wishes to protest all or any
17		part of an assessment for any year shall first pay the full
18		amount of the assessment as set forth in the notice provided by
19		the Association. The payment shall be available and may be used
20		to meet Association obligations during the pendency of the
21		protest and any subsequent appeal. Such payments shall be
22		accompanied by a statement in writing that the payment is made
23		under protest, setting forth a brief statement of the ground
24		for the protest. The Association shall hold such payments in a
25		separate interest bearing account.
26		(b) Within 60 30 days following the payment of an
27		assessment under protest by any protesting member insurer, the
28		Association must notify the member insurer in writing of its
29		final decision determination with respect to the protest unless
30		the Association notifies the member that additional time is
31		required to resolve the issues raised by the protest.
32		(c) Within 30 days after a final decision has been made,
33		the Association shall notify the protesting member insurer in
34		writing of that final decision. In the event the Association
35		determines that the protesting member insurer is entitled to a
36		refund, such refund shall be made within 30 days following the

1		date upon which the Association makes its determination.
2		(d) The final decision of the Association with respect to a
3		protest may be appealed to the Director pursuant to Section
4		531.11(3).
5		(e) In the alternative to rendering a decision with respect
6		to any protest based on a question regarding the assessment
7		base, the Association may refer such protests to the Director
8		for final decision, with or without a recommendation from the
9		Association.
10		(f) In the event the Association determines, or on appeal
11		of the Association's decision it is determined, that the
12		protesting member insurer is entitled to a refund of all or a
13		portion of the amount paid under protest, such refund shall be
14		made to the protesting member insurer. Interest on any refund
15		due a protesting member insurer shall be paid at the rate
16		actually earned by the Association. Interest on any refund due
17		a protesting member insurer shall be paid at the rate actually
18		earned by the Association on the separate account.
19		(5) The plan of operation may provide that any or all
20		powers and duties of the Association, except those under
21		paragraph (c) of subsection (10) subdivision (16)(c) of Section
22		531.08 and Section 531.09 are delegated to a corporation,
23		association or other organization which performs or will
24		perform functions similar to those of this Association, or its
25		equivalent, in 2 or more states. Such a corporation,
26		association or organization shall be reimbursed for any
27		payments made on behalf of the Association and shall be paid
28		for its performance of any function of the Association. A
29		delegation under this subsection shall take effect only with
30		the approval of both the board of directors and the Director,
31		and may be made only to a corporation, association or
32		organization which extends protection not substantially less
33		favorable and effective than that provided by this Article Act.
34		(Source: P.A. 84-1035.)
35		(215 ILCS 5/531.11) (from Ch. 73, par. 1065.80-11)

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

1		seeking judicial review has not sought reconsideration or
2		rehearing by the Director.
3		(4) The liquidator, rehabilitator, or conservator of any
4		impaired insurer may notify all interested persons of the
5		effect of this Article.
6		(Source: P.A. 89-97, eff. 7-7-95.)
7		(215 ILCS 5/531.12) (from Ch. 73, par. 1065.80-12)
8		Sec. 531.12. Prevention of Insolvencies. To aid in the
9		detection and prevention of insurer insolvencies or
10		impairments:
11		(1) It shall be the duty of the Director:
12		(a) To notify the commissioners of all other states,
13		territories of the United States, and the District of Columbia
14		when he or she takes any of the following actions against a
15		member insurer:
16		(i) revocation of license;
17		(ii) suspension of license;
18		(iii) makes any formal order except for an order issued
19		pursuant to Article XII 1/2 of this Code that such company
20		restrict its premium writing, obtain additional contributions
21		to surplus, withdraw from the State, reinsure all or any part
22		of its business, or increase capital, surplus or any other
23		account for the security of policyholders or creditors.
24		Such notice shall be transmitted to all commissioners
25		within 30 days following the action taken or the date on which
26		the action occurs.
27		(b) To report to the board of directors when he or she has
28		taken any of the actions set forth in subparagraph (a) of this
29		paragraph or has received a report from any other commissioner
30		indicating that any such action has been taken in another
31		state. Such report to the board of directors shall contain all
32		significant details of the action taken or the report received
33		from another commissioner.
34		(2) The Director may seek the advice and recommendations of
35		the board of directors concerning any matter affecting the

1		Director's his duties and responsibilities regarding the
2		financial condition of member companies and companies seeking
3		admission to transact insurance business in this State.
4		(3) The board of directors may, upon majority vote, make
5		reports and recommendations to the Director upon any matter
6		germane to the liquidation, rehabilitation or conservation of
7		any member insurer. Such reports and recommendations shall not
8		be considered public documents.
9		(4) The board of directors may, upon majority vote, make
10		recommendations to the Director for the detection and
11		prevention of insurer insolvencies.
12		(5) The board of directors may shall, at the conclusion of
13		any insurer insolvency in which the Association was obligated
14		to pay covered claims prepare a report to the Director
15		containing such information as it may have in its possession
16		bearing on the history and causes of such insolvency. The board
17		shall cooperate with the boards of directors of guaranty
18		associations in other states in preparing a report on the
19		history and causes for insolvency of a particular insurer, and
20		may adopt by reference any report prepared by such other
21		associations.
22		(Source: P.A. 86-753.)
23		(215 ILCS 5/531.14) (from Ch. 73, par. 1065.80-14)
24		Sec. 531.14. Miscellaneous Provisions.) (1) Nothing in
25		this Article may be construed to reduce the liability for
26		unpaid assessments of the insured of an impaired or insolvent
27		insurer operating under a plan with assessment liability.
28		(2) No member insurer may voluntarily withdraw from this
29		State or liquidate its property, business, and affairs, and no
30		such voluntary withdrawal or voluntary liquidation shall be
31		effective, until such member insurer has paid all authorized
32		assessments, whether called or uncalled, for which it is liable
33		under this Article.
34		(3) (2) Records must be kept of all meetings of the board
35		of directors negotiations and meetings in which the Association

1		or its representatives are involved to discuss the activities
2		of the Association in carrying out its powers and duties under
3		Section 531.08. The records of the Association with respect to
4		an impaired or insolvent insurer may be made public only (a)
5		upon the order of the Director or a court of competent
6		jurisdiction or upon a determination by the board, and (b)
7		during the pendency Records of such negotiations or meetings
8		may be made public only upon the termination of a liquidation,
9		rehabilitation, or conservation proceeding involving the
10		impaired or insolvent insurer, upon a showing of compelling
11		circumstances the termination of the impairment or insolvency
12		of the insurer, or upon the order of a court of competent
13		jurisdiction. Nothing in this paragraph (3) (2) limits the duty
14		of the Association to render a report of its activities under
15		Section 531.15.
16		(4) (3) For the purpose of carrying out its obligations
17		under this Article, the Association is deemed to be a creditor
18		of the impaired or insolvent insurer to the extent of assets
19		attributable to covered policies reduced by any amounts to
20		which the Association is entitled as subrogee (under paragraph
21		(15) (8) of Section 531.08). All assets of the impaired or
22		insolvent insurer attributable to covered policies must be used
23		to continue all covered policies and pay all contractual
24		obligations of the impaired insurer as required by this
25		Article. "Assets attributable to covered policies", as used in
26		this paragraph (4) (3), is that proportion of the assets which
27		the reserves that should have been established for such
28		policies bear to the reserves reserve that should have been
29		established for all policies of insurance written by the
30		impaired or insolvent insurer.
31		(5) As a creditor of the impaired or insolvent insurer as
32		established in paragraph (4) of this Section 531.14 and
33		paragraph (15) of Section 531.08 and consistent with paragraph
34		(2) of Section 205 of the Code and similar provisions under the
35		laws of other states, the Association and other similar
36		associations shall be entitled to receive disbursements of

1		assets out of the marshaled assets from time to time as the
2		assets become available. If the liquidator has not, within 120
3		days of a final determination of insolvency of an insurer by
4		the receivership court, made an application to the court for
5		the approval of a proposal to disburse assets out of marshaled
6		assets to guaranty associations having obligations because of
7		the insolvency, then the Association shall be entitled to make
8		application to the receivership court for approval of its own
9		proposal to disburse these assets.
10		(6) (4) (a) Prior to the termination of any liquidation,
11		rehabilitation, or conservation proceeding, the court may take
12		into consideration the contributions of the respective
13		parties, including the Association, the shareholders and the
14		policy and contract owners policyowners of the impaired or
15		insolvent insurer, and any other party with a bona fide
16		interest, in making an equitable distribution of the ownership
17		rights of such impaired or insolvent insurer. In such a
18		determination, consideration must be given to the welfare of
19		the policy owners and contract owners policyholders of the
20		continuing or successor insurer.
21		(b) No distribution to stockholders, if any, of an impaired
22		or insolvent insurer may be made until and unless the total
23		amount of valid claims of the Association for funds expended in
24		carrying out its powers and duties under Section 531.08, with
25		respect to such insurer have been fully recovered by the
26		Association.
27		(7) (5) (a) If an order for liquidation or rehabilitation
28		of an insurer domiciled in this State has been entered, the
29		receiver appointed under such order has a right to recover on
30		behalf of the insurer, from any affiliate that controlled it,
31		the amount of distributions, other than stock dividends paid by
32		the insurer on its capital stock, made at any time during the 5
33		years preceding the petition for liquidation or rehabilitation
34		subject to the limitations of subparagraphs paragraphs (b) to
35		(d) of this paragraph (7).
36		(b) No such dividend is recoverable if the insurer shows

1		that when paid the distribution was lawful and reasonable, and
2		that the insurer did not know and could not reasonably have
3		known that the distribution might adversely affect the ability
4		of the insurer to fulfill its contractual obligations.
5		(c) Any person who was as an affiliate that controlled the
6		insurer at the time the distributions were paid is liable up to
7		the amount of distributions the person he received. Any person
8		who was an affiliate that controlled the insurer at the time
9		the distributions were declared, is liable up to the amount of
10		distributions the person he would have received if they had
11		been paid immediately. If 2 or more persons are liable with
12		respect to the same distributions, they are jointly and
13		severally liable.
14		(d) The maximum amount recoverable under this paragraph (7)
15		subsection (5) of this Section is the amount needed in excess
16		of all other available assets of the insolvent insurer to pay
17		the contractual obligations of the insolvent insurer.
18		(e) If any person liable under subparagraph paragraph (c)
19		of this paragraph (7) subsection (5) of this Section is
20		insolvent, all its affiliates that controlled it at the time
21		the dividend was paid are jointly and severally liable for any
22		resulting deficiency in the amount recovered from the insolvent
23		affiliate.
24		(Source: P.A. 81-899.)
25		(215 ILCS 5/531.15) (from Ch. 73, par. 1065.80-15)
26		Sec. 531.15. Examination of the Association. Annual
27		Report. The Association shall be subject to examination and
28		regulation by the Director. The board of directors must submit
29		to the Director, not later than the first day of the fifth
30		month following the end of the Association's fiscal year, a
31		financial report for such fiscal year in a form acceptable to
32		the Director and a report of its activities during such fiscal
33		year. Upon the request of a member insurer, the Association
34		shall provide the member with a copy of the report.
35		(Source: P.A. 86-753.)

1		(215 ILCS 5/531.17) (from Ch. 73, par. 1065.80-17)
2		Sec. 531.17. Immunity.) There is no liability on the part
3		of and no cause of action of any nature may arise against any
4		member insurer or its agents or employees, the Association or
5		its agents or employees, members of the board of directors or
6		their representatives or alternate representatives, or the
7		Director or the Director's his representatives, for any
8		decision or action taken or omission made by them in the
9		performance of their powers and duties under this Article.
10		Without limitation, the Association shall be immune from any
11		claim that any omission by the Association or any action of the
12		Association, taken separately or in concert with the Director
13		in any of his or her capacities, has caused loss or any other
14		injury to any impaired insurer or any insolvent insurer.
15		Immunity shall extend to the Association's participation in any
16		organization of one or more other state associations of similar
17		purposes and to any such organization and its agents or
18		employees.
19		(Source: P.A. 81-899.)
20		(215 ILCS 5/531.19) (from Ch. 73, par. 1065.80-19)
21		Sec. 531.19. Prohibited advertisement of action of the
22		Insurance Guaranty Association in sale of insurance.
23		(a) No person, including an insurer, agent or affiliate of
24		an insurer shall make, publish, disseminate, circulate, or
25		place before the public, or cause directly or indirectly, to be
26		made, published, disseminated, circulated or placed before the
27		public, in any newspaper, magazine or other publication, or in
28		the form of a notice, circular, pamphlet, letter or poster, or
29		over any radio station or television station, or in any other
30		way, any advertisement, announcement or statement, written or
31		oral, which uses the existence of the Insurance Guaranty
32		Association of this State for the purpose of sales,
33		solicitation or inducement to purchase any form of insurance
34		covered by this Article; provided, however, that this Section

1		shall not apply to the Illinois Life and Health Guaranty
2		Association or any other entity which does not sell or solicit
3		insurance.
4		(b) Within 180 days of August 16, 1993, the Association
5		shall prepare a summary document describing the general
6		purposes and current limitations of this Article and complying
7		with subsection (c). This document shall be submitted to the
8		Director for approval. Sixty days after receiving approval, no
9		insurer may deliver a policy or contract described in
10		subparagraph (2)(a) of paragraph (2) of Section 531.03 and not
11		excluded under subparagraph (2)(b) of that Section to a policy
12		or contract owner holder unless the document is delivered to
13		the policy or contract owner holder prior to or at the time of
14		delivery of the policy or contract. The document should also be
15		available upon request by a policy or contract owner
16		policyholder. The distribution, delivery, or contents or
17		interpretation of this document shall not mean that either the
18		policy or the contract or the holder thereof would be covered
19		in the event of the impairment or insolvency of a member
20		insurer. The description document shall be revised by the
21		Association as amendments to this Article may require. Failure
22		to receive this document does not give the policy or
23		policyholder, contract owner holder, certificate holder, or
24		insured any greater rights than those stated in this Article.
25		(c) The document prepared under subsection (b) shall
26		contain a clear and conspicuous disclaimer on its face. The
27		Director shall promulgate a rule establishing the form and
28		content of the disclaimer. The disclaimer shall:
29		(1) State the name and address of the Illinois Life and
30		Health Insurance Guaranty Association and of the
31		Department.
32		(2) Prominently warn the policy or contract owner
33		holder that the Illinois Life and Health Insurance Guaranty
34		Association may not cover the policy or contract or, if
35		coverage is available, it will be subject to substantial
36		limitations and exclusions and conditioned on continued

1		residence in the State.
2		(3) State that the insurer and its agents are
3		prohibited by law from using the existence of the Illinois
4		Life and Health Insurance Guaranty Association for the
5		purpose of sales, solicitation, or inducement to purchase
6		any form of insurance.
7		(4) Emphasize that the policy or contract owner holder
8		should not rely on coverage under the Illinois Life and
9		Health Insurance Guaranty Association Law when selecting
10		an insurer.
11		(5) Set forth the name, address, and a toll-free
12		telephone number of the insurer along with a statement that
13		the policy or contract owner should direct inquiries or
14		comments to the insurer at such address or telephone
15		number.
16		(6) (5) Provide other information as directed by the
17		Director.
18		(d) (Blank).
19		(Source: P.A. 88-364; 88-627, eff. 9-9-94; 89-97, eff. 7-7-95.)

Section 99. Effective date. This Act takes effect on January 1, 2005.