Illinois General Assembly - Full Text of HB4193
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Full Text of HB4193  99th General Assembly

HB4193 99TH GENERAL ASSEMBLY

  
  

 


 
99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
HB4193

 

Introduced , by Rep. Jim Durkin

 

SYNOPSIS AS INTRODUCED:
 
215 ILCS 5/121-2.08  from Ch. 73, par. 733-2.08
215 ILCS 5/412  from Ch. 73, par. 1024
215 ILCS 5/445  from Ch. 73, par. 1057

    Amends the Illinois Insurance Code. In the provision concerning transactions in the State involving industrial insureds' contracts of insurance, restores the language that was deleted by Public Act 98-978 and deletes the language that was added by Public Act 98-978. Deletes the references to the provision concerning transactions in the State involving industrial insureds' contracts of insurance that were added by Public Act 98-978. Deletes language in the definition of "home state" that was added by Public Act 98-978. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Insurance Code is amended by
5changing Sections 121-2.08, 412, and 445 as follows:
 
6    (215 ILCS 5/121-2.08)  (from Ch. 73, par. 733-2.08)
7    Sec. 121-2.08. Transactions in this State involving
8contracts of insurance issued to one or more independently
9procured directly from an unauthorized insurer by industrial
10insureds. For the purposes of this Section, "industrial
11insured" is an insured:
12    (a) which procures the insurance of any risk or risks other
13than life and annuity contracts by use of the services of a
14full-time employee acting as an insurance manager or buyer or
15the services of a regularly and continuously retained qualified
16insurance consultant;
17    (b) whose aggregate annual premiums for insurance on all
18risks, except for life and accident and health insurance, total
19at least $100,000; and
20    (c) which either (i) has at least 25 full-time employees,
21(ii) has gross assets in excess of $3,000,000, or (iii) has
22annual gross revenues in excess of $5,000,000.
23    (a) As used in this Section:

 

 

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1    "Exempt commercial purchaser" means exempt commercial
2purchaser as the term is defined in subsection (1) of Section
3445 of this Code.
4    "Home state" means home state as the term is defined in
5subsection (1) of Section 445 of this Code.
6    "Industrial insured" means an insured:
7        (i) that procures the insurance of any risk or risks of
8    the kinds specified in Classes 2 and 3 of Section 4 of this
9    Code by use of the services of a full-time employee who is
10    a qualified risk manager or the services of a regularly and
11    continuously retained consultant who is a qualified risk
12    manager;
13        (ii) that procures the insurance directly from an
14    unauthorized insurer without the services of an
15    intermediary insurance producer; and
16        (iii) that is an exempt commercial purchaser whose home
17    state is Illinois.
18    "Insurance producer" means insurance producer as the term
19is defined in Section 500-10 of this Code.
20    "Qualified risk manager" means qualified risk manager as
21the term is defined in subsection (1) of Section 445 of this
22Code.
23    "Unauthorized insurer" means unauthorized insurer as the
24term is defined in subsection (1) of Section 445 of this Code.
25    (b) For contracts of insurance effective January 1, 2015 or
26later, within 90 days after the effective date of each contract

 

 

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

 

 

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1countersignature fee from the amount of premium charged by and
2otherwise payable to the insurer for the insurance. If the
3insured fails to withhold the tax and countersignature fee from
4the premium, then the insured shall be liable for the amounts
5thereof and shall pay the amounts as prescribed in subsection
6(c) of this Section.
7(Source: P.A. 98-978, eff. 1-1-15.)
 
8    (215 ILCS 5/412)  (from Ch. 73, par. 1024)
9    Sec. 412. Refunds; penalties; collection.
10    (1)(a) Whenever it appears to the satisfaction of the
11Director that because of some mistake of fact, error in
12calculation, or erroneous interpretation of a statute of this
13or any other state, any authorized company or , surplus line
14producer, or industrial insured has paid to him, pursuant to
15any provision of law, taxes, fees, or other charges in excess
16of the amount legally chargeable against it, during the 6 year
17period immediately preceding the discovery of such
18overpayment, he shall have power to refund to such company or ,
19surplus line producer, or industrial insured the amount of the
20excess or excesses by applying the amount or amounts thereof
21toward the payment of taxes, fees, or other charges already
22due, or which may thereafter become due from that company until
23such excess or excesses have been fully refunded, or upon a
24written request from the authorized company, surplus line
25producer, or industrial insured, the Director shall provide a

 

 

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1cash refund within 120 days after receipt of the written
2request if all necessary information has been filed with the
3Department in order for it to perform an audit of the tax
4report for the transaction or period or annual return for the
5year in which the overpayment occurred or within 120 days after
6the date the Department receives all the necessary information
7to perform such audit. The Director shall not provide a cash
8refund if there are insufficient funds in the Insurance Premium
9Tax Refund Fund to provide a cash refund, if the amount of the
10overpayment is less than $100, or if the amount of the
11overpayment can be fully offset against the taxpayer's
12estimated liability for the year following the year of the cash
13refund request. Any cash refund shall be paid from the
14Insurance Premium Tax Refund Fund, a special fund hereby
15created in the State treasury.
16    (b) Beginning January 1, 2000 and thereafter, the
17Department shall deposit a percentage of the amounts collected
18under Sections 409, 444, and 444.1 of this Code into the
19Insurance Premium Tax Refund Fund. The percentage deposited
20into the Insurance Premium Tax Refund Fund shall be the annual
21percentage. The annual percentage shall be calculated as a
22fraction, the numerator of which shall be the amount of cash
23refunds approved by the Director for payment and paid during
24the preceding calendar year as a result of overpayment of tax
25liability under Sections 121-2.08, 409, 444, 444.1, and 445 of
26this Code and the denominator of which shall be the amounts

 

 

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1collected pursuant to Sections 121-2.08, 409, 444, 444.1, and
2445 of this Code during the preceding calendar year. However,
3if there were no cash refunds paid in a preceding calendar
4year, the Department shall deposit 5% of the amount collected
5in that preceding calendar year pursuant to Sections 121-2.08,
6409, 444, 444.1, and 445 of this Code into the Insurance
7Premium Tax Refund Fund instead of an amount calculated by
8using the annual percentage.
9    (c) Beginning July 1, 1999, moneys in the Insurance Premium
10Tax Refund Fund shall be expended exclusively for the purpose
11of paying cash refunds resulting from overpayment of tax
12liability under Sections 121-2.08, 409, 444, 444.1, and 445 of
13this Code as determined by the Director pursuant to subsection
141(a) of this Section. Cash refunds made in accordance with this
15Section may be made from the Insurance Premium Tax Refund Fund
16only to the extent that amounts have been deposited and
17retained in the Insurance Premium Tax Refund Fund.
18    (d) This Section shall constitute an irrevocable and
19continuing appropriation from the Insurance Premium Tax Refund
20Fund for the purpose of paying cash refunds pursuant to the
21provisions of this Section.
22    (2)(a) When any insurance company fails to file any tax
23return required under Sections 408.1, 409, 444, and 444.1 of
24this Code or Section 12 of the Fire Investigation Act on the
25date prescribed, including any extensions, there shall be added
26as a penalty $400 or 10% of the amount of such tax, whichever

 

 

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1is greater, for each month or part of a month of failure to
2file, the entire penalty not to exceed $2,000 or 50% of the tax
3due, whichever is greater.
4    (b) When any industrial insured or surplus line producer
5fails to file any tax return or report required under Section
6Sections 121-2.08 and 445 of this Code or Section 12 of the
7Fire Investigation Act on the date prescribed, including any
8extensions, there shall be added:
9        (i) as a late fee, if the return or report is received
10    at least one day but not more than 7 days after the
11    prescribed due date, $400 or 10% of the tax due, whichever
12    is greater, the entire fee not to exceed $1,000;
13        (ii) as a late fee, if the return or report is received
14    at least 8 days but not more than 14 days after the
15    prescribed due date, $400 or 10% of the tax due, whichever
16    is greater, the entire fee not to exceed $1,500;
17        (iii) as a late fee, if the return or report is
18    received at least 15 days but not more than 21 days after
19    the prescribed due date, $400 or 10% of the tax due,
20    whichever is greater, the entire fee not to exceed $2,000;
21    or
22        (iv) as a penalty, if the return or report is received
23    more than 21 days after the prescribed due date, $400 or
24    10% of the tax due, whichever is greater, for each month or
25    part of a month of failure to file, the entire penalty not
26    to exceed $2,000 or 50% of the tax due, whichever is

 

 

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1    greater.
2    A tax return or report shall be deemed received as of the
3date mailed as evidenced by a postmark, proof of mailing on a
4recognized United States Postal Service form or a form
5acceptable to the United States Postal Service or other
6commercial mail delivery service, or other evidence acceptable
7to the Director.
8    (3)(a) When any insurance company fails to pay the full
9amount due under the provisions of this Section, Sections
10408.1, 409, 444, or 444.1 of this Code, or Section 12 of the
11Fire Investigation Act, there shall be added to the amount due
12as a penalty an amount equal to 10% of the deficiency.
13    (a-5) When any industrial insured or surplus line producer
14fails to pay the full amount due under the provisions of this
15Section, Sections 121-2.08 or Section 445 of this Code, or
16Section 12 of the Fire Investigation Act on the date
17prescribed, there shall be added:
18        (i) as a late fee, if the payment is received at least
19    one day but not more than 7 days after the prescribed due
20    date, 10% of the tax due, the entire fee not to exceed
21    $1,000;
22        (ii) as a late fee, if the payment is received at least
23    8 days but not more than 14 days after the prescribed due
24    date, 10% of the tax due, the entire fee not to exceed
25    $1,500;
26        (iii) as a late fee, if the payment is received at

 

 

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1    least 15 days but not more than 21 days after the
2    prescribed due date, 10% of the tax due, the entire fee not
3    to exceed $2,000; or
4        (iv) as a penalty, if the return or report is received
5    more than 21 days after the prescribed due date, 10% of the
6    tax due.
7    A tax payment shall be deemed received as of the date
8mailed as evidenced by a postmark, proof of mailing on a
9recognized United States Postal Service form or a form
10acceptable to the United States Postal Service or other
11commercial mail delivery service, or other evidence acceptable
12to the Director.
13    (b) If such failure to pay is determined by the Director to
14be wilful, after a hearing under Sections 402 and 403, there
15shall be added to the tax as a penalty an amount equal to the
16greater of 50% of the deficiency or 10% of the amount due and
17unpaid for each month or part of a month that the deficiency
18remains unpaid commencing with the date that the amount becomes
19due. Such amount shall be in lieu of any determined under
20paragraph (a) or (a-5).
21    (4) Any insurance company, industrial insured, or surplus
22line producer that fails to pay the full amount due under this
23Section or Sections 121-2.08, 408.1, 409, 444, 444.1, or 445 of
24this Code, or Section 12 of the Fire Investigation Act is
25liable, in addition to the tax and any late fees and penalties,
26for interest on such deficiency at the rate of 12% per annum,

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1county in which the property subject to the lien is located.
2For purposes of this Section, "bona fide" shall not include any
3mortgage of real or personal property or any other credit
4transaction that results in the mortgagee or the holder of the
5security acting as trustee for unsecured creditors of the
6company or person mentioned in the notice of lien who executed
7such chattel or real property mortgage or the document
8evidencing such credit transaction. The lien shall be inferior
9to the lien of general taxes, special assessments, and special
10taxes levied by any political subdivision of this State. In
11case title to land to be affected by the notice of lien or
12notice of jeopardy assessment lien is registered under the
13provisions of the Registered Titles (Torrens) Act, such notice
14shall be filed in the office of the Registrar of Titles of the
15county within which the property subject to the lien is
16situated and shall be entered upon the register of titles as a
17memorial or charge upon each folium of the register of titles
18affected by such notice, and the Department shall not have a
19preference over the rights of any bona fide purchaser,
20mortgagee, judgment creditor, or other lienholder arising
21prior to the registration of such notice. The regular lien or
22jeopardy assessment lien shall not be effective against any
23purchaser with respect to any item in a retailer's stock in
24trade purchased from the retailer in the usual course of the
25retailer's business.
26(Source: P.A. 98-158, eff. 8-2-13; 98-978, eff. 1-1-15.)
 

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1    this Section.
2        (b) Licensed surplus line producers may procure
3    surplus line insurance from an unauthorized insurer
4    domiciled in the United States only if the insurer:
5            (i) is permitted in its domiciliary jurisdiction
6        to write the type of insurance involved; and
7             (ii) has, based upon information available to the
8        surplus line producer, a policyholders surplus of not
9        less than $15,000,000 determined in accordance with
10        the laws of its domiciliary jurisdiction; and
11             (iii) has standards of solvency and management
12        that are adequate for the protection of policyholders.
13         Where an unauthorized insurer does not meet the
14    standards set forth in (ii) and (iii) above, a surplus line
15    producer may, if necessary, procure insurance from that
16    insurer only if prior written warning of such fact or
17    condition is given to the insured by the insurance producer
18    or surplus line producer.
19        (c) Licensed surplus line producers may procure
20    surplus line insurance from an unauthorized insurer
21    domiciled outside of the United States only if the insurer
22    meets the standards for unauthorized insurers domiciled in
23    the United States in paragraph (b) of this subsection (1.5)
24    or is listed on the Quarterly Listing of Alien Insurers
25    maintained by the International Insurers Department of the
26    NAIC. The Director shall make the Quarterly Listing of

 

 

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1    Alien Insurers available to surplus line producers without
2    charge.
3        (d) Insurance producers shall not procure from an
4    unauthorized insurer an insurance policy:
5            (i) that is designed to satisfy the proof of
6        financial responsibility and insurance requirements in
7        any Illinois law where the law requires that the proof
8        of insurance is issued by an authorized insurer or
9        residual market mechanism;
10            (ii) that covers the risk of accidental injury to
11        employees arising out of and in the course of
12        employment according to the provisions of the Workers'
13        Compensation Act; or
14            (iii) that insures any Illinois personal lines
15        risk, as defined in subsection (a), (b), or (c) of
16        Section 143.13 of this Code, that is eligible for
17        residual market mechanism coverage, unless the insured
18        or prospective insured requests limits of liability
19        greater than the limits provided by the residual market
20        mechanism. In the course of making a diligent effort to
21        procure insurance from authorized insurers, an
22        insurance producer shall not be required to submit a
23        risk to a residual market mechanism when the risk is
24        not eligible for coverage or exceeds the limits
25        available in the residual market mechanism.
26        Where there is an insurance policy issued by an

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1This contract is issued by a domestic surplus line insurer, as
2defined in Section 445a of the Illinois Insurance Code,
3pursuant to Section 445, and as such is not covered by the
4Illinois Insurance Guaranty Fund."
5    (11) The Illinois Surplus Line law does not apply to
6insurance of property and operations of railroads or aircraft
7engaged in interstate or foreign commerce, insurance of
8vessels, crafts or hulls, cargoes, marine builder's risks,
9marine protection and indemnity, or other risks including
10strikes and war risks insured under ocean or wet marine forms
11of policies.
12    (12) Surplus line insurance procured under this Section,
13including insurance procured from a domestic surplus line
14insurer, is not subject to the provisions of the Illinois
15Insurance Code other than Sections 123, 123.1, 401, 401.1, 402,
16403, 403A, 408, 412, 445, 445.1, 445.2, 445.3, 445.4, and all
17of the provisions of Article XXXI to the extent that the
18provisions of Article XXXI are not inconsistent with the terms
19of this Act.
20(Source: P.A. 97-955, eff. 8-14-12; 98-978, eff. 1-1-15.)
 
21    Section 99. Effective date. This Act takes effect upon
22becoming law.