Illinois General Assembly - Full Text of SB1753
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Full Text of SB1753  102nd General Assembly

SB1753sam001 102ND GENERAL ASSEMBLY

Sen. Michael E. Hastings

Filed: 3/16/2021

 

 


 

 


 
10200SB1753sam001LRB102 10455 BMS 23322 a

1
AMENDMENT TO SENATE BILL 1753

2    AMENDMENT NO. ______. Amend Senate Bill 1753 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Insurance Code is amended by
5changing Sections 412, 445, 445.1, 445.2, and 445.3 as
6follows:
 
7    (215 ILCS 5/412)  (from Ch. 73, par. 1024)
8    Sec. 412. Refunds; penalties; collection.
9    (1)(a) Whenever it appears to the satisfaction of the
10Director that because of some mistake of fact, error in
11calculation, or erroneous interpretation of a statute of this
12or any other state, any authorized company, surplus line
13producer, or industrial insured has paid to him, pursuant to
14any provision of law, taxes, fees, or other charges in excess
15of the amount legally chargeable against it, during the 6 year
16period immediately preceding the discovery of such

 

 

10200SB1753sam001- 2 -LRB102 10455 BMS 23322 a

1overpayment, he shall have power to refund to such company,
2surplus line producer, or industrial insured the amount of the
3excess or excesses by applying the amount or amounts thereof
4toward the payment of taxes, fees, or other charges already
5due, or which may thereafter become due from that company
6until such excess or excesses have been fully refunded, or
7upon a written request from the authorized company, surplus
8line producer, or industrial insured, the Director shall
9provide a cash refund within 120 days after receipt of the
10written request if all necessary information has been filed
11with the Department in order for it to perform an audit of the
12tax report for the transaction or period or annual return for
13the year in which the overpayment occurred or within 120 days
14after the date the Department receives all the necessary
15information to perform such audit. The Director shall not
16provide a cash refund if there are insufficient funds in the
17Insurance Premium Tax Refund Fund to provide a cash refund, if
18the amount of the overpayment is less than $100, or if the
19amount of the overpayment can be fully offset against the
20taxpayer's estimated liability for the year following the year
21of the cash refund request. Any cash refund shall be paid from
22the Insurance Premium Tax Refund Fund, a special fund hereby
23created in the State treasury.
24    (b) Beginning January 1, 2000 and thereafter, the
25Department shall deposit a percentage of the amounts collected
26under Sections 409, 444, and 444.1 of this Code into the

 

 

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1Insurance Premium Tax Refund Fund. The percentage deposited
2into the Insurance Premium Tax Refund Fund shall be the annual
3percentage. The annual percentage shall be calculated as a
4fraction, the numerator of which shall be the amount of cash
5refunds approved by the Director for payment and paid during
6the preceding calendar year as a result of overpayment of tax
7liability under Sections 121-2.08, 409, 444, 444.1, and 445 of
8this Code and the denominator of which shall be the amounts
9collected pursuant to Sections 121-2.08, 409, 444, 444.1, and
10445 of this Code during the preceding calendar year. However,
11if there were no cash refunds paid in a preceding calendar
12year, the Department shall deposit 5% of the amount collected
13in that preceding calendar year pursuant to Sections 121-2.08,
14409, 444, 444.1, and 445 of this Code into the Insurance
15Premium Tax Refund Fund instead of an amount calculated by
16using the annual percentage.
17    (c) Beginning July 1, 1999, moneys in the Insurance
18Premium Tax Refund Fund shall be expended exclusively for the
19purpose of paying cash refunds resulting from overpayment of
20tax liability under Sections 121-2.08, 409, 444, 444.1, and
21445 of this Code as determined by the Director pursuant to
22subsection 1(a) of this Section. Cash refunds made in
23accordance with this Section may be made from the Insurance
24Premium Tax Refund Fund only to the extent that amounts have
25been deposited and retained in the Insurance Premium Tax
26Refund Fund.

 

 

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1    (d) This Section shall constitute an irrevocable and
2continuing appropriation from the Insurance Premium Tax Refund
3Fund for the purpose of paying cash refunds pursuant to the
4provisions of this Section.
5    (2)(a) When any insurance company fails to file any tax
6return required under Sections 408.1, 409, 444, and 444.1 of
7this Code or Section 12 of the Fire Investigation Act on the
8date prescribed, including any extensions, there shall be
9added as a penalty $400 or 10% of the amount of such tax,
10whichever is greater, for each month or part of a month of
11failure to file, the entire penalty not to exceed $2,000 or 50%
12of the tax due, whichever is greater.
13    (b) When any industrial insured or surplus line producer
14fails to file any tax return or report required under Sections
15121-2.08 and 445 of this Code or Section 12 of the Fire
16Investigation Act on the date prescribed, including any
17extensions, there shall be added:
18        (i) as a late fee, if the return or report is received
19    at least one day but not more than 7 days after the
20    prescribed due date, $400 or 10% of the tax due, whichever
21    is greater, the entire fee not to exceed $1,000;
22        (ii) as a late fee, if the return or report is received
23    at least 8 days but not more than 14 days after the
24    prescribed due date, $400 or 10% of the tax due, whichever
25    is greater, the entire fee not to exceed $1,500;
26        (iii) as a late fee, if the return or report is

 

 

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1    received at least 15 days but not more than 21 days after
2    the prescribed due date, $400 or 10% of the tax due,
3    whichever is greater, the entire fee not to exceed $2,000;
4    or
5        (iv) as a penalty, if the return or report is received
6    more than 21 days after the prescribed due date, $400 or
7    10% of the tax due, whichever is greater, for each month or
8    part of a month of failure to file, the entire penalty not
9    to exceed $2,000 or 50% of the tax due, whichever is
10    greater.
11    A tax return or report shall be deemed received as of the
12date mailed as evidenced by a postmark, proof of mailing on a
13recognized United States Postal Service form or a form
14acceptable to the United States Postal Service or other
15commercial mail delivery service, or other evidence acceptable
16to the Director. Whenever it appears to the satisfaction of
17the Director that the circumstances of a late filing warrant a
18reduction or waiver of the fees or penalties in paragraph (b)
19of this subsection (2), the fees or penalties may be reduced or
20waived at the discretion of the Director.
21    (3)(a) When any insurance company fails to pay the full
22amount due under the provisions of this Section, Sections
23408.1, 409, 444, or 444.1 of this Code, or Section 12 of the
24Fire Investigation Act, there shall be added to the amount due
25as a penalty an amount equal to 10% of the deficiency.
26    (a-5) When any industrial insured or surplus line producer

 

 

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

 

 

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1a reduction or waiver of the fees or penalties in this
2paragraph, the fees or penalties may be reduced or waived at
3the discretion of the Director.
4    (b) If such failure to pay is determined by the Director to
5be willful wilful, after a hearing under Sections 402 and 403,
6there shall be added to the tax as a penalty an amount equal to
7the greater of 50% of the deficiency or 10% of the amount due
8and unpaid for each month or part of a month that the
9deficiency remains unpaid commencing with the date that the
10amount becomes due. Such amount shall be in lieu of any
11determined under paragraph (a) or (a-5).
12    (4) Any insurance company, industrial insured, or surplus
13line producer that fails to pay the full amount due under this
14Section or Sections 121-2.08, 408.1, 409, 444, 444.1, or 445
15of this Code, or Section 12 of the Fire Investigation Act is
16liable, in addition to the tax and any late fees and penalties,
17for interest on such deficiency at the rate of 12% per annum,
18or at such higher adjusted rates as are or may be established
19under subsection (b) of Section 6621 of the Internal Revenue
20Code, from the date that payment of any such tax was due,
21determined without regard to any extensions, to the date of
22payment of such amount.
23    (5) The Director, through the Attorney General, may
24institute an action in the name of the People of the State of
25Illinois, in any court of competent jurisdiction, for the
26recovery of the amount of such taxes, fees, and penalties due,

 

 

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1and prosecute the same to final judgment, and take such steps
2as are necessary to collect the same.
3    (6) In the event that the certificate of authority of a
4foreign or alien company is revoked for any cause or the
5company withdraws from this State prior to the renewal date of
6the certificate of authority as provided in Section 114, the
7company may recover the amount of any such tax paid in advance.
8Except as provided in this subsection, no revocation or
9withdrawal excuses payment of or constitutes grounds for the
10recovery of any taxes or penalties imposed by this Code.
11    (7) When an insurance company or domestic affiliated group
12fails to pay the full amount of any fee of $200 or more due
13under Section 408 of this Code, there shall be added to the
14amount due as a penalty the greater of $100 or an amount equal
15to 10% of the deficiency for each month or part of a month that
16the deficiency remains unpaid.
17    (8) The Department shall have a lien for the taxes, fees,
18charges, fines, penalties, interest, other charges, or any
19portion thereof, imposed or assessed pursuant to this Code,
20upon all the real and personal property of any company or
21person to whom the assessment or final order has been issued or
22whenever a tax return is filed without payment of the tax or
23penalty shown therein to be due, including all such property
24of the company or person acquired after receipt of the
25assessment, issuance of the order, or filing of the return.
26The company or person is liable for the filing fee incurred by

 

 

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

 

 

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1instituted. Where the lien results from the filing of a tax
2return without payment of the tax or penalty shown therein to
3be due, the lien shall terminate, unless a notice of lien is
4filed, within 3 years after the date when the return is filed
5with the Department.
6    The time limitation period on the Department's right to
7file a notice of lien shall not run during any period of time
8in which the order of any court has the effect of enjoining or
9restraining the Department from filing such notice of lien. If
10the Department finds that a company or person is about to
11depart from the State, to conceal himself or his property, or
12to do any other act tending to prejudice or to render wholly or
13partly ineffectual proceedings to collect the amount due and
14owing to the Department unless such proceedings are brought
15without delay, or if the Department finds that the collection
16of the amount due from any company or person will be
17jeopardized by delay, the Department shall give the company or
18person notice of such findings and shall make demand for
19immediate return and payment of the amount, whereupon the
20amount shall become immediately due and payable. If the
21company or person, within 5 days after the notice (or within
22such extension of time as the Department may grant), does not
23comply with the notice or show to the Department that the
24findings in the notice are erroneous, the Department may file
25a notice of jeopardy assessment lien in the office of the
26recorder of the county in which any property of the company or

 

 

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1person may be located and shall notify the company or person of
2the filing. The jeopardy assessment lien shall have the same
3scope and effect as the statutory lien provided for in this
4Section. If the company or person believes that the company or
5person does not owe some or all of the tax for which the
6jeopardy assessment lien against the company or person has
7been filed, or that no jeopardy to the revenue in fact exists,
8the company or person may protest within 20 days after being
9notified by the Department of the filing of the jeopardy
10assessment lien and request a hearing, whereupon the
11Department shall hold a hearing in conformity with the
12provisions of this Code and, pursuant thereto, shall notify
13the company or person of its findings as to whether or not the
14jeopardy assessment lien will be released. If not, and if the
15company or person is aggrieved by this decision, the company
16or person may file an action for judicial review of the final
17determination of the Department in accordance with the
18Administrative Review Law. If, pursuant to such hearing (or
19after an independent determination of the facts by the
20Department without a hearing), the Department determines that
21some or all of the amount due covered by the jeopardy
22assessment lien is not owed by the company or person, or that
23no jeopardy to the revenue exists, or if on judicial review the
24final judgment of the court is that the company or person does
25not owe some or all of the amount due covered by the jeopardy
26assessment lien against them, or that no jeopardy to the

 

 

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1revenue exists, the Department shall release its jeopardy
2assessment lien to the extent of such finding of nonliability
3for the amount, or to the extent of such finding of no jeopardy
4to the revenue. The Department shall also release its jeopardy
5assessment lien against the company or person whenever the
6amount due and owing covered by the lien, plus any interest
7which may be due, are paid and the company or person has paid
8the Department in cash or by guaranteed remittance an amount
9representing the filing fee for the lien and the filing fee for
10the release of that lien. The Department shall file that
11release of lien with the recorder of the county where that lien
12was filed.
13    Nothing in this Section shall be construed to give the
14Department a preference over the rights of any bona fide
15purchaser, holder of a security interest, mechanics
16lienholder, mortgagee, or judgment lien creditor arising prior
17to the filing of a regular notice of lien or a notice of
18jeopardy assessment lien in the office of the recorder in the
19county in which the property subject to the lien is located.
20For purposes of this Section, "bona fide" shall not include
21any mortgage of real or personal property or any other credit
22transaction that results in the mortgagee or the holder of the
23security acting as trustee for unsecured creditors of the
24company or person mentioned in the notice of lien who executed
25such chattel or real property mortgage or the document
26evidencing such credit transaction. The lien shall be inferior

 

 

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1to the lien of general taxes, special assessments, and special
2taxes levied by any political subdivision of this State. In
3case title to land to be affected by the notice of lien or
4notice of jeopardy assessment lien is registered under the
5provisions of the Registered Titles (Torrens) Act, such notice
6shall be filed in the office of the Registrar of Titles of the
7county within which the property subject to the lien is
8situated and shall be entered upon the register of titles as a
9memorial or charge upon each folium of the register of titles
10affected by such notice, and the Department shall not have a
11preference over the rights of any bona fide purchaser,
12mortgagee, judgment creditor, or other lienholder arising
13prior to the registration of such notice. The regular lien or
14jeopardy assessment lien shall not be effective against any
15purchaser with respect to any item in a retailer's stock in
16trade purchased from the retailer in the usual course of the
17retailer's business.
18(Source: P.A. 98-158, eff. 8-2-13; 98-978, eff. 1-1-15.)
 
19    (215 ILCS 5/445)  (from Ch. 73, par. 1057)
20    Sec. 445. Surplus line.
21    (1) Definitions. For the purposes of this Section:
22    "Affiliate" means, with respect to an insured, any entity
23that controls, is controlled by, or is under common control
24with the insured. For the purpose of this definition, an
25entity has control over another entity if:

 

 

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1        (A) the entity directly or indirectly or acting
2    through one or more other persons owns, controls, or has
3    the power to vote 25% or more of any class of voting
4    securities of the other entity; or
5        (B) the entity controls in any manner the election of
6    a majority of the directors or trustees of the other
7    entity.
8    "Affiliated group" means any group of entities that are
9all affiliated.
10    "Authorized insurer" means an insurer that holds a
11certificate of authority issued by the Director but, for the
12purposes of this Section, does not include a domestic surplus
13line insurer as defined in Section 445a or any residual market
14mechanism.
15    "Exempt commercial purchaser" means any person purchasing
16commercial insurance that, at the time of placement, meets the
17following requirements:
18        (A) The person employs or retains a qualified risk
19    manager to negotiate insurance coverage.
20        (B) The person has paid aggregate nationwide
21    commercial property and casualty insurance premiums in
22    excess of $100,000 in the immediately preceding 12 months.
23        (C) The person meets at least one of the following
24    criteria:
25            (I) The person possesses a net worth in excess of
26        $20,000,000, as such amount is adjusted pursuant to

 

 

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1        the provision in this definition concerning percentage
2        change.
3            (II) The person generates annual revenues in
4        excess of $50,000,000, as such amount is adjusted
5        pursuant to the provision in this definition
6        concerning percentage change.
7            (III) The person employs more than 500 full-time
8        or full-time equivalent employees per individual
9        insured or is a member of an affiliated group
10        employing more than 1,000 employees in the aggregate.
11            (IV) The person is a not-for-profit organization
12        or public entity generating annual budgeted
13        expenditures of at least $30,000,000, as such amount
14        is adjusted pursuant to the provision in this
15        definition concerning percentage change.
16            (V) The person is a municipality with a population
17        in excess of 50,000 persons.
18    Effective on January 1, 2015 and each fifth January 1
19occurring thereafter, the amounts in subitems (I), (II), and
20(IV) of item (C) of this definition shall be adjusted to
21reflect the percentage change for such 5-year period in the
22Consumer Price Index for All Urban Consumers published by the
23Bureau of Labor Statistics of the Department of Labor.
24    "Home state" means the following:
25        (A) With respect to an insured, except as provided in
26    item (B) of this definition:

 

 

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1            (I) the state in which an insured maintains its
2        principal place of business or, in the case of an
3        individual, the individual's principal residence; or
4            (II) if 100% of the insured risk is located out of
5        the state referred to in subitem (I), the state to
6        which the greatest percentage of the insured's taxable
7        premium for that insurance contract is allocated.
8        (B) If more than one insured from an affiliated group
9    are named insureds on a single surplus line insurance
10    contract, then "home state" means the home state, as
11    determined pursuant to item (A) of this definition, of the
12    member of the affiliated group that has the largest
13    percentage of premium attributed to it under such
14    insurance contract.
15        If more than one insured from a group that is not
16    affiliated are named insureds on a single surplus line
17    insurance contract, then:
18            (I) if individual group members pay 100% of the
19        premium for the insurance from their own funds, "home
20        state" means the home state, as determined pursuant to
21        item (A) of this definition, of each individual group
22        member; each individual group member's coverage under
23        the surplus line insurance contract shall be treated
24        as a separate surplus line contract for the purposes
25        of this Section;
26            (II) otherwise, "home state" means the home state,

 

 

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1        as determined pursuant to item (A) of this definition,
2        of the group.
3    Nothing in this definition shall be construed to alter the
4terms of the surplus line insurance contract.
5    "Master policy" means a surplus line insurance contract
6with a single set of general contractual terms that are
7designed to apply on a group basis to multiple insureds who may
8or may not be affiliated and who may be added to or removed
9from the contract throughout the course of the contract
10period. A master policy may include certain provisions that
11vary for each insured depending on the insured's
12characteristics and the coverage sought.
13    "Multi-State risk" means a risk with insured exposures in
14more than one State.
15    "NAIC" means the National Association of Insurance
16Commissioners or any successor entity.
17    "Personal lines insurance" means insurance as defined in
18subsection (a), (b), or (c) of Section 143.13 of this Code.
19    "Premium" means any amount designated as premium on the
20declarations page or elsewhere in a policy and on any
21endorsement, but does not include taxes, the Surplus Line
22Association of Illinois recording fee, or any other fee.
23    "Program business" means a clearly defined group of
24insurance contracts procured by a licensed surplus line
25producer from an unauthorized insurer, under a single
26agreement between the producer and insurer, for insureds with

 

 

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1the same or similar characteristics and containing the same or
2similar contract terms.
3    "Qualified risk manager" means, with respect to a
4policyholder of commercial insurance, a person who meets all
5of the following requirements:
6        (A) The person is an employee of, or third-party
7    consultant retained by, the commercial policyholder.
8        (B) The person provides skilled services in loss
9    prevention, loss reduction, or risk and insurance coverage
10    analysis, and purchase of insurance.
11        (C) With regard to the person:
12            (I) the person has:
13                (a) a bachelor's degree or higher from an
14            accredited college or university in risk
15            management, business administration, finance,
16            economics, or any other field determined by the
17            Director or his designee to demonstrate minimum
18            competence in risk management; and
19                (b) the following:
20                    (i) three years of experience in risk
21                financing, claims administration, loss
22                prevention, risk and insurance analysis, or
23                purchasing commercial lines of insurance; or
24                    (ii) alternatively has:
25                        (AA) a designation as a Chartered
26                    Property and Casualty Underwriter (in this

 

 

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1                    subparagraph (ii) referred to as "CPCU")
2                    issued by the American Institute for
3                    CPCU/Insurance Institute of America;
4                        (BB) a designation as an Associate in
5                    Risk Management (ARM) issued by the
6                    American Institute for CPCU/Insurance
7                    Institute of America;
8                        (CC) a designation as Certified Risk
9                    Manager (CRM) issued by the National
10                    Alliance for Insurance Education &
11                    Research;
12                        (DD) a designation as a RIMS Fellow
13                    (RF) issued by the Global Risk Management
14                    Institute; or
15                        (EE) any other designation,
16                    certification, or license determined by
17                    the Director or his designee to
18                    demonstrate minimum competency in risk
19                    management;
20            (II) the person has:
21                (a) at least 7 years of experience in risk
22            financing, claims administration, loss prevention,
23            risk and insurance coverage analysis, or
24            purchasing commercial lines of insurance; and
25                (b) has any one of the designations specified
26            in subparagraph (ii) of paragraph (b);

 

 

10200SB1753sam001- 20 -LRB102 10455 BMS 23322 a

1            (III) the person has at least 10 years of
2        experience in risk financing, claims administration,
3        loss prevention, risk and insurance coverage analysis,
4        or purchasing commercial lines of insurance; or
5            (IV) the person has a graduate degree from an
6        accredited college or university in risk management,
7        business administration, finance, economics, or any
8        other field determined by the Director or his or her
9        designee to demonstrate minimum competence in risk
10        management.
11    "Residual market mechanism" means an association,
12organization, or other entity described in Article XXXIII of
13this Code or Section 7-501 of the Illinois Vehicle Code or any
14similar association, organization, or other entity.
15    "State" means any state of the United States, the District
16of Columbia, the Commonwealth of Puerto Rico, Guam, the
17Northern Mariana Islands, the Virgin Islands, and American
18Samoa.
19    "Surplus line insurance" means insurance on a risk:
20        (A) of the kinds specified in Classes 2 and 3 of
21    Section 4 of this Code; and
22        (B) that is procured from an unauthorized insurer
23    after the insurance producer representing the insured or
24    the surplus line producer is unable, after diligent
25    effort, to procure the insurance from authorized insurers;
26    and

 

 

10200SB1753sam001- 21 -LRB102 10455 BMS 23322 a

1        (C) where Illinois is the home state of the insured,
2    for policies effective, renewed or extended on July 21,
3    2011 or later and for multiyear policies upon the policy
4    anniversary that falls on or after July 21, 2011; and
5        (D) that is located in Illinois, for policies
6    effective prior to July 21, 2011.
7    "Taxable premium" means a premium for any risk that is
8located in or attributed to any state.
9    "Unauthorized insurer" means an insurer that does not hold
10a valid certificate of authority issued by the Director but,
11for the purposes of this Section, shall also include a
12domestic surplus line insurer as defined in Section 445a.
13    (1.5) Procuring surplus line insurance; surplus line
14insurer requirements.
15        (a) License required. Insurance producers may procure
16    surplus line insurance only if licensed as a surplus line
17    producer under this Section.
18        (b) Domestic and foreign insurer eligibility. Licensed
19    surplus line producers may procure surplus line insurance
20    from an unauthorized insurer domiciled in any state the
21    United States only if the insurer:
22            (i) is permitted in its domiciliary jurisdiction
23        to write the type of insurance involved; and
24             (ii) has, based upon information available to the
25        surplus line producer, a policyholders surplus of not
26        less than $15,000,000 determined in accordance with

 

 

10200SB1753sam001- 22 -LRB102 10455 BMS 23322 a

1        the laws of its domiciliary jurisdiction; and
2             (iii) has standards of solvency and management
3        that are adequate for the protection of policyholders.
4         Where an unauthorized insurer does not meet the
5    standards set forth in (ii) and (iii) above, a surplus
6    line producer may, if necessary, procure insurance from
7    that insurer only if prior written warning of such fact or
8    condition is given to the insured by the insurance
9    producer or surplus line producer.
10        (c) Alien insurer eligibility. Licensed surplus line
11    producers may procure surplus line insurance from an
12    unauthorized insurer not domiciled in any state outside of
13    the United States only if the insurer meets the standards
14    for unauthorized insurers domiciled in any state the
15    United States in paragraph (b) of this subsection (1.5) or
16    is listed on the Quarterly Listing of Alien Insurers
17    maintained by the International Insurers Department of the
18    NAIC at the time of procurement. The Director shall make
19    the Quarterly Listing of Alien Insurers available to
20    surplus line producers without charge.
21        (d) Prohibited transactions. Insurance producers shall
22    not procure from an unauthorized insurer an insurance
23    policy:
24            (i) that is designed to satisfy the proof of
25        financial responsibility and insurance requirements in
26        any Illinois law where the law requires that the proof

 

 

10200SB1753sam001- 23 -LRB102 10455 BMS 23322 a

1        of insurance is issued by an authorized insurer or
2        residual market mechanism;
3            (ii) that covers the risk of accidental injury to
4        employees arising out of and in the course of
5        employment according to the provisions of the Workers'
6        Compensation Act; or
7            (iii) that insures any Illinois personal lines
8        risk, as defined in subsection (a), (b), or (c) of
9        Section 143.13 of this Code, that is eligible for
10        residual market mechanism coverage, unless the insured
11        or prospective insured requests limits of liability
12        greater than the limits provided by the residual
13        market mechanism. In the course of making a diligent
14        effort to procure insurance from authorized insurers,
15        an insurance producer shall not be required to submit
16        a risk to a residual market mechanism when the risk is
17        not eligible for coverage or exceeds the limits
18        available in the residual market mechanism.
19        Where there is an insurance policy issued by an
20    authorized insurer or residual market mechanism insuring a
21    risk described in item (i), (ii), or (iii) above, nothing
22    in this paragraph shall be construed to prohibit a surplus
23    line producer from procuring from an unauthorized insurer
24    a policy insuring the risk on an excess or umbrella basis
25    where the excess or umbrella policy is written over one or
26    more underlying policies.

 

 

10200SB1753sam001- 24 -LRB102 10455 BMS 23322 a

1        (e) Exempt commercial purchaser diligent effort.
2    Licensed surplus line producers may procure surplus line
3    insurance from an unauthorized insurer for an exempt
4    commercial purchaser without making the required diligent
5    effort to procure the insurance from authorized insurers
6    if:
7            (i) the producer has disclosed to the exempt
8        commercial purchaser that such insurance may or may
9        not be available from authorized insurers that may
10        provide greater protection with more regulatory
11        oversight; and
12            (ii) the exempt commercial purchaser has
13        subsequently in writing requested the producer to
14        procure such insurance from an unauthorized insurer.
15        (f) Wholesale transaction diligent effort. A licensed
16    surplus line producer may procure a surplus line insurance
17    contract, other than a personal line insurance contract,
18    from an unauthorized insurer without making the required
19    diligent effort to procure the insurance from authorized
20    insurers if the risk was referred to the surplus line
21    producer by an Illinois-licensed insurance producer who is
22    not affiliated with the surplus line producer.
23        (g) Master policy diligent effort. For master policy
24    insurance contracts, a licensed surplus line producer may
25    make the required diligent effort to procure the insurance
26    from authorized insurers annually for the master policy

 

 

10200SB1753sam001- 25 -LRB102 10455 BMS 23322 a

1    rather than individually for each insured that is added
2    during the policy period.
3        (h) Program business diligent effort. For program
4    business, a licensed surplus line producer may make the
5    required diligent effort to procure the insurance from
6    authorized insurers annually for the program rather than
7    individually for each contract.
8    (2) Surplus line producer; license. Any licensed producer
9who is a resident of this State, or any nonresident who
10qualifies under Section 500-40, may be licensed as a surplus
11line producer upon payment of an annual license fee of $400.
12    A surplus line producer so licensed shall keep a separate
13account of the business transacted thereunder for 7 years from
14the policy effective date which shall be open at all times to
15the inspection of the Director or his representative.
16    No later than July 21, 2012, the State of Illinois shall
17participate in the national insurance producer database of the
18NAIC, or any other equivalent uniform national database, for
19the licensure of surplus line producers and the renewal of
20such licenses.
21    (3) Taxes and reports.
22        (a) Surplus line tax and penalty for late payment. The
23    surplus line tax rate for a surplus line insurance policy
24    or contract is determined as follows:
25            (i) 3% for policies or contracts with an effective
26        date prior to July 1, 2003;

 

 

10200SB1753sam001- 26 -LRB102 10455 BMS 23322 a

1            (ii) 3.5% for policies or contracts with an
2        effective date of July 1, 2003 or later.
3        A surplus line producer shall file with the Director
4    on or before February 1 and August 1 of each year a report
5    in the form prescribed by the Director on all surplus line
6    insurance procured from unauthorized insurers and
7    submitted to the Surplus Line Association of Illinois
8    during the preceding 6 month period ending December 31 or
9    June 30 respectively, and on the filing of such report
10    shall pay to the Director for the use and benefit of the
11    State a sum equal to the surplus line tax rate multiplied
12    by the gross taxable premiums less returned taxable
13    premiums upon all surplus line insurance submitted to the
14    Surplus Line Association of Illinois during the preceding
15    6 months. However, if no insurance was procured from
16    unauthorized insurers and submitted to the Surplus Line
17    Association of Illinois during the period, no report shall
18    be required.
19        Any surplus line producer who fails to pay the full
20    amount due under this subsection is liable, in addition to
21    the amount due, for such late fee, penalty, and interest
22    charges as are provided for under Section 412 of this
23    Code. The Director, through the Attorney General, may
24    institute an action in the name of the People of the State
25    of Illinois, in any court of competent jurisdiction, for
26    the recovery of the amount of such taxes, late fees,

 

 

10200SB1753sam001- 27 -LRB102 10455 BMS 23322 a

1    interest, and penalties due, and prosecute the same to
2    final judgment, and take such steps as are necessary to
3    collect the same.
4        (b) Fire Marshal Tax. Each surplus line producer shall
5    file with the Director on or before February 1 March 31 of
6    each year a report in the form prescribed by the Director
7    on all fire insurance procured from unauthorized insurers
8    and submitted to the Surplus Line Association of Illinois
9    during the previous year that is subject to tax under
10    Section 12 of the Fire Investigation Act and shall pay to
11    the Director the fire marshal tax required thereunder.
12    However, if no fire insurance subject to the tax was
13    procured from unauthorized insurers and submitted to the
14    Surplus Line Association of Illinois during that year, no
15    report shall be required.
16        (c) Taxes and fees charged to insured. The taxes
17    imposed under this subsection and the recording
18    countersigning fees charged by the Surplus Line
19    Association of Illinois may be charged to and collected
20    from surplus line insureds.
21    (4) (Blank).
22    (5) Submission of documents to Surplus Line Association of
23Illinois. A surplus line producer shall submit every insurance
24contract and premium-bearing endorsement issued under his or
25her license to the Surplus Line Association of Illinois for
26recording and countersignature. The submission and recording

 

 

10200SB1753sam001- 28 -LRB102 10455 BMS 23322 a

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

 

 

10200SB1753sam001- 29 -LRB102 10455 BMS 23322 a

1required insurance from authorized insurers.
2    (6) Evidence of recording Countersignature required. It
3shall be unlawful for an insurance producer to deliver any
4unauthorized insurer contract or premium-bearing endorsement
5unless it contains evidence of recording such insurance
6contract is countersigned by the Surplus Line Association of
7Illinois.
8    (7) Inspection of records. A surplus line producer shall
9maintain separate records of the business transacted under his
10or her license for 7 years from the policy effective date,
11including complete copies of surplus line insurance contracts
12maintained on paper or by electronic means, which records
13shall be open at all times for inspection by the Director and
14by the Surplus Line Association of Illinois.
15    (8) Violations and penalties. The Director may suspend or
16revoke or refuse to renew a surplus line producer license for
17any violation of this Code. In addition to or in lieu of
18suspension or revocation, the Director may subject a surplus
19line producer to a civil penalty of up to $2,000 for each cause
20for suspension or revocation. Such penalty is enforceable
21under subsection (5) of Section 403A of this Code.
22    When a surplus line producer has made a documented good
23faith determination of the home state for a surplus line
24insurance contract and has paid the surplus line taxes to a
25state other than Illinois, if the Director determines that the
26producer's good faith determination was incorrect and the home

 

 

10200SB1753sam001- 30 -LRB102 10455 BMS 23322 a

1state is Illinois, the surplus line producer can, at the
2discretion of the Director, be required to submit the contract
3to the Surplus Line Association of Illinois and pay applicable
4taxes and recording fees, but there shall be no penalty,
5interest, or late fee assessed.
6    (9) Director may declare insurer ineligible. If the
7Director determines that the further assumption of risks might
8be hazardous to the policyholders of an unauthorized insurer,
9the Director may order the Surplus Line Association of
10Illinois not to accept and record countersign insurance
11contracts evidencing insurance in such insurer and order
12surplus line producers to cease procuring insurance from such
13insurer.
14    (10) Service of process upon Director. Insurance contracts
15delivered under this Section from unauthorized insurers, other
16than domestic surplus line insurers as defined in Section
17445a, shall contain a provision designating the Director and
18his successors in office the true and lawful attorney of the
19insurer upon whom may be served all lawful process in any
20action, suit or proceeding arising out of such insurance.
21Service of process made upon the Director to be valid
22hereunder must state the name of the insured, the name of the
23unauthorized insurer and identify the contract of insurance.
24The Director at his option is authorized to forward a copy of
25the process to the Surplus Line Association of Illinois for
26delivery to the unauthorized insurer or the Director may

 

 

10200SB1753sam001- 31 -LRB102 10455 BMS 23322 a

1deliver the process to the unauthorized insurer by other means
2which he considers to be reasonably prompt and certain.
3    (10.5) Required notice to policyholder. Insurance
4contracts delivered under this Section from unauthorized
5insurers, other than domestic surplus line insurers as defined
6in Section 445a, shall have stamped or imprinted on the first
7page thereof in not less than 12-pt. bold face type the
8following legend: "Notice to Policyholder: This contract is
9issued, pursuant to Section 445 of the Illinois Insurance
10Code, by a company not authorized and licensed to transact
11business in Illinois and as such is not covered by the Illinois
12Insurance Guaranty Fund." Insurance contracts delivered under
13this Section from domestic surplus line insurers as defined in
14Section 445a shall have stamped or imprinted on the first page
15thereof in not less than 12-pt. bold face type the following
16legend: "Notice to Policyholder: This contract is issued by a
17domestic surplus line insurer, as defined in Section 445a of
18the Illinois Insurance Code, pursuant to Section 445, and as
19such is not covered by the Illinois Insurance Guaranty Fund."
20    (11) Marine, aviation, and transportation. The Illinois
21Surplus Line law does not apply to insurance of property and
22operations of railroads or aircraft engaged in interstate or
23foreign commerce, insurance of vessels, crafts or hulls,
24cargoes, marine builder's risks, marine protection and
25indemnity, or other risks including strikes and war risks
26insured under ocean or wet marine forms of policies.

 

 

10200SB1753sam001- 32 -LRB102 10455 BMS 23322 a

1    (12) Applicability of Illinois Insurance Code. Surplus
2line insurance procured under this Section, including
3insurance procured from a domestic surplus line insurer, is
4not subject to the provisions of the Illinois Insurance Code
5other than Sections 123, 123.1, 401, 401.1, 402, 403, 403A,
6408, 412, 445, 445a, 445.1, 445.2, 445.3, 445.4, and all of the
7provisions of Article XXXI to the extent that the provisions
8of Article XXXI are not inconsistent with the terms of this
9Act.
10(Source: P.A. 97-955, eff. 8-14-12; 98-978, eff. 1-1-15.)
 
11    (215 ILCS 5/445.1)  (from Ch. 73, par. 1057.1)
12    Sec. 445.1. Surplus Line Association of Illinois. There is
13hereby created a non-profit association to be known as the
14Surplus Line Association of Illinois. All surplus line
15producers shall be and must remain individual members of the
16Association as a condition of their holding a license as a
17surplus line producer in this State. The Association must
18perform its functions under the plan of operation established
19and approved under Section 445.3 and must exercise its powers
20through a board of directors established under Section 445.2
21of this Code. The Association shall be supervised by the
22Director and is subject to the applicable provisions of the
23Illinois Insurance Code. The Association shall be authorized
24and have the duty to:
25        (1) receive and , record and countersign all surplus

 

 

10200SB1753sam001- 33 -LRB102 10455 BMS 23322 a

1    line insurance contracts that which surplus line producers
2    are required to file with the Association under subsection
3    (5) of Section 445;
4        (2) prepare monthly reports for the Director on
5    surplus line insurance procured by its members during the
6    preceding month in such form and providing such
7    information as the Director may prescribe;
8        (3) prepare and deliver to the Director and, at the
9    discretion of the Director, to each licensee the reports
10    of surplus line business prescribed in subsection (3) of
11    Section 445;
12        (4) assess its members for costs of operations in
13    accordance with a schedule adopted by the Board of
14    Directors of the Association and approved by the Director;
15        (5) employ and retain such persons as are necessary to
16    carry out the duties of the Association;
17        (6) borrow money as necessary to effect the purposes
18    of the Association;
19        (7) enter contracts as necessary to effect the
20    purposes of the Association;
21        (8) perform such other acts as will facilitate and
22    encourage compliance by its members with the surplus line
23    law of this State and rules promulgated thereunder; and
24        (9) provide such other services to its members as are
25    incidental or related to the purposes of the Association.
26    Nothing in this Act shall be construed as giving the

 

 

10200SB1753sam001- 34 -LRB102 10455 BMS 23322 a

1Association any discretionary authority to enforce this Act or
2to withhold or decline acceptance and recording
3countersignature of insurance contracts that which meet the
4requirements of subsection (5) of Section 445.
5(Source: P.A. 98-978, eff. 1-1-15.)
 
6    (215 ILCS 5/445.2)  (from Ch. 73, par. 1057.2)
7    Sec. 445.2. Board of Directors. The Association shall
8function through a Board of Directors elected by the
9Association members, and officers who shall be elected by the
10Board of Directors.
11    The Board of Directors of the Association shall consist of
12not less than 5 nor more than 9 persons serving terms as
13established in the plan of operation. The plan of operation
14shall provide for the election of a Board of Directors by the
15members of the Association from its membership. The plan of
16operation shall fix the manner of voting and may weigh each
17member's vote to reflect the annual surplus line insurance
18premium written by the member. Members employed by the same or
19affiliated employers may consolidate their premiums written
20and delegate an individual officer or partner to represent the
21member in the exercise of Association affairs, including
22service on the Association Board of Directors. The Director
23shall appoint an interim Board of Directors for the sole
24purpose of conducting an election of Directors. If no Board of
25Directors is elected within 90 days after the effective date

 

 

10200SB1753sam001- 35 -LRB102 10455 BMS 23322 a

1of this amendatory Act of 1984, the Director shall appoint the
2initial members of the Board of Directors.
3    The Board of Directors shall elect such officers as may be
4provided in the plan of operation.
5(Source: P.A. 83-1300.)
 
6    (215 ILCS 5/445.3)  (from Ch. 73, par. 1057.3)
7    Sec. 445.3. Plan of Operation.
8    (1) The Association shall submit to the Director a plan of
9operation and any amendments thereto to provide operating
10procedures for the administration of the Association. The plan
11of operation and any amendments thereto shall become effective
12upon approval in writing by the Director.
13    (2) (Blank). If the Association fails to submit a suitable
14plan of operation within 180 days following the effective date
15of this amendatory Act of 1984, or if at any time thereafter
16the Association fails to submit required amendments to the
17plan of operation, the Director shall, after notice and
18hearing pursuant to Sections 401, 402 and 403 of this Code,
19adopt and promulgate such rules as are necessary or advisable
20to effectuate the provisions of this Act. Such rules shall
21continue in force until modified by the Director or superseded
22by a plan of operation submitted by the Association and
23approved by the Director.
24    (3) All Association members must comply with the plan of
25operation.

 

 

10200SB1753sam001- 36 -LRB102 10455 BMS 23322 a

1(Source: P.A. 83-1300.)
 
2    Section 99. Effective date. This Act takes effect upon
3becoming law.".