215 ILCS 5/ Illinois Insurance Code.

(215 ILCS 5/531.14) (from Ch. 73, par. 1065.80-14)

Sec. 531.14. Miscellaneous provisions.

(1) Nothing in this Article may be construed to reduce the liability for unpaid assessments of the insured of an impaired or insolvent insurer operating under a plan with assessment liability.

(2) Records must be kept of all negotiations and meetings in which the Association or its representatives are involved to discuss the activities of the Association in carrying out its powers and duties under Section 531.08. Records of such negotiations or meetings may be made public only upon the termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired or insolvent insurer, upon the termination of the impairment or insolvency of the insurer, or upon the order of a court of competent jurisdiction. Nothing in this paragraph (2) limits the duty of the Association to render a report of its activities under Section 531.15.

(3) For the purpose of carrying out its obligations under this Article, the Association is deemed to be a creditor of the impaired or insolvent insurer to the extent of assets attributable to covered policies or contracts reduced by any amounts to which the Association is entitled as subrogee (under subsection (m) of Section 531.08). All assets of the impaired or insolvent insurer attributable to covered policies or contracts must be used to continue all covered policies and pay all contractual obligations of the impaired insurer as required by this Article. "Assets attributable to covered policies or contracts", as used in this paragraph (3), is that proportion of the assets which the reserves that should have been established for such policies or contracts bear to the reserve that should have been established for all policies of insurance or health benefit plans written by the impaired or insolvent insurer.

(4) (a) Prior to the termination of any liquidation, rehabilitation, or conservation proceeding, the court may take into consideration the contributions of the respective parties, including the Association, the shareholders, contract owners, certificate holders, enrollees, and policy owners of the impaired or insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of such impaired or insolvent insurer. In such a determination, consideration must be given to the welfare of the policy owners, contract owners, certificate holders, and enrollees of the continuing or successor insurer.

(b) No distribution to stockholders, if any, of an impaired or insolvent insurer may be made until and unless the total amount of valid claims of the Association for funds expended with interest in carrying out its powers and duties under Section 531.08, with respect to such member insurer have been fully recovered by the Association.

(5) (a) If an order for liquidation or rehabilitation of a member insurer domiciled in this State has been entered, the receiver appointed under such order has a right to recover on behalf of the member insurer, from any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the member insurer on its capital stock, made at any time during the 5 years preceding the petition for liquidation or rehabilitation subject to the limitations of paragraphs (b) to (d).

(b) No such dividend is recoverable if the member insurer shows that when paid the distribution was lawful and reasonable, and that the member insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the member insurer to fulfill its contractual obligations.

(c) Any person who as an affiliate that controlled the member insurer at the time the distributions were paid is liable up to the amount of distributions he received. Any person who was an affiliate that controlled the member insurer at the time the distributions were declared, is liable up to the amount of distributions he would have received if they had been paid immediately. If 2 persons are liable with respect to the same distributions, they are jointly and severally liable.

(d) The maximum amount recoverable under subsection (5) of this Section is the amount needed in excess of all other available assets of the insolvent insurer to pay the contractual obligations of the insolvent insurer.

(e) If any person liable under paragraph (c) of subsection (5) of this Section is insolvent, all its affiliates that controlled it at the time the dividend was paid are jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.

(6) As a creditor of the impaired or insolvent insurer as established in subsection (3) of this Section and consistent with subsection (2) of Section 205 of this Code, the Association and other similar associations shall be entitled to receive a disbursement of assets out of the marshaled assets, from time to time as the assets become available to reimburse it, as a credit against contractual obligations under this Article. If the liquidator has not, within 120 days after a final determination of insolvency of a member insurer by the receivership court, made an application to the court for the approval of a proposal to disburse assets out of marshaled assets to guaranty associations having obligations because of the insolvency, then the Association shall be entitled to make application to the receivership court for approval of its own proposal to disburse these assets.

(Source: P.A. 100-687, eff. 8-3-18.)

(215 ILCS 5/531.15) (from Ch. 73, par. 1065.80-15)

Sec. 531.15. Examination of the Association - Annual Report. The Association shall be subject to examination and regulation by the Director. The board of directors must submit to the Director, not later than the first day of the fifth month following the end of the Association's fiscal year, a financial report for such fiscal year in a form acceptable to the Director and a report of its activities during such fiscal year.

(Source: P.A. 86-753.)

(215 ILCS 5/531.16) (from Ch. 73, par. 1065.80-16)

Sec. 531.16. Tax Exemptions.) The Association is exempt from payment of all fees and all taxes levied by this State or any of its subdivisions, except taxes levied on real property.

(Source: P.A. 81-899.)

(215 ILCS 5/531.17) (from Ch. 73, par. 1065.80-17)

Sec. 531.17. Immunity.) There is no liability on the part of and no cause of action of any nature may arise against any member insurer or its agents or employees, the Association or its agents or employees, members of the board of directors, or the Director or his representatives, for any action taken by them in the performance of their powers and duties under this Article.

(Source: P.A. 81-899.)

(215 ILCS 5/531.18) (from Ch. 73, par. 1065.80-18)

Sec. 531.18. Stay of Proceedings - Reopening Default Judgments.) All proceedings in which the insolvent insurer is a party in any court in this State shall be stayed 180 days from the date an order of liquidation, rehabilitation, or conservation is final to permit proper legal action by the Association on any matters germane to its powers or duties. As to a judgment under any decision, order, verdict, or finding based on default the Association may apply to have such judgment set aside by the same court that made such judgment and must be permitted to defend against such suit on the merits.

(Source: P.A. 96-1450, eff. 8-20-10.)

(215 ILCS 5/531.19) (from Ch. 73, par. 1065.80-19)

Sec. 531.19. Prohibited advertisement of action of the Insurance Guaranty Association in sale of insurance.

(a) No person, including a member insurer, agent or affiliate of a member insurer shall make, publish, disseminate, circulate, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in any newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station or television station, or in any other way, any advertisement, announcement or statement, written or oral, which uses the existence of the Insurance Guaranty Association of this State for the purpose of sales, solicitation or inducement to purchase any form of insurance or other coverage covered by this Article; provided, however, that this Section shall not apply to the Illinois Life and Health Guaranty Association or any other entity which does not sell or solicit insurance or coverage by a health maintenance organization.

(b) Within 180 days of August 16, 1993, the Association shall prepare a summary document describing the general purposes and current limitations of this Article and complying with subsection (c). This document shall be submitted to the Director for approval. Sixty days after receiving approval, no member insurer may deliver a policy or contract described in subparagraph (a) of paragraph (2) of Section 531.03 and not excluded under subparagraph (b) of that Section to a policy owner, contract owner, certificate holder, or enrollee unless the document is delivered to the policy owner, contract owner, certificate holder, or enrollee prior to or at the time of delivery of the policy or contract. The document should also be available upon request by a policy owner, contract owner, certificate holder, or enrollee. The distribution, delivery, or contents or interpretation of this document shall not mean that either the policy or the contract or the policy owner, contract owner, certificate holder, or enrollee thereof would be covered in the event of the impairment or insolvency of a member insurer. The description document shall be revised by the Association as amendments to this Article may require. Failure to receive this document does not give the policy owner, contract owner, certificate holder, enrollee, or insured any greater rights than those stated in this Article.

(c) The document prepared under subsection (b) shall contain a clear and conspicuous disclaimer on its face. The Director shall promulgate a rule establishing the form and content of the disclaimer. The disclaimer shall:

(1) State the name and address of the Life and Health Insurance Guaranty Association and of the Department.

(2) Prominently warn the policy owner, contract owner, certificate holder, or enrollee that the Life and Health Insurance Guaranty Association may not cover the policy or contract or, if coverage is available, it will be subject to substantial limitations and exclusions and conditioned on continued residence in the State.

(3) State that the member insurer and its agents are prohibited by law from using the existence of the Life and Health Insurance Guaranty Association for the purpose of sales, solicitation, or inducement to purchase any form of insurance or health maintenance organization coverage.

(4) Emphasize that the policy owner, contract owner, certificate holder, or enrollee should not rely on coverage under the Life and Health Insurance Guaranty Association when selecting an insurer or health maintenance organization.

(5) Provide other information as directed by the Director.

(d) (Blank).

(Source: P.A. 100-687, eff. 8-3-18.)

(215 ILCS 5/531.20)

Sec. 531.20. Merger of Illinois Health Maintenance Organization Guaranty Association with and into the Illinois Life and Health Insurance Guaranty Association. In order to provide for the merger of the Illinois Health Maintenance Organization Guaranty Association with and into the Illinois Life and Health Insurance Guaranty Association, the following shall apply:

(1) The Illinois Health Maintenance Organization Guaranty Association is merged with and into the Illinois Life and Health Insurance Guaranty Association, which shall then continue to be known as the Illinois Life and Health Insurance Guaranty Association.

(2) All premerger rights, powers, privileges, assets, property, duties, debts, obligations, and liabilities of each association related to a liquidated member shall remain with the members of the respective association prior to merger and subject to the laws in effect at the time the order of liquidation was entered with respect to the liquidated member, but shall be administered by the Illinois Life and Health Insurance Guaranty Association. The Illinois Life and Health Insurance Guaranty Association shall adopt changes to its plan of operation which reasonably accomplish this.

(3) Subject to paragraph (2), the Illinois Life and Health Insurance Guaranty Association shall succeed, without other transfer, to all the rights, powers, privileges, assets, and property of the Illinois Health Maintenance Organization Guaranty Association and shall be subject to all duties, debts, obligations, and liabilities of the Illinois Health Maintenance Organization that exist as of the date of the merger of the Illinois Health Maintenance Organization Guaranty Association into the Illinois Life and Health Insurance Guaranty Association. Without limiting the generality of the foregoing, the Illinois Life and Health Insurance Guaranty Association shall succeed to (A) all collected, uncollected, or unbilled assessments of the Illinois Health Maintenance Organization Guaranty Association, (B) all cash, bank accounts, accrued interest, and tangible property of the Illinois Health Maintenance Organization Guaranty Association, (C) all rights, powers, privileges, duties, and obligations of the Illinois Health Maintenance Organization Guaranty Association under any of its contracts or commitments, and (D) all subrogations, assignments, and creditor rights and interests of the Illinois Health Maintenance Organization Guaranty Association.

(4) All rights of creditors and all liens upon the property of the Illinois Health Maintenance Organization Guaranty Association shall be preserved unimpaired, provided that the liens upon property of the Illinois Health Maintenance Organization Guaranty Association shall be limited to the property affected thereby immediately prior to the effective date of this amendatory Act of the 100th General Assembly.

(5) Any action or proceeding pending by or against the Illinois Health Maintenance Organization Guaranty Association may be prosecuted to judgment.

(6) Notwithstanding any other provision to the contrary in this Article:

(A) It is the intent of this Section to preserve only the rights, powers, privileges, assets, property, debts, obligations, and liabilities of the Illinois Health Maintenance Organization Guaranty Association as they existed on the date of its merger into the Illinois Life and Health Insurance Guaranty Association, and not to provide contract owners, certificate holders, enrollees and policy owners, or their respective payees, beneficiaries, or assignees, with duplicative or new rights, powers, privileges, assets, or property.

(B) Accordingly, no contract owner, certificate holder, enrollee and policy owner, and no contract owner's, certificate holder's, enrollee's or policy owner's payee, beneficiary, or assignee, shall be entitled to (i) a recovery from the Illinois Life and Health Insurance Guaranty Association that is duplicative of a previous recovery from the Illinois Health Maintenance Organization Guaranty Association or (ii) a recovery from the Illinois Life and Health Insurance Guaranty Association on account of a claim against the Illinois Health Maintenance Organization Guaranty Association where the Illinois Life and Health Insurance Guaranty Association is liable with respect to a claim under the same policy or contract under this Article.

(Source: P.A. 100-687, eff. 8-3-18.)

(215 ILCS 5/Art. XXXIV heading) ARTICLE XXXIV. ILLINOIS INSURANCE GUARANTY FUND

(215 ILCS 5/532) (from Ch. 73, par. 1065.82)

Sec. 532. Purpose.

(a) The purpose of this Article is to provide a mechanism for the payment of covered claims under certain insurance policies, to avoid excessive delay in payment of covered claims, to avoid financial loss to claimants or policyholders because of the entry of an Order of Liquidation against an insolvent company, including through services offered to the Director in her or his capacity as receiver under Article XIII of this Code that relate to covered claims, to provide a Fund to assess among member companies the costs of such protection and maintain the continuity and self-sufficient operation of the Fund, and to offset the costs associated with maintaining the Fund's continuity and self-sufficient operations when practical by providing assistance and services to the Director in her or his capacity as receiver under Article XIII of this Code as described in this Section.

(b) The purpose of this Article is also to provide a mechanism for the Fund to participate in and facilitate the process by which the assets of an insolvent company are marshaled and distributed pursuant to Article XIII of this Code beyond reimbursing the cost of covered claims. This subsection (b) is inoperative 5 years after the effective date of this amendatory Act of the 102nd General Assembly.

(Source: P.A. 102-396, eff. 8-16-21.)

(215 ILCS 5/533) (from Ch. 73, par. 1065.83)

Sec. 533. Scope. This Article applies to all of the kinds of insurance written on a direct basis which are included in Class 2 and Class 3 of Section 4 of this Code, except that it shall not apply to:

(a) accident and health insurance written under clause (a) of Class 2, or

(b) mortgage guaranty or other financial guaranty written as suretyship obligations or insurance under clause (g), clause (h) or clause (i) of Class 2 or otherwise, or

(c) fidelity or surety bonds, or any other bonding obligations other than employee fidelity bonds, or

(d) marine insurance other than inland marine insurance, written under clause (d) of Class 3, or

(e) insurance of warranties or service contracts, including insurance that provides for the repair, replacement, or service of goods or property or indemnification for repair, replacement, or service for the operational or structural failure of the goods or property due to a defect in materials, workmanship, or normal wear and tear or provides reimbursement for the liability incurred by the issuer of agreements or service contracts that provide these benefits, or

(f) any claim servicing agreement or insurance policy which contains a retrospective rating or other premium adjustment agreement under which premiums are substantially equal to the losses and loss expenses covered under the policy or any policy providing retroactive insurance of known loss, or

(g) any insurance which is provided, guaranteed or reinsured pursuant to the Federal Crop Insurance Program or the National Flood Insurance Program, including flood insurance written by National Flood Insurance Program Write Your Own Companies.

(Source: P.A. 103-113, eff. 6-30-23.)

(215 ILCS 5/534) (from Ch. 73, par. 1065.84)

Sec. 534. Definitions. For the purposes of this Article, unless the context requires otherwise, the words and phrases defined in Sections 534.1 through 534.9 have the meanings set forth in those Sections.

(Source: P.A. 103-113, eff. 6-30-23.)

(215 ILCS 5/534.1) (from Ch. 73, par. 1065.84-1)

Sec. 534.1. "Fund" means the Illinois Insurance Guaranty Fund created by this Article.

(Source: P.A. 77-305.)

(215 ILCS 5/534.2) (from Ch. 73, par. 1065.84-2)

Sec. 534.2. "Director" means the Director of Insurance of the State of Illinois.

(Source: P.A. 77-305.)

(215 ILCS 5/534.3) (from Ch. 73, par. 1065.84-3)

Sec. 534.3. Covered claim; unearned premium defined.

(a) "Covered claim" means an unpaid claim for a loss arising out of and within the coverage of an insurance policy to which this Article applies and which is in force at the time of the occurrence giving rise to the unpaid claim, including claims presented during any extended discovery period which was purchased from the company before the entry of a liquidation order or which is purchased or obtained from the liquidator after the entry of a liquidation order, made by a person insured under such policy or by a person suffering injury or damage for which a person insured under such policy is legally liable, and for unearned premium, if:

(i) The company issuing, assuming, or being allocated the policy becomes an insolvent company as defined in Section 534.4 after the effective date of this Article; and

(ii) The claimant or insured is a resident of this State at the time of the insured occurrence, or the property from which a first party claim for damage to property arises is permanently located in this State or, in the case of an unearned premium claim, the policyholder is a resident of this State at the time the policy was issued; provided, that for entities other than an individual, the residence of a claimant, insured, or policyholder is the state in which its principal place of business is located at the time of the insured event.

(b) "Covered claim" does not include:

(i) any amount in excess of the applicable limits of liability provided by an insurance policy to which this Article applies; nor

(ii) any claim for punitive or exemplary damages or fines and penalties paid to government authorities; nor

(iii) any first party claim by an insured who is an affiliate of the insolvent company; nor

(iv) any first party or third party claim by or against an insured whose net worth on December 31 of the year next preceding the date the insurer becomes an insolvent insurer exceeds $25,000,000; provided that an insured's net worth on such date shall be deemed to include the aggregate net worth of the insured and all of its affiliates as calculated on a consolidated basis. However, this exclusion shall not apply to third party claims against the insured where the insured has applied for or consented to the appointment of a receiver, trustee, or liquidator for all or a substantial part of its assets, filed a voluntary petition in bankruptcy, filed a petition or an answer seeking a reorganization or arrangement with creditors or to take advantage of any insolvency law, or if an order, judgment, or decree is entered by a court of competent jurisdiction, on the application of a creditor, adjudicating the insured bankrupt or insolvent or approving a petition seeking reorganization of the insured or of all or substantial part of its assets; nor

(v) any claim for any amount due any reinsurer, insurer, insurance pool, or underwriting association as subrogated recoveries, reinsurance recoverables, contribution, indemnification or otherwise. No such claim held by a reinsurer, insurer, insurance pool, or underwriting association may be asserted in any legal action against a person insured under a policy issued by an insolvent company other than to the extent such claim exceeds the Fund obligation limitations set forth in Section 537.2 of this Code.

(c) "Unearned Premium" means the premium for the unexpired period of a policy which has been terminated prior to the expiration of the period for which premium has been paid and does not mean premium which is returnable to the insured for any other reason.

(Source: P.A. 101-60, eff. 7-12-19; 102-558, eff. 8-20-21.)

(215 ILCS 5/534.4) (from Ch. 73, par. 1065.84-4)

Sec. 534.4. "Insolvent company" means a company organized as a stock company, mutual company, reciprocal or Lloyds (a) which holds a certificate of authority to transact insurance in this State either at the time the policy was issued or when the insured event occurred, or any company which has assumed or has been allocated such policy obligation through merger, division, insurance business transfer, consolidation, or reinsurance, whether or not such assuming company held a certificate of authority to transact insurance in this State at the time such policy was issued or when the insured event occurred; and (b) against which a final Order of Liquidation with a finding of insolvency to which there is no further right of appeal has been entered by a court of competent jurisdiction in the company's State of domicile after the effective date of this Article.

(Source: P.A. 103-75, eff. 6-9-23.)

(215 ILCS 5/534.5) (from Ch. 73, par. 1065.84-5)

Sec. 534.5. Member company. "Member Company" means any insurance company organized as a stock company, mutual company, reciprocal or Lloyds, which holds a certificate of authority to transact any kind of insurance in this State to which this Article applies, and which is either:

(a) a domestic insurance company formed before or after the effective date of this Article; or

(b) a foreign or alien insurance company.

An insurance company shall cease to be a member company effective on the day following the termination or expiration of its license to transact the kinds of insurance to which this Article applies; provided, however, that the insurance company shall remain liable as a member company for any and all obligations, including obligations for assessments levied before the termination or expiration of the insurance company's license and assessments levied after the termination or expiration, based on any insolvency as to which the determination of insolvency by a court of competent jurisdiction occurs before the termination or expiration of the insurance company's license.

(Source: P.A. 89-97, eff. 7-7-95.)