Illinois General Assembly - Full Text of Public Act 093-0876
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Public Act 093-0876


 

Public Act 0876 93RD GENERAL ASSEMBLY



 


 
Public Act 093-0876
 
SB2560 Enrolled LRB093 15798 SAS 41413 b

    AN ACT concerning insurance.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Illinois Insurance Code is amended by
changing Section 445 as follows:
 
    (215 ILCS 5/445)  (from Ch. 73, par. 1057)
    Sec. 445. Surplus line.
    (1) Surplus line defined; surplus line insurer
requirements. "Surplus line insurance" means is insurance on an
Illinois risk of the kinds specified in Classes 2 and 3 of
Section 4 of this Code procured from an unauthorized insurer or
a domestic surplus line insurer as defined in Section 445a
after the insurance producer representing the insured or the
surplus line producer is unable, after diligent effort, to
procure said insurance from authorized insurers which are
authorized to transact business in this State other than
domestic surplus line insurers as defined in Section 445a.
    "Authorized insurer" means an insurer that holds a
certificate of authority issued by the Director but, for the
purposes of this Section, does not include a domestic surplus
line insurer as defined in Section 445a or any residual market
mechanism.
    "Residual market mechanism" means an association,
organization, or other entity described in Article XXXIII of
this Code or Section 7-501 of the Illinois Vehicle Code or any
similar association, organization, or other entity.
    "Unauthorized insurer" means an insurer that does not hold
a valid certificate of authority issued by the Director but,
for the purposes of this Section, shall also include a domestic
surplus line insurer as defined in Section 445a.
    Insurance producers may procure surplus line insurance
only if licensed as a surplus line producer under this Section
and may procure that insurance only from an unauthorized
insurer or from a domestic surplus line insurer as defined in
Section 445a:
        (a) that based upon information available to the
    surplus line producer has a policyholders surplus of not
    less than $15,000,000 determined in accordance with
    accounting rules that are applicable to authorized
    insurers; and
        (b) that has standards of solvency and management that
    are adequate for the protection of policyholders; and
        (c) where an unauthorized insurer does not meet the
    standards set forth in (a) and (b) above, a surplus line
    producer may, if necessary, procure insurance from that
    insurer only if prior written warning of such fact or
    condition is given to the insured by the insurance producer
    or surplus line producer.
    Insurance producers shall not procure from an unauthorized
insurer an insurance policy:
        (i) that is designed to satisfy the proof of financial
    responsibility and insurance requirements in any Illinois
    law where the law requires that the proof of insurance is
    issued by an authorized insurer or residual market
    mechanism;
        (ii) that covers the risk of accidental injury to
    employees arising out of and in the course of employment
    according to the provisions of the Workers' Compensation
    Act; or
        (iii) that insures any Illinois personal lines risk, as
    defined in subsection (a), (b), or (c) of Section 143.13 of
    this Code, that is eligible for residual market mechanism
    coverage, unless the insured or prospective insured
    requests limits of liability greater than the limits
    provided by the residual market mechanism. In the course of
    making a diligent effort to procure insurance from
    authorized insurers, an insurance producer shall not be
    required to submit a risk to a residual market mechanism
    when the risk is not eligible for coverage or exceeds the
    limits available in the residual market mechanism.
    Where there is an insurance policy issued by an authorized
insurer or residual market mechanism insuring a risk described
in item (i), (ii), or (iii) above, nothing in this paragraph
shall be construed to prohibit a surplus line producer from
procuring from an unauthorized insurer a policy insuring the
risk on an excess or umbrella basis where the excess or
umbrella policy is written over one or more underlying
policies.
    (2) Surplus line producer; license. Any licensed producer
who is a resident of this State, or any nonresident who
qualifies under Section 500-40, may be licensed as a surplus
line producer upon:
        (a) completing a prelicensing course of study. The
    course provided for by this Section shall be conducted
    under rules and regulations prescribed by the Director. The
    Director may administer the course or may make
    arrangements, including contracting with an outside
    educational service, for administering the course and
    collecting the non-refundable application fee provided for
    in this subsection. Any charges assessed by the Director or
    the educational service for administering the course shall
    be paid directly by the individual applicants. Each
    applicant required to take the course shall enclose with
    the application a non-refundable $20 application fee
    payable to the Director plus a separate course
    administration fee. An applicant who fails to appear for
    the course as scheduled, or appears but fails to complete
    the course, shall not be entitled to any refund, and shall
    be required to submit a new request to attend the course
    together with all the requisite fees before being
    rescheduled for another course at a later date; and
        (b) payment of an annual license fee of $400; and
        (c) procurement of the surety bond required in
    subsection (4) of this Section.
    A surplus line producer so licensed shall keep a separate
account of the business transacted thereunder which shall be
open at all times to the inspection of the Director or his
representative.
    The prelicensing course of study requirement in (a) above
shall not apply to insurance producers who were licensed under
the Illinois surplus line law on or before January 1, 2002 the
effective date of this amendatory Act of the 92nd General
Assembly.
    (3) Taxes and reports.
        (a) Surplus line tax and penalty for late payment.
        A surplus line producer shall file with the Director on
    or before February 1 and August 1 of each year a report in
    the form prescribed by the Director on all surplus line
    insurance procured from unauthorized insurers during the
    preceding 6 month period ending December 31 or June 30
    respectively, and on the filing of such report shall pay to
    the Director for the use and benefit of the State a sum
    equal to 3.5% of the gross premiums less returned premiums
    upon all surplus line insurance procured or cancelled
    during the preceding 6 months.
        Any surplus line producer who fails to pay the full
    amount due under this subsection is liable, in addition to
    the amount due, for such penalty and interest charges as
    are provided for under Section 412 of this Code. The
    Director, through the Attorney General, may institute an
    action in the name of the People of the State of Illinois,
    in any court of competent jurisdiction, for the recovery of
    the amount of such taxes and penalties due, and prosecute
    the same to final judgment, and take such steps as are
    necessary to collect the same.
        (b) Fire Marshal Tax.
        Each surplus line producer shall file with the Director
    on or before March 31 of each year a report in the form
    prescribed by the Director on all fire insurance procured
    from unauthorized insurers subject to tax under Section 12
    of the Fire Investigation Act and shall pay to the Director
    the fire marshal tax required thereunder.
        (c) Taxes and fees charged to insured. The taxes
    imposed under this subsection and the countersigning fees
    charged by the Surplus Line Association of Illinois may be
    charged to and collected from surplus line insureds.
    (4) Bond. Each surplus line producer, as a condition to
receiving a surplus line producer's license, shall execute and
deliver to the Director a surety bond to the People of the
State in the penal sum of $20,000, with a surety which is
authorized to transact business in this State, conditioned that
the surplus line producer will pay to the Director the tax,
interest and penalties levied under subsection (3) of this
Section.
    (5) Submission of documents to Surplus Line Association of
Illinois. A surplus line producer shall submit every insurance
contract issued under his or her license to the Surplus Line
Association of Illinois for recording and countersignature.
The submission and countersignature may be effected through
electronic means. The submission shall set forth:
        (a) the name of the insured;
        (b) the description and location of the insured
    property or risk;
        (c) the amount insured;
        (d) the gross premiums charged or returned;
        (e) the name of the unauthorized insurer or domestic
    surplus line insurer as defined in Section 445a from whom
    coverage has been procured;
        (f) the kind or kinds of insurance procured; and
        (g) amount of premium subject to tax required by
    Section 12 of the Fire Investigation Act.
        Proposals, endorsements, and other documents which are
    incidental to the insurance but which do not affect the
    premium charged are exempted from filing and
    countersignature.
        The submission of insuring contracts to the Surplus
    Line Association of Illinois constitutes a certification
    by the surplus line producer or by the insurance producer
    who presented the risk to the surplus line producer for
    placement as a surplus line risk that after diligent effort
    the required insurance could not be procured from
    authorized insurers which are authorized to transact
    business in this State other than domestic surplus line
    insurers as defined in Section 445a and that such
    procurement was otherwise in accordance with the surplus
    line law.
    (6) Countersignature required. It shall be unlawful for an
insurance producer to deliver any unauthorized insurer
contract or domestic surplus line insurer contract unless such
insurance contract is countersigned by the Surplus Line
Association of Illinois.
    (7) Inspection of records. A surplus line producer shall
maintain separate records of the business transacted under his
or her license, including complete copies of surplus line
insurance contracts maintained on paper or by electronic means,
which records shall be open at all times for inspection by the
Director and by the Surplus Line Association of Illinois.
    (8) Violations and penalties. The Director may suspend or
revoke or refuse to renew a surplus line producer license for
any violation of this Code. In addition to or in lieu of
suspension or revocation, the Director may subject a surplus
line producer to a civil penalty of up to $2,000 for each cause
for suspension or revocation. Such penalty is enforceable under
subsection (5) of Section 403A of this Code.
    (9) Director may declare insurer ineligible. If the
Director determines that the further assumption of risks might
be hazardous to the policyholders of an unauthorized insurer,
the Director may order the Surplus Line Association of Illinois
not to countersign insurance contracts evidencing insurance in
such insurer and order surplus line producers to cease
procuring insurance from such insurer.
    (10) Service of process upon Director. Insurance contracts
delivered under this Section from unauthorized insurers, other
than domestic surplus line insurers as defined in Section 445a,
shall contain a provision designating the Director and his
successors in office the true and lawful attorney of the
insurer upon whom may be served all lawful process in any
action, suit or proceeding arising out of such insurance.
Service of process made upon the Director to be valid hereunder
must state the name of the insured, the name of the
unauthorized insurer and identify the contract of insurance.
The Director at his option is authorized to forward a copy of
the process to the Surplus Line Association of Illinois for
delivery to the unauthorized insurer or the Director may
deliver the process to the unauthorized insurer by other means
which he considers to be reasonably prompt and certain.
    (10.5) Insurance contracts delivered under this Section
from unauthorized insurers, other than domestic surplus line
insurers as defined in Section 445a, shall have stamped or
imprinted on the first page thereof in not less than 12-pt.
bold face type the following legend: "Notice to Policyholder:
This contract is issued, pursuant to Section 445 of the
Illinois Insurance Code, by a company not authorized and
licensed to transact business in Illinois and as such is not
covered by the Illinois Insurance Guaranty Fund." Insurance
contracts delivered under this Section from domestic surplus
line insurers as defined in Section 445a shall have stamped or
imprinted on the first page thereof in not less than 12-pt.
bold face type the following legend: "Notice to Policyholder:
This contract is issued by a domestic surplus line insurer, as
defined in Section 445a of the Illinois Insurance Code,
pursuant to Section 445, and as such is not covered by the
Illinois Insurance Guaranty Fund."
    (11) The Illinois Surplus Line law does not apply to
insurance of property and operations of railroads or aircraft
engaged in interstate or foreign commerce, insurance of
vessels, crafts or hulls, cargoes, marine builder's risks,
marine protection and indemnity, or other risks including
strikes and war risks insured under ocean or wet marine forms
of policies.
    (12) Surplus line insurance procured under this Section,
including insurance procured from a domestic surplus line
insurer, is not subject to the provisions of the Illinois
Insurance Code other than Sections 123, 123.1, 401, 401.1, 402,
403, 403A, 408, 412, 445, 445.1, 445.2, 445.3, 445.4, and all
of the provisions of Article XXXI to the extent that the
provisions of Article XXXI are not inconsistent with the terms
of this Act.
(Source: P.A. 92-386, eff. 1-1-02; 93-29, eff. 6-20-03; 93-32,
eff. 7-1-03.)
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 8/6/2004