Public Act 100-0410

SB0683 Enrolled LRB100 06876 SMS 16925 b

AN ACT concerning regulation.

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 adding

Section 141b and by changing Sections 205 and 545 as follows:

(215 ILCS 5/141b new)

Sec. 141b. Third party access to files. Any contract with a

third party ("administrator") to provide claim services for a

property and casualty company must contain the following

provisions:

(1) Upon liquidation or rehabilitation of the insurer,

the files and any data related thereto become the sole

property of the estate. The administrator shall have

reasonable access and right to copy files at the

administrator's expense.

(2) In the event electronic files are used, the

administrator must keep all data in such a format that it

is easily separated from other data maintained by the

administrator and timely transferred to the liquidator

upon the entry of an order or liquidation. "Timely

transferred", in this context, means the claim file data

must be transferred to the liquidator within 10 days after

the entry of an order of liquidation.

The provisions of this Section shall apply to all contracts

entered into after the effective date of this amendatory Act of

the 100th General Assembly, and any existing contracts shall

have one year to come into compliance with this Section.

(215 ILCS 5/205) (from Ch. 73, par. 817)

Sec. 205. Priority of distribution of general assets.

(1) The priorities of distribution of general assets from

the company's estate is to be as follows:

(a) The costs and expenses of administration,

including, but not limited to, the following:

(i) The reasonable expenses of the Illinois

Insurance Guaranty Fund, the Illinois Life and Health

Insurance Guaranty Association, and the Illinois

Health Maintenance Organization Guaranty Association

and of any similar organization in any other state,

including overhead, salaries, and other general

administrative expenses allocable to the receivership

(administrative and claims handling expenses and

expenses in connection with arrangements for ongoing

coverage), but excluding expenses incurred in the

performance of duties under Section 547 or similar

duties under the statute governing a similar

organization in another state. For property and

casualty insurance guaranty associations that guaranty

certain obligations of any member company as defined by

Section 534.5, expenses shall include, but not be

limited to, loss adjustment expenses, which shall

include adjusting and other expenses and defense and

cost containment expenses. The expenses of such

property and casualty guaranty associations, including

the Illinois Insurance Guaranty Fund, shall be

reimbursed as prescribed by Section 545, but shall be

subordinate to all other costs and expenses of

administration, including the expenses reimbursed

pursuant to subparagraph (ii) of this paragraph (a).

(ii) The expenses expressly approved or ratified

by the Director as liquidator or rehabilitator,

including, but not limited to, the following:

(1) the actual and necessary costs of

preserving or recovering the property of the

insurer;

(2) reasonable compensation for all services

rendered on behalf of the administrative

supervisor or receiver;

(3) any necessary filing fees;

(4) the fees and mileage payable to witnesses;

(5) unsecured loans obtained by the receiver;

and

(6) expenses approved by the conservator or

rehabilitator of the insurer, if any, incurred in the

course of the conservation or rehabilitation that are

unpaid at the time of the entry of the order of

liquidation.

Any unsecured loan falling under item (5) of

subparagraph (ii) of this paragraph (a) shall have priority

over all other costs and expenses of administration, unless

the lender agrees otherwise. Absent agreement to the

contrary, all other costs and expenses of administration

shall be shared on a pro-rata basis, except for the

expenses of property and casualty guaranty associations,

which shall have a lower priority pursuant to subparagraph

(i) of this paragraph (a). , including the expenses of the

Illinois Insurance Guaranty Fund, the Illinois Life and

Health Insurance Guaranty Association, the Illinois Health

Maintenance Organization Guaranty Association and of any

similar organization in any other state as prescribed in

subsection (c) of Section 545.

(b) Secured claims, including claims for taxes and

debts due the federal or any state or local government,

that are secured by liens perfected prior to the filing of

the complaint.

(c) Claims for wages actually owing to employees for

services rendered within 3 months prior to the date of the

filing of the complaint, not exceeding $1,000 to each

employee unless there are claims due the federal government

under paragraph (f), then the claims for wages shall have a

priority of distribution immediately following that of

federal claims under paragraph (f) and immediately

preceding claims of general creditors under paragraph (g).

(d) Claims by policyholders, beneficiaries, and

insureds, under insurance policies, annuity contracts, and

funding agreements, liability claims against insureds

covered under insurance policies and insurance contracts

issued by the company, claims of obligees (and, subject to

the discretion of the receiver, completion contractors)

under surety bonds and surety undertakings (not to include

bail bonds, mortgage or financial guaranty, or other forms

of insurance offering protection against investment risk),

claims by principals under surety bonds and surety

undertakings for wrongful dissipation of collateral by the

insurer or its agents, and claims incurred during any

extension of coverage provided under subsection (5) of

Section 193, and claims of the Illinois Insurance Guaranty

Fund, the Illinois Life and Health Insurance Guaranty

Association, the Illinois Health Maintenance Organization

Guaranty Association, and any similar organization in

another state as prescribed in Section 545. For purposes of

this Section, "funding agreement" means an agreement

whereby an insurer authorized to write business under Class

1 of Section 4 of this Code may accept and accumulate funds

and make one or more payments at future dates in amounts

that are not based upon mortality or morbidity

contingencies.

(e) Claims by policyholders, beneficiaries, and

insureds, the allowed values of which were determined by

estimation under paragraph (b) of subsection (4) of Section

209.

(f) Any other claims due the federal government.

(g) All other claims of general creditors not falling

within any other priority under this Section including

claims for taxes and debts due any state or local

government which are not secured claims and claims for

attorneys' fees incurred by the company in contesting its

conservation, rehabilitation, or liquidation.

(h) Claims of guaranty fund certificate holders,

guaranty capital shareholders, capital note holders, and

surplus note holders.

(i) Proprietary claims of shareholders, members, or

other owners.

Every claim under a written agreement, statute, or rule

providing that the assets in a separate account are not

chargeable with the liabilities arising out of any other

business of the insurer shall be satisfied out of the funded

assets in the separate account equal to, but not to exceed, the

reserves maintained in the separate account under the separate

account agreement, and to the extent, if any, the claim is not

fully discharged thereby, the remainder of the claim shall be

treated as a priority level (d) claim under paragraph (d) of

this subsection to the extent that reserves have been

established in the insurer's general account pursuant to

statute, rule, or the separate account agreement.

For purposes of this provision, "separate account

policies, contracts, or agreements" means any policies,

contracts, or agreements that provide for separate accounts as

contemplated by Section 245.21.

To the extent that any assets of an insurer, other than

those assets properly allocated to and maintained in a separate

account, have been used to fund or pay any expenses, taxes, or

policyholder benefits that are attributable to a separate

account policy, contract, or agreement that should have been

paid by a separate account prior to the commencement of

receivership proceedings, then upon the commencement of

receivership proceedings, the separate accounts that benefited

from this payment or funding shall first be used to repay or

reimburse the company's general assets or account for any

unreimbursed net sums due at the commencement of receivership

proceedings prior to the application of the separate account

assets to the satisfaction of liabilities or the corresponding

separate account policies, contracts, and agreements.

To the extent, if any, reserves or assets maintained in the

separate account are in excess of the amounts needed to satisfy

claims under the separate account contracts, the excess shall

be treated as part of the general assets of the insurer's

estate.

(2) Within 120 days after the issuance of an Order of

Liquidation with a finding of insolvency against a domestic

company, the Director shall make application to the court

requesting authority to disburse funds to the Illinois

Insurance Guaranty Fund, the Illinois Life and Health Insurance

Guaranty Association, the Illinois Health Maintenance

Organization Guaranty Association, and similar organizations

in other states from time to time out of the company's

marshaled assets as funds become available in amounts equal to

disbursements made by the Illinois Insurance Guaranty Fund, the

Illinois Life and Health Insurance Guaranty Association, the

Illinois Health Maintenance Organization Guaranty Association,

and similar organizations in other states for covered claims

obligations on the presentation of evidence that such

disbursements have been made by the Illinois Insurance Guaranty

Fund, the Illinois Life and Health Insurance Guaranty

Association, the Illinois Health Maintenance Organization

Guaranty Association, and similar organizations in other

states.

The Director shall establish procedures for the ratable

allocation and distribution of disbursements to the Illinois

Insurance Guaranty Fund, the Illinois Life and Health Insurance

Guaranty Association, the Illinois Health Maintenance

Organization Guaranty Association, and similar organizations

in other states. In determining the amounts available for

disbursement, the Director shall reserve sufficient assets for

the payment of the expenses of administration described in

paragraph (1)(a) of this Section. All funds available for

disbursement after the establishment of the prescribed reserve

shall be promptly distributed. As a condition to receipt of

funds in reimbursement of covered claims obligations, the

Director shall secure from the Illinois Insurance Guaranty

Fund, the Illinois Life and Health Insurance Guaranty

Association, the Illinois Health Maintenance Organization

Guaranty Association, and each similar organization in other

states, an agreement to return to the Director on demand funds

previously received as may be required to pay claims of secured

creditors and claims falling within the priorities established

in paragraphs (a), (b), (c), and (d) of subsection (1) of this

Section in accordance with such priorities.

(3) The changes made in this Section by this amendatory Act

of the 100th General Assembly apply to all liquidation,

rehabilitation, or conservation proceedings that are pending

on the effective date of this amendatory Act of the 100th

General Assembly and to all future liquidation,

rehabilitation, or conservation proceedings.

(4) The provisions of this Section are severable under

Section 1.31 of the Statute on Statutes.

(Source: P.A. 92-65, eff. 7-12-01; 92-875, eff. 1-3-03.)

(215 ILCS 5/545) (from Ch. 73, par. 1065.95)

Sec. 545. Effect of paid claims.

(a) Every insured or claimant seeking the protection of

this Article shall cooperate with the Fund to the same extent

as such person would have been required to cooperate with the

insolvent company. The Fund shall have all the rights, duties

and obligations under the policy to the extent of the covered

claim payment, provided the Fund shall have no cause of action

against the insured of the insolvent company for any sums it

has paid out except such causes of action as the insolvent

company would have had if such sums had been paid by the

insolvent company and except as provided in paragraph (d) of

this Section.

(b) The Fund and any similar organization in another state

shall be recognized as claimants in the liquidation of an

insolvent company for any amounts paid by them on covered

claims obligations as determined under this Article or similar

laws in other states and shall receive dividends at the

priority set forth in paragraph (d) of subsection (1) of

Section 205 of this Code; provided that if, at the time that

the liquidator Liquidator issues a cut-off notice to the Fund

in anticipation of closing the estate, a reserve has been

established by the Fund, or any similar organization in another

state, for the amount of their future administrative expenses

and loss development associated with unpaid reported pending

claims, these reserves will be deemed to have been paid as of

the date of the notice and payment shall be made accordingly.

The liquidator of an insolvent company shall be bound by

determinations of covered claim eligibility under the Act and

by settlements of claims made by the Fund or a similar

organization in another state on the receipt of certification

of such payments, to the extent those determinations or

settlements satisfy obligations of the Fund, but the receiver

shall not be bound in any way by those determinations or

settlements to the extent that there remains a claim in the

estate for amounts in excess of the payments by the Fund. In

submitting their claim for covered claim payments the Fund and

any similar organization in another state shall not be subject

to the requirements of Sections 208 and 209 of this Code and

shall not be affected by the failure of the person receiving a

covered claim payment to file a proof of claim.

(c) The expenses of the Fund and of any similar

organization in any other state, other than expenses incurred

in the performance of duties under Section 547 or similar

duties under the statute governing a similar organization in

another state, shall be accorded the same priority over all

claims against the estate, except as provided for in paragraph

(a) of subsection (1) of Section 205 of this Code as the

liquidator's expenses. The liquidator shall make prompt

reimbursement to the Fund and any similar organization for such

expense payments.

(d) The Fund has the right to recover from the following

persons the amount of any covered claims and allocated claims

expenses which the Fund paid or incurred on behalf of such

person in satisfaction, in whole or in part, of liability

obligations of such person to any other person:

(i) any insured whose net worth on December 31 of the

year next preceding the date the company becomes an

insolvent company 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.

(ii) any insured who is an affiliate of the insolvent

company.

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

Section 99. Effective date. This Act takes effect upon

becoming law.