Bill Text: IL SB1573 | 2015-2016 | 99th General Assembly | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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

Spectrum: Slight Partisan Bill (Democrat 2-1)

Status: (Engrossed - Dead) 2015-04-21 - Referred to Rules Committee [SB1573 Detail]

Download: Illinois-2015-SB1573-Introduced.html

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99TH GENERAL ASSEMBLY State of Illinois 2015 and 2016 SB1573 Introduced 2/20/2015, by Sen. William R. Haine SYNOPSIS AS INTRODUCED:
215 ILCS 5/121-2.08 from Ch. 73, par. 733-2.08
215 ILCS 5/412 from Ch. 73, par. 1024
215 ILCS 5/445 from Ch. 73, par. 1057
Amends the Illinois Insurance Code. In the provision concerning transactions in the State involving industrial insureds' contracts of insurance, restores the language that was deleted by Public Act 98-978 and deletes the language that was added by Public Act 98-978. Deletes the references to the provision concerning transactions in the State involving industrial insureds' contracts of insurance that were added by Public Act 98-978. Deletes language in the definition of "home state" that was added by Public Act 98-978. Effective immediately.
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FISCAL NOTE ACT MAY APPLY
A BILL FOR
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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
changing Sections 121-2.08, 412, and 445 as follows:
(215 ILCS 5/121-2.08) (from Ch. 73, par. 733-2.08)
Sec. 121-2.08. Transactions in this State involving
contracts of insurance issued to one or more independently
procured directly from an unauthorized insurer by industrial
insureds. For the purposes of this Section, "industrial
insured" is an insured:
(a) which procures the insurance of any risk or risks other
than life and annuity contracts by use of the services of a
full-time employee acting as an insurance manager or buyer or
the services of a regularly and continuously retained qualified
insurance consultant;
(b) whose aggregate annual premiums for insurance on all
risks, except for life and accident and health insurance, total
at least $100,000; and
(c) which either (i) has at least 25 full-time employees,
(ii) has gross assets in excess of $3,000,000, or (iii) has
annual gross revenues in excess of $5,000,000.
(a) As used in this Section:

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

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

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

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

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

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

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greater.
A tax return or report shall be deemed received as of the
date mailed as evidenced by a postmark, proof of mailing on a
recognized United States Postal Service form or a form
acceptable to the United States Postal Service or other
commercial mail delivery service, or other evidence acceptable
to the Director.
(3)(a) When any insurance company fails to pay the full
amount due under the provisions of this Section, Sections
408.1, 409, 444, or 444.1 of this Code, or Section 12 of the
Fire Investigation Act, there shall be added to the amount due
as a penalty an amount equal to 10% of the deficiency.
(a-5) When any industrial insured or surplus line producer
fails to pay the full amount due under the provisions of this
Section, Sections 121-2.08 or Section 445 of this Code, or
Section 12 of the Fire Investigation Act on the date
prescribed, there shall be added:
(i) as a late fee, if the payment is received at least
one day but not more than 7 days after the prescribed due
date, 10% of the tax due, the entire fee not to exceed
$1,000;
(ii) as a late fee, if the payment is received at least
8 days but not more than 14 days after the prescribed due
date, 10% of the tax due, the entire fee not to exceed
$1,500;
(iii) as a late fee, if the payment is received at

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

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or at such higher adjusted rates as are or may be established
under subsection (b) of Section 6621 of the Internal Revenue
Code, from the date that payment of any such tax was due,
determined without regard to any extensions, to the date of
payment of such amount.
(5) 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, fees, and penalties due,
and prosecute the same to final judgment, and take such steps
as are necessary to collect the same.
(6) In the event that the certificate of authority of a
foreign or alien company is revoked for any cause or the
company withdraws from this State prior to the renewal date of
the certificate of authority as provided in Section 114, the
company may recover the amount of any such tax paid in advance.
Except as provided in this subsection, no revocation or
withdrawal excuses payment of or constitutes grounds for the
recovery of any taxes or penalties imposed by this Code.
(7) When an insurance company or domestic affiliated group
fails to pay the full amount of any fee of $200 or more due
under Section 408 of this Code, there shall be added to the
amount due as a penalty the greater of $100 or an amount equal
to 10% of the deficiency for each month or part of a month that
the deficiency remains unpaid.
(8) The Department shall have a lien for the taxes, fees,

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

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

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

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

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

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(215 ILCS 5/445) (from Ch. 73, par. 1057)
Sec. 445. Surplus line.
(1) Definitions. For the purposes of this Section:
"Affiliate" means, with respect to an insured, any entity
that controls, is controlled by, or is under common control
with the insured. For the purpose of this definition, an entity
has control over another entity if:
(A) the entity directly or indirectly or acting through
one or more other persons owns, controls, or has the power
to vote 25% or more of any class of voting securities of
the other entity; or
(B) the entity controls in any manner the election of a
majority of the directors or trustees of the other entity.
"Affiliated group" means any group of entities that are all
affiliated.
"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.
"Exempt commercial purchaser" means any person purchasing
commercial insurance that, at the time of placement, meets the
following requirements:
(A) The person employs or retains a qualified risk
manager to negotiate insurance coverage.

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

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

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

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accredited college or university in risk
management, business administration, finance,
economics, or any other field determined by the
Director or his designee to demonstrate minimum
competence in risk management; and
(b) the following:
(i) three years of experience in risk
financing, claims administration, loss
prevention, risk and insurance analysis, or
purchasing commercial lines of insurance; or
(ii) alternatively has:
(AA) a designation as a Chartered
Property and Casualty Underwriter (in this
subparagraph (ii) referred to as "CPCU")
issued by the American Institute for
CPCU/Insurance Institute of America;
(BB) a designation as an Associate in
Risk Management (ARM) issued by the
American Institute for CPCU/Insurance
Institute of America;
(CC) a designation as Certified Risk
Manager (CRM) issued by the National
Alliance for Insurance Education &
Research;
(DD) a designation as a RIMS Fellow
(RF) issued by the Global Risk Management

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Institute; or
(EE) any other designation,
certification, or license determined by
the Director or his designee to
demonstrate minimum competency in risk
management;
(II) the person has:
(a) at least 7 years of experience in risk
financing, claims administration, loss prevention,
risk and insurance coverage analysis, or
purchasing commercial lines of insurance; and
(b) has any one of the designations specified
in subparagraph (ii) of paragraph (b);
(III) the person has at least 10 years of
experience in risk financing, claims administration,
loss prevention, risk and insurance coverage analysis,
or purchasing commercial lines of insurance; or
(IV) the person has a graduate degree from an
accredited college or university in risk management,
business administration, finance, economics, or any
other field determined by the Director or his or her
designee to demonstrate minimum competence in risk
management.
"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

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similar association, organization, or other entity.
"State" means any state of the United States, the District
of Columbia, the Commonwealth of Puerto Rico, Guam, the
Northern Mariana Islands, the Virgin Islands, and American
Samoa.
"Surplus line insurance" means insurance on a risk:
(A) of the kinds specified in Classes 2 and 3 of
Section 4 of this Code; and
(B) that is procured from an unauthorized insurer after
the insurance producer representing the insured or the
surplus line producer is unable, after diligent effort, to
procure the insurance from authorized insurers; and
(C) where Illinois is the home state of the insured,
for policies effective, renewed or extended on July 21,
2011 or later and for multiyear policies upon the policy
anniversary that falls on or after July 21, 2011; and
(D) that is located in Illinois, for policies effective
prior to July 21, 2011.
"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.
(1.5) Procuring surplus line insurance; surplus line
insurer requirements.
(a) Insurance producers may procure surplus line
insurance only if licensed as a surplus line producer under

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this Section.
(b) Licensed surplus line producers may procure
surplus line insurance from an unauthorized insurer
domiciled in the United States only if the insurer:
(i) is permitted in its domiciliary jurisdiction
to write the type of insurance involved; and
(ii) has, based upon information available to the
surplus line producer, a policyholders surplus of not
less than $15,000,000 determined in accordance with
the laws of its domiciliary jurisdiction; and
(iii) has standards of solvency and management
that are adequate for the protection of policyholders.
Where an unauthorized insurer does not meet the
standards set forth in (ii) and (iii) 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.
(c) Licensed surplus line producers may procure
surplus line insurance from an unauthorized insurer
domiciled outside of the United States only if the insurer
meets the standards for unauthorized insurers domiciled in
the United States in paragraph (b) of this subsection (1.5)
or is listed on the Quarterly Listing of Alien Insurers
maintained by the International Insurers Department of the
NAIC. The Director shall make the Quarterly Listing of

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Alien Insurers available to surplus line producers without
charge.
(d) 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

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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.
(e) Licensed surplus line producers may procure
surplus line insurance from an unauthorized insurer for an
exempt commercial purchaser without making the required
diligent effort to procure the insurance from authorized
insurers if:
(i) the producer has disclosed to the exempt
commercial purchaser that such insurance may or may not
be available from authorized insurers that may provide
greater protection with more regulatory oversight; and
(ii) the exempt commercial purchaser has
subsequently in writing requested the producer to
procure such insurance from an unauthorized insurer.
(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 payment of an annual license fee of $400.
A surplus line producer so licensed shall keep a separate
account of the business transacted thereunder for 7 years from
the policy effective date which shall be open at all times to

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the inspection of the Director or his representative.
No later than July 21, 2012, the State of Illinois shall
participate in the national insurance producer database of the
NAIC, or any other equivalent uniform national database, for
the licensure of surplus line producers and the renewal of such
licenses.
(3) Taxes and reports.
(a) Surplus line tax and penalty for late payment. The
surplus line tax rate for a surplus line insurance policy
or contract is determined as follows:
(i) 3% for policies or contracts with an effective
date prior to July 1, 2003;
(ii) 3.5% for policies or contracts with an
effective date of July 1, 2003 or later.
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 and
submitted to the Surplus Line Association of Illinois
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 the surplus line tax rate multiplied
by the gross premiums less returned premiums upon all
surplus line insurance submitted to the Surplus Line
Association of Illinois during the preceding 6 months.

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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 late fee, 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, late fees, interest,
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 and
submitted to the Surplus Line Association of Illinois
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) (Blank).
(5) Submission of documents to Surplus Line Association of
Illinois. A surplus line producer shall submit every insurance

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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 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 and
that such procurement was otherwise in accordance with the
surplus line law.
(6) Countersignature required. It shall be unlawful for an

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insurance producer to deliver any unauthorized 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 for 7 years from the policy effective date,
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

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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:

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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. 97-955, eff. 8-14-12; 98-978, eff. 1-1-15.)
Section 99. Effective date. This Act takes effect upon
becoming law.