Public Act 103-0113
HB0047 EnrolledLRB103 00158 BMS 45163 b HB0047 Enrolled LRB103 00158 BMS 45163 b
HB0047 Enrolled LRB103 00158 BMS 45163 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
changing Sections 533, 534, 537.2, 537.7, 538.2, and 545 and
by adding Section 534.9 as follows:
(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 as they appear
and are defined in those clauses as of January 1, 1985, 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,
HB0047 Enrolled LRB103 00158 BMS 45163 b
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. 89-97, eff. 7-7-95.)
(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 534.9 534.8 have the
meanings set forth in those Sections.
(Source: P.A. 85-576.)
(215 ILCS 5/534.9 new)
Sec. 534.9. Cybersecurity insurance. "Cybersecurity
insurance" means a type of insurance under Class 2 of Section 4
of this Code that involves first-party and third-party
coverage, in a policy or endorsement, written on a direct,
admitted basis to cover losses and loss mitigation arising out
of or relating to data privacy breaches, unauthorized
information network security intrusions, computer viruses,
ransomware, cyber extortion, identity theft, and similar
exposures.
(215 ILCS 5/537.2) (from Ch. 73, par. 1065.87-2)
Sec. 537.2. Obligation of Fund. The Fund shall be
obligated to the extent of the covered claims existing prior
to the entry of an Order of Liquidation against an insolvent
company and arising within 30 days after the entry of such
Order, or before the policy expiration date if less than 30
days after the entry of such Order, or before the insured
replaces the policy or on request effects cancellation, if he
does so within 30 days after the entry of such Order. If the
entry of an Order of Liquidation occurs on or after October 1,
1975 and before October 1, 1977, such obligations shall not:
(i) exceed $100,000, or (ii) include any obligation to refund
the first $100 of any unearned premium claim; and if the entry
of an Order of Liquidation occurs on or after October 1, 1977
and before January 1, 1988, such obligations shall not: (i)
exceed $150,000, except that this limitation shall not apply
to any workers compensation claims, or (ii) include any
obligation to refund the first $100 of any unearned premium
claim; and if the entry of an Order of Liquidation occurs on or
after January 1, 1988 and before January 1, 2011, such
obligations shall not: (i) exceed $300,000, except that this
limitation shall not apply to any workers compensation claims,
or (ii) include any obligation to refund the first $100 of any
unearned premium claim or to refund any unearned premium over
$10,000 under any one policy. If the entry of an Order of
Liquidation occurs on or after January 1, 2011, then such
obligations shall not: (i) exceed $500,000, except that this
limitation shall not apply to any workers compensation claims
or (ii) include any obligation to refund the first $100 of any
unearned premium claim or refund any unearned premium over
$10,000 under any one policy. If the entry of an Order of
Liquidation occurs on or after January 1, 2023, then such
obligations shall not: (i) exceed $500,000, except that this
limitation shall not apply to any workers compensation claims,
or (ii) exceed without any deduction $50,000 for any unearned
premium claim or refund under any one policy. In no event shall
the Fund be obligated to a policyholder or claimant in an
amount in excess of the face amount of the policy from which
the claim arises, including, but not limited to, any
applicable specific or aggregate limits. For purposes of this
Article Act, obligations arising under an insurance policy
written to indemnify a permissibly self-insured employer under
subsection (a) of Section 4 of the Workers' Compensation Act
for its liability to pay workers' compensation benefits in
excess of a specific or aggregate retention shall be subject
to the applicable per-claim limits set forth in this Section.
In no event shall the Fund be obligated to pay an amount in
excess of $500,000 in the aggregate for all first-party and
third-party claims under a policy or endorsement providing
cybersecurity insurance as defined in Section 534.9 and
arising out of or related to a single insured event,
regardless of the number of claims made or number of
claimants.
In no event shall the Fund be liable for any interest on
any judgment entered against the insured or the insolvent
company, or for any other interest claim against the insured
or the insolvent company, regardless of whether the insolvent
company would have been obligated to pay such interest under
the terms of its policy. The Fund shall be liable for interest
at the statutory rate on money judgments entered against the
Fund until the judgment is satisfied.
Any obligation of the Fund to defend an insured shall
cease upon the Fund's payment or tender of an amount equal to
the lesser of the Fund's covered claim obligation limit or the
applicable policy limit.
(Source: P.A. 99-368, eff. 8-14-15.)
(215 ILCS 5/537.7) (from Ch. 73, par. 1065.87-7)
Sec. 537.7. Investigation of claims; disposition.
(a) The Fund shall investigate claims brought against the
Fund and adjust, compromise, settle, and pay covered claims to
the extent of the Fund's obligation and deny all other claims.
(b) The Fund shall not be bound by a settlement, release,
compromise, waiver, or final judgment executed or entered
within 12 months prior to an order of liquidation and shall
have the right to assert all defenses available to the Fund
including, but not limited to, defenses applicable to
determining and enforcing its statutory rights and obligations
to any claim. The Fund shall be bound by a settlement, release,
compromise, waiver, or final judgment executed or entered more
than 12 months prior to an order of liquidation, but only if
the claim is a covered claim and the settlement, release,
compromise, waiver, or final judgment was not a result of
fraud, collusion, default, or failure to defend. In addition,
with respect to covered claims arising from a judgment under a
decision, verdict, or finding based on the default of the
insolvent insurer or its failure to defend, upon application
by the Fund, either on its own behalf or on behalf of an
insured, the court shall set aside the judgment, order,
decision, verdict, or finding, and the Fund shall be permitted
to defend against the claim on the merits. The same criteria
determining whether the Fund will be bound, as specified in
this subsection (b), shall apply to any settlement, release,
compromise, waiver, or final judgment entered into by a high
net worth insured before the date on which claims by or against
that insured became non-exempt for reasons specified in
paragraph (iv) of subsection (b) of Section 534.3.
(c) The Fund shall have the right to appoint or approve and
to direct legal counsel retained under liability insurance
policies for the defense of covered claims as well as the right
to appoint or approve and to direct legal counsel and other
service providers under any other insurance policies subject
to this Article, regardless of any limitations in the policy.
(Source: P.A. 101-60, eff. 7-12-19.)
(215 ILCS 5/538.2) (from Ch. 73, par. 1065.88-2)
Sec. 538.2. The Fund may employ or retain such persons as
are necessary to handle claims, provide policy benefits and
services, and perform other duties of the Fund.
(Source: P.A. 77-305.)
(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 subsection (d) of
this Section. Any person recovering under this Article and any
insured whose liabilities are satisfied under this Article
shall be deemed to have assigned the person's or insured's
rights under the policy to the Fund to the extent of his or her
recovery or satisfaction obtained from the Fund's payments.
(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 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 priority over all claims
against the estate, except as provided for in paragraph (a) of
subsection (1) of Section 205 of this Code. 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 (as determined
without regard to the exemption in paragraph (iv) of
subsection (b) of Section 534.3) 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.
The Fund may also, at its sole discretion and without
assumption of any ongoing duty to do so, pay any workers
compensation claims or any other third-party claims or any
cybersecurity insurance obligations covered by a policy of an
insolvent company on behalf of a high net worth insured as
defined in paragraph (iv) of subsection (b) of Section 534.3.
In that case, the Fund shall recover from the high net worth
insured under this Section for all amounts paid on its behalf,
all allocated claim adjusted expenses related to such claims,
the Fund's attorney's fees, and all court costs in any action
necessary to collect the full amount to the Fund's
reimbursement under this Section.
(Source: P.A. 100-410, eff. 8-25-17; 101-60, eff. 7-12-19.)
Section 99. Effective date. This Act takes effect upon
becoming law.