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2005 Illinois 215 ILCS 5/      Illinois Insurance Code. Article XXXIII 1/2 - Life and Health Insurance Guaranty Association


      (215 ILCS 5/Art. XXXIII.5 heading)
ARTICLE XXXIII 1/2. LIFE AND HEALTH
INSURANCE GUARANTY ASSOCIATION

    (215 ILCS 5/531.01) (from Ch. 73, par. 1065.80‑1)
    Sec. 531.01. Title.) This Article is known and may be cited as the Illinois Life and Health Insurance Guaranty Association Law.
(Source: P.A. 81‑899.)

    (215 ILCS 5/531.01a) (from Ch. 73, par. 1065.80‑1a)
    Sec. 531.01a. Existing Liability. Any liabilities of the Association for any member company which was an insolvent insurer as defined by this Article prior to January 1, 1986 shall be determined under the law which was in effect at the time the member company became an insolvent insurer as if there had been no amendment to that law. Any liabilities of the Association for a member company which became an insolvent insurer on or after January 1, 1986, shall be determined under the law in effect at the time when the member became an insolvent insurer, notwithstanding any prior law.
    On or after January 1, 1986, any assessments made against other member companies to meet Association liabilities shall be made based on the law which was in effect when the member company was an impaired or insolvent insurer as defined by this Article. If different assessment methods are used in any one year, those assessments shall be aggregated for purposes of calculating the aggregate assessment under Sections 531.09 and 531.13.
(Source: P.A. 84‑1035.)

    (215 ILCS 5/531.02) (from Ch. 73, par. 1065.80‑2)
    Sec. 531.02. Purpose. The purpose of this Article is to protect, subject to certain limitations, the persons specified in paragraph (1) of Section 531.03 against failure in the performance of contractual obligations, under life or health insurance policies, annuity contracts and health or medical care service contracts specified in paragraph (2) of Section 531.03, due to the impairment or insolvency of the insurer issuing such policies or contracts. To provide this protection, (1) an association of insurers is created to enable the guaranty of payment of benefits and of continuation of coverages, (2) members of the Association are subject to assessment to provide funds to carry out the purpose of this Article, and (3) the Association is authorized to assist the Director, in the prescribed manner, in the detection and prevention of insurer impairments or insolvencies.
(Source: P.A. 86‑753.)

    (215 ILCS 5/531.03) (from Ch. 73, par. 1065.80‑3)
    Sec. 531.03. Coverage and limitations.
    (1) This Article shall provide coverage for the policies and contracts specified in paragraph (2) of this Section:
        (a) to persons who, regardless of where they reside
    
(except for non‑resident certificate holders under group policies or contracts), are the beneficiaries, assignees or payees of the persons covered under subparagraph (1)(b), and
        (b) to persons who are owners of or certificate
    
holders under such policies or contracts; or, in the case of unallocated annuity contracts, to the persons who are the contract holders, and who
            (i) are residents of this State, or
            (ii) are not residents, but only under all of
        
the following conditions:
                (A) the insurers which issued such policies
            
or contracts are domiciled in this State;
                (B) such insurers never held a license or
            
certificate of authority in the states in which such persons reside;
                (C) such states have associations similar to
            
the association created by this Act; and
                (D) such persons are not eligible for
            
coverage by such associations.
    (2)(a) This Article shall provide coverage to the persons specified in paragraph (l) of this Section for direct, (i) nongroup life, health, annuity and supplemental policies, or contracts, (ii) for certificates under direct group policies or contracts, (iii) for unallocated annuity contracts and (iv) for contracts to furnish health care services and subscription certificates for medical or health care services issued by persons licensed to transact insurance business in this State under the Illinois Insurance Code. Annuity contracts and certificates under group annuity contracts include but are not limited to guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement agreements, lottery contracts and any immediate or deferred annuity contracts.
    (b) This Article shall not provide coverage for:
        (i) that portion or part of such policies or
    
contracts under which the risk is borne by the policyholder; provided however, that nothing in this subparagraph (i) shall make this Article inapplicable to assessment life and accident and health insurance policies or contracts; or
        (ii) any such policy or contract or part thereof
    
assumed by the impaired or insolvent insurer under a contract of reinsurance, other than reinsurance for which assumption certificates have been issued; or
        (iii) any portion of a policy or contract to the
    
extent such portion represents an accrued value that the rate of interest on which it is accrued
            (A) averaged over the period of four years prior
        
to the date on which the Association becomes obligated with respect to such policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four year period or for such lesser period if the policy or contract was issued less than four years before the Association became obligated; and
            (B) on and after the date on which the
        
Association becomes obligated with respect to such policy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available; or
        (iv) any unallocated annuity contract issued to an
    
employee benefit plan protected under the federal Pension Benefit Guaranty Corporation; or
        (v) any portion of any unallocated annuity contract
    
which is not issued to or in connection with a specific employee, union or association of natural persons benefit plan or a government lottery; or
        (vi) any burial society organized under Article XIX
    
of this Act, any fraternal benefit society organized under Article XVII of this Act, any mutual benefit association organized under Article XVIII of this Act, and any foreign fraternal benefit society licensed under Article VI of this Act; or
        (vii) any health maintenance organization
    
established pursuant to the Health Maintenance Organization Act including any health maintenance organization business of a member insurer; or
        (viii) any health services plan corporation
    
established pursuant to the Voluntary Health Services Plans Act; or
        (ix) (blank); or
        (x) any dental service plan corporation established
    
pursuant to the Dental Service Plan Act; or
        (xi) any stop‑loss insurance, as defined in clause
    
(b) of Class 1 or clause (a) of Class 2 of Section 4, and further defined in subsection (d) of Section 352; or
        (xii) that portion or part of a variable life
    
insurance or variable annuity contract not guaranteed by an insurer.
    (3) The benefits for which the Association may become liable shall in no event exceed the lesser of:
        (a) the contractual obligations for which the
    
insurer is liable or would have been liable if it were not an impaired or insolvent insurer, or
        (b)(i) with respect to any one life, regardless of
    
the number of policies or contracts:
            (A) $300,000 in life insurance death benefits,
        
but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance;
            (B) $300,000 in health insurance benefits,
        
including any net cash surrender and net cash withdrawal values;
            (C) $100,000 in the present value of annuity
        
benefits, including net cash surrender and net cash withdrawal values;
        (ii) with respect to each individual participating
    
in a governmental retirement plan established under Section 401, 403(b) or 457 of the U.S. Internal Revenue Code covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, $100,000 in present value annuity benefits, including net cash surrender and net cash withdrawal values; provided, however, that in no event shall the Association be liable to expend more than $300,000 in the aggregate with respect to any one individual under subparagraph (1) and this subparagraph;
        (iii) with respect to any one contract holder
    
covered by any unallocated annuity contract not included in subparagraph (3)(b)(ii) of this Section above, $5,000,000 in benefits, irrespective of the number of such contracts held by that contract holder.
(Source: P.A. 90‑177, eff. 7‑23‑97; 91‑357, eff. 7‑29‑99.)

    (215 ILCS 5/531.04) (from Ch. 73, par. 1065.80‑4)
    Sec. 531.04. Construction.) This Article is to be liberally construed to effect the purpose under Section 531.02 which constitutes an aid and guide to interpretation.
(Source: P.A. 81‑899.)

    (215 ILCS 5/531.05) (from Ch. 73, par. 1065.80‑5)
    Sec. 531.05. Definitions. As used in this Act:
    (1) "Account" means either of the 3 accounts created under Section 531.06.
    (2) "Association" means the Illinois Life and Health Insurance Guaranty Association created under Section 531.06.
    (3) "Director" means the Director of Insurance of this State.
    (4) "Contractual obligation" means any obligation under a policy or contract or certificate under a group policy or contract, or portion thereof for which coverage is provided under Section 531.03.
    (5) "Covered person" means any person who is entitled to the protection of the Association as described in Section 531.02.
    (6) "Covered policy" means any policy or contract within the scope of this Article under Section 531.03.
    (7) "Impaired insurer" means a member insurer deemed by the Director after the effective date of this Article to be potentially unable to fulfill its contractual obligations and not an insolvent insurer.
    (8) "Insolvent insurer" means (a) a member insurer either at the time the policy was issued or when the insured event occurred, or any company which has acquired such direct policy obligations through purchase, merger, consolidation, reinsurance or otherwise, whether or not such acquiring 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) becomes insolvent and is placed under a final order of liquidation, rehabilitation or conservation by a court of competent jurisdiction.
    (9) "Member insurer" means any person licensed or who holds a certificate of authority to transact in this State any kind of insurance business to which this Article applies under Section 531.03. For purposes of this Article "member insurer" includes any person whose certificate of authority may have been suspended pursuant to Section 119.
    (10) "Moody's Corporate Bond Yield Average" means the Monthly Average Corporates as published by Moody's Investors Service, Inc., or any successor thereto.     (11) "Premiums" means direct gross insurance premiums or subscriptions and annuity considerations received on covered policies or contracts, less return premiums and considerations thereon and dividends paid or credited to policyholders on such direct business. "Premiums" do not include premiums and considerations on contracts between insurers and reinsurers. "Premiums" do not include any amounts received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under paragraph (2) of Section 531.03 except that assessable premium shall not be reduced on account of subparagraph (2)(b)(iii) of Section 531.03 relating to interest limitations and subparagraph (3)(b) of Section 531.03 relating to limitations with respect to any one individual, any one participant and any one contractholder; provided that "premiums" shall not include any premiums in excess of five million dollars on any unallocated annuity contract not issued under a governmental retirement plan established under Sections 401, 403(b) or 457 of the United States Internal Revenue Code.
    (12) "Person" means any individual, corporation, partnership, association or voluntary organization.
    (13) "Resident" means any person who resides in this State at the time the insurer is determined to be impaired or insolvent and to whom contractual obligations are owed. A person may be a resident of only one state which, in the case of a person other than a natural person, shall be its principal place of business.
    (14) "Supplemental contract" means any agreement entered into for the distribution of policy or contract proceeds.
    (15) "Unallocated annuity contract" means any annuity contract or group annuity certificate which is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed to an individual by an insurer under such contract or certificate.
(Source: P.A. 86‑753.)

    (215 ILCS 5/531.06) (from Ch. 73, par. 1065.80‑6)
    Sec. 531.06. Creation of the Association. There is created a non‑profit legal entity to be known as the Illinois Life and Health Insurance Guaranty Association. All member insurers are and must remain members of the Association as a condition of their authority to transact insurance in this State. The Association must perform its functions under the plan of operation established and approved under Section 531.10 and must exercise its powers through a board of directors established under Section 531.07. For purposes of administration and assessment, the Association must maintain 2 accounts:
    (1) The life insurance and annuity account which includes the following subaccounts:
    (a) Life Insurance Account;
    (b) Annuity account; and
    (c) Unallocated Annuity Account which shall include contracts qualified under Section 403(b) of the United State Internal Revenue Code.
    (2) The health insurance account.
    The Association shall be supervised by the Director and is subject to the applicable provisions of the Illinois Insurance Code.
(Source: P.A. 86‑753.)

    (215 ILCS 5/531.07) (from Ch. 73, par. 1065.80‑7)
    Sec. 531.07. Board of Directors.) The board of directors of the Association consists of not less than 5 nor more than 9 members serving terms as established in the plan of operation. The members of the board are to be selected by member insurers subject to the approval of the Director. Vacancies on the board must be filled for the remaining period of the term in the manner described in the plan of operation. To select the initial board of directors, and initially organize the Association, the Director must give notice to all member insurers of the time and place of the organizational meeting. In determining voting rights at the organizational meeting each member insurer is entitled to one vote in person or by proxy. If the board of directors is not selected within 60 days after notice of the organizational meeting, the Director may appoint the initial members.
    In approving selections or in appointing members to the board, the Director must consider, whether all member insurers are fairly represented.
    Members of the board may be reimbursed from the assets of the Association for expenses incurred by them as members of the board of directors but members of the board may not otherwise be compensated by the Association for their services.
(Source: P.A. 81‑899.)

    (215 ILCS 5/531.08) (from Ch. 73, par. 1065.80‑8)
    Sec. 531.08. Powers and duties of the Association. In addition to the powers and duties enumerated in other Sections of this Article:
        (1) If a domestic insurer is an impaired insurer,
    
the Association may, subject to any conditions imposed by the Association other than those which impair the contractual obligations of the impaired insurer, and approved by the impaired insurer and the Director:
            (a) Guarantee or reinsure, or cause to be
        
guaranteed, assumed or reinsured, any or all of the covered policies of covered persons of the impaired insurer;
            (b) Provide such monies, pledges, notes,
        
guarantees, or other means as are proper to effectuate paragraph (a), and assure payment of the contractual obligations of the impaired insurer pending action under paragraph (a);
            (c) Loan money to the impaired insurer;
        (2) If a domestic, foreign, or alien insurer is an
    
insolvent insurer, the Association shall, subject to the approval of the Director;
            (a)(i) Guarantee, assume or reinsure or cause to
        
be guaranteed, assumed, or reinsured the covered policies of covered persons of the insolvent insurer;
            (ii) Assure payment of the contractual
        
obligations of the insolvent insurer to covered persons;
            (iii) Provide such monies, pledges, notes,
        
guaranties, or other means as are reasonably necessary to discharge such duties; or
            (b) with respect to only life and health
        
insurance policies, provide benefits and coverages in accordance with Section 531.08(3).
            (c) Provided however that this subsection (2)
        
shall not apply when the Director has determined that the foreign or alien insurers domiciliary jurisdiction or state of entry provides, by statute, protection substantially similar to that provided by this Article for residents of this State and such protection will be provided in a timely manner.
        (3) When proceeding under subparagraph (2)(b) of
    
this Section the Association shall, with respect to only life and health insurance policies:
            (a) assure payment of benefits for premiums
        
identical to the premiums and benefits (except for terms of conversion and renewability) that would have been payable under the policies of the insolvent insurer, for claims incurred:
                (i) with respect to group policies, not
            
later than the earlier of the next renewal date under such policies or contracts or sixty days, but in no event less than thirty days, after the date on which the Association becomes obligated with respect to such policies;
                (ii) with respect to non‑group policies, not
            
later than the earlier of the next renewal date (if any) under such policies or one year, but in no event less than thirty days, from the date on which the Association becomes obligated with respect to such policies;
            (b) make diligent efforts to provide all known
        
insureds or group policyholders with respect to group policies thirty days notice of the termination of the benefits provided; and
            (c) with respect to non‑group policies, make
        
available to each known insured, or owner if other than the insured, and with respect to an individual formerly insured under a group policy who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of subparagraph (3)(d) of this Section, if the insureds had a right under law or the terminated policy to convert coverage to individual coverage or to continue a non‑group policy in force until a specified age or for a specified time, during which the insurer has no right unilaterally to make changes in any provision of the policy or had a right only to make changes in premium by class.
            (d)(i) In providing the substitute coverage
        
required under subparagraph (3)(c) of this Section, the Association may offer either to reissue the terminated coverage or to issue an alternative policy.
            (ii) Alternative or reissued policies shall be
        
offered without requiring evidence of insurability, and shall not provide for any waiting period or exclusion that would not have applied under the terminated policy.
            (iii) The Association may reinsure any
        
alternative or reissued policy.
            (e)(i) Alternative policies adopted by the
        
Association shall be subject to the approval of the Director. The Association may adopt alternative policies of various types for future insurance without regard to any particular impairment or insolvency.
            (ii) Alternative policies shall contain at least
        
the minimum statutory provisions required in this State and provide benefits that shall not be unreasonable in relation to the premium charged. The Association shall set the premium in accordance with a table of rates which it shall adopt. The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured, but shall not reflect any changes in the health of the insured after the original policy was last underwritten.
            (iii) Any alternative policy issued by the
        
Association shall provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the Association.
            (f) If the Association elects to reissue
        
terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the Association in accordance with the amount of insurance provided and the age and class of risk, subject to approval of the Director or by a court of competent jurisdiction.
            (g) The Association's obligations with respect
        
to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy shall cease on the date such coverage or policy is replaced by another similar policy by the policyholder, the insured, or the Association.
        (4) When proceeding under subparagraph (2)(b) of
    
this Section with respect to any policy or contract carrying guaranteed minimum interest rates, the Association shall assure the payment or crediting of a rate of interest consistent with subparagraph (2)(b)(iii)(B) of Section 531.03.
        (5) Nonpayment of premiums thirty‑one days after the
    
date required under the terms of any guaranteed, assumed, alternative or reissued policy or contract or substitute coverage shall terminate the Association's obligations under such policy or coverage under this Act with respect to such policy or coverage, except with respect to any claims incurred or any net cash surrender value which may be due in accordance with the provisions of this Act.
        (6) Premiums due for coverage after entry of an
    
order of liquidation of an insolvent insurer shall belong to and be payable at the direction of the Association, and the Association shall be liable for unearned premiums due to policy or contract owners arising after the entry of such order.
        (7) (a) In carrying out its duties under subsection
    
(2), permanent policy liens, or contract liens, may be imposed in connection with any guarantee, assumption or reinsurance agreement, if the court:
            (i) Finds that the amounts which can be assessed
        
under this Act are less than the amounts needed to assure full and prompt performance of the insolvent insurer's contractual obligations, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of policy or contract liens, to be in the public interest; and
            (ii) Approves the specific policy liens or
        
contract liens to be used.
        (b) Before being obligated under subsection (2) the
    
Association may request that there be imposed temporary moratoriums or liens on payments of cash values and policy loans in addition to any contractual provisions for deferral of cash or policy loan values, and such temporary moratoriums and liens may be imposed if they are approved by the court.
        (8) There shall be no liability on the part of and
    
no cause of action shall arise against the Association or against any transferee from the Association in connection with the transfer by reinsurance or otherwise of all or any part of an impaired or insolvent insurer's business by reason of any action taken or any failure to take any action by the impaired or insolvent insurer at any time.
        (9) If the Association fails to act within a
    
reasonable period of time as provided in subsection (2) of this Section with respect to an insolvent insurer, the Director shall have the powers and duties of the Association under this Act with regard to such insolvent insurers.
        (10) The Association or its designated
    
representatives may render assistance and advice to the Director, upon his request, concerning rehabilitation, payment of claims, continuations of coverage, or the performance of other contractual obligations of any impaired or insolvent insurer.
        (11) The Association has standing to appear before
    
any court concerning all matters germane to the powers and duties of the Association, including, but not limited to, proposals for reinsuring or guaranteeing the covered policies of the impaired or insolvent insurer and the determination of the covered policies and contractual obligations.
        (12) (a) Any person receiving benefits under this
    
Article is deemed to have assigned the rights under the covered policy to the Association to the extent of the benefits received because of this Article whether the benefits are payments of contractual obligations or continuation of coverage. The Association may require an assignment to it of such rights by any payee, policy or contract owner, beneficiary, insured, certificate holder or annuitant as a condition precedent to the receipt of any rights or benefits conferred by this Article upon such person. The Association is subrogated to these rights against the assets of any insolvent insurer.
        (b) The subrogation rights of the Association under
    
this subsection have the same priority against the assets of the insolvent insurer as that possessed by the person entitled to receive benefits under this Article.
        (13) The Association may:
            (a) Enter into such contracts as are necessary
        
or proper to carry out the provisions and purposes of this Article;
            (b) Sue or be sued, including taking any legal
        
actions necessary or proper for recovery of any unpaid assessments under Section 531.09. The Association shall not be liable for punitive or exemplary damages;
            (c) Borrow money to effect the purposes of this
        
Article. Any notes or other evidence of indebtedness of the Association not in default are legal investments for domestic insurers and may be carried as admitted assets.
            (d) Employ or retain such persons as are
        
necessary to handle the financial transactions of the Association, and to perform such other functions as become necessary or proper under this Article.
            (e) Negotiate and contract with any liquidator,
        
rehabilitator, conservator, or ancillary receiver to carry out the powers and duties of the Association.
            (f) Take such legal action as may be necessary
        
to avoid payment of improper claims.
            (g) Exercise, for the purposes of this Article
        
and to the extent approved by the Director, the powers of a domestic life or health insurer, but in no case may the Association issue insurance policies or annuity contracts other than those issued to perform the contractual obligations of the impaired or insolvent insurer.
            (h) Exercise all the rights of the Director
        
under Section 193(4) of this Code with respect to covered policies after the association becomes obligated by statute.
        (14) With respect to covered policies for which the
    
Association becomes obligated after an entry of an order of liquidation or rehabilitation, the Association may elect to succeed to the rights of the insolvent insurer arising after the date of the order of liquidation or rehabilitation under any contract of reinsurance to which the insolvent insurer was a party, to the extent that such contract provides coverage for losses occurring after the date of the order of liquidation or rehabilitation. As a condition to making this election, the Association must pay all unpaid premiums due under the contract for coverage relating to periods before and after the date of the order of liquidation or rehabilitation.
(Source: P.A. 93‑326, eff. 1‑1‑04.)

    (215 ILCS 5/531.09) (from Ch. 73, par. 1065.80‑9)
    Sec. 531.09. Assessments. (1) For the purpose of providing the funds necessary to carry out the powers and duties of the Association, the board of directors shall assess the member insurers, separately for each account, at such times and for such amounts as the board finds necessary. Assessments shall be due not less than 30 days after written notice to the member insurers and shall accrue interest from the due date at such adjusted rate as is established under Section 6621 of Chapter 26 of the United States Code and such interest shall be compounded daily.
    (2) There shall be 2 classes of assessments, as follows:
    (a) Class A assessments shall be made for the purpose of meeting administrative costs and other general expenses and examinations conducted under the authority of the Director under subsection (5) of Section 531.12.
    (b) Class B assessments shall be made to the extent necessary to carry out the powers and duties of the Association under Section 531.08 with regard to an impaired or insolvent domestic insurer or insolvent foreign or alien insurers.
    (3) (a) The amount of any Class A assessment shall be determined by the Board and may be made on a non‑pro rata basis. Such assessments shall not exceed $200 per company in any one calendar year. The amount of any Class B assessment shall be allocated for assessment purposes among the accounts and subaccounts pursuant to an allocation formula which may be based on the premiums or reserves of the impaired or insolvent insurer or any other standard deemed by the board in its sole discretion as being fair and reasonable under the circumstances.
    (b) Class B assessments against member insurers for each account and subaccount shall be in the proportion that the premiums received on business in this State by each assessed member insurer on policies or contracts covered by each account or subaccount for the three most recent calendar years for which information is available preceding the year in which the insurer became impaired or insolvent, as the case may be, bears to such premiums received on business in this State for such calendar years by all assessed member insurers.
    (c) Assessments for funds to meet the requirements of the Association with respect to an impaired or insolvent insurer shall not be made until necessary to implement the purposes of this Article. Classification of assessments under subsection (2) and computations of assessments under this subsection shall be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible.
    (4) The Association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. The total of all assessments upon a member insurer for the life and annuity account and for each subaccount thereunder may not in any one calendar year exceed 2% and for the health account may not in any one calendar year exceed 2% of such insurer's average premiums received in this State on the policies and contracts covered by the account or subaccount during the three calendar years preceding the year in which the insurer became an impaired or insolvent insurer. If a one percent assessment for any subaccount of the life and annuity account in any one year does not provide an amount sufficient to carry out the responsibilities of the Association, then pursuant to subsection 3(b), the board shall access all subaccounts of the life and annuity account for the necessary additional amount, subject to the maximum stated in this subsection.
    (5) In the event an assessment against a member insurer is abated, or deferred, in whole or in part, because of the limitations set forth in subsection (4) of this Section the amount by which such assessment is abated or deferred, may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this Section. If the maximum assessment, together with the other assets of the Association in either account, does not provide in any one year in either account an amount sufficient to carry out the responsibilities of the Association, the necessary additional funds may be assessed as soon thereafter as permitted by this Article. The board may provide in the plan of operation a method of allocating funds among claims, whether relating to one or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims.
    (6) The board may, by an equitable method as established in the plan of operation, refund to member insurers, in proportion to the contribution of each insurer to that account, the amount by which the assets of the account exceed the amount the board finds is necessary to carry out during the coming year the obligations of the Association with regard to that account, including assets accruing from net realized gains and income from investments. A reasonable amount may be retained in any account to provide funds for the continuing expenses of the Association and for future losses if refunds are impractical.
    (7) An assessment is deemed to occur on the date upon which the board votes such assessment. The board may defer calling the payment of the assessment or may call for payment in one or more installments.
    (8) It is proper for any member insurer, in determining its premium rates and policyowner dividends as to any kind of insurance within the scope of this Article, to consider the amount reasonably necessary to meet its assessment obligations under this Article.
    (9) The Association must issue to each insurer paying a Class B assessment under this Article a certificate of contribution, in a form acceptable to the Director, for the amount of the assessment so paid. All outstanding certificates are of equal dignity and priority without reference to amounts or dates of issue. A certificate of contribution may be shown by the insurer in its financial statement as an asset in such form and for such amount, if any, and period of time as the Director may approve, provided the insurer shall in any event at its option have the right to show a certificate of contribution as an admitted asset at percentages of the original face amount for calendar years as follows:
    100% for the calendar year after the year of issuance;
    80% for the second calendar year after the year of issuance;
    60% for the third calendar year after the year of issuance;
    40% for the fourth calendar year after the year of issuance;
    20% for the fifth calendar year after the year of issuance.
(Source: P.A. 86‑753.)

    (215 ILCS 5/531.10) (from Ch. 73, par. 1065.80‑10)
    Sec. 531.10. Plan of Operation.) (1) (a) The Association must submit to the Director a plan of operation and any amendments thereto necessary or suitable to assure the fair, reasonable, and equitable administration of the Association. The plan of operation and any amendments thereto become effective upon approval in writing by the Director.
    (b) If the Association fails to submit a suitable plan of operation within 180 days following the effective date of this Article or if at any time thereafter the Association fails to submit suitable amendments to the plan, the Director may, after notice and hearing, adopt and promulgate such reasonable rules as are necessary or advisable to effectuate the provisions of this Article. Such rules are in force until modified by the Director or superseded by a plan submitted by the Association and approved by the Director.
    (2) All member insurers must comply with the plan of operation.
    (3) The plan of operation must, in addition to requirements enumerated elsewhere in this Article:
    (a) Establish procedures for handling the assets of the Association;
    (b) Establish the amount and method of reimbursing members of the board of directors under Section 531.07;
    (c) Establish regular places and times for meetings of the board of directors;
    (d) Establish procedures for records to be kept of all financial transactions of the Association, its agents, and the board of directors;
    (e) Establish the procedures whereby selections for the board of directors will be made and submitted to the Director;
    (f) Establish any additional procedures for assessments under Section 531.09; and
    (g) Contain additional provisions necessary or proper for the execution of the powers and duties of the Association.
    (4) The plan of operation shall establish a procedure for protest by any member insurer of assessments made by the Association pursuant to Section 531.09. Such procedures shall require that:
    (a) Any member insurer that wishes to protest all or any part of an assessment for any year shall first pay the full amount of the assessment as set forth in the notice provided by the Association. Such payments shall be accompanied by a statement in writing that the payment is made under protest, setting forth a brief statement of the ground for the protest. The Association shall hold such payments in a separate interest bearing account.
    (b) Within 30 days following the payment of an assessment under protest by any protesting member insurer, the Association must notify the member insurer in writing of its determination with respect to the protest unless the Association notifies the member that additional time is required to resolve the issues raised by the protest.
    (c) In the event the Association determines that the protesting member insurer is entitled to a refund, such refund shall be made within 30 days following the date upon which the Association makes its determination.
    (d) The decision of the Association with respect to a protest may be appealed to the Director pursuant to Section 531.11(3).
    (e) In the alternative to rendering a decision with respect to any protest based on a question regarding the assessment base, the Association may refer such protests to the Director for final decision, with or without a recommendation from the Association.
    (f) Interest on any refund due a protesting member insurer shall be paid at the rate actually earned by the Association on the separate account.
    (5) The plan of operation may provide that any or all powers and duties of the Association, except those under paragraph (c) of subsection (10) of Section 531.08 and Section 531.09 are delegated to a corporation, association or other organization which performs or will perform functions similar to those of this Association, or its equivalent, in 2 or more states. Such a corporation, association or organization shall be reimbursed for any payments made on behalf of the Association and shall be paid for its performance of any function of the Association. A delegation under this subsection shall take effect only with the approval of both the Board of Directors and the Director, and may be made only to a corporation, association or organization which extends protection not substantially less favorable and effective than that provided by this Act.
(Source: P.A. 84‑1035.)

    (215 ILCS 5/531.11) (from Ch. 73, par. 1065.80‑11)
    Sec. 531.11. Duties and powers of the Director. In addition to the duties and powers enumerated elsewhere in this Article:
    (1) The Director must:
        (a) Upon request of the board of directors, provide
    
the Association with a statement of the premiums in the appropriate accounts for each member insurer.
        (b) notify the board of directors of the existence
    
of an impaired or insolvent insurer not later than 3 days after a determination of impairment or insolvency is made or when the Director receives notice of impairment or insolvency.
        (c) give notice to an impaired insurer as required
    
by Sections 34 or 60. Notice to the impaired insurer shall constitute notice to its shareholders, if any.
        (d) In any liquidation or rehabilitation proceeding
    
involving a domestic insurer, be appointed as the liquidator or rehabilitator. If a foreign or alien member insurer is subject to a liquidation proceeding in its domiciliary jurisdiction or state of entry, the Director shall be appointed conservator.
    (2) The Director may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this State of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative the Director may levy a forfeiture on any member insurer which fails to pay an assessment when due. Such forfeiture may not exceed 5% of the unpaid assessment per month, but no forfeiture may be less than $100 per month.
    (3) Any action of the board of directors or the Association may be appealed to the Director by any member insurer or any other person adversely affected by such action if such appeal is taken within 30 days of the action being appealed. Any final action or order of the Director is subject to judicial review in a court of competent jurisdiction.
    (4) The liquidator, rehabilitator, or conservator of any impaired insurer may notify all interested persons of the effect of this Article.
(Source: P.A. 89‑97, eff. 7‑7‑95.)

    (215 ILCS 5/531.12) (from Ch. 73, par. 1065.80‑12)
    Sec. 531.12. Prevention of Insolvencies. To aid in the detection and prevention of insurer insolvencies or impairments:
    (1) It shall be the duty of the Director:
    (a) To notify the Commissioners of all other states, territories of the United States, and the District of Columbia when he takes any of the following actions against a member insurer:
    (i) revocation of license;
    (ii) suspension of license;
    (iii) makes any formal order except for an order issued pursuant to Article XII 1/2 of this Code that such company restrict its premium writing, obtain additional contributions to surplus, withdraw from the State, reinsure all or any part of its business, or increase capital, surplus or any other account for the security of policyholders or creditors.
    Such notice shall be transmitted to all commissioners within 30 days following the action taken or the date on which the action occurs.
    (b) To report to the board of directors when he has taken any of the actions set forth in subparagraph (a) of this paragraph or has received a report from any other commissioner indicating that any such action has been taken in another state. Such report to the board of directors shall contain all significant details of the action taken or the report received from another commissioner.
    (2) The Director may seek the advice and recommendations of the board of directors concerning any matter affecting his duties and responsibilities regarding the financial condition of member companies and companies seeking admission to transact insurance business in this State.
    (3) The board of directors may, upon majority vote, make reports and recommendations to the Director upon any matter germane to the liquidation, rehabilitation or conservation of any member insurer. Such reports and recommendations shall not be considered public documents.
    (4) The board of directors may, upon majority vote, make recommendations to the Director for the detection and prevention of insurer insolvencies.
    (5) The board of directors shall, at the conclusion of any insurer insolvency in which the Association was obligated to pay covered claims prepare a report to the Director containing such information as it may have in its possession bearing on the history and causes of such insolvency. The board shall cooperate with the boards of directors of guaranty associations in other states in preparing a report on the history and causes for insolvency of a particular insurer, and may adopt by reference any report prepared by such other associations.
(Source: P.A. 86‑753.)

    (215 ILCS 5/531.13) (from Ch. 73, par. 1065.80‑13)
    Sec. 531.13. Tax offset. In the event the aggregate Class A, B and C assessments for all member insurers do not exceed $3,000,000 in any one calendar year, no member insurer shall receive a tax offset. However, for any one calendar year before 1998 in which the total of such assessments exceeds $3,000,000, the amount in excess of $3,000,000 shall be subject to a tax offset to the extent of 20% of the amount of such assessment for each of the 5 calendar years following the year in which such assessment was paid, and ending prior to January 1, 2003, and each member insurer may offset the proportionate amount of such excess paid by the insurer against its liabilities for the tax imposed by subsections (a) and (b) of Section 201 of the Illinois Income Tax Act. The provisions of this Section shall expire and be given no effect for any tax period commencing on and after January 1, 2003.
(Source: P.A. 93‑29, eff. 6‑20‑03.)

    (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 reduced by any amounts to which the Association is entitled as subrogee (under paragraph (8) of Section 531.08). All assets of the impaired or insolvent insurer attributable to covered policies 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", as used in this paragraph (3), is that proportion of the assets which the reserves that should have been established for such policies bear to the reserve that should have been established for all policies of insurance 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 and policyowners 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 policyholders 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 in carrying out its powers and duties under Section 531.08, with respect to such insurer have been fully recovered by the Association.
    (5) (a) If an order for liquidation or rehabilitation of an insurer domiciled in this State has been entered, the receiver appointed under such order has a right to recover on behalf of the insurer, from any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the 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 insurer shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.
    (c) Any person who as an affiliate that controlled the 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 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.
(Source: P.A. 81‑899.)

    (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 60 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. 82‑210.)

    (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 an insurer, agent or affiliate of an 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 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.
    (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 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 or contract holder unless the document is delivered to the policy or contract holder prior to or at the time of delivery of the policy or contract. The document should also be available upon request by a policyholder. The distribution, delivery, or contents or interpretation of this document shall not mean that either the policy or the contract or the holder 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 policyholder, contract holder, certificate holder, 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 or contract holder
    
that the Life and Health Insurance Guaranty Association may not cover the policy 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 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.
        (4) Emphasize that the policy or contract holder
    
should not rely on coverage under the Life and Health Insurance Guaranty Association when selecting an insurer.
        (5) Provide other information as directed by the
    
Director.
    (d) (Blank).
(Source: P.A. 88‑364; 88‑627, eff. 9‑9‑94; 89‑97, eff. 7‑7‑95.)

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