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| Public Act 093-0876 |
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AN ACT concerning insurance.
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Be it enacted by the People of the State of Illinois, | ||||
represented in the General Assembly:
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Section 5. The Illinois Insurance Code is amended by | ||||
changing Section 445 as
follows:
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(215 ILCS 5/445) (from Ch. 73, par. 1057)
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Sec. 445. Surplus line.
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(1) Surplus line defined; surplus line insurer
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requirements. "Surplus line insurance" means
is insurance on an | ||||
Illinois risk of
the kinds specified in Classes 2 and 3 of | ||||
Section 4 of this Code procured
from an unauthorized insurer or | ||||
a domestic surplus line insurer
as defined in
Section 445a
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after the insurance producer representing the
insured or the | ||||
surplus line producer is unable, after diligent effort, to
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procure said insurance from authorized insurers which are | ||||
authorized to
transact
business in this State other than | ||||
domestic surplus line insurers as defined
in Section 445a.
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"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
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mechanism. | ||||
"Residual market mechanism" means an association, | ||||
organization, or other
entity described in Article XXXIII of | ||||
this Code or Section 7-501 of the
Illinois Vehicle Code or any | ||||
similar association, organization, or other
entity. | ||||
"Unauthorized insurer" means an insurer that does not hold | ||||
a valid
certificate of authority issued by the Director but, | ||||
for the purposes of this
Section, shall also include a domestic | ||||
surplus line insurer as defined in
Section 445a.
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Insurance producers may procure surplus line insurance | ||||
only if licensed
as a surplus line producer under this Section | ||||
and may procure that
insurance only from an unauthorized | ||
insurer or from a domestic
surplus line
insurer as defined in | ||
Section 445a:
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(a) that based upon information available to the | ||
surplus
line producer
has a policyholders surplus of not | ||
less than $15,000,000
determined in
accordance with | ||
accounting rules that are applicable to
authorized | ||
insurers;
and
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(b) that has standards of solvency and management that | ||
are adequate
for the protection of policyholders; and
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(c) where an unauthorized insurer does not meet the
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standards set forth
in (a) and (b) above, a surplus line | ||
producer may, if necessary, procure
insurance from that | ||
insurer only if prior written warning of
such fact or
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condition is given to the insured by the insurance producer | ||
or surplus line
producer.
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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
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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
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required to submit a risk to a residual market mechanism | ||
when the risk is not
eligible for coverage or exceeds the | ||
limits available in the residual market
mechanism. | ||
Where there is an insurance policy issued by an
authorized | ||
insurer or residual market mechanism
insuring a risk described | ||
in item (i), (ii), or (iii)
above, nothing in this paragraph | ||
shall be construed
to prohibit a surplus line producer from | ||
procuring
from an unauthorized insurer a policy insuring the
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risk on an excess or umbrella basis where the excess
or | ||
umbrella policy is written over one or more
underlying | ||
policies.
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(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:
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(a) completing a prelicensing course of study. The
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course provided for by this Section shall be conducted
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under rules and
regulations prescribed by the Director. The | ||
Director may administer the
course or may make | ||
arrangements, including contracting with
an outside
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educational service, for administering the course and
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collecting the non-refundable application fee provided for | ||
in this subsection.
Any
charges assessed
by the Director or | ||
the educational service for administering
the course
shall | ||
be paid directly by the individual applicants. Each | ||
applicant
required to take the course shall enclose with | ||
the application a non-refundable
$20
application
fee | ||
payable to the Director plus a separate course
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administration fee. An applicant who fails to appear for | ||
the
course as scheduled, or appears but fails to complete | ||
the
course, shall not be
entitled to any refund, and shall | ||
be required to submit a new request to
attend the course | ||
together with all the requisite fees before being | ||
rescheduled
for another course at a later date; and
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(b) payment of an annual license fee of $400; and
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(c) procurement of the surety bond required in | ||
subsection (4) of this
Section.
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A surplus line producer so licensed shall keep a separate
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account of
the business transacted thereunder which shall be | ||
open at all times to the
inspection of the Director or his | ||
representative.
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The prelicensing course of study requirement in (a) above
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shall not apply to insurance
producers who were licensed under | ||
the Illinois surplus line law on or before
January 1, 2002
the | ||
effective
date
of this amendatory Act of the 92nd General | ||
Assembly.
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(3) Taxes and reports.
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(a) Surplus line tax and penalty for late payment.
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A surplus line producer shall file with the Director on | ||
or
before
February 1 and August 1 of each year a report in | ||
the form prescribed by the
Director on all surplus line | ||
insurance procured from unauthorized insurers
during the | ||
preceding
6 month period ending December 31 or June 30
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respectively, and on the filing of such report shall pay to | ||
the Director
for the use and benefit of the State a sum | ||
equal to 3.5% of the
gross
premiums less returned premiums | ||
upon all surplus line insurance procured
or cancelled | ||
during the preceding 6 months.
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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
penalty and interest charges as | ||
are provided for under Section 412 of
this Code. The | ||
Director, through the
Attorney General, may
institute an | ||
action in the name of the People of the State of Illinois, | ||
in
any court of competent jurisdiction, for the recovery of | ||
the amount of such
taxes and penalties due, and prosecute | ||
the same to final judgment, and take
such steps as are | ||
necessary to collect the same.
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(b) Fire Marshal Tax.
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Each surplus line producer shall file with the Director | ||
on or before
March 31 of each year a report in the form | ||
prescribed by the Director on all
fire insurance procured | ||
from unauthorized insurers subject to tax under
Section 12 | ||
of the Fire Investigation
Act
and shall pay to the Director | ||
the fire marshal tax required thereunder.
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(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.
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(4) Bond. Each surplus line producer, as a condition to | ||
receiving a
surplus line producer's license, shall execute and | ||
deliver to the Director
a surety bond to the People of the | ||
State in the penal sum of $20,000, with
a surety which is | ||
authorized to transact business in this State,
conditioned that | ||
the surplus line producer will pay to the Director the tax,
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interest and penalties levied under subsection (3) of this | ||
Section.
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(5) Submission of documents to Surplus Line Association of | ||
Illinois.
A surplus line producer shall submit every insurance | ||
contract
issued
under his or her license to the Surplus Line | ||
Association of Illinois for
recording and countersignature. | ||
The submission and countersignature may be
effected through | ||
electronic means. The submission shall set
forth:
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(a) the name of the insured;
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(b) the description and location of the insured | ||
property or
risk;
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(c) the amount insured;
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(d) the gross premiums charged or returned;
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(e) the name of the unauthorized insurer or domestic | ||
surplus line
insurer as defined in Section 445a from whom | ||
coverage has been procured;
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(f) the kind or kinds of insurance procured; and
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(g) amount of premium subject to tax required by | ||
Section 12 of the Fire
Investigation Act.
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Proposals, endorsements, and other documents which are
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incidental to the insurance but which do not affect the | ||
premium
charged
are exempted from filing and | ||
countersignature.
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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
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placement as a surplus line risk that
after diligent effort | ||
the required insurance could not be procured from
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authorized insurers which are authorized to transact | ||
business in this
State other than
domestic surplus line | ||
insurers as defined in Section 445a and that
such | ||
procurement was otherwise in accordance with the surplus | ||
line law.
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(6) Countersignature required. It shall be unlawful for an | ||
insurance
producer to deliver any unauthorized insurer
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contract or domestic
surplus line insurer contract unless such
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insurance contract is countersigned by the Surplus Line | ||
Association of
Illinois.
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(7) Inspection of records. A surplus line producer shall
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maintain
separate records of the business transacted under his | ||
or her license,
including complete copies of surplus line | ||
insurance contracts maintained on
paper or by electronic means, | ||
which
records shall be open at all times for inspection by the | ||
Director and by
the Surplus Line Association of Illinois.
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(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.
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(9) Director may declare insurer ineligible. If the
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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
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such insurer and order surplus line producers to cease
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procuring insurance
from such insurer.
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(10) Service of process upon Director. Insurance contracts
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delivered under this Section from unauthorized insurers, other | ||
than domestic
surplus line insurers as defined in Section 445a,
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shall contain a
provision designating the
Director and his | ||
successors in office the true and lawful attorney of the
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insurer upon whom may be served all lawful process in any
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action, suit or
proceeding arising out of such insurance.
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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.
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(10.5) Insurance contracts delivered under this Section | ||
from unauthorized insurers, other than domestic surplus line | ||
insurers as defined in Section 445a, shall have stamped or | ||
imprinted on the first page thereof in not less than 12-pt. | ||
bold face type the following legend: "Notice to Policyholder: | ||
This contract is issued, pursuant to Section 445 of the | ||
Illinois Insurance Code, by a company not authorized and | ||
licensed to transact business in Illinois and as such is not | ||
covered by the Illinois Insurance Guaranty Fund." Insurance | ||
contracts delivered under this Section from domestic surplus | ||
line insurers as defined in Section 445a shall have stamped or | ||
imprinted on the first page thereof in not less than 12-pt. | ||
bold face type the following legend: "Notice to Policyholder: | ||
This contract is issued by a domestic surplus line insurer, as | ||
defined in Section 445a of the Illinois Insurance Code, | ||
pursuant to Section 445, and as such is not covered by the | ||
Illinois Insurance Guaranty Fund."
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(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
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strikes and war risks insured under ocean or wet marine forms | ||
of policies.
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(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
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provisions of Article XXXI are not inconsistent with the terms | ||
of this Act.
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(Source: P.A. 92-386, eff. 1-1-02; 93-29, eff. 6-20-03; 93-32, | ||
eff.
7-1-03.)
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Section 99. Effective date. This Act takes effect upon | ||
becoming law. | ||