SB3536 96TH GENERAL ASSEMBLY

LRB096 20233 EFG 35808 b

96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
SB3536

Introduced 2/10/2010, by Sen. Kwame Raoul

SYNOPSIS AS INTRODUCED:

215 ILCS 5/155.18	from Ch. 73, par. 767.18
215 ILCS 5/155.18a
215 ILCS 5/155.19	from Ch. 73, par. 767.19
215 ILCS 5/1204	from Ch. 73, par. 1065.904

Amends the Illinois Insurance Code to re-enact certain provisions of Public Act 94-677, which was declared to be unconstitutional. Includes explanatory, validation, and severability provisions. Includes revisory changes. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning insurance.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Findings; purpose; revisory changes; validation.

(a) The Illinois Supreme Court, in Lebron v. Gottlieb Memorial Hospital, found that the limitations on noneconomic damages in medical malpractice actions that were created in Public Act 94-677, contained in Section 2-1706.5 of the Code of Civil Procedure, violate the separation of powers clause of the Illinois Constitution. Because Public Act 94-677 contained an inseverability provision, the Court held the Act to be void in its entirety. The Court emphasized, however, that "because the other provisions contained in Public Act 94-677 are deemed invalid solely on inseverability grounds, the legislature remains free to reenact any provisions it deems appropriate".

(b) It is the purpose of this Act to reenact the provisions of Public Act 94-677 that amended the Illinois Insurance Code, and to validate certain actions taken in reliance on those provisions.

(c) Public Act 94-677 amended existing Sections 155.18, 155.19, and 1204 of the Illinois Insurance Code and added a new Section 155.18a. Section 1204 was subsequently amended by Public Act 95-331, which was a revisory bill that combined the changes made by Public Act 94-277 with those made by Public Act 94-677. Sections 155.18, 155.18a, and 155.19 have not been amended since the enactment of Public Act 94-677.

Executive Order No. 2004-6 changed the Department of Insurance into the Division of Insurance within the Department of Financial and Professional Regulation. In conformance with that executive order, Public Act 94-677 changed certain references in the affected Sections from the Director of Insurance to the Secretary of Financial and Professional Regulation. Public Act 96-811 superseded the executive order and re-established the Department of Insurance as a separate department, once again under the supervision of the Director of Insurance. Therefore, in reenacting these Sections, revisory changes have been included that conform the text to Public Act 96-811 by changing references to the Secretary back to the Director. A revisory change is also made in a reference to the effective date of Public Act 94-677, which is replaced by the actual date.

In this Act, the text of the reenacted Sections is set forth as it existed at the time of the Supreme Court's decision, including the amendment by Public Act 95-331. Striking and underscoring is used only to show the revisory changes being made to that text.

(d) All otherwise lawful actions taken in reasonable reliance on or pursuant to the Sections re-enacted by this Act, as set forth in Public Act 94-677 or subsequently amended, by any officer, employee, agency, or unit of State or local government or by any other person or entity, are hereby validated.

With respect to actions taken in relation to matters arising under the Sections re-enacted by this Act, a person is rebuttably presumed to have acted in reasonable reliance on and pursuant to the provisions of Public Act 94-677, as those provisions had been amended at the time the action was taken.

With respect to its administration of matters arising under the Sections re-enacted by this Act, the Department of Insurance shall continue to apply the provisions of Public Act 94-677, as those provisions had been amended at the relevant time.

Section 5. The Illinois Insurance Code is amended by reenacting and changing Sections 155.18, 155.18a, 155.19, and 1204 as follows:

(215 ILCS 5/155.18) (from Ch. 73, par. 767.18)

Sec. 155.18. (a) This Section shall apply to insurance on risks based upon negligence by a physician, hospital or other health care provider, referred to herein as medical liability insurance. This Section shall not apply to contracts of reinsurance, nor to any farm, county, district or township mutual insurance company transacting business under an Act entitled "An Act relating to local mutual district, county and township insurance companies", approved March 13, 1936, as now or hereafter amended, nor to any such company operating under a special charter.

(b) The following standards shall apply to the making and use of rates pertaining to all classes of medical liability insurance:

(1) Rates shall not be excessive or inadequate nor shall they be unfairly discriminatory.

(2) Consideration shall be given, to the extent applicable, to past and prospective loss experience within and outside this State, to a reasonable margin for underwriting profit and contingencies, to past and prospective expenses both countrywide and those especially applicable to this State, and to all other factors, including judgment factors, deemed relevant within and outside this State.

Consideration may also be given in the making and use of rates to dividends, savings or unabsorbed premium deposits allowed or returned by companies to their policyholders, members or subscribers.

(3) The systems of expense provisions included in the rates for use by any company or group of companies may differ from those of other companies or groups of companies to reflect the operating methods of any such company or group with respect to any kind of insurance, or with respect to any subdivision or combination thereof.

(4) Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for individual risks in accordance with rating plans which establish standards for measuring variations in hazards or expense provisions, or both. Such standards may measure any difference among risks that have a probable effect upon losses or expenses. Such classifications or modifications of classifications of risks may be established based upon size, expense, management, individual experience, location or dispersion of hazard, or any other reasonable considerations and shall apply to all risks under the same or substantially the same circumstances or conditions. The rate for an established classification should be related generally to the anticipated loss and expense factors of the class.

(c) (1) Every company writing medical liability insurance shall file with the Director of Insurance Secretary of Financial and Professional Regulation the rates and rating schedules it uses for medical liability insurance. A rate shall go into effect upon filing, except as otherwise provided in this Section.

(2) If (i) 1% of a company's insureds within a specialty or 25 of the company's insureds (whichever is greater) request a public hearing, (ii) the Director Secretary at his or her discretion decides to convene a public hearing, or (iii) the percentage increase in a company's rate is greater than 6%, then the Director Secretary shall convene a public hearing in accordance with this paragraph (2). The Director Secretary shall notify the public of any application by an insurer for a rate increase to which this paragraph (2) applies. A public hearing under this paragraph (2) must be concluded within 90 days after the request, decision, or increase that gave rise to the hearing. The Director Secretary may, by order, adjust a rate or take any other appropriate action at the conclusion of the hearing.

(3) A rate filing shall occur upon a company's commencement of medical liability insurance business in this State and thereafter as often as the rates are changed or amended.

(4) For the purposes of this Section, any change in premium to the company's insureds as a result of a change in the company's base rates or a change in its increased limits factors shall constitute a change in rates and shall require a filing with the Director Secretary.

(5) It shall be certified in such filing by an officer of the company and a qualified actuary that the company's rates are based on sound actuarial principles and are not inconsistent with the company's experience. The Director Secretary may request any additional statistical data and other pertinent information necessary to determine the manner the company used to set the filed rates and the reasonableness of those rates. This data and information shall be made available, on a company-by-company basis, to the general public.

(d) If after a public hearing the Director Secretary finds:

(1) that any rate, rating plan or rating system violates the provisions of this Section applicable to it, he shall issue an order to the company which has been the subject of the hearing specifying in what respects such violation exists and, in that order, may adjust the rate;

(2) that the violation of any of the provisions of this Section by any company which has been the subject of the hearing was wilful or that any company has repeatedly violated any provision of this Section, he may take either or both of the following actions:

(A) Suspend or revoke, in whole or in part, the certificate of authority of such company with respect to the class of insurance which has been the subject of the hearing.

(B) Impose a penalty of up to $1,000 against the company for each violation. Each day during which a violation occurs constitutes a separate violation.

The burden is on the company to justify the rate or proposed rate at the public hearing.

(e) Every company writing medical liability insurance in this State shall offer to each of its medical liability insureds the option to make premium payments in quarterly installments as prescribed by and filed with the Director Secretary. This offer shall be included in the initial offer or in the first policy renewal occurring after August 25, 2005 the effective date of this amendatory Act of the 94th General Assembly, but no earlier than January 1, 2006.

(f) Every company writing medical liability insurance is encouraged, but not required, to offer the opportunity for participation in a plan offering deductibles to its medical liability insureds. Any plan to offer deductibles shall be filed with the Department.

(g) Every company writing medical liability insurance is encouraged, but not required, to offer their medical liability insureds a plan providing premium discounts for participation in risk management activities. Any such plan shall be reported to the Department.

(h) A company writing medical liability insurance in Illinois must give 180 days' notice before the company discontinues the writing of medical liability insurance in Illinois.

(Source: P.A. 94-677, eff. 8-25-05.)

(215 ILCS 5/155.18a)

Sec. 155.18a. Professional Liability Insurance Resource Center. The Director of Insurance Secretary of Financial and Professional Regulation shall establish a Professional Liability Insurance Resource Center on the Department's Internet website containing the name, telephone number, and base rates of each licensed company providing medical liability insurance and the name, address, and telephone number of each producer who sells medical liability insurance and the name of each licensed company for which the producer sells medical liability insurance. Each company and producer shall submit the information to the Department on or before September 30 of each year in order to be listed on the website. Hyperlinks to company websites shall be included, if available. The publication of the information on the Department's website shall commence on January 1, 2006. The Department shall update the information on the Professional Liability Insurance Resource Center at least annually.

(Source: P.A. 94-677, eff. 8-25-05.)

(215 ILCS 5/155.19) (from Ch. 73, par. 767.19)

Sec. 155.19. All claims filed after December 31, 1976 with any insurer and all suits filed after December 31, 1976 in any court in this State, alleging liability on the part of any physician, hospital or other health care provider for medically related injuries, shall be reported to the Director of Insurance Secretary of Financial and Professional Regulation in such form and under such terms and conditions as may be prescribed by the Director Secretary. In addition, and notwithstanding any other provision of law to the contrary, any insurer, stop loss insurer, captive insurer, risk retention group, county risk retention trust, religious or charitable risk pooling trust, surplus line insurer, or other entity authorized or permitted by law to provide medical liability insurance in this State shall report to the Director Secretary, in such form and under such terms and conditions as may be prescribed by the Director Secretary, all claims filed after December 31, 2005 and all suits filed after December 31, 2005 in any court in this State alleging liability on the part of any physician, hospital, or health care provider for medically related injuries. Each clerk of the circuit court shall provide to the Director Secretary such information as the Director Secretary may deem necessary to verify the accuracy and completeness of reports made to the Director Secretary under this Section. The Director Secretary shall maintain complete and accurate records of all claims and suits including their nature, amount, disposition (categorized by verdict, settlement, dismissal, or otherwise and including disposition of any post-trial motions and types of damages awarded, if any, including but not limited to economic damages and non-economic damages) and other information as he may deem useful or desirable in observing and reporting on health care provider liability trends in this State. Records received by the Director Secretary under this Section shall be available to the general public; however, the records made available to the general public shall not include the names or addresses of the parties to any claims or suits. The Director Secretary shall release to appropriate disciplinary and licensing agencies any such data or information which may assist such agencies in improving the quality of health care or which may be useful to such agencies for the purpose of professional discipline.

With due regard for appropriate maintenance of the confidentiality thereof, the Director Secretary shall release, on an annual basis, to the Governor, the General Assembly and the general public statistical reports based on such data and information.

If the Director Secretary finds that any entity required to report information in its possession under this Section has violated any provision of this Section by filing late, incomplete, or inaccurate reports, the Director Secretary may fine the entity up to $1,000 for each offense. Each day during which a violation occurs constitutes a separate offense.

The Director Secretary may promulgate such rules and regulations as may be necessary to carry out the provisions of this Section.

(Source: P.A. 94-677, eff. 8-25-05.)

(215 ILCS 5/1204) (from Ch. 73, par. 1065.904)

Sec. 1204. (A) The Director Secretary shall promulgate rules and regulations which shall require each insurer licensed to write property or casualty insurance in the State and each syndicate doing business on the Illinois Insurance Exchange to record and report its loss and expense experience and other data as may be necessary to assess the relationship of insurance premiums and related income as compared to insurance costs and expenses. The Director Secretary may designate one or more rate service organizations or advisory organizations to gather and compile such experience and data. The Director Secretary shall require each insurer licensed to write property or casualty insurance in this State and each syndicate doing business on the Illinois Insurance Exchange to submit a report, on a form furnished by the Director Secretary, showing its direct writings in this State and companywide.

(B) Such report required by subsection (A) of this Section may include, but not be limited to, the following specific types of insurance written by such insurer:

(1) Political subdivision liability insurance reported separately in the following categories:

(a) municipalities;

(b) school districts;

(c) other political subdivisions;

(2) Public official liability insurance;

(3) Dram shop liability insurance;

(4) Day care center liability insurance;

(5) Labor, fraternal or religious organizations liability insurance;

(6) Errors and omissions liability insurance;

(7) Officers and directors liability insurance reported separately as follows:

(a) non-profit entities;

(b) for-profit entities;

(8) Products liability insurance;

(9) Medical malpractice insurance;

(10) Attorney malpractice insurance;

(11) Architects and engineers malpractice insurance; and

(12) Motor vehicle insurance reported separately for commercial and private passenger vehicles as follows:

(a) motor vehicle physical damage insurance;

(b) motor vehicle liability insurance.

(C) Such report may include, but need not be limited to the following data, both specific to this State and companywide, in the aggregate or by type of insurance for the previous year on a calendar year basis:

(1) Direct premiums written;

(2) Direct premiums earned;

(3) Number of policies;

(4) Net investment income, using appropriate estimates where necessary;

(5) Losses paid;

(6) Losses incurred;

(7) Loss reserves:

(a) Losses unpaid on reported claims;

(b) Losses unpaid on incurred but not reported claims;

(8) Number of claims:

(a) Paid claims;

(b) Arising claims;

(9) Loss adjustment expenses:

(a) Allocated loss adjustment expenses;

(b) Unallocated loss adjustment expenses;

(10) Net underwriting gain or loss;

(11) Net operation gain or loss, including net investment income;

(12) Any other information requested by the Director Secretary.

(C-3) Additional information by an advisory organization as defined in Section 463 of this Code.

(1) An advisory organization as defined in Section 463 of this Code shall report annually the following information in such format as may be prescribed by the Director Secretary:

(a) paid and incurred losses for each of the past 10 years;

(b) medical payments and medical charges, if collected, for each of the past 10 years;

(c) the following indemnity payment information: cumulative payments by accident year by calendar year of development. This array will show payments made and frequency of claims in the following categories: medical only, permanent partial disability (PPD), permanent total disability (PTD), temporary total disability (TTD), and fatalities;

(d) injuries by frequency and severity;

(e) by class of employee.

(2) The report filed with the Director Secretary of Financial and Professional Regulation under paragraph (1) of this subsection (C-3) shall be made available, on an aggregate basis, to the General Assembly and to the general public. The identity of the petitioner, the respondent, the attorneys, and the insurers shall not be disclosed.

(3) Reports required under this subsection (C-3) shall be filed with the Director Secretary no later than September 1 in 2006 and no later than September 1 of each year thereafter.

(C-5) Additional information required from medical malpractice insurers.

(1) In addition to the other requirements of this Section, the following information shall be included in the report required by subsection (A) of this Section in such form and under such terms and conditions as may be prescribed by the Director Secretary:

(a) paid and incurred losses by county for each of the past 10 policy years;

(b) earned exposures by ISO code, policy type, and policy year by county for each of the past 10 years; and

(c) the following actuarial information:

(i) Base class and territory equivalent exposures by report year by relative accident year.

(ii) Cumulative loss array by accident year by calendar year of development. This array will show frequency of claims in the following categories: open, closed with indemnity (CWI), closed with expense (CWE), and closed no pay (CNP); paid severity in the following categories: indemnity and allocated loss adjustment expenses (ALAE) on closed claims; and indemnity and expense reserves on pending claims.

(iii) Cumulative loss array by report year by calendar year of development. This array will show frequency of claims in the following categories: open, closed with indemnity (CWI), closed with expense (CWE), and closed no pay (CNP); paid severity in the following categories: indemnity and allocated loss adjustment expenses (ALAE) on closed claims; and indemnity and expense reserves on pending claims.

(iv) Maturity year and tail factors.

(v) Any expense, contingency ddr (death, disability, and retirement), commission, tax, and/or off-balance factors.

(2) The following information must also be annually provided to the Department:

(a) copies of the company's reserve and surplus studies; and

(b) consulting actuarial report and data supporting the company's rate filing.

(3) All information collected by the Director Secretary under paragraphs (1) and (2) shall be made available, on a company-by-company basis, to the General Assembly and the general public. This provision shall supersede any other provision of State law that may otherwise protect such information from public disclosure as confidential.

(D) In addition to the information which may be requested under subsection (C), the Director Secretary may also request on a companywide, aggregate basis, Federal Income Tax recoverable, net realized capital gain or loss, net unrealized capital gain or loss, and all other expenses not requested in subsection (C) above.

(E) Violations - Suspensions - Revocations.

(1) Any company or person subject to this Article, who willfully or repeatedly fails to observe or who otherwise violates any of the provisions of this Article or any rule or regulation promulgated by the Director Secretary under authority of this Article or any final order of the Director Secretary entered under the authority of this Article shall by civil penalty forfeit to the State of Illinois a sum not to exceed $2,000. Each day during which a violation occurs constitutes a separate offense.

(2) No forfeiture liability under paragraph (1) of this subsection may attach unless a written notice of apparent liability has been issued by the Director Secretary and received by the respondent, or the Director Secretary sends written notice of apparent liability by registered or certified mail, return receipt requested, to the last known address of the respondent. Any respondent so notified must be granted an opportunity to request a hearing within 10 days from receipt of notice, or to show in writing, why he should not be held liable. A notice issued under this Section must set forth the date, facts and nature of the act or omission with which the respondent is charged and must specifically identify the particular provision of this Article, rule, regulation or order of which a violation is charged.

(3) No forfeiture liability under paragraph (1) of this subsection may attach for any violation occurring more than 2 years prior to the date of issuance of the notice of apparent liability and in no event may the total civil penalty forfeiture imposed for the acts or omissions set forth in any one notice of apparent liability exceed $100,000.

(4) All administrative hearings conducted pursuant to this Article are subject to 50 Ill. Adm. Code 2402 and all administrative hearings are subject to the Administrative Review Law.

(5) The civil penalty forfeitures provided for in this Section are payable to the General Revenue Fund of the State of Illinois, and may be recovered in a civil suit in the name of the State of Illinois brought in the Circuit Court in Sangamon County or in the Circuit Court of the county where the respondent is domiciled or has its principal operating office.

(6) In any case where the Director Secretary issues a notice of apparent liability looking toward the imposition of a civil penalty forfeiture under this Section that fact may not be used in any other proceeding before the Director Secretary to the prejudice of the respondent to whom the notice was issued, unless (a) the civil penalty forfeiture has been paid, or (b) a court has ordered payment of the civil penalty forfeiture and that order has become final.

(7) When any person or company has a license or certificate of authority under this Code and knowingly fails or refuses to comply with a lawful order of the Director Secretary requiring compliance with this Article, entered after notice and hearing, within the period of time specified in the order, the Director Secretary may, in addition to any other penalty or authority provided, revoke or refuse to renew the license or certificate of authority of such person or company, or may suspend the license or certificate of authority of such person or company until compliance with such order has been obtained.

(8) When any person or company has a license or certificate of authority under this Code and knowingly fails or refuses to comply with any provisions of this Article, the Director Secretary may, after notice and hearing, in addition to any other penalty provided, revoke or refuse to renew the license or certificate of authority of such person or company, or may suspend the license or certificate of authority of such person or company, until compliance with such provision of this Article has been obtained.

(9) No suspension or revocation under this Section may become effective until 5 days from the date that the notice of suspension or revocation has been personally delivered or delivered by registered or certified mail to the company or person. A suspension or revocation under this Section is stayed upon the filing, by the company or person, of a petition for judicial review under the Administrative Review Law.

(Source: P.A. 94-277, eff. 7-20-05; 94-677, eff. 8-25-05; 95-331, eff. 8-21-07.)

Section 97. Severability. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.

Section 99. Effective date. This Act takes effect upon becoming law.