Public Act 103-0113

HB0047 Enrolled LRB103 00158 BMS 45163 b

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois,

represented in the General Assembly:

Section 5. The Illinois Insurance Code is amended by

changing Sections 533, 534, 537.2, 537.7, 538.2, and 545 and

by adding Section 534.9 as follows:

(215 ILCS 5/533) (from Ch. 73, par. 1065.83)

Sec. 533. Scope. This Article applies to all of the kinds

of insurance written on a direct basis which are included in

Class 2 and Class 3 of Section 4 of this Code as they appear

and are defined in those clauses as of January 1, 1985, except

that it shall not apply to:

(a) accident and health insurance written under clause (a)

of Class 2, or

(b) mortgage guaranty or other financial guaranty written

as suretyship obligations or insurance under clause (g),

clause (h) or clause (i) of Class 2 or otherwise, or

(c) fidelity or surety bonds, or any other bonding

obligations other than employee fidelity bonds, or

(d) marine insurance other than inland marine insurance,

written under clause (d) of Class 3, or

(e) insurance of warranties or service contracts,

including insurance that provides for the repair, replacement,

or service of goods or property or indemnification for repair,

replacement, or service for the operational or structural

failure of the goods or property due to a defect in materials,

workmanship, or normal wear and tear or provides reimbursement

for the liability incurred by the issuer of agreements or

service contracts that provide these benefits, or

(f) any claim servicing agreement or insurance policy

which contains a retrospective rating or other premium

adjustment agreement under which premiums are substantially

equal to the losses and loss expenses covered under the policy

or any policy providing retroactive insurance of known loss,

or

(g) any insurance which is provided, guaranteed or

reinsured pursuant to the Federal Crop Insurance Program or

the National Flood Insurance Program, including flood

insurance written by National Flood Insurance Program Write

Your Own Companies.

(Source: P.A. 89-97, eff. 7-7-95.)

(215 ILCS 5/534) (from Ch. 73, par. 1065.84)

Sec. 534. Definitions. For the purposes of this Article,

unless the context requires otherwise, the words and phrases

defined in Sections 534.1 through 534.9 534.8 have the

meanings set forth in those Sections.

(Source: P.A. 85-576.)

(215 ILCS 5/534.9 new)

Sec. 534.9. Cybersecurity insurance. "Cybersecurity

insurance" means a type of insurance under Class 2 of Section 4

of this Code that involves first-party and third-party

coverage, in a policy or endorsement, written on a direct,

admitted basis to cover losses and loss mitigation arising out

of or relating to data privacy breaches, unauthorized

information network security intrusions, computer viruses,

ransomware, cyber extortion, identity theft, and similar

exposures.

(215 ILCS 5/537.2) (from Ch. 73, par. 1065.87-2)

Sec. 537.2. Obligation of Fund. The Fund shall be

obligated to the extent of the covered claims existing prior

to the entry of an Order of Liquidation against an insolvent

company and arising within 30 days after the entry of such

Order, or before the policy expiration date if less than 30

days after the entry of such Order, or before the insured

replaces the policy or on request effects cancellation, if he

does so within 30 days after the entry of such Order. If the

entry of an Order of Liquidation occurs on or after October 1,

1975 and before October 1, 1977, such obligations shall not:

(i) exceed $100,000, or (ii) include any obligation to refund

the first $100 of any unearned premium claim; and if the entry

of an Order of Liquidation occurs on or after October 1, 1977

and before January 1, 1988, such obligations shall not: (i)

exceed $150,000, except that this limitation shall not apply

to any workers compensation claims, or (ii) include any

obligation to refund the first $100 of any unearned premium

claim; and if the entry of an Order of Liquidation occurs on or

after January 1, 1988 and before January 1, 2011, such

obligations shall not: (i) exceed $300,000, except that this

limitation shall not apply to any workers compensation claims,

or (ii) include any obligation to refund the first $100 of any

unearned premium claim or to refund any unearned premium over

$10,000 under any one policy. If the entry of an Order of

Liquidation occurs on or after January 1, 2011, then such

obligations shall not: (i) exceed $500,000, except that this

limitation shall not apply to any workers compensation claims

or (ii) include any obligation to refund the first $100 of any

unearned premium claim or refund any unearned premium over

$10,000 under any one policy. If the entry of an Order of

Liquidation occurs on or after January 1, 2023, then such

obligations shall not: (i) exceed $500,000, except that this

limitation shall not apply to any workers compensation claims,

or (ii) exceed without any deduction $50,000 for any unearned

premium claim or refund under any one policy. In no event shall

the Fund be obligated to a policyholder or claimant in an

amount in excess of the face amount of the policy from which

the claim arises, including, but not limited to, any

applicable specific or aggregate limits. For purposes of this

Article Act, obligations arising under an insurance policy

written to indemnify a permissibly self-insured employer under

subsection (a) of Section 4 of the Workers' Compensation Act

for its liability to pay workers' compensation benefits in

excess of a specific or aggregate retention shall be subject

to the applicable per-claim limits set forth in this Section.

In no event shall the Fund be obligated to pay an amount in

excess of $500,000 in the aggregate for all first-party and

third-party claims under a policy or endorsement providing

cybersecurity insurance as defined in Section 534.9 and

arising out of or related to a single insured event,

regardless of the number of claims made or number of

claimants.

In no event shall the Fund be liable for any interest on

any judgment entered against the insured or the insolvent

company, or for any other interest claim against the insured

or the insolvent company, regardless of whether the insolvent

company would have been obligated to pay such interest under

the terms of its policy. The Fund shall be liable for interest

at the statutory rate on money judgments entered against the

Fund until the judgment is satisfied.

Any obligation of the Fund to defend an insured shall

cease upon the Fund's payment or tender of an amount equal to

the lesser of the Fund's covered claim obligation limit or the

applicable policy limit.

(Source: P.A. 99-368, eff. 8-14-15.)

(215 ILCS 5/537.7) (from Ch. 73, par. 1065.87-7)

Sec. 537.7. Investigation of claims; disposition.

(a) The Fund shall investigate claims brought against the

Fund and adjust, compromise, settle, and pay covered claims to

the extent of the Fund's obligation and deny all other claims.

(b) The Fund shall not be bound by a settlement, release,

compromise, waiver, or final judgment executed or entered

within 12 months prior to an order of liquidation and shall

have the right to assert all defenses available to the Fund

including, but not limited to, defenses applicable to

determining and enforcing its statutory rights and obligations

to any claim. The Fund shall be bound by a settlement, release,

compromise, waiver, or final judgment executed or entered more

than 12 months prior to an order of liquidation, but only if

the claim is a covered claim and the settlement, release,

compromise, waiver, or final judgment was not a result of

fraud, collusion, default, or failure to defend. In addition,

with respect to covered claims arising from a judgment under a

decision, verdict, or finding based on the default of the

insolvent insurer or its failure to defend, upon application

by the Fund, either on its own behalf or on behalf of an

insured, the court shall set aside the judgment, order,

decision, verdict, or finding, and the Fund shall be permitted

to defend against the claim on the merits. The same criteria

determining whether the Fund will be bound, as specified in

this subsection (b), shall apply to any settlement, release,

compromise, waiver, or final judgment entered into by a high

net worth insured before the date on which claims by or against

that insured became non-exempt for reasons specified in

paragraph (iv) of subsection (b) of Section 534.3.

(c) The Fund shall have the right to appoint or approve and

to direct legal counsel retained under liability insurance

policies for the defense of covered claims as well as the right

to appoint or approve and to direct legal counsel and other

service providers under any other insurance policies subject

to this Article, regardless of any limitations in the policy.

(Source: P.A. 101-60, eff. 7-12-19.)

(215 ILCS 5/538.2) (from Ch. 73, par. 1065.88-2)

Sec. 538.2. The Fund may employ or retain such persons as

are necessary to handle claims, provide policy benefits and

services, and perform other duties of the Fund.

(Source: P.A. 77-305.)

(215 ILCS 5/545) (from Ch. 73, par. 1065.95)

Sec. 545. Effect of paid claims.

(a) Every insured or claimant seeking the protection of

this Article shall cooperate with the Fund to the same extent

as such person would have been required to cooperate with the

insolvent company. The Fund shall have all the rights, duties

and obligations under the policy to the extent of the covered

claim payment, provided the Fund shall have no cause of action

against the insured of the insolvent company for any sums it

has paid out except such causes of action as the insolvent

company would have had if such sums had been paid by the

insolvent company and except as provided in subsection (d) of

this Section. Any person recovering under this Article and any

insured whose liabilities are satisfied under this Article

shall be deemed to have assigned the person's or insured's

rights under the policy to the Fund to the extent of his or her

recovery or satisfaction obtained from the Fund's payments.

(b) The Fund and any similar organization in another state

shall be recognized as claimants in the liquidation of an

insolvent company for any amounts paid by them on covered

claims obligations as determined under this Article or similar

laws in other states and shall receive dividends at the

priority set forth in paragraph (d) of subsection (1) of

Section 205 of this Code; provided that if, at the time that

the liquidator issues a cut-off notice to the Fund in

anticipation of closing the estate, a reserve has been

established by the Fund, or any similar organization in

another state, for the amount of their future administrative

expenses and loss development associated with unpaid reported

pending claims, these reserves will be deemed to have been

paid as of the date of the notice and payment shall be made

accordingly. The liquidator of an insolvent company shall be

bound by determinations of covered claim eligibility under the

Act and by settlements of claims made by the Fund or a similar

organization in another state on the receipt of certification

of such payments, to the extent those determinations or

settlements satisfy obligations of the Fund, but the receiver

shall not be bound in any way by those determinations or

settlements to the extent that there remains a claim in the

estate for amounts in excess of the payments by the Fund. In

submitting their claim for covered claim payments the Fund and

any similar organization in another state shall not be subject

to the requirements of Sections 208 and 209 of this Code and

shall not be affected by the failure of the person receiving a

covered claim payment to file a proof of claim.

(c) The expenses of the Fund and of any similar

organization in any other state, other than expenses incurred

in the performance of duties under Section 547 or similar

duties under the statute governing a similar organization in

another state, shall be accorded priority over all claims

against the estate, except as provided for in paragraph (a) of

subsection (1) of Section 205 of this Code. The liquidator

shall make prompt reimbursement to the Fund and any similar

organization for such expense payments.

(d) The Fund has the right to recover from the following

persons the amount of any covered claims (as determined

without regard to the exemption in paragraph (iv) of

subsection (b) of Section 534.3) and allocated claims expenses

which the Fund paid or incurred on behalf of such person in

satisfaction, in whole or in part, of liability obligations of

such person to any other person:

(i) any insured whose net worth on December 31 of the

year next preceding the date the company becomes an

insolvent company exceeds $25,000,000; provided that an

insured's net worth on such date shall be deemed to

include the aggregate net worth of the insured and all of

its affiliates as calculated on a consolidated basis.

(ii) any insured who is an affiliate of the insolvent

company.

The Fund may also, at its sole discretion and without

assumption of any ongoing duty to do so, pay any workers

compensation claims or any other third-party claims or any

cybersecurity insurance obligations covered by a policy of an

insolvent company on behalf of a high net worth insured as

defined in paragraph (iv) of subsection (b) of Section 534.3.

In that case, the Fund shall recover from the high net worth

insured under this Section for all amounts paid on its behalf,

all allocated claim adjusted expenses related to such claims,

the Fund's attorney's fees, and all court costs in any action

necessary to collect the full amount to the Fund's

reimbursement under this Section.

(Source: P.A. 100-410, eff. 8-25-17; 101-60, eff. 7-12-19.)

Section 99. Effective date. This Act takes effect upon

becoming law.