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92_SB1976enr
SB1976 Enrolled LRB9214934JSpcA
1 AN ACT concerning insurance.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The Illinois Insurance Code is amended by
5 changing Sections 205 and 226.1 as follows:
6 (215 ILCS 5/205) (from Ch. 73, par. 817)
7 Sec. 205. Priority of distribution of general assets.
8 (1) The priorities of distribution of general assets
9 from the company's estate is to be as follows:
10 (a) The costs and expenses of administration,
11 including the expenses of the Illinois Insurance Guaranty
12 Fund, the Illinois Life and Health Insurance Guaranty
13 Association, the Illinois Health Maintenance Organization
14 Guaranty Association and of any similar organization in
15 any other state as prescribed in subsection (c) of
16 Section 545.
17 (b) Secured claims, including claims for taxes and
18 debts due the federal or any state or local government,
19 that are secured by liens perfected prior to the filing
20 of the complaint.
21 (c) Claims for wages actually owing to employees
22 for services rendered within 3 months prior to the date
23 of the filing of the complaint, not exceeding $1,000 to
24 each employee unless there are claims due the federal
25 government under paragraph (f), then the claims for wages
26 shall have a priority of distribution immediately
27 following that of federal claims under paragraph (f) and
28 immediately preceding claims of general creditors under
29 paragraph (g).
30 (d) Claims by policyholders, beneficiaries, and
31 insureds, under insurance policies, annuity contracts,
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1 and funding agreements, and liability claims against
2 insureds covered under insurance policies and insurance
3 contracts issued by the company, and claims of the
4 Illinois Insurance Guaranty Fund, the Illinois Life and
5 Health Insurance Guaranty Association, the Illinois
6 Health Maintenance Organization Guaranty Association and
7 any similar organization in another state as prescribed
8 in Section 545. For purposes of this Section, "funding
9 agreement" means an agreement whereby an insurer
10 authorized to write business under Class 1 of Section 4
11 of this Code may accept and accumulate funds and make one
12 or more payments at future dates in amounts that are not
13 based upon mortality or morbidity contingencies.
14 (e) Claims by policyholders, beneficiaries, and
15 insureds, the allowed values of which were determined by
16 estimation under paragraph (b) of subsection (4) of
17 Section 209.
18 (f) Any other claims due the federal government.
19 (g) All other claims of general creditors not
20 falling within any other priority under this Section
21 including claims for taxes and debts due any state or
22 local government which are not secured claims and claims
23 for attorneys' fees incurred by the company in contesting
24 its conservation, rehabilitation, or liquidation.
25 (h) Claims of guaranty fund certificate holders,
26 guaranty capital shareholders, capital note holders, and
27 surplus note holders.
28 (i) Proprietary claims of shareholders, members, or
29 other owners.
30 Every claim under a written agreement, statute, or rule
31 providing that the assets in a separate account are not
32 chargeable with the liabilities arising out of any other
33 business of the insurer shall be satisfied out of the funded
34 assets in the separate account equal to, but not to exceed,
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1 the reserves maintained in the separate account under the
2 separate account agreement, and to the extent, if any, the
3 claim is not fully discharged thereby, the remainder of the
4 claim shall be treated as a priority level (d) claim under
5 paragraph (d) of this subsection to the extent that reserves
6 have been established in the insurer's general account
7 pursuant to statute, rule, or the separate account agreement.
8 For purposes of this provision, "separate account
9 policies, contracts, or agreements" means any policies,
10 contracts, or agreements that provide for separate accounts
11 as contemplated by Section 245.21.
12 To the extent that any assets of an insurer, other than
13 those assets properly allocated to and maintained in a
14 separate account, have been used to fund or pay any expenses,
15 taxes, or policyholder benefits that are attributable to a
16 separate account policy, contract, or agreement that should
17 have been paid by a separate account prior to the
18 commencement of receivership proceedings, then upon the
19 commencement of receivership proceedings, the separate
20 accounts that benefited from this payment or funding shall
21 first be used to repay or reimburse the company's general
22 assets or account for any unreimbursed net sums due at the
23 commencement of receivership proceedings prior to the
24 application of the separate account assets to the
25 satisfaction of liabilities or the corresponding separate
26 account policies, contracts, and agreements.
27 To the extent, if any, reserves or assets maintained in
28 the separate account are in excess of the amounts needed to
29 satisfy claims under the separate account contracts, the
30 excess shall be treated as part of the general assets of the
31 insurer's estate.
32 (2) Within 120 days after the issuance of an Order of
33 Liquidation with a finding of insolvency against a domestic
34 company, the Director shall make application to the court
SB1976 Enrolled -4- LRB9214934JSpcA
1 requesting authority to disburse funds to the Illinois
2 Insurance Guaranty Fund, the Illinois Life and Health
3 Insurance Guaranty Association, the Illinois Health
4 Maintenance Organization Guaranty Association and similar
5 organizations in other states from time to time out of the
6 company's marshaled assets as funds become available in
7 amounts equal to disbursements made by the Illinois Insurance
8 Guaranty Fund, the Illinois Life and Health Insurance
9 Guaranty Association, the Illinois Health Maintenance
10 Organization Guaranty Association and similar organizations
11 in other states for covered claims obligations on the
12 presentation of evidence that such disbursements have been
13 made by the Illinois Insurance Guaranty Fund, the Illinois
14 Life and Health Insurance Guaranty Association, the Illinois
15 Health Maintenance Organization Guaranty Association and
16 similar organizations in other states.
17 The Director shall establish procedures for the ratable
18 allocation and distribution of disbursements to the Illinois
19 Insurance Guaranty Fund, the Illinois Life and Health
20 Insurance Guaranty Association, the Illinois Health
21 Maintenance Organization Guaranty Association and similar
22 organizations in other states. In determining the amounts
23 available for disbursement, the Director shall reserve
24 sufficient assets for the payment of the expenses of
25 administration described in paragraph (1) (a) of this
26 Section. All funds available for disbursement after the
27 establishment of the prescribed reserve shall be promptly
28 distributed. As a condition to receipt of funds in
29 reimbursement of covered claims obligations, the Director
30 shall secure from the Illinois Insurance Guaranty Fund, the
31 Illinois Life and Health Insurance Guaranty Association, the
32 Illinois Health Maintenance Organization Guaranty Association
33 and each similar organization in other states, an agreement
34 to return to the Director on demand funds previously received
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1 as may be required to pay claims of secured creditors and
2 claims falling within the priorities established in
3 paragraphs (a), (b), (c), and (d) of subsection (1) of this
4 Section in accordance with such priorities.
5 (3) The provisions of this Section are severable under
6 Section 1.31 of the Statute on Statutes.
7 (Source: P.A. 92-65, eff. 7-12-01.)
8 (215 ILCS 5/226.1) (from Ch. 73, par. 838.1)
9 Sec. 226.1. Entitled annuity payment options. Annuity
10 contracts and funding agreements may be issued without a life
11 contingency annuity payment option in the following
12 circumstances: (1) to fund benefits under an employee benefit
13 plan as defined in the Employee Retirement Income Security
14 Act of 1974, as now or hereafter amended; (2) to fund the
15 activities of an organization exempt from taxation under
16 Internal Revenue Code Section 501(c), as now or hereafter
17 amended; (3) to fund a program of a governmental entity or of
18 an agency or instrumentality thereof; (4) to fund an
19 agreement providing for periodic payments entered into in
20 satisfaction of a claim; or (5) to fund a program of an
21 institution having assets in excess of $25,000,000.
22 (Source: P.A. 86-753.)
23 Section 99. Effective date. This Act takes effect upon
24 becoming law.
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