Illinois to Enact Most Comprehensive Insurance Guaranty Fund Reform in Decades

On June 24, 2010, Illinois House Bill 5217 ("HB 5217") went to Governor Pat Quinn after passing both houses of the Illinois General Assembly. HB 5217 is set to become law immediately upon Governor Quinn's signature or automatically 60 calendar days after reaching the Governor's desk. This comprehensive reform legislation amends a number of provisions, including the following:

Certain provisions of the Illinois Life and Health Insurance Guaranty Association Act that were last amended in 1980 (e.g., 215 ILCS 5/531.04 ("Construction"), 5/531.07 ("Board of Directors"), and 5/531.14 ("Miscellaneous Provisions"); and certain provisions that were amended later (e.g., 215 ILCS 5/531.18 ("Stay of Proceedings-Reopening Default Judgments" in 1981, and 215 ILCS 5/531.03 ("Coverage and Limitations") in 1999); Certain provisions of the Illinois Insurance Guaranty Fund Act that were last amended in 1997 (e.g., 215 ILCS 5/545 ("Effect of Paid Claims"); an Certain provisions of the Illinois Health Maintenance Organization Guaranty Association Law that have not been amended since the original enactment of the statute in 1987 (e.g., 215 ILCS 125/6-9 ("Assessments"), 125/6-10 ("Plan of Operation"), and 125/6-18 ("Stay of Proceedings-Reopening Default Judgments"). Illinois Receivership Act

HB 5217 incorporates language from the NAIC Insurer Receivership Model Act Number 555-1 and:

Defines "Netting agreement" and "Qualified financial contract" for the first time in the Illinois Rehabilitation, Liquidation, Conservation and Dissolution of Companies Act (215 ILCS 5/187); Creates a new Section 206.1 that sets forth, among other things, the treatment of transfers and set-offs under netting agreements and qualified financial contracts, the effect of disaffirmance and repudiation, and the conditions under which no person shall be stayed or prohibited from exercising contractual rights in an insolvency or insurer default (215 ILCS 5/206.1); and Eliminates the requirement that proofs of claim must be signed under oath, paving the way to online proof of claim submissions in Illinois receiverships (215 ILCS 5/209). Illinois Life and Health Insurance Guaranty Association Act

The legislation also incorporates language from the NAIC Life and Health Insurance Guaranty Association Model Act Number 520-1 and:

Clarifies coverage under the Illinois Life and Health Insurance Guaranty Association Act based upon residency to avoid duplicate coverage under more than one state's...