SB 2187 — INSURANCE-SERVICE CONTRACTS

*LRB09519517KBJ45825b* SB2187 95THEngrossed GENERALLRB095 ASSEMBLY19517 StateKBJ of45825 Illinoisb andAN 2008ACT SB2187concerning Introducedregulation. 2/14/2008, by Sen.

David Koehler SYNOPSIS AS INTRODUCED:

ILCS 5/155.39 ILCS 5/205 from Ch.

73, par.

817 ILCS 152/10 ILCS 152/50 Amends the Illinois Insurance Code.

Deletes a provision providing that no vehicle protection product sold or offered for sale in this State shall be subject to the provisions of the Code.

Provides that vehicle protection products, the warrantors of such products, and related vehicle protection product sellers and warranty administrators complying with the provision are not required to comply with and are not subject to any other provision of the Code, except that such parties shall be deemed to be engaged in an insurance business subject to the Insurance Code for purposes of rehabilitation, liquidation, conservation, or dissolution by the Director pursuant to Article XIII of the Code.

Amends the Service Contract Act.

Provides that service contract providers and related service contract sellers and administrators complying with the Act are not required to comply with and are not subject to any provision of the Insurance Code, except that such parties shall be deemed to be engaged in an insurance business subject to the Code for purposes of rehabilitation, liquidation, conservation, or dissolution by the Director of Insurance pursuant to Article XIII of the Code.

Provides that if a service contract provider engages in a pattern or practice of conduct that violates the Act and that the Director reasonably believes threatens to render the service contract provider insolvent or cause irreparable loss or injury to the property or business of any person or company located in this State, the Director may report the case to the Attorney General for proceedings in accordance with Article XIII of the Code.

Makes other changes.

Effective immediately.

LRB095 19517 KBJ 45825 b FISCAL NOTE ACT MAY APPLY A BILL FOR SB2187 LRB095 19517 KBJ 45825 b AN ACT concerning regulation.

"Vehicle protection product" means a vehicle protection device, system, or service that is (i) installed on or applied SB2187 Engrossed - 2 - LRB095 19517 KBJ 45825 b to a vehicle, (ii) is designed to prevent loss or damage to a vehicle from a specific cause, (iii) includes a written warranty by a warrantor that provides if the vehicle protection product fails to prevent loss or damage to a vehicle from a specific cause, that the warranty holder shall be paid specified incidental costs by the warrantor as a result of the failure of the vehicle protection product to perform pursuant to the terms of the warranty, and (iv) the warrantor’s liability is covered by a warranty reimbursement insurance policy.

The warranty reimbursement insurance policy shall be issued by an insurer authorized to do business in this State that has filed its policy form with the SB2187 Engrossed - 3 - LRB095 19517 KBJ 45825 b Department.

SB2187 Engrossed - 4 - LRB095 19517 KBJ 45825 b (a) The costs and expenses of administration, including the expenses of the Illinois Insurance Guaranty Fund, the Illinois Life and Health Insurance Guaranty Association, the Illinois Health Maintenance Organization Guaranty Association and of any similar organization in any other state as prescribed in subsection (c) of Section 545.

(d) Claims by policyholders, beneficiaries, and insureds, and consumers under insurance policies, annuity contracts, and funding agreements, service contracts, vehicle protection products, and liability claims against insureds covered under insurance policies and insurance contracts issued by the company, and claims of the Illinois Insurance Guaranty Fund, the Illinois Life and Health Insurance Guaranty Association, the Illinois Health SB2187 Engrossed - 5 - LRB095 19517 KBJ 45825 b Maintenance Organization Guaranty Association and any similar organization in another state as prescribed in Section 545.

Every claim under a written agreement, statute, or rule providing that the assets in a separate account are not SB2187 Engrossed - 6 - LRB095 19517 KBJ 45825 b chargeable with the liabilities arising out of any other business of the insurer shall be satisfied out of the funded assets in the separate account equal to, but not to exceed, the reserves maintained in the separate account under the separate account agreement, and to the extent, if any, the claim is not fully discharged thereby, the remainder of the claim shall be treated as a priority level (d) claim under paragraph (d) of this subsection to the extent that reserves have been established in the insurer’s general account pursuant to statute, rule, or the separate account agreement.

To the extent that any assets of an insurer, other than those assets properly allocated to and maintained in a separate account, have been used to fund or pay any expenses, taxes, or policyholder benefits that are attributable to a separate account policy, contract, or agreement that should have been paid by a separate account prior to the commencement of receivership proceedings, then upon the commencement of receivership proceedings, the separate accounts that benefited from this payment or funding shall first be used to repay or reimburse the company’s general assets or account for any unreimbursed net sums due at the commencement of receivership proceedings prior to the application of the separate account SB2187 Engrossed - 7 - LRB095 19517 KBJ 45825 b assets to the satisfaction of liabilities or the corresponding separate account policies, contracts, and agreements.

SB2187 Engrossed - 8 - LRB095 19517 KBJ 45825 b The Director shall establish procedures for the ratable allocation and distribution of disbursements to the Illinois Insurance Guaranty Fund, the Illinois Life and Health Insurance Guaranty Association, the Illinois Health Maintenance Organization Guaranty Association and similar organizations in other states.

The Service Contract Act is amended by changing SB2187 Engrossed - 9 - LRB095 19517 KBJ 45825 b Sections 10 and 50 as follows:

Contracts for the repair and monitoring of private alarm or private security systems regulated under the Private Detective, Private Alarm, Private Security, SB2187 Engrossed - 10 - LRB095 19517 KBJ 45825 b Fingerprint Vendor, and Locksmith Act of 2004 are not required to comply with this Act and are not subject to any provision of the Illinois Insurance Code.

If a service contract provider engages in a pattern or practice of conduct that violates this Act and that the Director reasonably believes threatens to render the service contract provider insolvent or cause irreparable loss or injury to the property or business of any person or company located in this State, the Director may (i) issue an order directed to that service contract provider to cease and desist SB2187 Engrossed - 11 - LRB095 19517 KBJ 45825 b from engaging in further acts, practices, or transactions that are causing the conduct;

The provisions of Section 10-25 of the Illinois Administrative Procedure Act shall apply to a hearing request SB2187 Engrossed - 12 - LRB095 19517 KBJ 45825 b under this Section.