The Illinois General Assembly passed a number of insurance related bills during the 1996 legislative session.
House Bills
House Bill 1796 (PA 89-484, effective 06/21/96) -- This legislation calls for a new act to regulate viatical settlement companies, entities that buy the life insurance contracts of terminally ill policyholders. This type of business is not currently regulated in Illinois, and this legislation would protect the consumers of this service. The bill provides for:
Departmental approval of all contracts (forms);
Disclosure of facts to the consumer on: alternatives to a viatical settlement; taxability of the disbursement; creditors' rights; the possible effect on government benefits; rescission rights; possible effects on others named in the insurance policy; and the relationship between the agent and company;
Confidentiality of medical information obtained by the company according to applicable state laws;
Rules ensuring the proper transfer of funds from the insurance company to the viatical settlement company and to the consumer;
An initial licensing fee of $1500 per viatical settlement company and a $750 annual renewal fee.
In addition, this bill extends the December 31, 1996, sunset date for 13 Articles of the Insurance Code to January 1, 2007.
Lastly, the legislation adds language in response to the federal Social Security Act Amendments of 1994, which made several amendments to the federal requirements related to Medicare supplement insurance. Individuals who qualify for Medicare because of disability or end-stage renal disease or who qualify for Medicare Part B under a health care pre-payment plan will be protected when seeking Medicare supplement insurance by the same standards that protect those over age 65. States had until April 26, 1996, to make these changes to their regulatory programs.
House Bill 2533 (PA 89-525, effective 07/19/96) -- Makes permanent the pilot Long Term Care (LTC) Insurance Partnership program and establishes options for protecting the assets of individuals wishing to participate in the LTC Partnership.
House Bill 2557 (PA 89-513, effective 07/17/96 for state employees; 09/15/96 for all others) -- Adds a provision to the Illinois Insurance Code to require entities that provide maternity benefits to provide coverage for a minimum of 48 hours of in-patient care following a vaginal delivery and 96 hours following a cesarean section for the mother and newborn child.
The legislation applies to the state, counties, municipalities and school districts. It also applies to health maintenance organizations, limited health services organizations, voluntary health services plans, and the Department of Public Aid's medical assistance program.
House Bill 2587 (PA 89-554, effective 07/26/96) -- Amends the Illinois Health Finance Reform Act to require the Illinois Health Care Cost Containment Council (IHCCCC) to collect outpatient surgical data in cooperation with the Department of Public Aid, the Department of Public Health and the Department of Insurance. This legislation also allows the IHCCCC to conduct a study on free standing ambulatory surgical treatment centers.
House Bill 2819 (PA 89-485, effective 06/21/96) -- As amended, this bill provides an exemption from the Insurance Code to allow certain charitable organizations to issue charitable gift annuities if they are backed by an insurer authorized to do business in Illinois and directly obligated to the consumer (donor).
House Bill 3186 (PA 89-486, effective 06/21/96) -- Amends the Comprehensive Health Insurance Plan Act to authorize the CHIP Board to offer optional family plans and establish separate premium rates for the plans. The legislation restricts coverage under CHIP to family members who meet medical and other eligibility criteria (currently eligible for coverage) and provides that deductibles and coinsurance amounts shall be established by the CHIP Board.
The bill also removes statutorily established deductibles and coinsurance amounts; establishes a maximum period of 60 months for imposing a surcharge for those eligible persons who purchase a waiver of the six month pre-existing condition period; and deletes expired language authorizing an option to reduce the pre-existing condition period from six to two months.
House Bill 3368 (PA 89-565, effective 07/26/96) - Amends the Illinois Vehicle Code to provide that a person who displays a false insurance card to a court or officer of the court is guilty of a Class A misdemeanor.
House Bill 3436 (PA 89-658, effective 01/01/97 for language dealing with the Insurance Code) -- Amends the Local Government Debt Reform Act to add fire protection districts to the list of governmental units.
Amends the Illinois Insurance Code to provide that the maximum amount payable by an underinsured motorist coverage carrier will not exceed the amount by which the limits of the underinsured motorist coverage exceed the limits of the bodily injury liability insurance of the owner or operator of the underinsured motor vehicle; (i.e., clarifies when underinsured motorist coverage would be available if the full liability limit is not met).
In addition, it amends the Insurance Code to provide that a judgment or settlement of the bodily injury claim in an amount less than the limits of liability of the bodily injury coverages applicable to the claim shall not preclude the claimant from making an underinsured motorist claim against the underinsured motorist coverage.
The legislation also amends the Illinois Vehicle Code regarding (1) certain municipal employees' waivers from the commercial driver's license requirements; (2) pedestrians entering, remaining upon, or traversing a railroad grade crossing; (3) school buses stopping at railroad grade crossings; (4) vehicles stopping on railroad tracks; (5) school bus pre-trip inspections; (6) buses that are more than 9 feet wide; and (7) vehicles with side mirrors 14 inches beyond each side.
House Bill 3520 (PA 89-628, effective 08/09/96) -- Amends the Comprehensive Health Insurance Plan Act. Authorizes the CHIP Board to establish conditions and procedures under which the Plan may, if funds permit, discount or subsidize premium rates that are paid directly by senior citizens, as defined by the Board, and other plan participants who are retired or unemployed and meet other qualifications.
Also amends the State Employees Group Insurance Act of 1971 to include a person who is a recipient or survivor of a recipient of a disability under the Teachers' Retirement System Article of the Illinois Pension Code within the definition of TRS benefit recipient.
Senate Bills
Senate Bill 1246 (PA 89-514, effective 11/14/96) -- Amends the Illinois Insurance Code to provide that women covered under group or individual policies of accident and health insurance or under a managed care plan must be permitted to designate an obstetrician/gynocologist as a principal health care provider to whom they have access without referral or prior approval from their primary care provider.
Senate Bill 1260 (PA 89-501, effective 07/01/96) -- Omnibus state appropriation bill. The Department of Insurance budget is contained in Article 45 of the bill.
Senate Bill 1279 (PA 89-638, effective 01/01/97) -- Adds new Part 22 to the Code of Civil Procedure to establish that producers are held to only ordinary care when placing insurance coverage. The legislation also establishes that producers are not fiduciaries except in the handling of premium monies. The bill clearly states that this does not impair producer/insurer contract terms and it does not release the producer from liability for negligent acts.
Senate Bill 1418 (PA 89-608, effective 08/02/96) -- This legislation deletes the requirement that each educational service region in Illinois must contain at least 80,000 inhabitants. It also amends the School Code to eliminate the reference to vans under rental agreements with school districts, allowing schools to own these vehicles. In addition, it eliminates the requirement that insurance covering the transportation of students under this section of the Code must be issued by a company licensed in and authorized to write such coverage in Illinois.
Senate Bill 1424 (PA 89-669, effective 01/01/97) -- This bill contains five components:
Language which allows a company to include property and liability guaranty fund or guaranty association assessments paid in any state as an admitted asset, but only to the extent it is probable that the payments will be able to offset those assessments against present or future premium taxes or income taxes;
A proposal of the Illinois Insurance Exchange (IIE) to change the number of public trustees on the Board from four to five and prohibit insurers and Exchange brokers from becoming public trustees;
Language which requires insurers to mail notices of cancellation and intention not to renew in a specified number of days before the event;
Language which defines when a flood vehicle is to be considered salvage; and
Language which exempts religious institutions/organizations and entities sponsored by religious institutions/ organizations from having to provide insurance coverage for various infertility procedures.
Senate Bill 1425 (Amendatory Veto) -- Would prohibit licensed insurance companies from denying life, health or disability income insurance coverage solely because of abuse. However, the bill does permit companies to underwrite based on health conditions. The result of this legislation would be that a company would be able to deny coverage to a victim of abuse who has a health condition that would not be covered even if there was no abuse as long as that decision is based on the underlying health problem and not on the discovery of abuse by the insurer.
The Governor's amendatory veto suggests clarification of the applicability of the law to dependents in cases of life insurance and health insurance coverage.
September 20, 1996
Illinois Insurance Information Service
Board of Directors
400 North Michigan Avenue, Suite 708
Chicago, Illinois 60611
Dear Board Members:
One of my priorities as Director of Insurance is consumer education. I firmly believe that the more people understand about insurance before they buy it, the less likely they will be to experience problems when they have a claim.
To that end, the Department of Insurance is exploring a number of programs to provide consumers the kind of information they need to make more thoughtful decisions about insurance. One of our more visible efforts is our growing presence on the Internet. Recognizing that this technology offers limitless possibilities for consumer education, we are striving to make the Department's web site a valuable electronic information resource.
At the same time, we are mindful that technology is not an acceptable substitute for personal interaction. When consumers have a problem or a question, they want to talk to a real person, not a machine. The Illinois Insurance Hotline sponsored by Illinois Insurance Information Service provides this type of personalized assistance to thousands of Illinoisans each year.
The Illinois insurance industry has a rich history of cooperation with the Department of Insurance to meet the needs of our citizens. Market assistance programs, collaboration on educational materials, the pre-home purchase insurance counseling program, and the Hotline are all prime examples of our domestic industry filling those gaps that the Department's limited budget and staff resources cannot fully address.
Illinois has always been in the vanguard of insurance regulation, and I believe we are on our way to becoming a leader in consumer initiatives as well. Continuation of proven successes like the Hotline will go a long way to make that happen. I wholeheartedly endorse the efforts of IIIS to educate consumers and strongly encourage industry support for the Hotline.
Sincerely,
Mark Boozell
Director
Thanks to the efforts of the Department of Insurance and the testimony of Supervisor Kathy Eigell and Assistant Deputy Director Etta Mae Credi, a federal jury has convicted two Illinois men of mail fraud for selling worthless automobile insurance policies. A third defendant pleaded guilty before the trial began on July 22.
The insurance policies were sold through tv ads and issued by a shell insurance company, American United Casualty Company, Inc., controlled by defendants Lawrence J. Goldstein, Frank J. Bonanno and Harry T. Gio. Policies were marketed through Auto Insurance Headquarters Agency, Inc. to more than 800 customers in the greater Chicago area over a five-month period in 1993. A bogus premium finance company, American United Payment Services, Inc., collected the premiums that were paid on an installment basis. Only the insurance agency was actually registered with the Illinois Department of Insurance. All three entities were subsequently placed in conservation by the Illinois Office of the Special Deputy.
The defendants collected more than $140,000 in total promised premiums of $600,000 before the Department of Insurance shut down the operation in August 1993. Approximately 40 customers had filed claims under the bogus policies.
Each count of mail fraud carries a maximum term of five years imprisonment and a maximum fine of $250,000; or alternatively, a fine totalling the greater of not more than twice the defendant's gross gain or twice the gross loss to any victim. The Court may also order restitution.
All three defendants remain free on bond pending sentencing. Gio is scheduled to be sentenced on October 18; no date has been set for the other two.
The former office headquarters building of Supreme Life Insurance Company, has been sold to the Black Metropolis Convention and Tourism Council, a community-based organization committed to redevelopment of Chicago's historic Bronzeville area. Roughly $130,000 in net proceeds from the sale will be used to pay claims against the Supreme liquidation estate.
Boozell is the statutory liquidator of Supreme Life Insurance Company which voluntarily entered into liquidation in July 1995. Located at 35th Street and King Drive, the minority- owned insurance company sold policies primarily to inner-city residents in Chicago and other major American cities.
The sale was the culmination of year-long negotiations by both the purchaser and Boozell and his staff at the Office of the Special Deputy Receiver in Chicago. Boozell said the transaction accomplished his two main objectives--obtaining a fair price for the benefit of Supreme's creditors and preserving the cultural value of the building.
The full text of Department rules is printed in the Illinois Register published weekly by the Illinois Secretary of State's Index Department, 111 E. Monroe St., Springfield, IL 62756. Subscriptions are available from that source for an annual fee of $290. Issue numbers and a Department contact person are listed below after each rule summary.
Copies of rules are also available upon written request to the Department of Insurance at a $1 per page charge. Adopted rules are codified in Title 50 of the Illinois Administrative Code.
Rule 3119 (Prelicensing and Continuing Education) was amended on July 19, 1996, to reflect a number of major changes in continuing education on the horizon for Illinois insurance producers. In conjunction with recommendations of the Professional Independent Insurance Association of Illinois and the Illinois Life Underwriters Association, the Department of Insurance included in its 1995 legislative package a revised continuing education proposal that was enacted by the Illinois General Assembly (PA 89-152).
Effective January 1, 1997, all resident insurance producers will be required to obtain 15 hours of continuing education each year prior to renewing their license. The current requirement is for 25 hours, but only for the first four renewals after a producer is initially licensed. There will be no exceptions to the new requirement. Producers who have completed their four years, as well as those who were grandfathered out of the initial continuing education requirement, are all subject to the new requirements. (Vol. 20, #31; Bruce Cassens)
Rule 2051 (Preferred Provider Program Administrators) was amended on July 15, 1996, to change the rule number from Part 6501 to correspond to the statutory provisions which this rule implements. There are no substantive differences between the two rules. (Vol. 20, #30; Denise Hamilton)
Rule 6101 (Health Maintenance Organization) was amended on July 25, 1996, to add new requirements for Point of Service Plans (Section 6101.113) and to clarify the regulatory intent of other requirements. The amendments set minimum coverage standards for basic health care services, full and fair disclosure of health care services provided by group contracts or evidences of coverage including coordination of benefits, conversion, cancellation, termination, deductibles and co-payments, pre-existing conditions and other provisions to carry out the HMO Act. (Vol. 20, #32; Mary Petersen)
Illinois Insurance Director Mark Boozell obtained an Order of Conservation on September 20, 1996, against First Oak Brook Corporation Syndicate, a member of the Illinois Insurance Exchange. First Oak Brook consented to the entry of the order.
Located in Oak Brook, IL, the syndicate is a wholly owned subsidiary of United Financial Holdings, Inc., an Illinois holding company, which in turn is owned by United Financial Group, Inc. of Illinois.
The action was taken at the request of the Illinois Insurance Exchange, as well as First Oak Brook, to conserve its assets for the protection of policyholders and creditors. The order also contains a temporary moratorium on the payment of all claims and loss adjustment expenses, as well as return premiums or other contractual obligations of First Oak Brook, until further order of the court, and an injunction prohibiting suits against First Oak Brook outside of the conservation proceedings.
On September 11, 1996, the Board of Trustees of the Illinois Insurance Exchange notified the Director of Insurance that First Oak Brook was unable to meet its minimum policyholders surplus of $3,500,000. The Director subsequently determined that First Oak Brook was impaired.
The syndicate has ceased writing all new business. Its most recent annual statement for the period ending December 31, 1995, reveals that First Oak Brook wrote approximately $33 million in direct and assumed reinsurance premiums. The Conservation Order authorizes the Conservator to take possession and control of the property, books, records, and assets of First Oak Brook, and to supervise its business and affairs in an effort to conserve its assets. The Conservator will also ascertain the syndicate's financial condition and review its claims and other pertinent records to determine what further action may be appropriate.
The conservation proceedings are being handled by the Department's Office of the Special Deputy Receiver, 222 Merchandise Mart Plaza, Suite 1450, Chicago, IL 60654; (312) 836-9500.
The Illinois Insurance Department contracted with Gould Publications of Florida, Inc. to publish the most recent paperback version of the Illinois Insurance Laws.
Copies of the 1996 edition are available through Gould Publications for $29.95 each. To order your copy, phone Gould at (407) 695-9500 or fax at (407) 695-2906.
Revocation of Licensing Authority Arnette V. Bradley PO Box 292 Olympia Fields, IL Effective 7/29/96 Lonny R. Dorman RT 3, Box 148C Lindsey, OK Effective 8/19/96 Interstate Insurance Services, Inc. 550 North Water Street PO Box 1254 Decatur, IL Effective 7/15/96 Kathleen M. Konieczny 101 Belt Avenue O'Fallon, IL Effective 7/5/96 Konieczny Insurance Agency 627 West Highway 50 O'Fallon, IL Effective 7/5/96 O'Dell & Wathan Agency, Inc. 550 North Water Street Decatur, IL Effective 7/15/96 Charles Pribich 2321 West 111 Place Chicago, IL Effective 7/31/96 Roderick Smith 8235 South Oglesby Chicago, IL Effective 7/11/96 Juan J. Tamayo 11627 Pineview Drive Orland Park, IL Effective 8/19/96 Alice F. Wathan 333 West North Street Decatur, IL 62523 Effective 7/15/96 Leslie L. Watson 1533 West 71st Street Chicago, IL Effective 7/31/96 Voluntary Revocation Ronald F. Burton Memory Lane Estates 15724 Donald Court Sandwich, IL Effective 7/2/96 Denelda J. Davis 2345 South 5th Avenue North Riverside, IL Effective 8/19/96 EMT & Associates, Inc. 3681 West 183rd Street Hazel Crest, IL Effective 8/19/96 Sandra B. Rainey 4054 West 176th Place Country Club Hills, IL Effective 8/19/96 Order of Suspension Luis I. Cruz 405 North 1st Street, Apt. B Cary, IL Effective 8/21/96 Don Ray Overtoom 496 Forest Avenue Glen Ellyn, IL Effective 8/21/96 Asma Sayeed 1952 Pastoral Lane Hanover Park, IL Effective 8/21/96 Denial of Request for License Michael P. Bukowsky 807 West College Fredericktown, MO Effective 8/21/96 Robert J. Hegarty 1208 Hull Terrace Evanston, IL Effective 8/7/96 Yvonne Mason 1324 West 98th Street Chicago, IL Effective 8/7/96 Gerald W. Ripperda RR #2, Box 5A Pocahontas, IL Effective 8/19/96 Stipulation and Consent Order - Civil Forfeiture Paid Ralph E. Brush 7104 Foster Morton Grove, IL Effective 8/7/96 Emil A. Dicks 731 Circle Drive Roselle, IL Effective 7/29/96 Jerry Encil Furlong 4 Star Dust Drive Sherman, IL Effective 7/12/96 Robert C. Gordon 6837 West Winston Tinley Park, IL Effective 6/12/96 Illinois Insurance Center 6821 West North Avenue Oak Park, IL Effective 7/12/96 Gordon A. Johnnic 635 Iola Avenue Romeoville, IL Effective 5/22/96 Stipulation and Consent Order - Civil Forfeiture Paid Jorge I. Rodriguez Insurance Agency, Ltd. 3203 North Elston Avenue Chicago, IL Effective 6/18/96 Marvin R. Keller 526 West Wesley Street Wheaton, IL Effective 6/7/96 Paul E. Manns 225 Lake Shore Lane Bloomingdale, IL Effective 7/8/96 Silas McWilliams 10459 South Calumet Chicago, IL Effective 6/18/96 Thomas M. Mehlhorn 42926 North Janette Street Antioch, IL Effective 5/22/96 Oscar Barry Parks 7940 West 139th Street Orland Park, IL Effective 7/30/96 Carolyn P. Pitzaferro 8028 North Odell Niles, IL Effective 7/12/96 Daniel J. Projansky 220 Waubansee Riverside, IL Effective 7/8/96 Howard S. Projansky 190 South Old Creek Road Vernon Hills, IL Effective 7/8/96 Stuart Projansky 505 North Lake Shore Drive, Apt. 1601 Chicago, IL Effective 7/8/96 Stipulation and Consent Order - Civil Forfeiture Paid Michael Alan Rapaport 391 Ferne Drive Wheeling, IL Effective 7/29/96 Patricia L. Reichart 1441 Jersey Ridge Road Davenport, IA 52703 Effective 7/8/96 Jorge Isaac Rodriguez 3203 North Elston Avenue Chicago, IL Effective 6/18/96 Stuart Projansky and Associates, Inc. 5940 West Touhy, Suite 390 Niles, IL Effective 7/8/96 Thomas M. Uebele 413 North Quincy Hinsdale, IL Effective 7/12/96 Joseph M. Walsh 4404 Redwood Drive Norridge, IL Effective 6/7/96 William H. Welpott 307 Crest Drive Cary, IL Effective 7/29/96 William J. Wetherald 140 West Pomeroy West Chicago, IL Effective 7/8/96 Stipulation and Consent Order - Civil Forfeiture Not Paid Colnon Insurance Agency Box 339 Main Street Ridgway, IL Effective 7/8/96 Rhoda G. Cox Box 545 Ridgway, IL Effective 7/8/96 Richard Steven Lombardi 811 Bradwell Barrington, IL Effective 6/27/96 Douglas A. Schueler 1308 East 13th Street Sterling, IL Effective 6/12/96
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Company action
New Admissions Certificates of authority have been issued to the following insurance companies: Omni Indemnity Company, IL, 6/10/96 Country Medical Plans, Inc., IL, 7/30/96 Health Alliance-Midwest, Inc., IL, 7/30/96 Excalibur Insurance Corporation, IL, 8/7/96 CareAmerica Compensation & Liability Insurance Company, CA, 8/27/96 Terminations Certificates of authority have been revoked for the following insurance companies: Randmark, Inc., MD, voluntary withdrawal, 5/24/96 American International Insurance Company of Delaware, voluntary cancellation 8/2/96
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Examination reports filed
Financial USLife Credit Life inusrance Company 7/17/96 Medical Center Health Plan 7/18/96 Humana HealthChicago Insurance Company 7/22/96 American Medical Assurance Company 8/28/96 Atlanta Casualty Company 8/28/96 Protection Mutual Insurance Company 8/28/96 Thompson and Guilford Mutual Insurance Company 8/28/96 York Insurance Company 8/28/96 United Equitable Insurance Company 8/29/96 First Non-Profit Trust 9/05/96 Allen and Otter Creek Mutual Insurance Company 9/10/96 Ancilla Insurance Trust 9/10/96 Humana HealthChicago, Inc. 9/10/96 Market Conduct Jackson National Life, Lansing, MI 5/02/96 The Reliable Life Insurance Company 5/02/96 Illinois National Insurance Company 5/28/96 New Hampshire Insurance Company 5/28/96 Northwestern Mutual Life Insurance Company 7/08/96 Dairyland Insurance Company 8/26/96 Principal Mutual Life 8/26/96
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Scheduled Hearings
Victor J. Lewis State Farm Mutual Automobile Insurance Company Nonrenewal 9/17/96 Hearing No. 3471 American Combined Life Insurance Company by Resource Financial Corporation and Resource Acquisition Corporation Form A 9/17/96 Hearing No. 3475 Michael R. Cole Revocation 9/26/96 Hearing No. 3469 Jerry L. Knotts State Farm Fire & Casualty Company Cancellation 9/30/96 Hearing No. 3468 Midwest Material Company Bituminous Casualty Company Cancellation 10/3/96 Hearing No. 3474 Roman Lopez Gracie Perez German Mutual Fire Insurance Company of North Chicago Cancellation 10/8/96 Hearing No. 3477 Dick and Libbie Brandt State Farm General Insurance Company Cancellation 10/9/96 Hearing No. 3476 Indicator Lites Inc. National Council on Compensation Insurance, Inc. Properly classified in Code 10/11/96 Hearing No. 3472 Matters Settled without Hearing: Larry and Ione Hesch Country Mutual Insurance Company Dismissed 8/26/96 Hearing No. 3459 Otis W. Cromartie, Sr. State Farm Fire & Casualty Company Dismissed 8/14/96 Hearing No. 3460 Completed Hearings: John Anthony Paterno Order of Revocation rescinded 7/30/96 Hearing No. 3419 K & S Associates, Inc. Generali Cancellation effective 7/30/96 Hearing No. 3437 Sudesh Suri State Farm Mutual Automobile Insurance Company Nonrenewal effective 7/30/96 Hearing No. 3451 Chiropractice Benefit Network Cease and Desist Order previously issued becomes final 7/22/96 Hearing No. 3440
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