Property and Casualty Law Supplement
General Cancellation Provisions
- Individual auto and property policies (Fire and extended perils): 30 day's written notice of specific reason for cancellation. -All policies for nonpayment of premium: 10 days written notice of cancellation
UTP: Boycott
A group that avoids a certain company or producer to steer business to another company or producer
Cease and Desist Orders
For violation of insurance statutes. Hearings: Held 20-30 days from the date of the hearing notice Penalties: Max $100 each day of violation. Max $5,000 in total. Revocation or suspension of certificate of authority or license. Or any combo of the above
UTP: Intimidation
Use of words or actions to make a consumer buy insurance from a producer or company
Workers Compensation
-Companies licensed to write workers' comp must participate in the Illinois Assigned Risk Plan for Workers' Comp and Occupational Diseases Acts Coverage -Eligible employers must have been rejected by two insurers within 60 days
Appointment Termination
-Contracts between an independent agent and a company may not be terminated until at least one year in effect -The company must provide a 180 day written notice of termination to the independent agent
Mine Subsidence
-Mine subsidence insurance is available to all residences, living units, and commercial buildings through the IL Mine Subsidence Insurance Fund -Mine subsidence is lateral or vertical ground movement caused by a failure initiated at the mine level of man-made underground mines
Cancellation of Commercial Fire and Marine Insurance
10 day written notice will be sent to the named insured if insured's buildings: -Have had a fire loss that has not been repaired within 60 days after an insurance settlement -Have been unoccupied for 60 consecutive days -Have an order to be vacated or demolished due to poor condition -Have not had water, heat, or public lighting for 30 consecutive days
IL Automobile Insurance Plan (AIP)
An assigned risk pool that provides auto insurance to individuals who: -Have applied for insurance within the previous 60 days -Have not been able to obtain insurance at rates lower than rates under plan -Have been rejected by three insurers
Controlled Business
Insurance procured by or through a person upon: His own life, person, property, or risks or those of his spouse or; the life, person, property, or risks of his employer or own business Total amount of premiums from controlled business either one year after issuance of a license or two years prior to renewal may not exceed the total amount of premiums on all other insurance business.
Antitheft Mechanism
Insureds with anti-theft mechanisms on the vehicle must be offered a premium reduction
Address Changes
Licensee must inform the director within 30 days of any change of: Residence address, business address, mailing address, or email address.
Unfair Trade Practices: Rebating
Offering valuable consideration, other than that which is offered in the contract, as an inducement to purchase a policy is illegal. This includes: -K ickbacks of commission, extraordinary gifts, payments of consulting fees, or offering to pay the insured's premium
Illinois Insurance Guaranty Association
Provide for the payment of covered claims of an insolvent insurer. Insurers and producers may not use the existence of the Association for the purpose of selling any form of insurance covered by the Association.
IL Fair Access to Insurance Requirements (FAIR) Plan
Purpose is to make property insurance available to urban property owners unable to obtain coverage in normal markets -For eligibility: Three unsuccessful attempts to obtain basic property or homeowners insurance through normal channels -Companies writing fire and extended coverage policies are required to participate in the FAIR pool
Examination of Records- Insurers
The Director may examine the records of any domestic insurance company. - Must be examined at least once every five years. -Companies may request a hearing within 10 days of receiving exam report. -Director must issue written order within 90 days of hearing - Max penalty of violating any order is $2,000
Fiduciary
When a producer receives premiums in the process of selling insurance, these funds are considered to be held in a fiduciary or trust capacity. Penalties for illegally withholding or misappropriating fiduciary funds: -$150 or less is a class A misdemeanor -$150 or less repeatedly is a class 4 felony -More than $150 is a class 3 felony
Business Entity License
- Business entity is a corporation, association, partnership, or other legal entity - If acting as an insurance producer, the entity must obtain an insurance producer license - One licensed, producer must be designated as the party responsible for ensuring compliance with the laws of IL
Suspension or Revocation
-Applicants or licensees must receive a written notice of reasons to nonrenew/suspend/revoke a license -Hearings may be requested within 30 days of the notice and must be held between 20-30 days of the mailing of the notice of hearing -Civil penalties of up to $10,000 per cause and $100,000 for all causes may be levied -A person is ineligible to apply for any licenses for three years following revocation/suspension/denial.
Temporary Non-Producer License
Director may issue for up to 180 days without an examination if necessary for servicing an insurance business in the case of Death/disability of licensed producer, or active military service of the licensed producer.
Temporary Producer License
Director may issue temporary producer license for up to 90 days provided the appointee: -Is going through the licensing process -Is enrolled in pre-licensing classes -Has paid the applicable fees
Licensing Fees/Bonds
Fees every two years: For insurance producer license $180, for non resident insurance license $250 Bond required for producers acting as brokers: Greater of $2,500 or 5% of premiums brokered in the previous years
UTP: Coercion
Forcing a person to buy insurance through a particular company or producer
Reinstatement of License
If a producer's license lapses they may have it reinstated: -Within 12 months after the due date of the renewal fee -Without passing a written exam -By paying a penalty of double the unpaid renewal fee
More Auto Insurance
Mandatory minimum financial responsibility liability limits in Illinois are (25/50/20) -$25,000 per person for bodily injury -$50,000 per accident for bodily injury -$20,000 per accident for property damage
Guaranty Association
Max liability per covered claim: - The full amount of any covered claim under workers' comp insurance - Up to $10,000 unearned premium for any one policy - Not more than $500,000 for all other types of covered claims
Penalties for Failure to Provide Proof of Insurance
Minimum $500 fine for driving without insurance Minimum $1,000 fine for driving a vehicle whose registration has been suspended for noninsurance
MORE Unfair Claims Settlement Practices
-Attempting to settle claims for less than the amount the insured was led to believe they were entitled - Attempting to settle claims on the basis of an application that was altered without the insured's knowledge and consent -Making claims payments without indicating the coverage under which each payment is being made -Denying a claim or offering a compromise settlement without a prompt explanation for such actions -unreasonably delaying a claim investigation or payment by requiring both a formal proof of loss and subsequent verification that duplicates the info.
Nonresident License
-Director may issue an insurance producer's license to qualified nonresident producers - The person must be currently licensed an in good standing in their resident state - The person must submit the proper application and fees -Their home state must award insurance producer licenses to IL producers on the same basis -When producer moves to another state, they must file a change of address and provide certification from new resident state within *30* days of change of legal residence.
Continuing Education (CE)
-Every resident producer must complete 24 credit hours of CE every two years. -At least three credit hours must consist of an approved ethics course delivered in a classroom -Records of courses taken must be kept for three years
Unfair Claims Settlement Practices (cont.)
-Failing to affirm or deny coverage within a reasonable time after completing a claim investigation -Not attempting in good faith to bring about prompt, fair, and equitable settlement of claims submitted in which liability has become reasonably clear -Compelling insureds to institute suits to recover amounts due under their policies by offering substantially less than the amounts ultimately recovered in suits brought by them
Do we even need to know these? MORE unfair claims settlement practices
-Failing to settle claims promptly where liability has become reasonably clear under one portion of insurance coverage in order to influence settlement under other portions of the insurance policy -Failing to promptly provide a reasonable explanation for the basis for the denial of a claim.
Additional Penalties and Fees
-First offense- $100 -Second or subsequent offenses within 4 years- $100, 4 month suspension Submitting false proof of insurance- $200, 6 month suspension, class A misdemeanor -Providing fraudulent address- $1,001-$1,200
Resident License
-General knowledge, and state-specific knowledge exams must be passed within 90 days of each other. -Licenses are issued for a two year period -Must contain the licensee's name, address, license number and national producer number, date of issue, lines of authority, and expiration date of license
Unfair Claims Settlement Practices
-Knowingly misrepresenting relevant facts or policy provisions to claimants and insureds -Failing to acknowledge communications regarding claims -Failing to implement procedures for the prompt investigation and settlement of claims -Refusing to pay claims without conducting a reasonable investigation
Reporting Actions
An insurance producer who is convicted of a felony must report the conviction to the Director within 30 days of the judgement.
License Exemptions
An officer, director, or employee of an insurer/producer is exempt if: -Commissions are not received on policies sold in IL -Activities are executive, administrative, managerial, or clerical and indirectly related to insurance sales -Activities are related to underwriting, loss control, inspection, adjusting, investigating, or settling claims -Supervisory activities do not include selling, soliciting, or negotiating insurance.
Unfair Trade Practices: Defamation
Any statement, written or oral, that is false or maliciously critical of the financial condition of an insurance company or a producer representing that company -Violators of this section are subject to fines between $200 and $10,000
Producer License Requirements
Applicant must be: -At least 18 years old -Be sufficiently rehabilitated in case of any previously committed acts that are grounds for denial -Complete a relicensing course of study for the lines of authority for which the person has applied -Pay the required fees -Pass the exams for the lines of authority for which they have applied
Director of Insurance
Appointed by the governor. Duties include: -Conduct investigations and exams -Write reasonable rules and regulations -Impose penalties -Approve insurance policy forms, rates, and rate increases -Issue insurance licenses and certificates of authority
Suspension or Revocation
Director can suspend, revoke, or refuse to issue or renew the license of a producer who: -Provided incorrect, misleading, incomplete, or untrue information in the application -Violated any law, or order of a Director -Obtained a license by fraud -Cheated on licensing exam -Failed to pay child support -Failed to pay income tax -Misappropriated any monies or properties received in course of doing insurance business -Intentionally misrepresented terms of an insurance contract or application for insurance -Was convicted of a felony -Admitted to or was found to have committed any insurance unfair trade practice -Used any fraudulent or dishonest practices or demonstrated incompetence or financial irresponsibility in the conduct of business -Had an insurance license denied/suspended/revoked in any other state. -Forged another person's name in an insurance transaction -Knowingly accepted insurance business from an unlicensed individual
Examination of Records- Producers
Director may examine records of any licenses insurance producer to ensure compliance with insurance laws. - Violators may request hearing within 14 days of receiving an exam report -Director must issue a written order within 90 days -Max penalty for violating an order is $20,000
Defensive Driving Discount
Drivers age 55 and older that complete at least eight hours of an approved defensive driving course must be offered a premium reduction. This reduction is effective for up to three years after successful completion of the course
Unfair Claims Practices Penalties
Failure to obey a cease and desist order by the Director may result in: -Revocation of a company's certificate of authority for six months -A civil penalty of up to $250,000 -A combination of both
UTP Penalties
Failure to obey a cease and desist order by the director will subject offenders to a fine of $1,000 for each violation
Auto Insurance
Minimum uninsured motorist limits of coverage are mandatory in IL -$25,000 for bodily injury or death to any one person in any one accident -$50,000 for bodily injury or death to two or more persons in any one accident Unless rejected in writing by an insured, the uninsured motorist coverage must equal the insured's bodily injury liability limits
Cancellation of Personal Auto Insurance
Policies in effect more than 60 days may be canceled for: -nonpayment of premium -Fraud or material misrepresentation -The insured's conviction of a crime -Suspension of revocation of a driver's license within 12 months prior to cancellation -The auto fails inspection, is unfit for use, is altered and increases the risk, or is not used as a personal auto
Cancellation of Residential Fire and Extended Coverage Insurance
Policies that have been in effect for more than 60 days may only be canceled for: -Nonpayment of premium -Policy originally obtained by fraud or through misrepresentation -Any act that measurably increases the risk originally accepted
Producer License Requirements
Pre-license study requirements: -20 hours per line of authority (life, accident and health, property, casualty, or personal lines. With a minimum of 7.5 hours of classroom instruction -12.5 hours of motor vehicle insurance with a minimum of 5 hours of classroom instruction
