Illinois Announces Senate Bill 1753 Has Been Passed and Will Go Into Effect, January 1, 2022

IL | Effective January 1, 2022, IL SB 1753 signed into law the following;

o Diligent Effort Reform
▪ Commercial Wholesale Transactions Exempt from Diligent Effort Requirements. A licensed surplus line producer may procure surplus line insurance for a commercial insured without making the required diligent effort if the risk was referred to the surplus line producer by an Illinois-licensed insurance producer who is not affiliated with the surplus line producer. This exemption does not apply to personal lines insurance or transactions between a retail and wholesaler who are affiliated.
▪ Annual Diligent Effort for Master Policies. For master policies, the new law specifies that a producer need only make the required diligent effort annually for the master policy, rather than individually for each insured that is added. The diligent effort must include any and all variable provisions of the master policy. The diligent effort must be performed annually, even if the master policy period is greater than one year. A master policy is defined as “a surplus line insurance
contract with a single set of general contractual terms that are designed to apply on a group basis to multiple insureds who may or may not be affiliated and who may be added to or removed from the contract throughout the course of the contract period. A master policy may include certain provisions that vary for each insured depending on the insured’s characteristics and the coverage sought.”
▪ Annual Diligent Effort for Program Business. For program business, the new law specifies that a producer need only make the required diligent effort annually for the program, rather than individually for each contract issued under the program. The diligent effort must include any and all variable provisions of the program. The diligent effort for the program must be performed annually, even if some individual policy periods are greater than one year. Program business is defined as “a clearly defined group of insurance contracts procured by a licensed surplus line producer from an unauthorized insurer, under a single agreement between the producer and insurer, for insureds with the same or similar characteristics and containing the same or similar contract terms.”

o Fire Marshal Tax Due Date
Annual fire marshal tax statements and payments are now due on the same day as the Jul-Dec surplus line tax statements, February 1st of each year. For a list of Illinois surplus line and fire marshal tax filing due dates, click here.

o Elimination of Reporting of Policy Limits
Members will no longer be required to report policy limits when filing policies on the EFS. Beginning with 2022 filings, the field will no longer appear on the EFS “Enter a Filing” screen. For Batch Upload and API filers, the system will still allow reporting of policy limits, but it will no longer be required field.

o Clarification of Taxability
Changes in the law clarify that the surplus line stamping fee and any other fees are not subject to tax. They also clarify that non-U.S. premium is not subject to tax.

o References to the Term “Countersignature”
The use of the term “countersignature” to refer to the receipt, acceptance and recording of policy and endorsement filings by the Surplus Line Association of Illinois has been eliminated. Instead, this process is now called receiving, accepting and recording so there is no longer any confusion with respect to purchasing groups, which are by law exempt from any “countersignature requirements as provided in” the Insurance Code. This change was intended to clarify that policies and endorsements procured by purchasing groups from unauthorized insurers are subject to the filing, tax and all other requirements set forth in Section 445.

o No Penalty for Good Faith Home State Mistake
If the Director is satisfied that a producer made a documented, good faith determination that the home state of an insured was a state other than Illinois, but it turns out that Illinois is the actual home state, the Director can require the filing of the policy and payment of taxes but there is no penalty, interest or late fee.