Office of the Special Deputy Receiver

Representing Jennifer Hammer, Director of Insurance, Illinois Department of Insurance

Frequently Asked Questions

Proof of Claim
Evaluation, Adjudication and Allowance of Claims
Distribution
Conservation
Rehabilitation
Liquidation
Guaranty Funds and Associations
Claim Issues
Other Issues



  • What is a proof of claim?
  • A proof of claim consists of a notarized written statement setting forth the details of the claim and including documentation in support of the asserted claim. To assert a claim against an insurance policy issued by the insolvent insurer, the claim must be based upon a known loss or occurrence. A complete statement of the legal requirements of a proof of claim can be found in Section 209(1) of the Illinois Insurance Code Article XIII. If a proper proof of claim is not received at this office by the claim filing deadline established for the company, you will not have a timely filed claim and your chances of participating in any distribution of estate assets will be greatly diminished.
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  • When will I receive my proof of claim form?
  • Numerous variables factor into when proof of claim forms get mailed. Every attempt is made to mail these forms within six months from the date a company is liquidated.
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  • How do I get a proof of claim form?
  • I have a previously unreported claim, who do I contact?
  • Both our office and the appropriate Guaranty Fund or Association, if any. We will then mail you a proof of claim form so that you may file the claim against the insolvent company. Your proof of claim will be subject to the claims filing deadline for this company.
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  • What is a claim filing deadline?
  • The claim filing deadline is the last day on which a proof of claim can be received by the Liquidator and accepted as timely filed for purposes of participating in any distributions of estate assets that may be made on allowed timely filed claims.
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  • What is a late claim?
  • If good cause exists, a proof of claim may be filed with the Liquidator after the claim filing deadline. Late filed proofs of claim participate in distributions of company assets, if at all, only after all allowed timely filed claims of general creditors have been paid in full.
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  • What is a contingent claim?
  • A contingent claim is one where the occurrence or loss took place but a determination of the insured's liability for that loss or occurrence was not made at the time the Liquidation Order was entered.
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  • What is a contingent claim date?
  • In order to participate in a distribution at level (d) of the priority schedule, an insured having a contingent claim must first file a proof of claim prior to the claim filing deadline and then pay the claim asserted against it out of its own funds and provide evidence of such payment prior to the contingent claim date. This is also referred to as liquidating a claim by actual payment. The contingent claim date is set by order of the Supervisory Court and is the last date by which evidence demonstrating that such a payment was made can be received by the Liquidator. If an insured's claim is not liquidated by actual payment on or before the contingent claim date, the claim may be still allowable at priority level (e).
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  • What is the process for evaluating claims?
  • An examiner will review a proof of claim for purposes of determining whether sufficient documentation has been presented to support a recommendation for allowance. This applies whether the claim is, for instance, for insurance coverage, attorneys' fees, or reinsurance protection. If additional documentation or other support is required, the examiner will contact the claimant or the claimant's representative. Depending on the particulars of a given claim and the nature of the information provided, there may be instances where further requests for information are needed. A claim will be either recommended for allowance if the facts demonstrate a valid claim or alternatively be denied if a claim does not exist or there is insufficient evidence to prove the claim. Once a decision is reached, the Liquidator will send a Notice of Determination to the claimant.
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  • What is a Notice of Determination?
  • A Notice of Determination advises the claimant of the Liquidator's intent to recommend that the claim be allowed or disallowed. If the recommendation is for an allowance, then the Notice of Determination advises the claimant of the amount and the priority level at which the claim is being recommended for allowance.
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  • What is an "objection"?
  • Either a claimant or one of the company's reinsurers may assert an objection to a Notice of Determination. An objection is when a claimant disagrees with the Liquidator's recommendation or denial by the Notice of Determination and files a timely letter objecting to the denial or the amount of the allowance. A claimant has 60 days from the date on which the initial Notice of Determination is mailed to submit a written objection to the Liquidator. If the claimant does not submit an objection within the 60-day period, the claimant is barred from objecting. If the claimant does submit a timely objection, the Liquidator's staff will attempt to resolve the objection with the claimant. Although the Liquidator and claimant are in agreement on an allowed claim, one or more of the receivership estate's reinsurers may object to the Liquidator's proposed recommendation for allowance.
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  • What is a "hearing"?
  • When the Liquidator and either a claimant or reinsurer are unable to resolve an objection, the Liquidator will present the disputed claim to the supervisory court for resolution. The objecting claimant or reinsurer will be given notice of the hearing process and will have an opportunity to present its objections to the court (either by way of written submissions and/or oral argument before the court).
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  • What is claim adjudication?
  • Claim adjudication is the process of having a recommendation for the allowance or disallowance of claim presented to the supervisory court and obtaining an order from the court either approving or disapproving the Liquidator's recommendation. If the claimant did not file a timely written objection to the Liquidator's Notice of Determination (See "What is a Notice of Determination?" and "What is an objection?") then the Liquidator will present the claim to the supervisory court for adjudication without notice to the claimant.
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  • What is an allowed claim?
  • A proof of claim becomes an allowed claim in the liquidation proceedings when an order is entered by the supervisory court stating that the claim is allowed for purposes of participating in any distributions of company assets that may be made at a particular priority level.
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My claim has been allowed for purposes of participating in a distribution of company assets. Will I receive the full amount of my allowed claim?
  • When a distribution is made at a given priority level, all claims allowed at that level receive the same percentage of their claims. This is referred to as a pro rata distribution. Although some receivership estates have assets to pay all allowed policyholder-related claims at priority level (d) in full, this is the exception. The percentage of a claim that is paid is based on the dollar amount of all allowed claims at a particular priority level to the remaining assets of the estate available for distribution. For purposes of illustration only, if your claim was allowed in the amount of $5,000 and a 25% pro-rata distribution is being made on all claims at your priority level, then you will receive a check for $1,250. The Liquidator does not usually know what the distribution percentage will be until shortly before the Liquidator petitions the supervisory court for authority to make a distribution.
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  • How are funds distributed in liquidation?
  • When the Liquidator determines that there are sufficient assets available in a company to make payment, in whole or in part, on allowed claims against the company, he will file a petition with the supervisory court requesting authorization to do so. There are nine priority levels and no claims at a lower priority can be paid until such time that either all claims allowed at the immediately higher level of priority have been paid in full or the Liquidator has reserved sufficient funds with which to pay all such claims. Interest is neither earned nor paid on the allowed amount of a claim. Upon receiving court approval, funds are distributed to claimants having allowed claims at a given priority level. If there are not enough funds available to pay the claims in full, then payment at a priority level is made on a prorated basis.
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  • What is the schedule of priorities for the distribution of company assets?
  • As set forth in Section 205(1) of the Illinois Insurance Code Article XIII the schedule of priorities is as follows:
      (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. Article XXXIV
      (b) Secured claims, including claims for taxes and debts due the federal or any state or local government, that are secured by liens perfected prior to the filing of the complaint.
      (c) Claims for wages actually owing to employees for services rendered within 3 months prior to the date of the filing of the complaint, not exceeding $1,000 to each employee unless there are claims due the federal government under paragraph (f), then the claims for wages shall have a priority of distribution immediately following that of federal claims under paragraph (f) and immediately preceding claims of general creditors under paragraph (g).
      (d) Claims by policyholders, beneficiaries, insured's 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 Maintenance Organization Guaranty Association and any similar organization in another state as prescribed in Section 545.
      (e)) Claims by policyholders, beneficiaries, and insured's, the allowed values of which were determined by estimation under paragraph (b) of subsection (4) of Section 209. Article XIII
      (f) Any other claims due the federal government.
      (g) All other claims of general creditors not falling within any other priority under this Section including claims for taxes and debts due any state or local government which are not secured claims and claims for attorneys' fees incurred by the company in contesting its conservation, rehabilitation, or liquidation.
      (h) Claims of guaranty fund certificate holders, guaranty capital shareholders, capital note holders, and surplus note holders.
      (i) Proprietary claims of shareholders, members, or other owners.
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  • When can I expect to have my claim paid by the Liquidator?
  • As it takes a number of years to liquidate an insolvent company, it cannot quickly be determined if and or when the Liquidator will be in a position to distribute its assets or how large the distribution may be. Some of the tasks undertaken by the Liquidator in order to make a distribution include: organizing company records for mailing out proof of claim forms; evaluating, negotiating and adjudicating proof of claim forms and marshalling assets due the estates from various sources which may require lengthy litigation, as well as collecting reinsurance recoveries on allowed claims.
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  • I am an attorney with an allowed claim for pre-liquidation fees and expenses incurred on behalf of an insured. Why is my claim classified as a general creditor rather than policy level claim?
  • Company assets are distributed pursuant to a detailed statutory schedule of priority levels Article XIII. When a type of creditor of the company, such as insurance defense attorneys, is not otherwise expressly identified in the schedule of priorities they are a general creditor.
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  • What happens to unclaimed, uncashed or undeliverable distribution/ dividend checks issued by a receivership estate?
  • In a company in which one or more distributions of company assets have been made on allowed claims, funds with which to pay unclaimed, uncashed and undeliverable distribution checks are delivered to the Illinois State Treasurer's office or the state of residence of the payee as abandoned property. This process is known as "escheatment." These funds must be delivered to the Treasurer's office as abandoned property following the passage of 30 months from the entry of a final order of distribution in the company. The funds delivered to the Treasurer's office are then handled pursuant to the provisions of the Uniform Disposition of Unclaimed Property Act (Illinois residents).  Also see off-site link.
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  • What is conservation?
  • A conservation proceeding begins with the filing of a verified complaint for conservation by the Illinois Director of Insurance and a judge's entry of an order of conservation. During the conservation proceeding, Illinois statutes require that the court supervise the receivership proceedings. Under an order of Conservation, the Director of Insurance becomes Conservator of an insurance company and, as Conservator, obtains possession and control of the property, business, books, records and accounts of a company and of the premises used by it for the transaction of its business. In order to maintain the status quo of the company, conservation orders and proceedings are typically subject to a confidentiality order (also known as a sequestration order). Conservation proceedings allow the Conservator to evaluate the condition of the company in order to determine its future direction: (1) discharge from conservation; (2) rehabilitation; or (3) liquidation. During the time the company remains in conservation there may be a court ordered moratorium on the payment of claims and loss adjustment expenses (typically, expenses related to the defense of claims against insured's).
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  • Why is the conservation confidential?
  • Confidentiality is required by statute because if creditors and the public become aware of an insurer's potential problems, the insurer could suffer irreparable harm even though the condition requiring conservation may be curable. Although only intended to be temporary, the confidentiality of the conservation order may only be lifted by a further court order either by petition of the Conservator upon good cause shown or with agreement of company management.
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  • What is rehabilitation?
  • Under an Order of Rehabilitation, the Director of Insurance becomes Rehabilitator of an insurance company and, as Rehabilitator, is vested with title to the company's property, assets, rights of action or lawsuits, books, records and premises. Rehabilitation can be used as a mechanism by which the Rehabilitator tries to restructure or run-off the company's business.
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  • The company I'm insured with has entered rehabilitation, what will happen to my policy?
  • Your policy may be kept in-force, modified or cancelled by court order, non-renewed, sold or transferred to another company, or cancelled by your agent.
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  • I have a claim against a company in rehabilitation, what do I do?
  • If the court supervising the proceedings enters an order of rehabilitation on petition of the Director of Insurance, the court will also approve a mechanism for handling claims. Potential claimants of the company, as identified in the company's books and records, will be given notice by the Rehabilitator as to how to proceed.
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  • Who can propose a Plan of Rehabilitation to the supervisory court?
  • In Illinois, only the Director of Insurance, as Rehabilitator, can submit a proposed plan of rehabilitation to the court supervising the receivership proceeding.
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  • What is liquidation?
  • Under an order of liquidation, the Director of Insurance becomes Liquidator of an insurance company and, as Liquidator, is vested with title to the company's property, assets, rights of action or lawsuits, books, records and premises. Notices are mailed to persons and entities reflected on the company's books and records as being potential claimants of the company. Claims properly filed against the company are evaluated and adjudicated by the Liquidator.  At the same time as he is addressing claims filed against the insolvent company, the Liquidator will be working to marshal the assets of the company. This can include the collection of contractual balances due the company, as well as filing lawsuits when warranted. When sufficient assets exist in the company and claims liabilities have been finalized, the Liquidator will seek court approval to make a distribution of assets. Distributions are made by priority level and are made on a pro-rata basis, meaning that each allowed creditor at the same priority level receives payment at the same percentage of its claim. Subsequent to a final distribution of assets, the company is closed.
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  • Can an Order of Liquidation be appealed?
  • In the rare instance that this might happen, the Illinois statutes require that the Director file with the Supervisory Court an "Appeal Pendency Plan" detailing how the Director will operate the insurer during the appeal. Depending on many factors such as the size and complexity of the company, as well as its asset condition, this plan can be a very complicated procedure, or something as simple as the preservation of the insurer's records, and a moratorium upon the payment of claims and defense costs.
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  • I have a Property & Casualty policy. Am I still insured?
  • The rights and liabilities of the company and its policyholders and creditors are fixed as of the date of liquidation (What is a contingent claim?).  However, all policies covered by a Property & Casualty Guaranty Fund will be continued and covered by such Guaranty Fund to the extent defined under your state's law for 30 days from the liquidation date. The policies covered by the Guaranty Fund will be cancelled effective 12:01am Local Time on the 30th day after Liquidation unless the policy has been terminated at an earlier date for any reason. Policies not covered by a Guaranty Fund are cancelled effective upon the entry of the Order of Liquidation.
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  • I have a Life and Health insurance policy. Am I still insured?
  • The rights and liabilities of the company and its policyholders and creditors are fixed as of the date of liquidation. However, policies covered by a Life & Health Guaranty Association will be continued and covered by such Guaranty Association to the extent defined under your state's law for an undetermined amount of time. You will receive notice from your Guaranty Association with regard to when your policy will terminate. Policies not covered by a Guaranty Association are cancelled effective upon the entry of the Order of Liquidation.
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  • Will the claims be paid now that the Company is in Liquidation?
  • Claims covered by the Guaranty Fund will be paid by the Guaranty Fund subject to the limitations and restrictions of the Guaranty Fund laws of the state in which you are a resident. Pre-liquidation claims in excess of applicable Guaranty Fund limits of coverage and pre-liquidation claims that are not covered by a Guaranty Fund will be paid by the Liquidator on a prorated basis depending upon the assets available in the company and the amount of all claims allowed at the priority level at which the funds are being distributed.
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  • What is a Guaranty Fund or Association?
  • All 50 states, Puerto Rico, the U.S. Virgin Islands (Property and Casualty only) and the District of Columbia have a "safety net" in place for the payment of covered claims arising from the insolvency of an insurer licensed to do business in that state or jurisdiction. Normally, for property and casualty business they are referred to as "Guaranty Funds" and for life and health they are typically referred to as "Guaranty Associations. Five states provide a guaranty mechanism for HMO's.In the case of life/health insurance, the Guaranty Association also provides for the continuation of eligible contracts that would otherwise terminate because of the insolvency. Coverage may vary slightly from state to state. You should contact your state's Guaranty Fund or Association to determine whether it provides coverage as a result of the liquidation of your insurer and, if so, the level of coverage provided.
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  • Where does the funding for the Guaranty Fund or Associations come from?
  • Insurance Guaranty Funds and Associations obtain the funds necessary to pay claims by assessing solvent members of the insurance industry writing similar lines of insurance in the state on a licensed basis.
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  • How can I contact the Illinois Guaranty Fund and Associations?
  • The Illinois Insurance Guaranty Fund is located at:
    120 South LaSalle Street, Suite 1910
    Chicago, Illinois 60603
    Phone: (312) 422-9700
    Fax: (312) 422-9750
  • The Illinois Life & Health Insurance Guaranty Association is located at:
    1520 Kensington Road, Suite 112
    Oak Brook, Illinois 60523
    Phone: (773) 714-8050
    Fax: (773) 304-3559
    www.ilhiga.org
  • The Illinois Health Maintenance Organization Guaranty Association is located at:
    1520 Kensington Road, Suite 112
    Oak Brook, Illinois 60523
    Phone: (773) 714-8054
    Fax: (773) 304-3559
  • www.ihmoga.org
  • If you are not an Illinois resident, please see our off-site links for assistance in locating your guaranty fund/association.
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  • What does the Illinois Insurance Guaranty Fund cover?
  • You should contact your attorney or the Guaranty Fund regarding the extent of its coverage, if any, for claims arising from the liquidation of your insurer.
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  • What about the $100 deductible on my unearned premium paid by the fund, or if my unearned premium is over $10,000?
  • You may file a proof of claim with the Liquidator in the amount of the deductible or premium not covered by the Fund.
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  • I have a claim in excess of the amount the Guaranty Fund or Association will pay, or it is not covered by the Guaranty Fund or Association, what do I do?
  • You may file a proof of claim with the Liquidator. If this is a previously unreported claim, or you have not received a proof of claim form from our office within 120 days of the liquidation date, please go to the "Proof of Claim Form" button on the home page.
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  • What products are covered by the Illinois Life & Health Insurance Guaranty Association?
  • Life, health and annuity policies and contracts are covered by the Guaranty Association. Generally, with respect to covered claims, the Guaranty Association has the option of discharging its obligations either directly or by transferring the business into another solvent insurer for purposes of providing continuing coverage.
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  • What is covered by the Illinois Health Maintenance Organization Guaranty Association?
  • You should contact your attorney or the Illinois HMO Guaranty Association regarding the extent of its coverage, if any, for claims arising from the liquidation of your insurer.
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  • Are claims against an insolvent workers' compensation self-insurance pool covered by the Illinois Insurance Guaranty Fund?
  • No. The Illinois Insurance Guaranty Fund does not cover these self-insured entities. However, the Illinois Insurance Code established the Group Workers' Compensation Pool Insolvency Fund. The Insolvency Fund can be activated whenever the Director of Insurance shall determine that compensation or medical services provided by the Act may be unpaid by reason of default of an insolvent pool. If you are interested in pursuing a claim against the fund you should contact the Department of Insurance at (217) 782-2867.
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  • I have a claim against one of he former syndicates on the Illinois Insurance Exchange (INEX).  Will the Illinois Insurance Guaranty Fund pay this?
  • No. The Illinois Insurance Guaranty Fund does not cover these entities. However, the Illinois Insurance Exchange (INEX) established a non-statutory Guaranty Fund with monies contributed by the exchange members to help pay the unpaid claims of insolvent syndicates. For more information regarding the Exchange's Guaranty Fund, you may call the Exchange (INEX) at (312) 372-4639 or click here to view their website.
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  • I am having problems with one of the Funds/Associations, can you help me?
  • In most cases no. While we attempt to provide the Guaranty Funds and Associations with any information we possess, in most cases we cannot intercede on your behalf. If your problem involves an Illinois Guaranty Fund or Association you may, however, contact the Department of Insurance Consumer Services Division at (217) 782-1515 (Springfield) or (312) 814-2420 (Chicago), or click here to view their website. If you are not an Illinois resident, please click here for assistance in contacting your Department of Insurance.
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  • Do I need to file a proof of claim form with your office in order to get Guaranty Fund or Association protection?
  • Some state Guaranty Funds and Associations require that you file a proof of claim with the Liquidator. The Illinois Guaranty Fund and Associations do not require this. You should contact your state's Guaranty Fund or Association for further information.
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  • Do I need to contact the Guaranty Fund or Association?
  • Until the Liquidator has sent the claim files, unearned or return premium data and other information to the Guaranty Funds, they will not be in a position to inform you of whether your claim is or is not a covered claim. When the Guaranty Fund is in a position to determine if and when your loss claim will be paid, the Guaranty Fund will contact you. For a return premium claim, the Guaranty Fund may require you to complete some paperwork. You can contact them in about six months after the liquidation date to request any forms that the Guaranty Fund requires a claimant to complete for a return premium claim.
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  • I was insured with another insurance company that settled my collision claim. However, I have a $100 collision deductible in my own policy. How do I file for this?
  • You may file a proof of claim with the Liquidator in the amount of your policy deductible. In the alternative, you may be able to recover your deductible from your state guaranty fund.
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  • I was collecting TTD (Temporary Total Disability) payments every week and they have now stopped, why?
  • The insurance company that paid your TTD is in liquidation and is unable to continue the weekly payments. You may file a proof of claim with the Liquidator. You may also be entitled to coverage from your state guaranty fund if it covers claims arising from the liquidation of this insurance company.
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  • I am an agent and I paid the premium through my agency but was not paid by the insured. How can I have the return premium refunded to me?
  • It will be necessary for you to obtain an Assignment of Interest form from the policyholder. This form will assign the right to the return premium over to whatever party the policyholder designates (your agency if you paid the premium). If applicable, the Guaranty Fund will also need this form in order to pay you the return premium. This assignment form is available here.
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  • What is the difference between a return premium claim and a loss claim?
  • A claim for return premium is for the unearned premium, if any, received by the insurer on your policy. For example, if a one-year policy was in force for six months when cancelled as a result of a liquidation order, then half of the total premium has been earned by the insurer and half is unearned and results in a claim against the company. A loss claim is for any liability claim you believe to be covered under a policy of insurance issued by the insurer.
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  • My HMO was placed in liquidation and I am now being pursued by providers and/or collection agencies. They are threatening to sue me and also threatening wage garnishments. What do I do?
  • Illinois law prohibits all medical providers from seeking to collect any payment for medical services rendered in excess of any applicable deductibles and co-pays, until the HMO Guaranty Association has made a final determination of its liability for the payment. You can send copies of itemized bills and letters from collection agencies or attorneys, and/or suit papers to:
  • COMPANY NAME, IN LIQUIDATION
    c/o Office of the Special Deputy
    222 Merchandise Mart Plaza, Suite 960
    Chicago, IL 60654
  • Although we will contact, as appropriate, the provider, collection agency or attorney pursuing collection and advise them of this prohibition against the collection of these balances from enrollees, you should seek independent legal counsel as to how to protect your interests.
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  • Why was my settlement check stopped?
  • All assets of the company may have been frozen by the order of Conservation, Rehabilitation or Liquidation.
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  • Do I still need to pay my premiums?
  • If you were paying your premium on a periodic basis, you do not have a continuing payment obligation unless a Guaranty Fund or Association is continuing your coverage under your policy and you choose not to cancel the policy. If you financed your policy, then your continuing obligation to make payments to the finance company is controlled by your premium financing agreement. When you have paid them in full, you will need a release from them stating they have no further interest in the return premium. Once you submit the release to us, the benefits will be assigned to you.
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  • When should I start looking for new insurance?
  • You should contact your insurance agent or financial advisor for advice on this matter.
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  • My company rendered services (provided supplies or equipment, or leased property) to the insurer prior to its being placed in receivership. What is the status of my invoices?
  • Invoices for services rendered (supplies or equipment provided, or property leased) prior to the insurer being placed into receivership must be submitted to the Liquidator with a proof of claim form. These are general creditor claims in the estate and, if allowed, share in any distributions made at the seventh priority level, level (g).
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