Illinois Code

Passed by a unanimous vote of both houses of the Illinois State Legislature last week was the Fitzgerald-Keane bill as finally amended after five years of agitation, two years' work by a legislative commission, the State Insurance Department and the Illinois Bar Association. One of the strongest State insurance codes yet enacted, the bill needed only Governor Henry Horner's signature to supersede all previous insurance laws in Illinois. Swart Governor Homer called it "one of the finest pieces of constructive workmanship for the protection of policyholders in the U. S." The code has been so universally praised, in fact, that last week State Insurance Department officials could well afford the modest protest that it was "no Magna Charta."

Illinois insurance laws have been flayed for years by insurance experts. Up to 1933 the enforcement was worse than the laws. Officially entrusted to a special director of the Department of Trade & Commerce, control over insurance companies frequently fell into the hands of lawyer-politicians who were not above doing a good turn at the expense of policyholders. The extent to which Illinois had become an insurance playground became abruptly clear in 1932, when eight of the nine insurance failures in the U. S. that year were Illinois companies. Biggest of these, and third or fourth biggest insurance crash of the Depression, was Illinois Life, which had $150,000,000 in policies outstanding when the siphoning of Chicago's Hotelmen Stevens finally broke it (TIME, Dec. 5, 1932). The resulting yells of dismay brought swift reform in Governor Horner's first term.

Appointed director of a new State Insurance Department was 54-year-old Ernest Palmer, for ten years special counsel to the Chicago Board of Underwriters. Dry-witted, poker-faced Mr. Palmer has been assistant attorney for the U. S. Department of the Interior in 1912, assistant general counsel to the National Board of Fire Underwriters from 1913 to 1923. No sooner had he taken office than he asserted his long-held opinion that Illinois insurance laws were a hodgepodge mostly written in 1869 and the only thing to do with them was to clean them all off the statute books. After two years' work a code stringent enough to suit Director Palmer was drafted by two University of Illinois professors and introduced in the Legislature. The Senate killed it twice, in 1935 and 1936. But the bill which finally went to Governor Horner last week was unchanged in these essential provisions:

1) Increased capital and surplus requirements for State registration to cut down risks on small-fry companies.

2) Restriction of life insurance companies to life, health and accident business.

3) Supervision of company investments of trust funds.

4) Greater authority for the Insurance Department to examine company finances and approve all policy forms.

5) Penalization of companies which "vexatiously and without reasonable cause" refuse to pay claims.

6) First State fire insurance rate regulation in Illinois.

Last week Director Palmer lay ill at St. John's Hospital in Springfield. Plan was to have Governor Horner honor his victory by signing the bill at his bedside.

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