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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?
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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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