Spitzer Sues Insurance Broker Universal Life

The San Diego company is alleged to have received 'undisclosed payments' from carriers.

Author:: Matthew Goldstein
Publish date:: Nov 12, 2004 3:48 PM EST

Updated from 2:05 p.m. EST

New York Attorney General Eliot Spitzer on Friday widened his investigation of the insurance business, this time suing a broker that allegedly took kickbacks from big life insurers.

The civil fraud suit against

Universal Life Resources

alleges the San Diego, Calif.-based broker took "undisclosed payments'' from insurance firms selling life, accident and disability policies to corporations. In return, the broker steered work to the life insurers, a practice Spitzer contends "raised premiums for individual employees."

The lawsuit alleges some of the insurers agreeing to make the payments, called "override agreements'' in the insurance industry, include

MetLife

(MET) - Get Report

Prudential Financial

(PRU) - Get Report

and

UnumProvident

(UNM) - Get Report

. The insurers were not named as defendants in the civil suit filed in New York state court.

"What is particularly egregious in this case is that the costs of ULR's concealed payments were ultimately borne by individual employees, who were in no position to know about or contest these illegal practices,'' said Spitzer, in a press release.

The lawsuit against Universal Life, a privately owned company, is similar to the one Spitzer's office filed a month ago against

Marsh & McLennan

(MMC) - Get Report

, the nation's largest insurance broker. In the Marsh suit, Spitzer alleged a scheme to take kickbacks from property and casualty firms such as

AIG

(AIG) - Get Report

and

Ace

(ACE)

Spitzer also charges that ULR hid these fee arrangements by "falsely representing its compensation" and "omitting its fees from mandatory government filings."

Like Marsh, Spitzer charges Universal Life also prodded some insurers to submit "fictitious bids'' for jobs in order to drive up premium prices. In another instance, Universal Life allegedly persuaded Unum Provident to submit a bid for a contract, solely to drive another insurer,

Aetna

(AET)

, out of the market. The complaint alleges that Universal Life wanted to prevent Aetna from getting the contract because the broker didn't have a kickback deal with the insurer.

ULR's list of corporate clients include

Intel

(INTL) - Get Report

Eastman Kodak

(EK)

Marriott International

(MAR) - Get Report

and

Dell

(DELL) - Get Report

. The lawsuit also names ULR's president, Douglas Cox, as a defendant.

Last month, Lerach Coughlin Stoia Geller Rudman & Robbins, a California securities law firm, filed a private lawsuit against ULR, raising many of the same allegations in Spitzer's complaint.