New York Attorney General Eliot Spitzer has followed the lead of a California lawyer and filed a suit accusing a San Diego insurance broker of misrepresenting its commission arrangements.[@@]
Spitzer alleges in a civil complaint filed in a state court in New York City that the broker, Universal Life Resources, has violated state laws by hiding commission override payments from employer clients.
Universal Life also has “conspired to unreasonably restrain trade and commerce” by selecting insurers on the basis of the hidden override commissions and soliciting fake bids to shut out insurers that did not make override payments, Spitzer alleges in the complaint in the case, The People of the State of New York vs. Universal Life.
In one case, Universal Life seems to have collected override commissions even though it agreed in a contract with a commercial customer to not collect override commissions, Spitzer says.
Spitzer also accuses Universal Life of leaving the override commissions out of its government filings, of refusing to do business with insurers that refused to pay hidden override commissions and of charging unreasonably high fees for communication services.
The Spitzer suit alleges that some of the companies that paid Universal Life to steer business their way included MetLife Inc., New York; Prudential Financial Inc., Newark, N.J.; and UnumProvident Corp., Chattanooga, Tenn.
In additional to Universal Life, the list of defendants includes 3 Universal Life affiliates and Douglas P. Cox, Universal Life’s president.
The suit seeks punitive damages and restitution for the injured parties.
The Spitzer suit follows on the heels of a suit, United Policyholders et al. vs. Universal Life Resources Inc., that was filed in October in a U.S. District Court in San Diego.
The federal suit was organized by John Stoia Jr., a partner at Lerach Coughlin Stoia Geller Rudman & Robbins L.L.P., San Diego. Stoia also filed a related suit in a state court in San Diego.
Unlike the Spitzer suit, the San Diego suits name several large life insurers as defendants.
Stoia concedes in the San Diego suits that the hidden payment arrangements cost each employee only a few dollars, but he argues that the total damage to employees is great because tens of thousands of employees are involved.
Cox and representatives for Universal Life and Cox were not available for comment at press time, but Cox responded to the Stoia allegations by “categorically denying any such allegations.”
“We look forward to continuing to serve our clients ethically and honestly as we have done in the past,” Cox said.