NEW YORK (Reuters) -
New York Attorney General Eliot Spitzer filed a lawsuit against San Diego-based health insurance company Universal Life Resources on Friday, alleging the company steered business to insurers in exchange for lucrative payoffs. The suit also alleges URL improperly inflated prices and passed the costs along to unwitting customers.
The civil complaint filed Friday in State Supreme Court in Manhattan alleges that ULR had undisclosed agreements with some of the country's largest life insurance companies.
The suit says companies, including MetLife (Research), Prudential (Research) and Unum Provident, paid millions of dollars to ULR so it would steer its clients to them.
Further, the complaint alleges that ULR imposes secret fees for "communication services," such as printing of informational materials, which are far above market rate.
People purchasing insurance would ultimately pay for those inflated prices through higher premiums, according to Spitzer.
These secret payments accounted for more than two-thirds of ULR's revenue in 2003, according to a press release from Spitzer's office.
Last month Spitzer accused Marsh & McLennan Cos., (down $0.02 to $27.52, Research) the world's largest insurance broker, of rigging what were presented as competitive bids, instead steering business to carriers based on who paid the highest fees to Marsh.
"Today's case demonstrates that the corrupt practices first laid bare in the Marsh suit are present in additional sectors of the industry," Spitzer said in the press release. "Secret payoffs and conflicts of interest that infected the market for property and casualty insurance have taken root in the employee benefits market as well."
Privately held ULR could not immediately be reached for comment.
Since the Marsh filing, more than a dozen insurers have reported receiving subpoenas from Spitzer's office, as well as requests from other state prosecutors and regulators.
Spitzer said the investigation continues to expand, reaching a range of companies across the spectrum of insurance products. In all, Spitzer estimated his office is in talks with "15, 20 (companies), at least."
The New York Attorney General also stressed that his office intends to seek criminal actions against companies and individuals, as warranted.
Spitzer's suit against ULR names the company, its Chief Executive Officer Douglas Cox and two affiliated corporations -- Universal Life Resources and Benefits Commerce.
The suit seeks an end to the secret agreements, disgorgement of improper payments, restitution for injured parties and punitive damages.
The press release gives numerous examples of ULR's improper practices.
In one instance, ULR obtained an insurer's agreement to artificially list service prices at three times their normal rate, so ULR could falsely tell a client, Viacom, Inc., that its insurance costs would be no cheaper if the insurer provided in-house the same services that ULR was providing.
In another case, ULR solicited a fictitious bid in order to block a disfavored insurer from reaching the final round of a bidding process for group life coverage at Marriott International, Inc.
"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.
Spitzer's release says that since 1999, ULR has brokered life, accident and disability insurance coverage for more than four million employees. Major clients include: Intel Corp. (Research), Colgate-Palmolive Co. (Research), Eastman Kodak Co. (Research), Marriott International, Inc. (Research), United Parcel Service (Research) and Dell, Inc (Research).
-- from staff and wire reports
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