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Insurance Broker to Settle Charges

Universal Life Resources was accused of taking kickbacks. It will return as much as $2 million.

January 06, 2006|Kathy M. Kristof | Times Staff Writer

A San Diego County insurance broker accused of taking kickbacks from insurance companies agreed Thursday to return as much as $2 million to former clients.

Universal Life Resources of Del Mar was hired by large employers such as Intel Corp. to negotiate group life and disability coverage for their workers. Authorities say Universal steered these clients to insurers who had secretly pledged to pay it kickbacks.

Universal owner Douglas P. Cox has agreed to establish a $2-million fund and provide regulators with a list of former clients that would be eligible to get rebates, according to a settlement announced with New York Atty. Gen. Eliot Spitzer. Those clients will be notified and given until May 1 to submit claims.

Cox neither admitted nor denied wrongdoing. He dissolved Universal after it came under investigation in 2004, and has since started a benefits consulting business that does not involve brokering insurance, spokesman Brian Maddox said.

The settlement, which requires Cox to cooperate in related investigations, is part of a probe into business practices in the insurance industry, Spitzer spokesman Marc Violette said.

Spitzer's investigation was made public in 2004, when he sued Marsh & McLennan Cos., the nation's biggest brokerage, alleging that the firm had rigged insurance bids to steer clients to favored insurance underwriters.

The charges against Universal were similar. The suit alleged that the company steered business to MetLife Inc., Prudential Financial Inc. and UnumProvident Corp., which paid so-called overrides in addition to ordinary commissions.

The insurance companies declined to comment Thursday, except to say they were cooperating with the investigation. UnumProvident, however, sent a letter to all of its brokers after the suits were filed, urging them to fully disclose commissions.

In the past, insurance industry officials have said it is unfair to characterize overrides as kickbacks, likening them instead to volume discounts.

Universal also was alleged by Spitzer to have collected $5.6 million in questionable fees by charging insured workers $10 to $20 each for the cost of brochures and other communications. The settlement does not say whether workers will be able to get these fees rebated, although an Intel employee has filed a civil suit seeking reimbursement for himself and others who were charged the fee.

Cox settled charges leveled by California Insurance Commissioner John Garamendi in 2004 by agreeing to cooperate in Garamendi's probe against insurers, which is still underway.

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