New York Attorney General Eliot Spitzer on Friday filed a lawsuit against a California insurance broker, alleging that the company steered business to insurers in exchange for lucrative payoffs, raising premiums for individual employees.

The action against Universal Life Resources, Inc. (ULR) is part of the Attorney General’s ongoing investigation into fraud and anti-competitive practices in the insurance industry. The investigation has already led to a civil suit against Marsh & McLennan Companies, Inc., and the criminal pleas of three insurance company executives.

“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. “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.”

In a related development, the New York State Insurance Department on Friday issued citations against Universal Life for violations of state insurance law.

“The New York State Insurance Department has charged the defendants with fraudulent, coercive and dishonest business conduct in the New York insurance market which has affected the price of insurance,” Superintendent Gregory V. Serio said. “This is part of the department’s ongoing effort to root out improper practices that have adversely impacted so many consumers.”

The lawsuit, filed in State Supreme Court in Manhattan, alleges that Universal Life had undisclosed agreements with some of the country’s largest life insurance companies, including MetLife, Prudential and Unum Provident, under which millions of dollars were paid to Universal Life in exchange for steering the business of its clients.

Further, the complaint alleges that Universal Life imposes secret fees for “communication services,” such as printing of informational materials, which are far above market rate, and which employees ultimately pay through higher premiums. These secret payments accounted for more than two-thirds of Universal Life’s revenue in 2003.

The complaint further alleges that Universal Life hides these agreements from its clients by falsely representing its compensation, omitting its fees from mandatory government filings, and refusing to deal with insurers who will not go along with its concealed arrangements.

Defendants named in the lawsuit are Universal Life, its Chief Executive Officer Douglas Cox and two affiliated corporations — Universal Life Resources and Benefits Commerce. The lawsuit seeks to end the secret agreements, disgorgement of improper payments, restitution for injured parties and punitive damages.

San Diego-based Universal Life brokers accident, disability, and life insurance coverage for more than four million employees. Major clients include: Intel Corp.; Colgate-Palmolive Co.; Eastman Kodak Co.; Marriott International, Inc.; United Parcel Service; Inc.; and Dell, Inc.

(via Office of New York State Attorney General)