Real estate brokerage operator faces lawsuit over insurance

By Steve Green

Sunday, Dec. 5, 2010 | 2:05 a.m.

One of the largest international operators and franchisors of real estate brokerages faces a national class-action lawsuit charging it offered health insurance to U.S. agents and brokers that in some cases turned out to provide no coverage.

The suit was filed Friday in U.S. District Court for Nevada against Realogy Corp. of Parsippany, N.J., which has brokerages under the Century 21, Coldwell Banker, Coldwell Banker Commercial, ERA, Sotheby’s International Realty and Better Homes and Gardens Real Estate brands. Under these brands, there are some 14,700 franchised and company-owned offices with about 267,000 sales associates.

Friday’s lawsuit says that in July 2007, Realogy sponsored major medical and limited-benefit health insurance programs and then marketed them to some 250,000 brokers, sales associates and their families.

The suit says Realogy represented that the plans were available in all 50 states, but that the three companies Realogy represented would provide the insurance were not licensed in every state.

“Plaintiffs and class members paid premiums to the Realogy-sponsored health programs based upon in large part upon Realogy’s sponsorship of the programs,” but some later found their medical bills went unpaid “because the Realogy-sponsored health programs were not legitimate insurance programs,” the lawsuit charges.

Officials at Realogy couldn’t immediately be reached for comment about the allegations.

The lead plaintiffs in Friday’s suit are Christopher Bulen and Janith Martinez, sales associates at what was called Century 21 Mountain Properties in Reno. That brokerage was purchased in 2008 and its name was changed to Coldwell Bankers Select. The suit was filed by attorneys with the Reno law firm Leverty & Associates.

It typically takes some time for judges to decide whether to certify such cases as class actions.

In the suit, Bulen and Martinez said they chose a health plan offered through Realogy and supposedly provided by a company called Association of Franchise and Independent Distributors LLC (AFID) of Springfield, Ohio, and that they paid monthly premiums of $618.

But after a June accident, Bulen required trauma care and medical providers could not reach AFID to file a claim and have now billed Bulen for more than $53,000, the suit says.

The lawsuit alleges Realogy induced the agents into buying “bogus” insurance and asserts claims of negligence; breach of a fiduciary relationship and constructive fraud; negligent misrepresentation, deceptive trade practices and other counts.

Realogy, in its 2007 announcement that it was offering insurance to agents and brokers, appeared to have been addressing a longtime issue in the real estate industry: most agents are independent contractors, and brokerages typically don’t offer insurance benefits.

The National Association of Realtors in 2009 announced it was offering affordable “limited medical insurance” to Realtors called Realtors Core Health Insurance.

At the time, the NAR said more than 25 percent of Realtors had no health insurance and that only 17 percent of real estate firms offered health care coverage for independent contractor agents.

In their lawsuit Friday, the Reno agents noted their insurer, AFID, had been the subject of cease and desist orders from regulators in North Carolina, Ohio and other states for “conducting the unauthorized practice of insurance.”

Orders in 2008 and 2009 by the North Carolina Department of Insurance said AFID and a company called Real Benefits Association (RBA) of Basking Ridge, N.J., had jointly marketed a health insurance program called “The One Advantage Plan.”

The orders said it was sometimes referred to as “One Advantage Program,” “Privilege Care,” “Per4mance Plus” plan and other names and that it purportedly provided major medical, limited medical and other benefits.

AFID also offered optional vision, dental, life and disability insurance, the orders said.

The orders said some of these benefits supposedly were “composed of several indemnity contracts fully insured by American International Group (AIG), Guarantee Trust Life (GTL) and American Insurance Company (ACE)” — but North Carolina investigators found AIG, GTL and ACE had nothing to do with AFID and RBA.

Some of the benefits were said to be offered by “Affinity Group Benefits Association Inc.” through “Beema Insurance Co.,” but North Carolina regulators said Beema was not authorized to do business in that state at the time.

The North Carolina agency also found representations by RBA that it was a federally-recognized labor union a “sham” aimed at evading state regulation of its insurance offerings.

AFID and its owner Paul Olzeski consented to the entry of a North Carolina order finding they had sold insurance when they should have known that the insurance was not provided through an authorized insurer.