An Ohio man has sued life settlements and insurance guru Barry Kaye's firm, alleging that the firm encouraged him to buy a $5 million life policy and left him hanging when it couldn't find a buyer on the secondary market.
Plaintiff Louis Levin filed suit Tuesday in U.S. District Court for the Southern District of Ohio (Western Division) in Dayton against Mr. Kaye's firm, Barry Kaye & Associates of Boca Raton, Fla., and Howard Kaye, son of the insurance mogul.
Mr. Kaye has been in the insurance business for more than 40 years. and has written a series of books, including "Die Rich and Tax Free!"(Dearborn Financial Publishing Inc., 2007)
In 2006, Edward Zuckerman, an employee at the firm, recommended that Mr. Levin become involved in life settlements as an investment opportunity, according to the complaint.
Mr. Levin was also told that a bank or other financial entity would cover the premiums on the life insurance policies and at the end of a two-year period he could sell the policies for profit, according to the complaint.
However, Mr. Levin alleges that the firm never notified him of the risks behind life settlements, including the lack of a market in which to sell the life insurance policy to an investor.
He also claims that the younger Mr. Kaye told him he could sell the policy for at least $1 million if Mr. Levin's health worsened during the two-year contestability period — the amount of time an insured must hold a life insurance policy — according to the complaint.
Mr. Levin then bought the $5 million policy from
Transamerica Occidental Life Insurance Co. of Cedar Rapids, Iowa, in November 2006 and paid $322,118 in premiums over the next 25 months.
He claims that the Kaye firm knew that he had sufficient financial resources and did not need that level of coverage.
Last fall, when Mr. Levin asked the firm to sell the policy, he was told that the company couldn't find any buyers and that there was no market for the insurance policy, according to the suit.
Nevertheless, the younger Mr. Kaye continued collecting commissions from having sold the policy to Mr. Levin in the first place, according to the complaint.
Mr. Levin is suing the firm and Howard Kaye for breach of contract, unjust enrichment, negligence, fraud and violation of Ohio's securities laws.
The lawsuit is only the latest incident in a run of bad press for Barry Kaye & Associates.
Earlier this week, the elder Kaye defaulted on a $16 million donation to Florida Atlantic University, also in Boca Raton, citing the tough economy.
Instead, he'll pay $5 million and have his name removed from FAU's Barry Kaye College of Business.
Back in 2007, the Kayes and their firm were named in a complaint issued by the Florida Office of Insurance Regulation against Coventry First LLC of Fort Washington, Pa., for engaging in fraudulent or dishonest practices involving life settlements.
