Larry King: Insurance Scammers Got Me

Larry King claims he was victimized by life insurance fraud that could cost him millions.

So the CNN host is suing, reports Early Show consumer correspondent Susan Koeppen.

King, 73, has a history of health problems and, with a young wife and family to think about, King took out hefty life insurance policies.

Now, according to the lawsuit, King feels he was tricked into selling two policies valued at $15 million. The hook? Some quick cash, and a promise he could buy new insurance. It's a process known as "flipping," Koeppen explains.

The problem? At his age and in his medical condition, King is what insurance companies would term a poor risk.

"With Mr. King's heart condition," says consumer advocate Tim Duffy, "I don't see how (any reputable insurance company) would even write a policy on him."

King did make a $1.4 million profit from the sales but, the suit alleges, his family stood to gain far more if he'd kept the policies. King is now saddled with higher premiums and a huge tax bill.

"Sometimes," Duffy observed, "ego gets in the way when you're such a high profile (individual) and have a lot of money. I can't get into Larry's mind and I don't know what was going thru it at the time, but sometimes greed can cloud someone's thinking."

King also charges that the insurance company, The Meltzer Group, sold his policies to a third party, which also profited. That new owner, Coventry Insurance, was sued last year over alleged predatory practices by then New York Attorney General Eliot Spitzer, now the state's governor.

Koeppen says Alan Meltzer, the focus of the lawsuit, told CBS News he couldn't comment, because of the nature of the case.

Flipping, Koeppen continued, isn't common. It started back in the late '80s, and the early '90s, with AIDS patients who needed a lot of money to pay for their drugs> That spawned the industry in which companies would come in and say, "We'll buy your life insurance policy from you. You get the cash, we get the policy so, when you die, we get the death benefit." Usually, it's older, wealthy people do that.

The Insurance Information Institute advises steering clear of flipping, and asking a lot of questions of any sales type who suggests you flip a policy. It's legal, but you pay taxes on profits from selling policies.

Another industry practice, "churning," means replacing a policy when it's not necessary to, Koeppen says. The agent or broker makes money, so it's in his or her best interest to get you to do it.