The Beattie Law Firm recently filed a nationwide class action against eBay arising out of illusory insurance. An article about the lawsuit appears below:

eBay’s ‘ShipCover’ insurance worthless, class action says

(Story from Westlaw Journal Insurance Coverage)

Online auctioneer eBay allows sellers and buyers to insure against any losses and damages that occur during shipment even when the company knows this so-called “ShipCover” policy specifically excludes the merchandise from coverage, a federal court lawsuit says.

26 Oct 2012  Melissa Sachs

Luke Knowles, an Iowa resident, filed his complaint in the U.S. District Court for the Northern District of California against the San Jose, Calif., company and its wholly owned subsidiary eBay Insurance Services Inc., a registered property and casualty broker-agent.

According to the suit, eBay allows site users to insure purchased merchandise during shipment for up to $1,000 per package. The company has offered this ShipCover insurance exclusively through its website since 2010, the complaint says.

Although eBay owns the intellectual property rights to ShipCover and its logo, co-defendantFireman’s Fund Insurance Co. underwrites the policies, the suit says.

At checkout, eBay presents the insurance as a default option, the complaint says, and the item’s final sale price determines the premium.

Knowles has purchased ShipCover insurance numerous times in 2011, the suit says, including when he sold a Lowes gift card, a 1926-D silver dollar, an 1893-O Morgan silver dollar and an 1866 shield nickel.

After one buyer received an empty package, Knowles refunded the buyer and submitted a claim under the insurance policy.

The defendants denied the claim, saying the policy did not cover certain items sold on eBay including coins, gift certificates, stocks, bonds or other negotiable documents, according to the suit.

“These exclusions are not evident on the checkout page, even though that page offers the insurance, sets the insured value and … determines the price of insurance,” the complaint says.

Additionally, the defendants knew the offered insurance would be worthless because the items Knowles sold were specifically listed under the website’s “Coins & Paper Money” category, the suit says.

Through its technology eBay can prohibit certain buyers or sellers from adding the insurance if the buyer or seller has made past claims, Knowles says.

The defendants could also prevent buyers or sellers from selecting the insurance at checkout if the purchased merchandise is listed under a category specifically excluded from coverage, the complaint says.

Instead, the defendants offer illusory ShipCover insurance, the suit says.

This deceptive and misleading advertising violates the state’s unfair-competition law, Cal. Bus. & Prof. Code § 17200, the complaint says.

The suit also includes counts for negligence, rescission, unilateral mistake and unjust enrichment. Additionally, it says the contracts are void as unconscionable and illusory.

Knowles seeks to sue on behalf of all sellers and buyers who purchased ShipCover insurance for the excluded negotiable document items and those who also submitted claims under the policies for these types of items.

The complaint seeks class certification, damages, restitution, injunctive relief, an order for defendants to create a corrective advertising campaign, fees, costs and interest.

Knowles v. eBay Inc. et al., No. C 12 5211, complaint filed (N.D. Cal., San Jose Div. Oct. 9, 2012).

https://beattielawfirm.com/Business-Litigation/