eBay Caught Selling Useless Insurance Policies To Customers

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EBay sells insurance that excludes from coverage the exact items it ships, rendering the policy useless, a class action claims in Federal Court.

Lead plaintiff Luke Knowles claims eBay knew its ShipCover insurance excludes entire categories of products from coverage, but the company does not disclose that to sellers when they buy the insurance.

He sued eBay, eBay Insurances Services, Brown & Brown of Missouri, and Fireman's Fund Insurance Co.

Knowles says he is a "regular seller of coins on eBay," and bought ShipCover insurance repeatedly to cover gift cards and coins he sold.
When a buyer notified him that a package he sent arrived open, with the coin missing, Knowles says, he refunded the buyer the purchase price.

Knowles made a claim under the ShipCover insurance, but the defendants denied on, claiming that the "'item insured is on the list of items that are ineligible for coverage,'" according to the complaint.

Knowles claims they denied his claim "based on the category selected by plaintiff when listing the coin." In other words, they accepted his premium payment, while simultaneously denying coverage for the item he wanted to insure.

"The ShipCover policy excludes from coverage 'coins, bullions, loose diamonds or stones, stocks, bonds, currency, deeds, evidences of debt, travelers checks, money orders, gift certificates, calling cards, lottery tickets, admission tickets, or any other negotiable documents,'" the complaint states.

But Knowles says: "These exclusions are not evident on the checkout page, even though that page offers the insurance sets the insured value, and that determines the price of insurance."

He adds that had he "been aware that the exact item he sought to insure was excluded from the policy, he never would have purchased ShipCover insurance because it was worthless. In fact, no person would purchase this insurance for any of the excluded categories if they were aware of the exclusions as it defeats the entire purpose of the insurance."

And, he says, the defendants "were aware when they offered the policy that plaintiff's item was excluded from coverage because he had specifically listed it on eBay in the predetermined category of 'Coins & Paper Money.'"

When listing an item a seller must identify the item from a predetermined list of categories set by eBay. The seller must then select a subcategory, which also is set by eBay.

Knowles claims that eBay, which shares in the revenue generated by ShipCover insurance, was aware it was offering insurance to the class on "other items specifically excluded from ShipCover insurance by virtue of eBay's listing system."

He claims the defendants "intentionally elected not to prohibit sellers from obtaining ShipCover insurance when merchandise is sold under the categories of items that are specifically excluded under the policy."

Knowles seeks damages for unfair competition, negligence, illusory contract, unjust enrichment, unconscionable contract and unilateral mistake.

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