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Wednesday, June 19, 2024 | Back issues
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EBay Blocks Suit Over ‘Worthless’ Insurance

OAKLAND, Calif. (CN) - A federal judge tossed claims that eBay's ShipCover insurance is useless because it excludes from coverage the exact items that are being shipped.

Lead plaintiff Luke Knowles claims eBay knew its ShipCover insurance excludes entire categories of products from coverage, but intentionally conceals that information from sellers who want to buy insurance.

He filed a federal complaint in October 2012 eBay, eBay Insurances Services, Brown & Brown of Missouri, and Fireman's Fund Insurance Co. for illusory and unconscionable contract and other causes of action.

Knowles allegedly made a claim under the ShipCover insurance after he refunded a buyer who notified him that a package he sent arrived open with the purchased coin missing. He says eBay denied the claim, noting that the "item insured is on the list of items that are ineligible for coverage."

Knowles says in the complaint 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."

An insurance underwriter for eBay told the court that it clearly discloses its exclusion of coins and other items from its ShipCover insurance, even if it will sell the policy to anyone who wants it.

Fireman's Fund also said Knowles knew that the policy excluded coins.

"Plaintiff admits he chose ShipCover insurance over the other options after he clicked a box affirming that he 'read and agreed to the terms and conditions of ShipCover insurance,'" the motion to dismiss stated. "Yet, the terms and conditions of ShipCover insurance, which plaintiff alleges Fireman's Fund Insurance Company ('FFIC') underwrites, clearly excluded coverage for coins and gift cards."

On Thursday, U.S. District Judge Phyllis Hamilton tossed a claim for negligence, giving leave to amend with better supporting facts that support the elements of the claim, including duty and breach as to eBay and Brown and Brown of Missouri.

Hamilton also dismissed without prejudice claims for illusory contract, unconscionable contract and unilateral mistake, asking the plaintiffs to "state a single cause of action for breach of contract or other contract-related claim, as it is not clear whether plaintiff is asserting that there was or was not a contract to which he was a party or third-party beneficiary. Each defendant's role must be specifically identified."

Knowles must also identify the law in question that supposedly gives rise to his unfair business practices claim. He must also identify the unfair practices and explain why they are unfair before the court can consider them.

Finally, the judge tossed, again with leave to amend, claims for rescission and unjust enrichment, as neither is an independent cause of action.

Knowles has until April 3 to file a first amended complaint, which must specify facts supporting each cause of action for each defendant. He cannot add new parties or new claims or theories without permission from the court.

The defendants will have until May 1 to respond to the amended suit.

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