Insurer Disputes Duty to Bar Useless Policies

OAKLAND, Calif. (CN) - EBay clearly discloses that it excludes coins and other items from its ShipCover insurance, even if it will sell the policy to anyone who wants it, the company's insurance underwriter told a federal judge.

Fireman's Fund Insurance Company moved to dismiss a class action filed by Luke Knowles, who claims the companies let him buy insurance to cover coins he sold and shipped, even though coins are specifically excluded from coverage, rendering the policy useless.

He sued eBay, eBay Insurances Services, Brown & Brown of Missouri, and Fireman's Fund Insurance Co. for unfair competition, negligence, illusory contract, unjust enrichment, unconscionable contract and unilateral mistake.

Knowles seeks to certify a class of buyers who bought but never made a claim under the ShipCover insurance on items that are specifically excluded from coverage, including coins, diamonds and stocks. He also described a separate class of buyers who made unsuccessful claims under the insurance for the excluded items.

Knowles says the "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."

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," according to the complaint. "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."

But Fireman's Fund says he was aware.

"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 states. "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."

The insurance company points out that the 9th Circuit and other courts have repeatedly held that "an exclusion is binding and enforceable, where, as here, the exclusion is plain and clear. Nowhere does plaintiff allege that it is not."

Knowles argues that the defendants knew he was shipping excluded items, and that it could "prohibit" him from buying the insurance.

Fireman's notes, however, that there is no allegation that it "was obligated or had the 'ability' to prohibit plaintiff's actions."

"Plaintiff cannot undo his affirmative acknowledgment of the exclusion at issue - or the binding effect of his acceptance of the terms and conditions - by claiming he was not 'aware' of the exclusion," according to the motion authored by Fireman's attorney Eric Knapp. "Because plaintiff alleges no facts that state a claim against FFIC, the Complaint must be dismissed."

Fireman's also attacks the allegations as "conclusory and devoid of factual support."

Knowles reverts to group pleading throughout the complaint, lumping individual defendants together, calling Fireman's Fund an agent of eBay when it is not and referring to the insurance company only twice in the entire complaint, the motion states.

"This court and numerous others have repeatedly held that 'group pleading' of the type engaged in by Plaintiff is prohibited as a matter of law," added Knapp, an attorney with Carroll, Burdick & McDonough in San Francisco.

Fireman's Fund asked the court to toss the entire complaint with prejudice for failure to state a claim.

Knowles is represented by Oakland attorney James Mills.

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