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October 22, 2012 / Corina Valderrama

Class Action Lawsuit Over eBay Shipping Insurance

A federal class action lawsuit filed against eBay claims that the company sold insurance to sellers on their website without disclosing that certain items were excluded from coverage.  eBay’s insurance program, , allows sellers to purchase insurance coverage for a certain fee, depending on the cost of the item, to protect against loss or damage. However, the action alleges that eBay knowingly failed to notify sellers that the insurance excludes from coverage entire categories of the very items it ships, thereby rendering the policy useless.

Lead Plaintiff Luke Knowles, a regular seller of collectible coins on eBay, was unaware of the exclusions in coverage until he needed to file a claim for a stolen coin he sold and shipped. After refunding the customer and filing a claim, Knowles was told by ShipCover that his claim was denied because the “item insure is on the list of items that are ineligible for coverage.”

According to the complaint, “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.” But “these exclusions are not evidence on the checkout page, even though that page offers the insurance and sets the insured value, and that determines the price of insurance.”

Knowles claims that eBay “intentionally elected not to prohibit sellers from obtaining ShipCover insurance when merchandise is solder under the categories of items that are specifically excluded under the policy;” presumably because eBay shares in the revenue generated by ShipCover. In essence, eBay accepts the insurance premium payment of a seller while simultaneously denying coverage for the very item it is intended to insured.

The lawsuit is seeking damages for unfair competition, negligence, illusory contract, unjust enrichment, unconscionable contract and unilateral mistake.

If you feel you have been the victim of an unfair contract, please contact Khorrami, LLP for a private consultation.

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One Comment

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  1. Oscar Beck / Jan 9 2013 1:46 pm

    Ebay’s shipping label page as of yesterday provides this information if add ShipCover insurance:

    ShipCover insurance
    Package value: $ 2xx.xx

    By checking this box you
    acknowledge that you’ve read and
    accepted the terms of coverage for
    ShipCover insurance, including the
    limitation of coverage, and that you’ve
    read and understood the surplus lines
    notice.

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