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Case 8:11-cv-01347-RWT Document 1

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA One Tower Square Hartford, Connecticut 06183 Plaintiff V. WEBS, INC. 1100 Wayne Avenue, Suite 801 Silver Spring, Maryland 20910 Defendant Serve: Resident Agent CSC-Lawyers Incorporating Service Company 7 St. Paul Street, Suite 1660 Baltimore, Maryland 21202 *** COMPLAINT FOR RESCISSION Civil Action: ______________

Plaintiff Travelers Property Casualty Company of America attorneys, sues Defendant Webs, Inc. ("Webs") for the following reasons:

Travelers , by its

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INTRODUCTION

1.

The lawsuit arises out of a Cybertech+sm Liability Protection Application

("Insurance Application") submitted by Webs to Travelers that contained false information about notifications of intellectual property rights infringement received by Webs. In reliance on the information provided by Webs, Travelers accepted Webs as an insured and sold Webs CyberFirst policy TT05805429 (the "CyberFirst Policy"). Had Travelers known the true facts about Webs' notification history, Travelers would not have issued the CyberFirst Policy as written for the premium charged. Travelers seeks to rescind ab initio the CyberFirst Policy based upon the misrepresentation and nondisclosure by Webs in the application.

THE PARTIES

2.

Travelers is an insurance company authorized to do business in Maryland. It is

incorporated in the State of Connecticut and has its principal place of business in the State of Connecticut. 3. Webs provides services and products that assist individuals or companies in

designing, constructing, marketing and growing online businesses, including providing web templates, tools, applications and hosting. It is incorporated in the State of Delaware and has its principal place of business in Silver Spring, Maryland.

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JURISDICTION AND VENUE

4.

This Court has jurisdiction pursuant to 28 U.S.C. § 1332(a) and (c). a. There is complete diversity of citizenship between Travelers and Webs. Travelers is considered a citizen of the State of Connecticut, where it is incorporated and where it has its principal place of business. Webs is a citizen of the State of Delaware, where it is incorporated, and of the State of Maryland, where it has its principal place of business. b. The amount in controversy exceeds $75,000. The Travelers provided

$2,000,000 of liability coverage for each wrongful act with a $2,000,000 general aggregate limit. Travelers seeks to rescind the policy in its entirety. 5. Venue is proper pursuant to 28 U.S.C. § 1391(a) in that Webs has its principal

place of business in Maryland and the events described in this complaint with regard to the completion and submission of the Insurance Application occurred in Maryland.

FACTS

6.

On February 8, 2010, Rolex Watch USA, Inc. ("Rolex") notified Webs that

replicastore.webs.com, one of the websites Webs hosted, was offering for sale counterfeit Rolex watches. A copy of the notification is attached as Ex 1. The communication indicated that Rolex

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would hold Webs liable for contributory trademark counterfeiting and infringement if the replicastore.webs.com website was not removed. 7. On February 11, 2010, Webs acknowledged receipt of the Rolex communication

described in the previous paragraph and requested additional information pursuant to the Digital Millennium Copyright Act ("DMCA"). A copy of the acknowledgement is attached as Ex. 2. 8. On February 12, 2010, Rolex, through counsel, sent a DMCA notification letter to

Webs. A copy of this letter is attached as Exhibit 3. 9. In August 2010, Webs began looking for quotes for liability insurance to cover its

business activities. 10. On August 25, 2010, the United States Department of Homeland Security served

a subpoena on Webs seeking documentation about replicastore.webs.com's activities. A copy of the cover letter and subpoena are attached as Exhibit 4. 11. On September 9, 2010, Webs applied for insurance with Travelers by completing

and submitting the Insurance Application. Part IV of the Insurance Application contained the following question numbered 7: Have you received notification that any of your material, products or services infringe on the intellectual property rights of another party? ("Question 7"). 12. Webs understood Question 7 as seeking information on notifications involving,

among other things, infringement of copyright or trademark. 13. Webs further knew that, by Question 7, Travelers was seeking information about

prior notifications of infringement of intellectual property rights (including copyright and trademark) in order to assess the risks Webs encountered in its business activities, to decide 4

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whether to insure Webs, to decide the terms under which it would insure Webs, and to determine the premium to charge Webs. 14. Webs answered "No" to Question 7. The person signing the Insurance

Application warranted that she was an authorized representative of Webs and that answers in the Insurance Application were "true, correct and complete to the best of [her] knowledge and belief." She also certified that "reasonable inquiry has been made to obtain the answers to these questions." A copy of the signed application is attached as Ex. 5 15. In reliance upon Webs' application, including specifically the "no" answer to

Question 7, Travelers agreed to insure Webs, calculated a premium and issued the CyberFirst Policy with effective dates of coverage from September 20, 2010, to September 20, 2011. Among other things, the CyberFirst Policy provides liability coverage on a claims made and reported basis for loss caused by a "communications and media wrongful act," which is defined to include claims for copyright and trademark infringement. A copy of the CyberFirst Policy is attached as Ex. 6. 16. On or about March 15, 2011, Webs notified Travelers that it had been sued in the

United States District court for the Southern District of New York by Rolex (civil action 11 cv 1488). A copy of the first amended complaint (with its exhibits) is attached as Ex. 7. 17. During the investigation of the claim, one of Webs' employees, advised Travelers

in a March 23, 2011 e-mail that Webs had "successfully handled several hundred Copyright/Trademark claims" and that such claims were "very common." 18. Travelers would not have issued the CyberFirst policy to Webs at the premium it

charged had Webs answered Question 7 truthfully and provided information about the Rolex

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notification, the subpoena from the United States Department of Homeland Security, or any other notifications of copyright or trademark infringement that Webs had received and "successfully handled."

COUNT ONE RESCISSION BASED ON INTENTIONAL MISREPRESENTATION (FRAUD), CONCEALMENT AND NON-DISCLOSURE 19. Count. 20. Webs, as an applicant for insurance, owed a duty to disclose truthful and material Travelers incorporates the allegations set forth in paragraphs 1 through 18 in this

information to Travelers, including disclosing all information about notifications of infringement of intellectual property rights, including infringement of copyright and trademark. 21. Webs breached the duty described in the previous paragraph by falsely answering

Question 7 and by otherwise concealing and not disclosing information about the Rolex notifications in February 2010, the subpoena served upon Webs by the United States Department of Homeland Security, and other notifications of copyright and/or trademark infringement. 22. Webs further knew that Travelers would rely on the answers it provided to the

questions in the Insurance Application, including Question 7. 23. Webs knew that information it provided to Travelers, including the answer to

Question 7, was material to Travelers' determination to insure Webs. 24. 25. Travelers. Webs knew that the answer to Question 7 in the Insurance Application was false. Webs provided the false answer to Question 7 with the intent to deceive

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26.

Travelers reasonably and justifiably relied on the information provided to it by

Webs, including the answer to Question 7, in deciding whether to accept Webs as an insured. 27. Travelers notified Webs of its intent to rescind the policy promptly after

discovering the false answer to Question 7. 28. 29. Travelers has acted promptly in filing this action to rescind the policy. Travelers has returned or offered to return all premium payments made by Webs

since the inception of the policy. 30. As a result of Webs' intentionally fraudulent false answer to Question 7, Travelers

is entitled to rescind the policy ab initio and restore the parties to their status prior to the formation of the insurance contract. REQUESTED RELIEF Wherefore, Plaintiff Travelers Property Casualty Company of America: a. Rescind ab initio CyberFirst policy TT05805429 issued by Travelers Property Casualty Company of America to Webs, Inc.; and b. Take whatever other action it deems necessary, including, if appropriate, awarding Travelers costs and attorney's fees.

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Respectfully submitted,

/s/ Andrew Janquitto
____________________ Andrew Janquitto Federal Bar 06637 Mudd, Harrison & Burch, L.L.P. 401 Washington Avenue, Suite 900 Towson, Maryland 21204-4835 Tel. 410 828 1335 Fax. 410 828 1042

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