Case 8:11-cv-01347-RWT Document 1 Filed 05/17/11 Page 1 of 8

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. Civil Action: ______________

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

Plaintiff Travelers Property Casualty Company of America ³Travelers´, by its

attorneys, sues Defendant Webs, Inc. ("Webs") for the following reasons:
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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

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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. Travelers incorporates the allegations set forth in paragraphs 1 through 18 in this

Count.

20. Webs, as an applicant for insurance, owed a duty to disclose truthful and material

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. Webs knew that the answer to Question 7 in the Insurance Application was false.

25. Webs provided the false answer to Question 7 with the intent to deceive

Travelers.

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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. Travelers has acted promptly in filing this action to rescind the policy.

29. 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