Class Action Claims Seel Unlawfully Offers Shipping Insurance As An Unadmitted Insurer in California

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A proposed class action lawsuit alleges that Seel, Inc. has, for years, illegally sold shipping insurance to consumers despite being unadmitted as an insurer in California as required under state law.

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The 25-page lawsuit contends that the “Worry-Free Delivery” service offered by Seel, an AI-powered insurance company founded in 2019 that partners with more than 2,000 global ecommerce retailers, meets the definition of insurance under California law, meaning the company is subject to the state’s Insurance Code. However, the case says that Seel’s Worry-Free Delivery service, which purportedly covers the cost if an item is lost, damaged or stolen, is not worth the price paid by consumers because the company is not an admitted, authorized insurer in California.

“If Plaintiff and Class members had been aware that Seel’s shipping insurance was unlawful, they wouldn’t have purchased it at all,” the complaint reads.

The filing takes issue with Seel’s apparent noninvolvement with the California Insurance Guarantee Association, which requires insurers to pay a percentage (typically two percent) of their premium to the association into a guarantee fund that pays out all unresolved claims should a company go under, the suit explains.

The case claims that the purported insurance policies offered by Seel for online retail purchases are not backed by the assurances and benefits of legitimate insurance products codified under law and designed to ensure consumer protection.

“Unlicensed insurance companies do not pay into the fund, and as such, there is no way for policyholders to recover unpaid claims from such companies,” the lawsuit states.

Seel’s shipping insurance protections, if the company was an accredited insurer, would presumably be designated as forms of “marine insurance” under the California Insurance Code, which protects against loss or damage of goods during navigation, transit or transportation. However, because Seel is not recognized or admitted as an insurer in the state, the company illegally enriches itself by charging “unfettered” rates for its services without the legal backing upheld by California marine insurance law for products shipped anywhere in the United States, the complaint alleges.

“If a consumer purchases insurance from an unlicensed insurer, the consumer will have fewer or even no protections if that insurer becomes insolvent,” the filing describes. “Therefore, a consumer is faced with substantially higher risks if they purchase from an unlicensed insurer rather than a licensed one—especially when that unlicensed insurer is a startup company funded by venture capital like Seel.”

According to the complaint, a reasonable consumer would have no meaningful way to discern that Seel is not a legally operating marine insurance provider, as the company uses the same language, policies and business model as actual insurers.

This mimicry, the case alleges, is evident as consumers are offered Seel’s shipping insurance by its retail partners, navigate the “insurance policies” offered on its website, or even when initiating the process to submit a “claim” after an issue occurs during shipping.

“Based on counsel’s investigation, Seel has simply provided self-insurance to itself,” the lawsuit says. “Seel Insurance, Inc. is merely a wholly owned subsidiary of Seel and is a captive insurance company that only provides insurance to Seel, not to consumers.”

The Seel class action lawsuit seeks to represent all consumers in the United States who purchased Seel’s “Worry-Free Delivery” or other shipping insurance products during the applicable limitations period.

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