Making good on its promise to vigorously defend a lawsuit filed Feb. 20 by eHealth-Insurance Services Inc., InsWeb Corp. filed a countersuit March 22 in U.S. District Court, Northern District of California, San Jose.InsWeb is denying allegations made by eHealthInsurance that InsWeb sent a considerable number of illegitimate referrals to a co-branded Web site built and maintained by eHealthInsurance (see "eHealthInsurance Sues InsWeb," April).

The illegitimate referrals cited in the eHealthInsurance suit were the result of a sexually oriented mass-marketing e-mail campaign-created by InsWeb partner, LifeMinders Inc. of Herndon, Va.-which contained the subject message: "Super Bowl Cheerleaders-Check 'Em Out."

Counter allegations

In addition to denying allegations of wrongdoing, InsWeb alleges that Sunnyvale, Calif.-based eHealth-Insurance is at fault for the following:

* Wrongfully terminating its linking agreement with InsWeb.

* Making material misrepresentations in order to induce InsWeb to give up its own marketplace and establish eHealthInsurance as its sole and exclusive source for health insurance.

* Interfering with contracts InsWeb has or had with third parties.

* Failing to perform its obligations under the linking agreement by improperly maintaining the co-branded site. InsWeb also charges that eHealthInsurance has not paid $2.5 million it still owes the company.

No prior approval

Recipients of the LifeMinders' e-mail promotion were presented with three football helmets. In its lawsuit, eHealthInsurance contends that many of the recipients who did not select the helmet linking them to the scantily-clad cheerleaders were instead sent to the co-branded site.

In a letter dated one week before the company filed its lawsuit, eHealthInsurance terminated its linking agreement with InsWeb, stating: "InsWeb and its partner have tarnished eHI's name and jeopardized critical eHI business relationships."

In its countersuit, Gold River, Calif.- based InsWeb claims it did not give prior approval to LifeMinders for the promotional campaign, and had no intention of paying for it.

InsWeb also claims to have offered to credit eHealthInsurance for any "click-through" charges associated with the promotion.

Claiming that LifeMinders is a third-party site and not an InsWeb agent, the InsWeb lawsuit states: "The damages sustained by eHealthInsurance, if any, were proximately caused . . . by negligent conduct, intentional conduct, and/or intervening conduct of persons or entities other than InsWeb, for which InsWeb is not liable or responsible."

Malicious intent

Beyond denying responsibility for the e-mail promotions, InsWeb charges that eHealthInsurance made misrepresentations "oppressively, fraudulently, maliciously, and in conscious disregard of InsWeb's rights." Specifically, InsWeb claims company executives were approached repeatedly in mid-1999 by eHealthInsurance, which, at that time, was a direct competitor of InsWeb.

The lawsuit states that eHealthInsurance provided InsWeb with an inflated "submit/click-through" rate-the percentage of visitors to its site who completed and submitted an online application. InsWeb did not reveal the actual percentage, however, citing a nondisclosure agreement between the two parties.

"At the time eHealthInsurance made these representations, it knew they were false," InsWeb charges.

Several months into the April 2000 agreement, eHealthInsurance reported a "submit/click-through" rate far lower than the one it had previously presented, and well below what InsWeb had experienced with its own health insurance marketplace, according to the InsWeb suit.

Had it known the actual facts, InsWeb contends it would not have abandoned its own health insurance marketplace-which it launched in 1998-and entered into the linking agreement with eHealthInsurance.

"Among other things, the representations consisted of information which directly correlated to the revenue InsWeb could expect to receive under the linking agreement and directly influenced the entire approach to negotiating . . . and entering into the linking agreement," the lawsuit states.

"Pure fabrication"

Commenting on InsWeb's countersuit, eHealthInsurance's general counsel Bruce Telkamp says, "Their claims are unsupportable and contrary to common sense. They're pure fabrication . . . If InsWeb really believes that it had a claim of false statements made by eHealthInsurance as far back as 1999, InsWeb would have asserted these claims many months ago. This is clearly a reflex on InsWeb's account designed to draw attention away from InsWeb's obvious misconduct."

InsWeb is one of more than 450 partnerships that eHealthInsurance has, Telkamp says. "This situation is the only time ever when we've had to terminate a partner relationship for inappropriate conduct."

InsWeb would not discuss the lawsuit, and LifeMinders did not return phone calls.

At press time, eHealthInsurance was preparing its response to InsWeb's counterclaims, which was due at the end of April. Sources say it will be several months before any hearings are scheduled.

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