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Amazon has announced a tightening of the rules regarding product liability insurance. From now on, a seller using their marketplace to deliver goods to customers, either through Fulfillment by Amazon or Fulfillment by Merchant, must acquire Product Liability Insurance once sales reach $10,000 in any one month.

While Amazon has turned a blind eye to sellers who have disregarded this requirement in the past, recent lawsuits against the company have forced it to rethink its approach. This means if you sell on Amazon, it’s time to think about insurance coverage.

Looks like Amazon is finally moving towards enforcing a rarely observed requirement for sellers to hold product liability insurance. The requirement has always been around, it’s just that many people often just ignored it, with no repercussions. This looks set to change.

So if you or your business are selling items on Amazon, you might want to call up your broker and purchase some insurance. Not only will it ease your mind, but now Amazon is offering a few incentives that might just make it worth it for you to get on board.

Perhaps the biggest change to Amazon’s Business Solutions Agreement is that a seller using its marketplace will now need to obtain product liability insurance once sales have reached $10,000 in any one month.

Previously, you only needed to obtain insurance once you had reached average sales of $10,000 a month over a 3 month span.

Because this requirement has rarely been enforced, it was widely ignored by those with relatively modest sales on Amazon. But now it is unclear how serious Amazon is going to be about enforcing this policy going forward. Recent court actions involving Amazon suggest this policy change reflects an attitude shift within the company regarding coverage.

So if your business is set to clear $10,000 a month in the coming year, it would be wise to start thinking about obtaining product liability insurance before you find yourself facing legal trouble brought on by a customer, or even Amazon itself.

Amazon has been put under intense scrutiny by the courts regarding liability for the products sold through its marketplace. Up till now, the courts have ruled in their favour on thousands of lawsuits in which they were named.

Recently though, some courts have suggested that Amazon could very well be liable after all. In 2020, the California Court of Appeals declared in Bolger v Amazon that Amazon could be strictly liable for a battery sold on its site by a third party which was allegedly defective.

Though there were no dramatic changes in Amazon’s recent revisions to their Business Solutions Agreement, it does indicate a shift towards enforcement of its requirement that sellers obtain product liability insurance.

Yet whether this policy will ultimately be enforced or not, in the meantime it appears Amazon is trying to incentivise sellers to comply with the policy voluntarily by offering A to Z Guarantee Seller benefits.

Considering that 80% of such claims are under $1,000, Amazon is basically saying that they will protect both sellers and buyers who comply with their policies. This is reason enough for your business to prioritise getting a valid insurance policy as it circumvents a lot of potential pitfalls and hassles.

If you sell, manufacture or distribute a product to customers, whether directly or through Amazon, it is highly recommended that you acquire Product Liability Insurance anyway. This protects you against claims alleging:

Claims are usually the result of a defect in design, manufacturing or marketing, such as a mislabelled product or a lack of sufficient safety warnings on the packaging.

So for example, a product you have shipped to a customer malfunctions, or is even used incorrectly, causing bodily harm, and as a result, that customer sues you. With Product Liability Insurance, you will be covered for any injury claims, including medical expenses, as well as the legal fees required to defend yourself.

Even if the claim is without merit, the very act of litigating this kind of claim can be very expensive and has the potential to financially ruin you and your business before you even get it off the ground!

This is why product liability coverage is a must-have for any retailer, regardless whether you sell through Amazon or not!

If your aim is to grow a robust, successful business, it is recommended that you more fully protect yourself by adding product liability coverage to a Commercial General Liability Insurance policy. This will give you the broadest possible coverage against lawsuits brought on by third parties.

Let’s face it, the chances of a liability claim are fairly low, but when they do happen, the legal costs, damages awarded and time drain can be extremely damaging to your business.

In addition to product liability, a sound, comprehensive policy should cover all possible liabilities related to the operation of your business, including:

Amazon’s insurance policy criteria is available on their Seller Central page. If you go to the “Program Policy” help menu, you can find it in “Pro-Merchant Insurance Requirements”.

While getting yourself all set up to sell on Amazon is usually a rather quick and straightforward process, it can get a little intricate depending on the scope of your operations. Furthermore, you might find your insurance needs exceed Amazon’s basic requirements.

So give Mitch a call today at 1-800-731-2228 and let us find you the coverage that not only satisfies the rules of Amazon, but also suits you and your business best in the long run. We have a panel of insurers on standby who specialize in insuring businesses like yours. Cause when it comes to peace of mind, we deliver!

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Call us today at 1-800-731-2228.

We can help keep that Amazon smile on the face of your business.

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