Amazon Makes Significant Changes to Requiring Sellers to Have Product Liability InsuranceAugust 10, 2021 in Blog
Amazon seems to be making steps to finally enforcing a long-standing requirement for sellers to hold product liability insurance.
Sellers awoke Tuesday to find a lengthy email from Amazon’s Vice President of its Trust and Fraud Department appearing to make an announcement about a revision of Amazon’s A to Z Guarantee program. In reality, the real takeaway from the email was an announcement regarding Amazon launching the Insurance Accelerator program to help sellers obtain product liability insurance.
What Did Amazon Say?
In the announcement, Amazon said that it will pay for A to Z Guarantee claims seeking compensation for personal injury and/or product damage under $1000 and will not seek compensation from sellers who hold valid insurance.
Amazon also announced that as of September 1, it is changing when a seller needs to obtain product liability insurance from once the seller has reached $10,000 in sales for three consecutive months to once they obtain $10,000 in sales in any month.
Finally, Amazon also announced the launching of the Insurance Accelerator program. Similar to IP Accelerator that helps sellers obtain a trademark, the Insurance Accelerator is a marketplace of Amazon-vetted insurance providers.
Amazon Has Previously Required Product Liability Insurance But Rarely Enforced It
Amazon has required sellers to hold product liability insurance for many years now once their sales reached $10,000 per month for three consecutive months, so the announcement is not a significant revision of the long-standing requirement for sellers to hold insurance. However, it has been a widely known secret that Amazon has very rarely enforced this insurance requirement for sellers.
Will Amazon Start to Enforce the Insurance Requirement?
As mentioned, there is no significant change to the Business Solutions Agreement, i.e., TOS, requiring sellers to obtain insurance. It has been a requirement for many years. The question is if Amazon will now be starting to enforce this requirement.
Amazon made no mention of enforcing the product liability requirement for sellers. Instead, at this time, their tact appears to be to incentivize sellers to voluntarily obtain insurance in order to obtain A to Z Guarantee seller benefits (specifically, Amazon paying personal injury/property damage claims up to $1000).
What Will Happen if Sellers Don’t Have Product Liability Insurance by September 1, 2021?
Once again, Amazon made no mention of enforcement regarding the long-standing product liability insurance requirement.
It would appear as though there will be no widespread action taken against sellers who do not hold product liability insurance come September 1, 2021 (when the threshold for when sellers are required to obtain product liability insurance changes). Given the fact that a very large percentage of sellers who require product liability insurance likely does not currently have insurance, it would seem unlikely Amazon will be enforcing the insurance requirement immediately to avoid disruption to the Amazon marketplace. However, this may be the first step towards Amazon enforcing the insurance requirement at a future date.
Why Is Amazon Doing This Now?
Amazon has come under increased scrutiny from courts regarding whether it can be held liable in product liability lawsuits. Amazon has been named in thousands of product liability lawsuits, but courts have historically ruled that Amazon is not liable for the products sold from its merchants. However, recently, courts have started to declare that Amazon could be liable, specifically in 2020 when the California Court of Appeals stated in Bolger v. Amazon.com that Amazon could be strictly liable for an allegedly defective battery manufactured by a third party and sold on its website.
What Is the Insurance Accelerator Program?
The Insurance Accelerator Program is a program similar to the IP Accelerator program that provides a marketplace of Amazon-vetted insurance providers that U.S. and Chinese sellers can work with. Currently, there are no insurance providers listed for non-Chinese and non-American sellers.
There is no word yet on how competitive the insurance rates provided by the Insurance Accelerator-approved insurers are.
Many sellers have suspected for some time that Amazon would eventually start to take action towards enforcing its product liability insurance requirement. While the announcement made does not specify Amazon changing its approach to enforcing this policy, it could be the first step towards eventually enforcing this requirement.
Do you currently hold product liability insurance for your company? If so, share with us your experience obtaining insurance in the comments section below.
Dave Bryant has been importing from China for over 10 years and has started numerous product brands. He sold his multi-million dollar ecommerce business in 2016 and create another 7-figure business within 18 months. He’s also a former Amazon warehouse employee of one week.