Product Liability Insurance: Is it mandatory for Amazon Sellers

Amazon announced last week to introduce new Product Liability Insurance Requirements for Amazon Sellers and expanded A-to-Z Guarantee to protect both customers and sellers in the unlikely event a defective product sold through Amazon.com causes property damage or personal injury. Starting September 1, 2021, Amazon will:

1. Offer an efficient process for both parties to resolve such claims.
2. Pay valid claims less than $1,000 and not seek reimbursement from sellers who have valid insurance.
3. Make it easier for sellers to buy insurance at competitive rates through Amazon Insurance Accelerator.

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 which helps sellers obtain a trademark, the Insurance Accelerator is a marketplace of Amazon-vetted insurance providers. With these innovations, Amazon is enabling customers to shop even more confidently, driving more opportunities for sellers to continue to grow their business on Amazon.

In this article, you’re going to learn about Product Liability Insurance, its pros, and cons, and how you can fulfill Amazon’s Product Liability Insurance requirements.

What is Product Liability Insurance?

Product liability insurance helps protect your business from claims that a product you made or sold caused bodily injury or property damage to someone else’s belongings. Without product liability coverage, your business could have to pay out of pocket for costly claims related to product defects.

Amazon will be enforcing its long-held requirement for sellers on its platforms worldwide to have product liability insurance. However, Amazon didn’t enforce it on sellers expected to ask them to upload their documents.

Why Product Liability Insurance is important for Amazon Sellers?

If your business sells products to customers, you could be at risk of a defect causing injuries or damage to someone else’s property. For example, let’s say a customer buys a power tool that your business manufactures or sells. A defect in the tool ends up injuring the customer, and they sue your business. Your product liability insurance helps cover:

• The customer’s medical costs to treat their injury
• Legal fees and costs to defend your business
• Settlements or judgments made against your business

Due to recent lawsuits that held Amazon responsible for items sold on their platform, Amazon is cracking down on sellers. There are both pros and cons of this announcement:

Pros of Amazon Product Liability Insurance

1. Amazon will cover all claims of $1,000 or less for sellers with no penalty to sellers.
2. Amazon has provided a list of approved carriers and international insurance brokers to help sellers find the right insurance for their businesses.
3. The right insurance will cover you on all the other platforms you sell on (including your own website).

Cons of Amazon Product Liability Insurance

1. Most sellers must comply by September 1, 2021, which isn’t a lot of time.
2. Sellers who are normally under the $10K per month threshold may be required to get insurance.
3. Foreign-based sellers must purchase in their local country and have a global protection policy.
4. Amazon must be added as an additional insured and notified if the policy is canceled or expires – this is not typical with most carriers.
5. Your insured name must match the “legal entity” name you provided to Amazon which could be expensive or complicated for entities with multiple names and unusual structures (like holding companies) who own the business.
6. Amazon sellers are on the hook for claims above $1,000 which are usually quite large because they are often lawsuits. $1M in coverage may not be enough to protect you.

Here’s the link to the Amazon Insurance Accelerator page in seller central. Amazon has worked with Marsh, an insurance broker, to select providers that meet our policy requirements and offer competitive policies and coverage. You may obtain coverage with other providers, just be sure that your policy fulfills our insurance policy requirements.

You can choose from the insurance comparison sites or insurance providers to get quotes.

Amazon now allows sellers to upload their existing product liability insurance in order to obtain additional A to Z Guarantee Benefits. 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?

It seems there will be no penal action taken against sellers who do not hold valid product liability insurance starting Sep 1, 2021. Due to the impact on a very large number of sellers who require product liability 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 toward Amazon enforcing the insurance requirement at a future date

Frequently Asked Questions

What are the required documents?

Amazon may ask you to provide a certificate of insurance within 30 days to show your compliance with our selling agreement. Your insurance company issues a Certificate of Insurance once you purchase a policy. This document details the property and persons covered, the amount of coverage, and any exclusions or deductibles. This document can be in .pdf, .doc, or .docx format. If needed, we may request additional documents such as a complete copy of your insurance policy and an invoice for purchasing your policy.

What are the insurance requirements?

Your commercial liability insurance policy must meet all of the following criteria:

1. The policy limit must be at least $1 million per occurrence and in aggregate, and cover liabilities caused by or occurring in conjunction with your business operations, including products, products/completed operations, and bodily injury;
2. The insurance policy type can be either commercial general, umbrella, or excess liability and be occurrence based;
3. Your insurance provider must have global claim handling capability and a financial rating of S&P A- and/or AM Best A- or better (if S&P or AM best is not valid or used in the country where you are required to obtain insurance, a local equivalent is allowed);
4. Your insurance provider must give Amazon at least 30 days’ notice of cancellation, modification or non-renewal;
5. The policy must name “Amazon.com Services LLC and its affiliates and assignees” as additional insureds;
6. The deductible for any policy(ies) must not be greater than $10,000 and any deductible amount must be listed on the certificate(s) of insurance;
7. The policy must cover all sales from products you have listed on the Amazon website;
8. Your insured name must match the “legal entity” name you provided to Amazon (view your legal entity name);
9. The policy must be completed in its entirety and signed; and
10. The policy must be valid for at least 60 days from the date of submission.

Can I choose my own insurance provider?

Yes. If you currently don’t have commercial liability insurance, you can choose any insurance provider that meets our requirements above or select one from the network of trusted insurance providers identified by Amazon. If you choose your own insurance provider, you can submit your proof of insurance using the upload proof tab.

Who is Marsh?

Marsh is a global leader in insurance brokering and risk management and is the insurance broker of record for Amazon. Marsh has facilitated the onboarding of the network of participants in the Amazon Insurance Accelerator. Selling Partners can reach out to Marsh with their unique product liability insurance requirements if they are unable to get a quote from any of the Amazon Insurance Accelerator participants. You can find out more at Marsh.

Can I include other retailers in my policy?

Yes, you may include other retailers as additional insured on your policy, whether you purchase insurance through Insurance Accelerator or purchase insurance on your own. Please contact your insurer directly for more information. For the Certificate of Insurance, you upload to Amazon, you only need to list Amazon as the additional insured.

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