- Jeff Cohen
- On August 7, 2019
- resource video
I recently sat down with Ashlin Hadden to discuss a red-hot topic: Amazon product liability insurance. Ashlin is the owner of Ashlin Hadden Insurance, a firm specializing in coverage for Amazon sellers, so she knows the rules and how sellers can protect themselves. It’s a short video and the subject matter is very important, so watch the video, read the post, and follow up in order to protect your business.
Have you heard of Amazon product liability insurance? Do you carry it? Many sellers are either unaware or they’ve opted to take their chances without coverage. But, per the Terms of Service to which all Amazon professional sellers agree, product liability protection is required by Amazon.
Until now, Amazon has stated the requirement in the ToS, but it has not required sellers to prove that they have product liability coverage. Given the recent lawsuits and the “Is Amazon liable or is the 3P seller liable?” question currently being battled in the courts, I expect the requirement to change. So if you don’t have Amazon product liability insurance, or you do but you can’t prove it, you need to make changes. This post and video will help you.
The Historical Precedent (aka “The Hot Coffee Lesson”)
First, travel back in time with me to 1994 when, more than two years after the incident occurred, a New Mexico jury awarded senior citizen Stella Liebeck $2.86 million in compensation for the burns and subsequent treatment she incurred (eight days in the hospital and skin grafts) after spilling a cup of McDonald’s coffee in her lap while in the passenger seat of a stopped car.
Ultimately, the judge reduced the award to $640,000. Many considered the case an example of a frivolous lawsuit, but that’s irrelevant. Liebeck proved that McDonald’s was liable and she won her case and McDonald’s had to pay and the story was huge. Something that came to light during the case was that in the decade prior to Liebeck’s incident, McDonald’s had received more than 700 reports of people burned by “too hot” coffee and the Golden Arches had already paid out more than $500,000 in damages. Why didn’t the company solve this clear (and costly) problem? Anyway. . .
The result? Today, most to-go coffee cups include a warning like “Caution! Hot!” You know, in case you didn’t know that the hot coffee you ordered would be served, well, hot. So it’s a safety reminder and warning for consumers and a way of McDonald’s doing some CYA as a result of the 1994 decision. Many companies have followed suit with their own “obvious” warnings such as “Caution! Sharp!” on packaging for kitchen knives. Better safe than sorry, I guess. And trust me when I say that you will want to be safe rather than sorry.
The Present Back-and-Forth Between Buyers, Sellers, and Amazon
Why have I strolled down legal memory lane now? Because of the Oberdorf v. Amazon ruling handed down in early July 2019. In a nutshell, Pennsylvania resident Heather Oberdorf sued Amazon in 2016 claiming that she had been blinded in one eye when a retractable dog leash she had purchased through an Amazon Marketplace third-party seller had snapped, recoiled, and struck her in the eye.
To be clear, the merchant known as The Furry Gang shipped the item directly to Oberdorf. Amazon did not fulfill the order or physically touch it in any way; the Amazon Marketplace was the platform for the product listing and for the transaction only.
Oberdorf sued both The Furry Gang and Amazon. But guess what: The Furry Gang skipped town and was nowhere to be found physically or virtually — by Oberdorf’s counsel and by Amazon’s lawyers.
This raises the question of “What do we do about temporary pop-up merchants who sell and then disappear (likely to return under a different guise and to conduct the same sketchy business)?” It also makes me wonder if Amazon, however responsible or not responsible it may be for the third-party seller’s dangerous product, is bearing the brunt of the complaint because The Furry Gang is MIA. But that’s not what matters most now.
The Current (Ever-Changing) Status of 3P Liability
What matters most now is that things are changing. Heather Oberdorf won her case (reversing a lower-court decision, no less) and Judge Jane Richards Roth said Amazon may be liable in part because its business model “enables third-party vendors to conceal themselves from the customer, leaving customers injured by defective products with no direct recourse to the third-party vendor.” Powerful for sure, but that’s one decision in one court in one state.
This is in no way settled and it may play out like online sales tax collection and remittance. That’s to say that we’re going to see more of these sorts of cases and different courts in different states are going to settle those cases differently. I expect another complicated patchwork rendering sellers confused and in need of assistance, which is why I chatted with Ashlin about Amazon product liability insurance.
Update 08/27/2019: Surprise! Amazon is challenging the Oberdorf decision and a court has granted a rehearing.
Amazon Product Liability Insurance: Next Steps for Sellers
Get in front of this. Do not wait until someone has a problem with your product and creates a potentially business-ending legal situation for you. If you don’t have Amazon product liability insurance, get it now. If you do have coverage, revisit your policy and update it to best reflect your brand and products. In addition to this being the smart-seller thing to do right now, you can best bet that Amazon will come knocking for that product liability coverage certificate soon enough.
Don’t put this off. Contact Ashlin about your individual situation and what you need to do to protect yourself on Amazon. Mention Seller Labs to receive a discount on your processing fee. Don’t sleep on this one lest you find yourself in court or on the backfoot with Amazon, neither one a good place to be.
- Ruling Against Amazon May Prove Broader Blow to Its Business Model (July 3, 2019)
- Amazon Can Be Held Liable for Third-Party Sales, Court Rules (July 4, 2019)
- Amazon May Be Liable for Marketplace Items–Oberdorf v. Amazon (July 8, 2019). This one goes deep and will appeal to the legal eagles amongst our readership.
- Lawsuit Ruling Over Dog Leash Purchased on Amazon Could Greatly Impact Third-Party Seller Business (July 8, 2019)
- Amazon Can Be Sued in Wisconsin Over Defective Third-Party Products: Judge (July 24, 2019)
- Amazon Loses Another Fight Over Shoddy Marketplace Merchandise (July 31, 2019). A good post-Oberdorf “What does this all mean?” article.
- The Seller Labs Amazon Terms of Service Resource Page