Product Liability Limit Requirements of Online Sellers

In my 20 plus years of overseeing Sadler Insurance’s Product Liability Insurance Department and helping thousands of entrepreneurs and businesses with their product liability insurance needs, I find many entrepreneurs and businesses go through the entire product development process and never consider the costs of insurance. I also see many start-up businesses that spend large amounts of time and energy pursuing venders like Walmart, Target, Home Depot and Amazon to name just a few and never take time to know their insurance requirements such as liability limits and special endorsements only to find they cannot afford insurance premiums to become an online seller.

The goal of this blog is to share with you as many of the top online e-commerce companies’ insurance requirements that online sellers must comply with to do business with them. I purposely will not go into detail and will just highlight the liability limit requirements so you will have a better idea of the costs to become a supplier with different online sellers. I will also highlight each online seller’s name so you can link to that online seller’s vendor portal or supplier website.

Liability Limit Requirements of Online Sellers

Online sellers such as Amazon, Walmart, and others often have specific liability limit requirements for the products they list. These limits are required to protect online sellers and their customers from potential harm and financial losses. As a manufacturer or distributor, it is crucial to understand these requirements to avoid legal and financial risks.

• Amazon: Requires proof of liability insurance with limits of at least $1 million per occurrence, aggregate, and product liability.
• Walmart: Like Amazon, Walmart also has specific insurance requirements for sellers.
• Other Platforms: Platforms like eBay, Newegg, and Best Buy may have varying requirements, so it is essential to review their policies and contract requirements.

Online Sellers Insurance Requirements with Links to Supplier/Vendor Portals

Amazon insurance requirements

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

1. The policy limit must be at least $1 million per occurrence and in aggregate, and cover liabilities caused or occurred in conjunction with your business operations, including products, products or completed operations and injury.
2. The insurance policy type can be either commercial general, umbrella, or excess liability and be based on occurrence.
3. Your insurance provider must have global claim handling capability and a financial rating of S&P (https://www.spglobal.com/ratings/en/sector/insurance/insurance-sector) A- or AM Best (https://www.ambest.com/home/default.aspx) A- or better (if S&P or AM best is not valid, a local equivalent is allowed).
4. Your insurance provider must give Amazon at least 30 days’ notice of cancellation, modification or nonrenewal.
5. The policy must name “Amazon.com Services LLC and its affiliates and assignees” as additional insureds.
6. The deductible for any policy 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 Amazon.
8. Your insured name must match the “legal entity” name you provided to Amazon. To view your legal entity name, go to: https://sellercentral.amazon.com/sw/AccountInfo/LegalEntity/step/LegalEntity.
9. The policy must be complete in its entirety and signed.
10. Claims made policies are allowed only if you sell any combination of the following products (and you must maintain an occurrence-based policy for all other products that you sell on Amazon)

• pharmaceuticals
• nutraceuticals and dietary supplements
• ingestible products
• chemicals
• critical automotive parts
• children’s consumable products that are not insurable under an occurrence policy form
• other products deemed acceptable to Amazon for claims made policies.

They have just added #10 to their list of requirements.

Please note that the Amazon requirements specify an Occurrence Based Policy (#2); however, based on prior communication with Amazon, they (decision makers at Amazon) are fully aware that Dietary Supplements/Nutraceuticals are written on Claims Made Policies and an Occurrence Based option is not available for Dietary Supplements/Nutraceuticals.  With that said, it has come to our attention that some of the Amazon employees whose job is to check/verify Certificates of Insurance will sometimes reject the Certificates of Insurance because they are Claims Made instead of Occurrence Based. We do understand that, since verifying Certificates of Insurance is a new requirement at Amazon, there appears to be some confusion at Amazon, but find that on the second or third try of submitting your Certificates of Insurance, they will indeed accept the Claims Made Certificates of Insurance.

Walmart Insurance Requirements

CATEGORY I ($1M per occurrence with $2M Aggregate): Any product not described under Category II, III, I(F), or II(F) shall be considered within Category I.

CATEGORY II ($5M per occurrence with $10M aggregate) : Any product with the following attributes shall be considered within Category II: · Any item powered by or connected to the household electrical system or a rechargeable battery, excluding heaters · Any item designed to contain a fire or be consumed by fire, excluding fire fueled by a liquid, gas, or gel · Any item intended for babies, infants, or young children, including but not limited to clothing, furniture, personal care, carriers, and automotive seats/boosters, but excluding medications · Any item designed to be ridden outdoors and propelled by the rider · Any item, system, or part thereof designed to hold a human body at a height greater than 6 feet · Any item intended to be applied directly to human hair or skin, excluding clothing · Any item intended to keep a human body afloat in water · Any air-powered rifle or pistol and any canister/container for propellant associated with such items · Any outdoor play equipment designed to assist or elevate the user to a height greater than 3 feet · Any item intended to prevent injury to the face, head, neck, or spine

CATEGORY III ($10M per occurrence with $$20M aggregate): Any product with the following attributes shall be considered within Category III: · Any item designed to contain a fire or be consumed by fire fueled by a liquid, gas, orgel and any container designed to hold such fuels · Any prescription medication and any ingestible product designed to diagnose, treat, cure, or prevent illness, disease, or ailment · Any item defined as a Dietary Supplement by the U.S. Dietary Supplement Health and Education Act · Any item designed to be ridden and powered by a combustible fuel · Any item designed to be ridden on a public roadway, excluding items propelled by the rider · Any item designed to bear the weight of an automobile, including but not limited to tires, jacks, stands, & hoists · Any firearm or ammunition and any propellant or explosive item associated with firearms · Any item designed to kill plants, insects, or animals by means of chemical or biological agent · Any liquid, powder, gel, or gas that presents a significant risk of injury or death if ingested, inhaled, or applied to human skin in small quantities and any item containing such substance · Any substance that exhibits one or more of the following characteristics as established by U.S. law: ignitability, corrosivity, reactivity, or toxicity · Any item designed to heat a space

FOOD AND DRINK CATEGORIES

CATEGORY I(F) ($2M per occurrence with $4M Aggregate): Any food or drink product, intended for human consumption, not described under Category II(F).

Category II(F) shall be considered within Category I(F) ($5M per occurrence with $10M aggregate): Any food or drink designed for consumption by babies, infants, or toddlers · Any fresh produce, meat, seafood, shellfish, poultry, dairy, or eggs · Any food or drink that requires heating to a specific temperature by the consumer to be considered safe for human consumption.

*Any Supplier that does not provide products under Category III and does not generate annual revenue exceeding$1,000,000 GMV may be exempt from the following requirements so long as Supplier at all times meets at least the requirements for Category I.

The Home Depot

Category I:  Per Occurrence and Aggregate Limit Requirement = $2,000,000 per occurrence; Department = 21-Lumber 22-Building Materials 23-Flooring 24-Paint 25-Hardware 26-Plumbing 27-Electrical and Lighting 28-Seasona l/Garden 29-Kitchen and Bath 30-Millwork 59-Blinds and Wallpaper

Category II;  Per Occurrence and Aggregate Limit Requirement = $4,000,000 per occurrence; Department = 21-Lumber 22-Building Materials 23-Flooring 24-Paint 25-Hardware 26-Plumbing 27-Electrical and Lighting 28-Seasonal/Garden 29-Kitchen and Bath 30-Millwork 59-Blinds and Wallpaper

Category III: Per Occurrence and Aggregate Limit Requirement = $8,000,000 per occurrence; Department = 21-Lumber 22-Building Materials 23-Flooring 24-Paint 25-Hardware 26-Plumbing 27-Electrical and Lighting 28-Seasonal/Garden 29-Kitchen and Bath 30-Millwork 59-Blinds and Wallpaper

Category IV: Per Occurrence and Aggregate Limit Requirement = $20,000,000 per occurrence; Department = 21-Lumber 22-Building Materials 23-Flooring 24-Paint 25-Hardware 26-Plumbing 27-Electrical and Lighting 28-Seasonal/Garden 29-Kitchen and Bath 30-Millwork 59-Blinds and Wallpaper None Ladders, Scaffolding

Supplier must have: a Commercial General liability insurance on an occurrence basis with a general aggregate limit of not less than the US dollar amounts specified on the Home Depot Insurance Requirements chart. b A products-completed operations aggregate limit of not less than the US dollar amount specified on the attached Home Depot Insurance Requirement Chart. c A per occurrence limit of no less than the amounts specified on the Home Depot Insurance Requirements chart. d Supplier’s insurance must be primary coverage. e The Certificate must reflect 30 days’ notice of cancellation. faxed back to The Home Depot. Fax number (951) 766-2299

Any questions regarding The Home Depot’s requirements or clarification of deficiency notices should be referred to The Home Depot at (951)-766-2210.

Lowes Companies, Inc.

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

1. The policy limit must be at least $1 million per occurrence and $2 million in aggregate, and cover liabilities caused or occurred in conjunction with your business operations, including products, products or completed operations and injury.
2. The insurance policy type can be either commercial general, umbrella, or excess liability and be based on occurrence.
3. Your insurance provider must have global claim handling capability and a financial rating of S&P (https://www.spglobal.com/ratings/en/sector/insurance/insurance-sector) A- or AM Best (https://www.ambest.com/home/default.aspx) A- or better (if S&P or AM best is not valid, a local equivalent is allowed).
4. Your insurance must include waiver of subrogation where required by contract and Primary and Noncontributory where required by contract insurance endorsements.
5. The policy must name ” Lowe’s Companies, Inc. and any and all subsidiaries are additional insured on the General policy where required by written contract.

Target Corporation

Commercial General Liability Insurance. Commercial general liability (“CGL”) insurance, including product liability coverage, with minimum limits of coverage of not less than $5,000,000 per occurrence for bodily injury and property damage, which shall include the following additional coverages: products and completed operations, contractual liability for liabilities assumed by Vendor under the Contract, and personal and advertising injury liability. Vendor’s CGL insurance shall: (i) designate “Target Corporation and its subsidiaries” as additional insureds, including with respect to third party claims or actions brought directly against Purchaser or against Purchaser and Vendor as co-defendants and arising out of the Contract, (ii) provide for a severability of interests, and (iii) have an additional insured endorsement of CG2015, CG2026, or equivalent. Coverage shall also include a waiver of subrogation.

1. Vendor shall evidence to Purchaser the required insurance for a continuous period of not less than three years from the receipt of Goods.
2. Vendor must provide insurance for the life of Goods covering claims occurring or brought by third parties, including after Purchaser discontinues sale of Goods.

Chewy Requirements

1. Comprehensive general liability/products liability, broad form bodily injury, property damage and personal and advertising injury insurance with coverage to include premises operations, products liability, completed operations hazards and, contractual liability (specifically insuring the liability assumed under the vendor agreement). Combined bodily injury and property damage insurance shall have minimum limits of liability of $1,000,000 per occurrence and $2,000,000 minimum available in the aggregate and/or no less than the full contract amount as set forth, such limits to be achieved either by primary or combined with excess/umbrella insurance.
2. Product Recall insurance that provides coverage limits of at least $5,000,000.

Wayfair Requirements

Occurrence based comprehensive general liability/product liability with $1,000,000 per occurrence and $2,000,000 aggregate liability limits.

Best Practices for Minimizing Product Liability Risks and Keeping Premiums Low

1. Rigorous Testing and Quality Control

Implement thorough testing and quality control processes to ensure your products meet all safety standards and perform as intended. Regular audits and updates to testing procedures can help identify and mitigate potential risks.

2. Accurate and Comprehensive Labeling

Ensure all product labels provide accurate and comprehensive information. This includes ingredients, usage instructions, safety warnings, and any claims about the product’s benefits. Misleading or incomplete information can lead to liability issues.

3. Compliance with Regulations

Stay updated with all relevant regulations and standards for your product category. This includes federal, state, and industry-specific regulations. Compliance helps protect your business from legal action and enhances consumer trust.

4. Clear Instructions and Warnings

Provide clear, easy-to-understand instructions and warnings for product use. This helps consumers use your products safely and reduces the risk of misuse that could lead to injuries.

5. Prompt Response to Issues

If a safety issue or defect is identified, respond promptly. This may involve issuing recalls, providing refunds, or taking corrective actions to fix the problem. A proactive approach can help mitigate the impact on your brand and reduce legal risks.

Conclusion

For manufacturers and distributors selling dietary supplements, children’s products, health and fitness products, outdoor products, and food products through online platforms like Amazon, Walmart, and others, understanding and managing product liability insurance is crucial. By understanding the product liability limit requirements of the Online Sellers, manufacturers and distributors can more effectively plan the rollout of their products and not overextend their budgets.

Get fast quotes for product liability insurance!

If you have any questions or would like product liability or product recall quotes for your products, please do not hesitate to contact me, Paul Owens, at 800-622-7370 or simply provide some information on our inquiry form and we will email you the appropriate application to receive product liability proposals.