A former logistics manager in Jacksonville launched a line of fitness equipment two years ago: resistance bands, adjustable dumbbells and a folding weight bench. A factory overseas makes the products, his logo goes on the equipment and the boxes, and he imports the goods through the port and sends them to Amazon’s fulfillment network. When he applied for liability insurance, he described his business as an online retailer. The underwriter’s questions surprised him. Who designed the bench? Who wrote the assembly instructions? Was his company the importer of record? Did the factory carry insurance in the United States? By the end of the call, he understood that the carrier did not see him as a retailer at all.
Many Amazon sellers think of their businesses as e-commerce. From a liability and insurance standpoint, a seller who brands, imports and markets a product can look much more like a manufacturer, even without ever operating a factory.
The Factory Is Overseas, but the Claim Lands Here
A common Amazon business model is straightforward. The seller finds a product opportunity, works with an overseas manufacturer to produce it, adds a logo and custom packaging, imports the goods and sells them online. From the seller’s perspective, the product was purchased finished.
When a product allegedly causes bodily injury or property damage, the injured person’s attorney looks at every business involved in bringing it to market. An overseas factory may be hard to identify, hard to serve with legal papers and hard to collect from through U.S. courts. The company whose name appears on the product, the packaging and the listing is often much easier to find, and it can become the main target of the claim.
Why Private-Label Sellers Are Treated Like Manufacturers
Under the apparent manufacturer doctrine recognized in many states, a business that presents a product as its own can be held to the same responsibility as the company that actually made it. The reasoning is that the customer relied on the brand on the box, not on a factory the customer never heard of. Florida also permits claims against sellers and distributors in the chain of distribution, so even a seller who escapes manufacturer treatment can still be named.
Insurance carriers follow the same logic. A private-label seller is usually underwritten with manufacturer or importer exposure in mind, which affects which carriers will write the business, how the premium is calculated and whether a standard business owners policy is available. Categories such as children’s products, electronics and batteries, fitness equipment, kitchen appliances, beauty and personal care, pet products and tools receive particular scrutiny because the potential injuries are more serious.
Importers Take On Similar Responsibilities
The same concern applies to businesses that import products for resale even without private labeling. When a company is the importer of record and the first point of distribution in the United States, it may be the closest U.S. business to the foreign manufacturer, which puts it in a position similar to that of a domestic maker. Carriers will usually ask whether the business imports directly, whether it modifies, assembles or repackages products and whether it is the first U.S. distributor.
Each answer moves the business along the spectrum from reseller toward manufacturer. A seller who changes a product’s design, writes its own warnings and instructions, or combines products into kits has taken more responsibility for how the product performs.
Fulfillment by Amazon Does Not Transfer the Liability
Some sellers assume that because Amazon stores, packs and ships their products, Amazon also carries the product risk. Fulfillment services handle logistics. They do not make the seller any less the seller. The seller generally owns the inventory throughout the process, the listing identifies the seller’s brand and Amazon’s own seller agreement requires sellers to defend and indemnify Amazon against claims involving their products. That is also why Amazon requires many sellers to carry commercial liability insurance and to name Amazon as an additional insured, a requirement we explain in product liability insurance for online sellers.
What Carriers Will Want to See
Underwriters evaluating a private-label or importing business typically ask for a complete product list, the countries of manufacture, sales by product and channel, product testing and certification records, copies of labels, instructions and warnings, any history of complaints or claims, and whether the manufacturer carries product liability insurance that can name the seller as an additional insured. A written supply agreement in which the manufacturer agrees to indemnify the seller can help, although its practical value depends on whether the manufacturer has assets or insurance a U.S. court can reach.
Sellers who prepare these documents before they apply usually receive better options than those who try to assemble them after a platform deadline or a demand letter arrives.
Choosing the Right Coverage
For lower-risk products, a business owners policy that includes products-completed operations coverage may be enough, provided the carrier understands the business is a private-label importer. For higher-risk categories or larger sales volumes, a standalone products liability policy from a specialty carrier is often necessary, and many sellers add an umbrella policy for higher limits. Product recall expenses are not covered by liability policies and require separate coverage if the seller wants it. Our overview of e-commerce insurance in Florida shows how product coverage fits with cyber, property and other policies.
Worth Confirming With Your Agent
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Whether your application describes your business as a private-label seller or importer, not simply a retailer
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Whether your policy includes products-completed operations coverage for every product and category you sell
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Whether your manufacturer carries product liability insurance and can name your company as an additional insured
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Whether your supply agreement includes indemnification, and whether the manufacturer can realistically honor it
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Whether your testing records, instructions and warnings are organized and current
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Whether your limits are adequate for the categories you sell, and whether recall coverage makes sense
This article is general information and is not legal advice.
Talk to Prestige Insurance Group
Prestige Insurance Group works with Florida Amazon sellers, private-label brands and importers to place product liability coverage that reflects how their businesses actually operate. Because we have access to standard and specialty carriers, we can place sellers whose products fall outside a typical business owners policy. If you are not sure how a carrier would classify your business, we can walk through it with you.
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