TAS 293 (Avoiding Lawsuits) Product Liability Insurance 101 and Best Practices

One of the things Amazon sellers can easily overlook is the issue of liability. Is your product safe? Should it include a choking warning? Is there a risk that you could be sued or that your product could be held liable for harm done to a person or their property? These are not things we like to think about but they are a necessary consideration when you’re building a business. On this episode, Scott is chatting with Michelle Love about the issue of liability insurance, both for your business and to cover your products. You’ll want to hear this one.

Do you know when you need to purchase product liability insurance for your Amazon biz?

Many Amazon sellers who are just getting started have small supplies of their products and very low investment in the business. The thought of purchasing business and product insurance could serve as another reason to quit or not get started at all. But you don’t need to worry about that hurdle yet because Amazon has sales thresholds that you have to meet in order for them to require you to purchase insurance. Do you know what it is? On this episode, you’ll find out and get a lot more advice about insurance for your business from Insurance Agent Michelle Love.

How much can Amazon sellers expect to pay for product liability insurance?

When you are trying to budget for the expense of product and business insurance you really need to have some figures you can start with to ensure you’re going to be able to pay for it when the time comes. But it’s hard to know exactly what you’re going to need to pay because the premiums depend on the specifics of the products you are selling. How risky are they? What dangers might be involved? It’s not an easy issue to unravel without professional help. On this episode, you’re going to be shown exactly how to know when and what insurance you need in order to cover yourself from lawsuits and liability.

How do you know if you’ve got the right kind and enough insurance for your Amazon business?

Insurance is not the most exciting thing to talk about but if you’re going to run a business you’ve got to make sure you do everything needed to protect yourself and handle any legal claims that may come against you. On this episode Scott is chatting with Michelle Love, an Insurance Professional who is also selling products through Amazon FBA, so she knows the particular issues that Amazon sellers face and can help you navigate the confusion. Find out how you can know the right insurance and the right amounts of it to purchase, on this episode.

Did you know that the Amazon Terms of Service you signed require you to purchase insurance?

The habit we all have when it comes to terms of service is to quickly scroll through and hit “accept.” But that’s a practice that can come back to bite you eventually, especially if you are agreeing to do something in the arrangement – which most terms of service do require. In Amazon’s terms of service, there are requirements on you as an Amazon FBA seller that you buy product liability insurance when you reach a certain sales threshold. Did you know that? More importantly, do you need insurance now? Find out the answer for your situation on this episode of The Amazing Seller.

OUTLINE OF THIS EPISODE OF THE AMAZING SELLER

  • [0:03] Scott’s introduction to this product liability episode of the podcast!
  • [0:30] Introduction to Scott’s guest, Michelle Love.
  • [5:00] The need and importance of insurance for your business and products.
  • [8:03] Product liability insurance: the price depends on the risk.
  • [10:47] When and what do you need to do to prove your insurance to Amazon?
  • [15:30] Additional issues that can impact Insurance premiums.
  • [18:00] How can you know that you’ve got the right insurance for your needs?
  • [22:40] Do you need coverage for products that are waiting to be shipped?
  • [24:00] Guidelines for what business and product liability insurance could cost.
  • [26:20] Is insurance needed for each and every product or just the brand as a whole?
  • [29:56] Don’t forget that you might need worldwide coverage for your products.
  • [32:00] Knowing the difference between “claims” and “occurrences.”
  • [42:21] The Amazon crack-downs on sellers who are not purchasing insurance.

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TRANSCRIPT TAS 293

TAS 293 (Avoiding Lawsuits) Product Liability Insurance 101 and Best Practices

[INTRODUCTION]

[00:00:03] Scott: Well hey, hey what’s up everyone! Welcome back to another episode of The Amazing Seller Podcast. This is episode number 293 and today we’re going to be talking about another not-so-sexy topic and that is product liability insurance and how we can avoid some lawsuits. Hopefully we won’t ever get faced with those but we’re going to need to understand basics about product liability insurance and also

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…just business insurance in general. I think people get those two confused. I know I did in the beginning and I’ve got a special guest on today. Actually someone that I met at our TAS Breakthrough Live Event. Her name is Michelle Love and she is in this insurance business for over 20 years now.

Like I said, I met her at our live event, had no idea that she was an insurance broker until after we got talking and she was there to build her private label business which she’s doing right now as well. Pretty interesting how things happen and then I said, ‘We got to have you on the podcast because you know a lot about this business because you’re someone that’s a private labeler that also understands the insurance business” which I found is really hard to find. I wanted to pick her brain, I wanted to get some of these questions answered, which you guys will hear and this way here you guys can have this connection as well. If you guys want to reach out to her I’ll give you her information at the end.

She’s going to fill in some of these gaps, some of these holes that might not really understand when it comes to insurance on our business when we should go and look for insurance and product liability. All of that stuff. She’s going to go into. Even like some products or some markets that you probably want to stay from when you’re looking at a product. Really, really great conversation and again, I met her by meeting her at our TAS Breakthrough Live Event, which is just crazy. That’s how you make these connections just awesome. Show notes, theamazingseller.com/293, that’s where you’ll find these show notes, transcripts all that stuff.

[00:02:00] Scott: I did want to remind you guys, if you’re listening to this episode on the 12th of December, that’s when this is going to be airing. If it’s after, that’s fine too. You can still go to this page but we’re having a replay of our last workshop of 2016 so you can go to theamazingseller.com/workshop and that will take you to the replay of our last Five Phase Launch Workshop. Basically where we take you through the five phases to launch a product, how to actually pick a product and then launch the product. That will be coming down on the 14th and our private label classroom will be closing then as well.

If you guys are interested at all at watching that or checking that out and it’s before the 14th then go over to theamazingseller.com/workshop. Guys, let’s get rocking and rolling. I am super excited for you guys to hear this conversation that I had with Michelle. She’s awesome and I think you guys are going to love her and she is there as a resource for all of us so definitely take her up on the offer to just look at your policy or maybe steer you in the right direction. All right. Enjoy this interview that I did with Michelle Love.

[INTERVIEW]

[00:03:07] Scott: Hey Michelle. Thank you so much for coming on the podcast. How are you doing?

[00:03:11] Michelle: I’m doing great Scott.

[00:03:12] Scott: I’m excited to have you. We’re going to be talking about a not-so-sexy topic and that is insurance or product liability insurance, regular business insurance stuff but I think it’s something that people need to know and a lot of times you don’t want to talk about it. I’m really excited to be able to sit down and to have this conversation to kind of pick your brain, someone that’s been in this business for a little while. Maybe you could fill people in that don’t really know much about you. And give us a little bit of your back story.

[00:03:41] Michelle: Okay. I’d be glad to. Well I have an accounting degree and my husband is a CPA so I decided to go into this sexier field as you like to refer to, the insurance field. I’ve been doing this for nearly 24 years now. I specialize in commercial risks with mainly municipalities, anything with an unusual type of exposure that not everyone has the expertise to handle the coverage for. I’m also very involved on a state and national level with our insurance company providers and other agents.  I feel like my resources are pretty strong.

I work for a great agency. We just celebrated our 90th anniversary. We’re in our fourth generation and moving in on one direction with the fourth generation in there. This is obviously an area that I’m interested in on a personal side because my daughter and I do have a private label business for about seven or eight months now. I’m seeing a lot of questions in regards to the insurance, and feel like this is something that I could actually help others like myself.

[00:05:05] Scott: Yeah. You know it’s funny because when I first got started I didn’t really even think about anything additionally to just your regular business insurance. Then as you get into the business you start to hear and you start to see and you start to see the requirements and stuff. And then you start to say to yourself, wait a minute here. There’s different things that I think I should be paying attention to now. These are doing your research and it’s really, to be honest with you, it’s really a confusing and I think hard to find the answers to what we really need, what Amazon wants us to have and what is going to be best to protect ourselves when we’re selling our products to random people really. We’re selling our product depending on what you’re selling you have more risks on certain products than others.

But is, it’s like you’re out there weeding through and I got to be honest when I was starting to do the research it took me a long time for someone to even understand what  I was talking about. I was like, here is what I do, and they’re like, “Wait a minute. You have a brick and mortar…” “No, I don’t.” “So where are you selling these?” “I’m selling on Amazon.” “Well, don’t they cover you…” “No.” It’s just really confusing.

So maybe what you can do is give us like a one on one little breakdown here as far as like what do we need to know as a brand new seller… Let’s say someone is brand new right now, they are going to be selling but they are not 100% live right now, what would be the best thing for them to do right now to be prepared for what’s to come? I think that’s probably where we should start.

[00:06:38] Michelle: Okay. As far as the insurance aspect, if you’re brand new, you’re probably not hitting the minimum threshold state Amazon has put in price for the business sellers which is a gross, not net, but gross sales exceeding $10,000 over a three month period. New sellers probably aren’t hitting that but it’s something that they need to be thinking about and obviously when they are in the product investigation phase they may want to stay away from things such as ammunition or things to do with automobiles, those sorts of high risk, firearms, those sorts of products, Might not be the best avenue for them as far as the insurance goes.

[00:07:31] Scott: Yeah. So finding a product that you’re saying that then is going to be like highly unsafe or something that could be a risk for someone that’s operating or like you and I have talked about this at our event there in Arizona. We talked about like baby products and stuff like that. There’s certain things you probably want to… Something goes on in your mouth, like stuff like that. So maybe you could even talk a little bit about that. Like when someone is going into this like not thinking about insurance or thinking about a product that’s risky or that could have a liability, is there any product that stands out to you or markets that you would say like if you’re just starting, this is going to add a whole another component to it that you might not go into right now.

[00:08:15] Michelle: Yeah. There’s sort of things what from an ammunitions standpoint, anything with the autos, anything that a lot of times that you put on your body or in your body are very hazardous and harder to place the insurance for. We do have, one of the companies I’m placing most of the coverage with right now, they have two different options. One is a medical or MD policy and that’s more for any sort of device possibly used in the medical field. It’s not necessarily for supplements and those sorts of things but I do have other markets for those. The other policy is basically everything else.

Of course the rights are based upon how risky the product is and so if you’re doing paper goods or stationary or if you’re doing just general needs, garlic presses for example, that’s not a high risk category but when you get into more, the health and beauty and some of those areas within Amazon that are gated, they’re gated for more reasons than just to restrict the number of people in there. It’s because they want to make sure that those sellers are doing it the right way because there is such a liability involved.

[00:09:53] Scott: Again, I think some people that I’ve talked to were thinking about essential oils and stuff like that and there are certain ones in that. Again, that would probably be fall under beauty or personal care and a lot of those sometimes have hazmat areas where you have to be careful and then Amazon immediately will just shut your listing down for whatever because you’re not supposed to be selling that or you have to have a special account to do that and I’ve just heard some really bad stories with that stuff. I’d just tell everybody that’s just starting especially, again listen to what Michelle is saying, like go after something that’s not going to be harmful outside of as far as like topical or anything like that. I’d stay away from that personally. It’s just going to make things a lot simply moving forward.

So, let’s say for example though we’re starting to sell, let’s catch everyone up. Like let’s say everyone is, they are selling now and they are at that $10,000 point, they’re making 10,000 bucks a month which is awesome, it’s grossing, they’re not making, putting it in the pocket but they’re grossing it which is great. Now, does Amazon just notify you and there’s like a trigger that gets’ set or there’s kind of like your responsibility to go ahead and get your coverage and then submit it to Amazon or do you not submit it to them until they actually ask for it? Like how do you treat that? Or what would you recommend someone do in that situation?

[00:11:25] Michelle: Well, I’m not an attorney. However I will say that you do sign the agreement that you will abide within their terms of their agreement and within there is the insurance and when you hit that threshold that they outline and within the US again, those are the three consecutive months of 10,000+ in gross sales. It’s different for Canada and other marketplaces. But once you hit that you’re supposed to go ahead and purchase the insurance and provide Amazon that proof of coverage in the form of a certificate of insurance and basically I have not heard of anyone being picked out by Amazon that they don’t have the coverage yet.

However, I think it will be something they’ll crack down on. The more that this evolves, the more that there are all product liability claims out there. In that instance you and I would be named individually in our claim but also Amazon and so they ‘are going to crack down on it the more that they’re named in any sort of product liability claim or lawsuit. You do sign their terms of agreement that you will carry the coverage once you get to that threshold and you know as well as I do if Amazon decides to check your account they’ll put a hold on your account immediately if you don’t adhere to those requirements.

[00:13:08] Scott: No, I agree. It’s one of those things and again I’m playing the listener that might be new and that doesn’t… Or maybe that’s not new, maybe hasn’t thought about this yet. You cannot do that and then you can take that risk but if you get that email, that dreaded red flag up in the left hand corner that basically says there’s a notification and it’s like a warning, it could be a bad email. We’re not here to scare anyone. I don’t want to scare anyone. I want people to be prepared and I want people to hear it from you that kind of understands the insurance side of things but also understands the ins and the outs of coverages but then also how to abide by their terms of service. That’s really what I want to do here for people. Now, the other question… Go ahead.

[00:14:00] Michelle: Just try and quiet that with people that try to get a car insurance just to get their licensing at the courthouse and then they let it lapse. Well there’s, really you’re not doing yourself any good because this coverage is there for a reason and it’s not just to give Amazon a certificate of insurance. It’s to protect you in the event something does go wrong.

[00:14:24] Scott: Yeah. That makes total sense. The other big question I get from a lot of people is, okay let’s say that I get product liability insurance and we’ll talk about the differences between business insurance and product liability in a second but the one I get a lot is, “Okay, I’m buying products from… I’m having them manufactured in China how do I get insurance on a product that’s made in China here in the States.” I know firsthand the minute, when I was asking for quotes, I would mention that, they’re like, “No,” as soon as you do that, they’re not liable and we’re not going to cover it because we don’t know all of the ins and outs of the factory, the manufacturing and all that stuff. Maybe you can address that.

[00:15:07] Michelle: I can and I can tell you I’m an independent insurance agent which means the I represent basically a wide array of companies and as a result I’m very familiar with those companies and their requirements. I can say that 90%, maybe 95% of those would stay away from a Chinese produced product because their checks and balances aren’t in place as they’re in the US and other countries. However one of my very good companies that I work quite a bit with has developed a product that is specifically it’s been developed specifically for an Amazon seller sourcing from China with that kind of customer in mind. They do not have an issue with the Chinese products and like my daughter on our business I’m listed as the manufacturer according to the insurance.

I am the one producing it, making it even though I’m getting it from China I’m listed as the manufacturer. Then we do also with this private labeling you also have freight forwarders. You have other people that might be involved on your chain of acquiring products that add extra checks and balances along the way and all of that makes a large difference in your premium as far as reducing it. There are companies that we write with every day on goods manufactured in the United States and it might be the exact same thing that we could source from China but they won’t touch it. It can be a big concern.

[00:17:09] Michelle: However, I do have a really good product that understands this business is the best way to put it.

[00:17:18] Scott: What you’re saying as far as product. You’re talking not in your Amazon business, you’re talking about your product as far as like you have a policy that can handle this type of situation.

[00:17:29] Michelle: Yes, I do. The Chinese quite part of the equation is removed.

[00:17:36] Scott: Okay. Got you, got you. Okay. That’s good and actually we’ll mention that at the end. We can let people know how they can get in touch with you and know more about that. Let’s just take a minute here and maybe go through a little bit of like what it would look like because I always look like, I’m going through this right now, even like my health insurance. It’s like you read 10/15/20 different policies and this one has this thing changed and this one here has a higher deductible but then you have less… You’re always thinking to yourself, you’re just getting kind of like I guess, you’re getting confused so this way here you don’t understand it and then when something happens you’re like, “Oh, it didn’t make sense so I figured it was right but I thought I was getting something and I really wasn’t.”

How do we know that we’re getting a policy that’s going to cover us and not just like almost like be like if all of this stuff aligns yes we’ll cover you but if one of these things is out of alignment, “I’m sorry, we’re not going to be able to help you.” You’re going to pay extra amount of dollars every year. That’s the big thing with insurance that bothers me to be honest with you because you really don’t know unless you have someone like you that can actually determine kind of like go through that, which we have someone here locally that we’ve met since we moved to South Carolina that took the time to sit down, a broker in a sense that says, “This is what all this means.” Almost like a translator in a sense that says, “If this happens, yes you’ll be covered. If this happens, no you will not be covered.” So make sure this doesn’t happen kind of thing.

[00:19:10] Michelle: Right and insurance is very confusing. It’s a good tool to help you fall asleep at night when you’re wanting to read a policy. I see sometimes on the Facebook groups in other people that I’ve met along this journey on the private label side that say they got their policy from a Capital One or State Farm or one of those. I’m not picking on them because I’ve great respect for those captives is what they are called. Captive Insurance companies. Whereas I’m an independent and they are captive, it’s just different type. They don’t understand this and that’s not what they normally deal with. As a result, they may ride on the general liability policy for $500 and they think that they’re covered and just like what you said.

What happens if things happen down the road then you find out oh I don’t have coverage because this is just a general liability policy doesn’t cover product liability. That’s a huge problem and I see it in there on the groups and I bite my tongue, but I just say always if you want me to look at you policy I will look at it and I hope it is that cheap for you but if it is it most likely not the coverage that you need to protect you in the event that you have a part in your garlic press pops off in your restaurant and somebody chokes on it. That’s a product liability claim.

[00:20:54] Scott: Okay. For people to understand as well, you touched on it there, people get confused because there’s a product liability policy and then there’s a business liability policy. Maybe just explain quickly, just myself personally like a general liability to me would be like if someone tripped and fell in my office then they’re going to get covered. I’m going to pay the doctor bills up to a certain point or a certain amount, whatever the policy is. A product liability is that product when that person gets that product, if they use it and for some reason it malfunctions or something happens that they hurt themselves and it was proven that the product was the reason why. Then that policy would pick up from there. Is that correct?

[00:21:40] Michelle: Exactly. That’s real good explanation actually. The product liability covers if your product that you’re selling causes bodily injury or property damage to a person or property. Your general liability policy won’t pick that up. There’s an exclusion for product liability. It gets a little confusing but the product liability policies that you purchase if it does have product liability, it will have the general liability attached in there as well and for the most part most of the private label people I’ve talked to and I’ve written their insurance do not have a separate office necessarily where publics come in the end and really don’t have much of an exposure on a general liability side. All their exposure is on the product liability.

[00:22:41] Scott: The other question I get a lot of times too is like, let’s say Amazon has my product in my warehouse and their warehouse catches fire. That’s on Amazon, right?

[00:22:53] Michelle: That’s on Amazon and everything that I have found and unless they tell me differently our products that are stored in their warehouses becomes in their care, custody and control and they have warehousing type coverage or those products of ours in their warehouses. Everything I have found that’s the way it is. Rarely again in the ones I’ve talked to and have written coverage for or talked to rarely do the private labelers store their products in their home or their office or warehouse on their own unless  it’s just in a transition phase where you’re getting it in and you’re sending it back out. Most of the time it’s in Amazon’s warehouses.

[00:23:44] Scott: That’s again, people just they don’t’ really understand that… I gotta be honest it’s tricky. Amazon does try to push as much off of us as they can so that way there just like sales tax and all that stuff, that’s a whole another discussion which we had but they do try to push as much as they can on the seller to handle the stuff. The other big question and you knew I was going to ask you this but a lot of people want to know, okay…

Well, I got two questions. One is they always ask how much am I looking for like product liability insurance? What’s the rate? I know that’s a hard question to answer because there is some variables there but can you give someone like just a basic idea of… Some people can think it’s going to be $500, it’s going to be $5,000, it’s going to be $10,000. Where can we expect to pay if we’re doing that $10,000 or $15,000 a month?

[00:24:43] Michelle: Okay. I was prepared for that question. I just did some research on some of the ones I’ve written already and using for example this one is just product liability, it’s a pretty vanilla type risk, it’s not very risky. This one, the receipts are $100,000 a year gross receipts and the premium $1,650. This other one, the gross receipts are closer to $250,000 on this and the premium was $2,800.

[00:25:26] Scott: You’re saying gross receipts meaning that was that they generated in revenue?

[00:25:30] Michelle: Yes. Gross revenue before the Amazon numbers, that sort of things.

[00:25:36] Scott: So basically as you go up in revenue that’s where the insurance would continue to increase as well.

[00:25:43] Michelle: Yes it is all of the product liability policies out there in the marketplace are based on your gross sales before expenses.

[00:25:53] Scott: Okay. I knew that. People listening might not have known but that I actually knew because I have a policy and I know that as it goes up you have to continually increase but if you’re making more money, obviously you’re able to offset that. That makes total sense. Here’s another big question. Let’s say, I have one product and it’s doing that $100,000 but now I’ve added three more products. They’re similar in the space but they’re not the same product. Does the brand get the liability insurance on all products across the brand or is each product insured for liability? If that makes sense. Hopefully it does.

[00:26:38] Michelle: It does. It makes sense. Basically you would ensure your LLC, your official corporate name and all branding underneath the fact. Then what happens in that case is sometimes what if you do have a very high risk type product and a lower risk? Sometimes we might have to carve out the high risk to put it with a different broker because of the company you currently have or your other coverage won’t write it. In that instance we can do that but we want to try to avoid doing that very much because you want to have one policy that would respond because it’s in your name of your corporate name.

That’s what Amazon really would like and that’s the way we prefer and the companies prefer to write it is old habit. You might start out with doing garlic presses and then moving to cutlery, using knives later and then that might be higher risk and the rating would be based upon the rating for the garlic press would be one premium and the writing on the knobs would be a different premium.

[00:28:04] Scott: If I launched a garlic press and a lemon press, that’s basically just going to be under the same thing. My policy necessarily isn’t going to go up. I’m going to let you know that that’s what I’m doing so you have those documented but you’re really only increasing my premium if I start generating more revenue. Is that correctly?

[00:28:26] Michelle: Exactly and most of the time I will say that these policies are audited just as if you had a workers compensation policy which is the policy that most people are familiar with audits on and basically you provide your tax returns or proof of what your premiums are and you can use your Amazon reports as well. If you take one out and you’re estimating annual gross sales of $100,000 but you’re actually doing that per month you get hit with an audit with an additional premium at the end of the term.

[00:29:02] Scott: That makes sense. Let’s say you’re doing, you did $100,000 before and then this year it looks like after the six month point you’re already at the $100,000 would you just contact your insurance and just say, “Hey listen, I think I’m going to be going up,” and then they can adjust that accordingly rather than being hit at the end.

[00:29:20] Michelle: Absolutely because you’re get hit at the end with and audit then you’ll also have an additional due because of the higher number.

[00:29:29] Scott: I got you. That makes sense. You almost got to do your own internal audit really you should to just say like where am I so I can make sure that I stay up to date with my policy.

[00:29:39] Michelle: Yeah, especially during your growth phase, that you’re growing your business and escalating it on a fast pace than yes, you definitely should adjust accordingly.

[00:29:51] Scott: Now, you had something else here on our notes that I’m reading that I wanted to make sure that we addressed too. You had Ocean Cargo Insurance and then also had Coverage Worldwide. Can you maybe address both of those?

[00:30:05] Michelle: I will, Coverage World Wide I would say if you have a policy in your and it’s $500 premium and you think you have the right coverage. Probably the best place to look to see if you have coverage is if it says worldwide or not. Most of the time your liability policies would be only if a claim was brought in the United States. But the policies that I have quoted again taking into account this type of business and the way it’s evolved our worldwide coverage. The claim in Mexico or brought in China or back against you with a U.S. based company, the coverage is there for you worldwide.

[00:30:53] Scott: Okay.

[00:30:55] Michelle: It’s a big deal, it really is. Then as far as cargo coverage that can be… There again I use a different company on that because I have another good relationship on the ocean cargo products. But this one can be for your products as they’re being shipped to you by sea. You can also change it and have it be by air cargo or other types of means.

[00:31:26] Scott: Really that’s insuring though that like let’s say the boat sank, right?

[00:31:33] Michelle: Yes.

[00:31:34] Scott: But technically if you’re using a freight forwarder I’m not sure, do they… Some of them may have that built in and that might just be a premium you pay. I’m not quite sure on all of them. I think Flex Port does but I’m not 100% sure. But if you want, like you said it’s almost like getting fire insurance or whatever. You’re basically insuring your product to make sure that it gets from point A to point B.

[00:31:52] Michelle: Right. That’s to cover your loss in your product. You do have to look at the freight forwarders. A lot of times they do provide the coverage or provide some coverage but they’re passing it along to you and it’s usually pretty expensive. They may not have the adequate limits. They might have a $25,000 per customer limit and you might have $100,000 in cargo coming in across.

[00:32:19] Scott: That’s a good point. I can see that. I understand.

[00:32:20] Michelle: It’s something to always look at especially when you’re using large numbers of product coming across by boat.

[00:32:29] Scott: The other thing I want to address here is let’s say that you have a claim. Let’s say that you put a claim in and let’s say that it’s granted and it’s been made. What’s the difference between that and an occurrence?

[00:32:45] Michelle: A claims made versus occurrence policy?

[00:32:48] Scott: Yes because some people say well I’m going to put a claim in and then they’re going to cancel my insurance. That’s what we always think when we get… If you get an accident you’re like, “If I get into accidents they’re just going to cancel me.” What do we have to know about that?

[00:33:00] Michelle: There’s really two questions in what you just said there and it’s a very confusing topic. As far a claim, if you have a claim you would call my office, email me, text me and we do have a dedicated claims person in my office. Then they in turn report it to the company that we put you with and then that claims adjuster handles your claim for you. As far as the difference between occurrence-based and claims made-based policies, this is one of the biggest concerns I have with people writing insurance for private labelers.

Product liability, policies are written on a claims-made basis versus an occurrence. Basically what that means is you have to continuously renew that policy because you have what they call a retro date which is the inception date of your policy; the day your policy begins. Basically they’re covering claims back, it might be five years down the road but they are covering claims back to when you first took it out and that product that you sold back four years ago causes injury.

If you can kind of think about it this way claims-made policies most of your medical malpractice policies are written on claims made or errors and admissions coverage are. Product-liability coverage is written this way as well and there again a lot of insurance agents don’t deal with claims-made policies. I do and I think that’s where a lot of my understanding of this product comes from is because I’ve dealt with this most of my career and handling claims-made versus occurrence.

[00:34:55] Michelle: Then the biggest issue you have there is at the time or when you decide to sell your business or you discontinue the garlic press and you move to the knives instead because garlic press is just… That’s all you’re doing. Well, you do need to buy what we call tail coverage or extended reporting because you still have an exposure down the road from somebody that bought your product two years earlier.

People that just close up their doors and cancel their insurance you’re not protecting yourself because you can still be sued and still have claims in the future from prior policy periods. That’s why these policies are written on claims made basis and again a very confusing concept. A lot of my colleagues that don’t deal with it don’t understand it fully and that’s just a concern I have for people that are trying to obtain this insurance and obtain it correctly whether they have the right policy or not.

[00:36:03] Scott: That’s important. Again, we’re throwing a lot of stuff out there for people and if you guys are just starting or if you haven’t done this yet start looking into it. It doesn’t mean that tomorrow something bad is going to happen. It’s just you want start planning for this. It is part of this type of business; when you’re selling a physical product. It’s getting to people’s hand and they’re using it, so you definitely want to just try to understand it. I think Michelle I think you’re describing it really well as my dog here is barking.

This will be interesting. To me it’s something that a lot of times you don’t want to talk about, you just want to not worry about it until something bad happens but we want to plan for it as best as we can. I think that having you share this is helpful. I think it can just at least give people the information so this way here they can be prepared and again reach out to you. If they have their own broker that they want to deal with that’s fine, we just want you to be prepared with what we feel that moving forward is going to help protect you and your business. Now, again we’re not legal advisors, we’re not here giving any legal advice or anything like that but maybe we can just address this real quick because… Well I want to address two things actually.

The one is as far as the amount of coverage I think Amazon requires you to have it up to a certain amount. I don’t know if it’s a million or two million per occurrence, is that correct?

[00:37:35] Michelle: It’s a million for the United States. Yes, it’s a million.

[00:37:38] Scott: You have it up to a million dollars, that’s what they want written. Do you normally see that that’s all you write or do you write for more than that?

[00:37:47] Michelle: It depends. For the ones that I just kind of used as examples with the numbers that I gave you those were all for one million dollar policies which met the Amazon requirement. But if you’re doing a lot more sales and you have obviously a larger at risk then you definitely should go up to two million or…

[00:38:12] Scott: Does it jump the premium that much by going up to two million?

[00:38:15] Michelle: That’s a big misconception, it’s not double the premium, no not necessarily because most of the time it’s just an increment usually 25%, 35%, 40% more. It’s not just duplicate doubling of the premium. There again that’s all just talking in general terms there. I don’t have the pencil to be able to place the premiums but I can just tell you from what I’ve seen over my career.

[00:38:46] Scott: Then the other thing is we’re really getting this insurance to protect ourselves, that’s what insurance is. It’s to protect ourselves, our business, our livelihood. But let’s just say for example we set up our LLC. Our LLC were really doing that because we want also create that business entity and we want that to be I guess the target if you will that if someone was to sue they’re going to go after the LLC.

The policy what that’s really doing is hopefully it’s going to intercept even that to the point where they would have to go after the LLC and then in turn if there was any holes in that they could go after you the owner but let’s not even go that far. The product liability really just so people are understanding this correctly is to protect you from being sued and if you are sued it’s going to be taken care by the policy and it won’t even get to the LLC.

[00:39:42] Michelle: Exactly as long as it’s within that policy limits. Another area to consider in these are the legal and the other expenses. It might be you’d have… If it goes to a trial and they bring in expert witnesses your legal expenses could be even more than the judgment. That is covered by the policy as well where some policies it might not be.

There’re lots of really scary gaps that could be out there for people who are doing private labeling or selling this… It doesn’t matter if this is on Amazon or if it’s one Etsy or any of the other platforms, the coverage would fall on you and your brand.

[00:40:34] Scott: Got you. I think that’s important to know that when you’re getting this policy it’s there really to protect you yes but it’s to protect the business. Also I think you brought up a good point there is that and I’ve heard both stories there as far both sides of that where some policies will say we’ll cover you if there’s a claim and we’ll pay out on that suit but we will not pay the legal fees. That’s a big one because obviously your team… Not your team, but the policies team of attorneys is going to really kind of fight that so they don’t have to pay the claim.

They’re going to be trying to really fight the claim and try to prove them wrong for… Maybe they’re not wrong but if, let’s face it, there’s people out there, there’s attorneys, there’s firms all that that are trying to put these things into people’s heads that if you pinch your figure on the garlic press you can sue, just want to let you know and then they’re going to start calling. That’s where a legal team that would be wise to this could say wait a minute here, show me this, this and this.

Where did it malfunction? Wait, by the way, and then they can prove that in the court of law and all that stuff and then it wouldn’t even get to a payout. Again, an insurance policy is really going to make that to be making sure that they can do their best job to make sure that if it is a claim it’s a legit claim.

[00:41:57] Michelle: Exactly. You want to make sure that the policy covers your legal expenses because that could be several tens of thousands of dollars in just a very small claim.

[00:42:09] Scott: That’s actually huge. I think we’ve covered a ton here. Is there anything that you think we left out or that we should address?

[00:42:18] Michelle: Not really other than it is something I foresee Amazon cracking down on given the number of people out here doing private labeling. I also see that it is something that I believe everyone should have whether they’re at that $10,000 limit or not but I do see that it’s a confusing topic. I don’t want to hold myself out as the expert but I have the expertise on the insurance side and I’m also private labeler so I understand how the process works.

[00:42:58] Scott: I think that’s important.

[00:42:59] Michelle: I do have the relationships with the companies to be able to explain it whereas some agents wouldn’t have that understanding of how it all works.

[00:43:10] Scott: I think that’s huge though. I think it is because again when I was calling around for a while in the beginning no one really understood. I had to keep explaining it. I wish I had a recording so then I didn’t have to go through the whole thing every single time. It’d be nice to actually talk to someone that actually is a private labeler and that also understands the insurance side. That is a pretty good thing.

Guys listening, if you want to learn more about this, if you have questions definitely reach out to Michelle. Michelle why don’t you tell people how to get in touch with you. We’ll put it in the show notes as well but how can people get in touch with you if they have any questions or if they want to enquire about a policy?

[00:43:46] Michelle: I’d be glad to. My agency that I work for is E.M. Ford. It’s actually a retired U.S. senator who’s now deceased but Wendell Ford’s family. He was a former governor of Kentucky and then a U.S. senator. It’s his office, his family’s office and we are located in Owensboro, Kentucky. That does not restrict me on writing all over the United States. I do want to make sure that’s known. My email address is mlove@emford.com and our website is just www.emford.com.

[00:44:33] Scott: Cool, that’s easy.

[00:44:34] Michelle: It’s all very easy. My phone number is listed on our website. I’m in most all of your Facebook groups and people could always private message me there, they can email me through our website, they can email me directly. We do have a very quick response time and as far as quoting, we turn around quotes on these types of risks very, very quickly; days in most cases. The other thing is I’m not a licensed consultant but I would be glad to look at anybody’s current policy just for extra set of eyes and just making you recommendations that I might see would be needed.

[00:45:19] Scott: That would be really cool. I’ll definitely link everything up here on the show notes. If you guys are listening right now and you have any questions definitely reach out to Michelle. I was fortunate to meet Michelle in Arizona at our TAS Live Breakthrough Event and I wasn’t even aware that you were doing this insurance thing. You were there for your private label stuff and then we got chatting and I’m like, “Well we got to have you on the show,” because this is really good information.

I’ve always been asked this. I’ve got a couple of ins as far as but not one that I personally… Like with you I had a conversation with you and I understand that you’re also private labeling. If I can ever bridge that gap I want to do so and I think that you’re an honest person so that’s another big one here. People think about insurance and they think about things we watch on American greed and stuff.

[00:46:08] Michelle: You bring that up Scott and I do want to just to say this. Even when we were in our live TAS live event no one talks about their product. By writing this coverage I do know what people are selling and I can… It’s my word but my word is all I can communicate here. I don’t do this because I’m trying to find out who’s making the best money or in what products. Your confidentiality is secure and it’s a huge deal with the private label world and there would never be any instance of me using that for personal gain or sharing that with other people. Our firm is rooted in integrity and professionalism and if I don’t have that then I don’t have anything.

[00:47:01] Scott: I agree. I totally get it and you’re right. People have to feel confident in who they’re dealing with especially when we’re talking private labeling because we don’t like to reveal our products or sometimes even our markets. But I appreciate that, I do appreciate that and I know that you know because you are a private labeler that you know the importance of that as well. It just really does lend itself nice to each other when you kind of do with both things so you can kind of understand where we’re coming from which I think is really great.

I think we’re going to wrap this up. This has been amazing. Show notes we’re going to have them ready for you guys, we’ll have transcripts of this entire thing, we’ll have the links, we’ll have the contact information for Michelle. Michelle thank you so much for coming on and spending time out of your busy day. I know you’re a pretty busy mom as well. I just want to say thank you so much. I really appreciate everything that you’ve shared here and also I enjoyed hanging out with you there for a couple of days there in Arizona as well.

[00:47:59] Michelle: It was great to finally meet you and some of the other guys that are on your team and I’m glad to be able to bring this little bit of expertise to the mix and hopefully some of the listeners will take me up on an offer to look at their coverage and see if I can help or tell them that they have exactly what they need.

[00:48:22] Scott: That’s great. I appreciate it and I’m sure that you’ll be getting some people reaching out to you. I’m just going to remind everyone definitely reach out to Michelle. She’s giving you guys like free information and a way to kind of see if what you’re doing is right or maybe she can say maybe you don’t have to go as heavy there, maybe we can go a little bit… There’s some advice there I’m sure she can give you.

I would say just definitely reach out. Michelle that’s it, that’s going to wrap it for our little conversation. I was to say thank you though once again, I appreciate you and will talk to you soon.

[00:48:54] Michelle: All right I appreciate it, thanks.

[00:48:56] Scott: A great interview, great information that Michelle was able to really let us know about because it can be confusing. I do want to say though, if you’re just starting don’t get yourself all worked up about this stuff. It’s like when it gets to that point then you’ll figure that point out and we just kind of did that for you here and you have a great resource now. When you are ready you reach out to Michelle and you ask some questions.

Again, I learned this from Pat Flynn and I think he learned it from someone else but I’m going to pass it onto you guys and I’ve said this before, I’ll say it again, “Just in time learning.” Don’t overwhelm yourself with everything you think you have to learn right now. If you’re still in the product research phase, stay in that phase. Just stay in there until you get out of that phase then move onto the sourcing phase and then the prelaunch phase and then the launch phase and then the promotion phase. Those are the five phases.

Just don’t get yourself all worked up but I do think it’s important to understand these different elements of business. This is business, this is what you have to understand. I do have the resource here for you that you guys can download the transcripts, you can download the show notes all that stuff over at theamazingseller.com/293. You might want to do that, also all her information will be there so you can reach out to her when and if you need to.

I’d also like to remind you right now depending on when you’re listening to this, if it’s on the 12th or the 13th or the 14th of December I just wanted to remind you guys if you want to watch the replay of our five phases workshop where we walk you through those five phases to launch a product. It’s still up until the 14th, theamazingseller.com/workshop. If it’s after that you can still go to that page and then just register for an upcoming one which will be after the first of year.

If you’re interested go ahead and do that, if not cool. Hopefully you got a ton of value from this episode. Again the show notes, theamazingseller.com/293. Just want to say thank you guys so much for listening.

[00:51:02] Scott: We are approaching 2017, that sounds weird. We are approaching 2017 and I cannot believe it. I’m excited though. So many cool things that I’m looking forward to and just another part of the journey.

We’re going to be talking more about how to get yourself prepared and everything for that in upcoming episodes. But I just want to say guys I appreciate each and every one of you for hanging out with me on these podcasts and hopefully you’re getting a ton of value that you can implement into your business. I have to say a lot of you that have wrote in ether it’s on a review, on iTunes you guys are awesome I want to thank you, or the blog post or just an email and said, “Scott it’s just so awesome that you’re giving us actionable content it’s not just like theory or it’s not just like…” There’s motivational stuff all the time.  

I like to be able to motivate if I can, if I can motivate you to take action that even better. But I just know a lot of you have said that you like the podcast because of the actionable content and I really want to continue to deliver than kind of content for you. I just want to say thank you everyone that’s a listener, everyone that’s left their reviews or the emails or whatever, thank you notes, I just want to say thank you. I really do appreciate every single one of you.

All right guys, that is going to wrap up this episode and I just want to say as always remember that I’m here for you and I believe in you and I’m rooting for you. But you have to, you have to, come on say it with me, say it loud, say it proud today, come on, “Take action.” Have an awesome amazing day and I’ll see you right back here on the next episode.

[END]

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