As an online retailer, the majority of your interaction with customers is virtual, that is, your business is conducted online rather than on a street front, therefore your public liability risk is low. Product liability cover, on the other hand, is a critical part of any online retail business, and is generally included as part of a Public & Product Liability insurance policy.
If you sell items online, such as electronic equipment, vitamins and supplements, jewellery, baby clothes, or even cosmetics, you could be held responsible for any damage or injury the products you sell cause.
Just like any traditional retail business, your eBay store is subject to the same laws, regulations and legal liabilities as if you were trading from a street front shop. In fact, liability issues for online retailers are considerably more complex because your online business may cross multiple legal jurisdictions, including international jurisdictions where there are often more onerous consumer and liability laws than those in Australia.
Many eBay retailers are importing goods from overseas and then selling via eBay. As an importer even if you haven’t manufactured or altered the items yourself, you could be liable for compensation claims. The ease of doing business online often means that product supply chains are long and international in nature. You may be purchasing a product from a wholesaler in Hong Kong who buys from a manufacturer in China, Taiwan or Indonesia. If you can’t identify the manufacturer or if the manufacturer has gone out of business, you could be held responsible for any of their products sold by you.
Let’s look at a simple example. Let’s say you are operating from Australia and import electronic widgets from China and then on sell the widgets via your eBay store to somebody in Dallas, Texas. The widget malfunctions, overheats and causes a fire. Damages occur at the purchaser’s premises and the purchaser suffers a personal injury from burns.
Your customer in Dallas is aggrieved and sues you as the retailer in a Texas court. – How will you fund the defence of the claim in a US Court? If damages are awarded for the plaintiff in the US, the plaintiff’s Dallas lawyer sends the US Court Orders over to their Australian office or Affiliate who then serves you with a claim of enforcement of the orders in Australia. All of a sudden, a simple, part-time, online business, could lead you to personal bankruptcy.
Unfortunately these types of product claims are being initiated every day and the consequences for the unweary and uninsured online retailer can be devastating. Don’t forget, even if you don’t sell your products outside of Australia as an importer you may be deemed to be liable for any damages your products cause.
Many direct insurance companies still refuse to insure online businesses, or lack products designed specifically for e-commerce. An experienced business insurance broker such as SMART Business Insurance will be able to assist you to:
- Determine what your risks are and what insurances you will require
- Place those insurances with reputable insurers.
Call SMART Business Insurance on 1300 542 573 or visit www.smartbusinessinsurance.com.auGoogle+