How Amazon disrupted product liability

Product liability law generally falls within the purview of the United States. However, third-parties who sell their products through Amazon may be based in other countries. (Photo: Shutterstock)

Amazon is the quintessential example of a modern-day “disrupter.” From books to electronics to groceries and media, the trillion-dollar behemoth has significantly impacted almost every sector of the economy. Perhaps less noteworthy to the general public, but significant to insurance professionals, is the impact Amazon has had on product liability law. The innovations that propelled Amazon past Walmart as the largest retailer in the world have called into question traditional understanding of what it means to be a “seller,” and specifically whether Amazon should be subject to seller liability for the products that third-party sellers list on Amazon.com.

Product liability law is generally within the purview of the United States. Most have adopted the principles set forth in the Restatement of Torts, the leading treatise on tort law in the U.S. The Restatement provides that “one who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm.” The Restatement does not distinguish retailers from manufacturers; it applies to all sellers within the supply chain. For example, Walmart could be found liable for selling a defective laptop battery even if the battery was designed and assembled by a Chinese corporation. Walmart could seek contribution from the Chinese corporation but the burden would be on Walmart, not the injured consumer.