Amazon Launches $1K Payouts for Customers Injured by Bogus Products to Head Off Lawsuits

Amazon has announced a new policy that aims to reduce the number of lawsuits the company faces over products that injure customers. According to the policy, Amazon will now pay injured customers up to $1,000 when a third-party product causes property damage or personal injury.

Ars Technica reports that Amazon has announced it will begin paying customers up to $1,000 when a third-party product causes personal injury or property damage. Payments of less than $1,000 will be made to the buyer with no cost to sellers who have valid insurance, but Amazon claims it will pay more than $1,000 in situations where a seller refuses a valid claim.

VAN HORN, TEXAS – JULY 20: Jeff Bezos speaks about his flight on Blue Origin’s New Shepard into space during a press conference on July 20, 2021 in Van Horn, Texas. Mr. Bezos and the crew that flew with him were the first human spaceflight for the company. (Photo by Joe Raedle/Getty Images)

An announcement from Amazon states:

Now, in the unlikely event a defective product sold through Amazon.com causes property damage or personal injury, Amazon will directly pay customers for claims under $1,000—which account for more than 80% of cases—at no cost to sellers, and may step in to pay claims for higher amounts if the seller is unresponsive or rejects a claim we believe to be valid. We are also launching Amazon Insurance Accelerator to help sellers buy insurance at competitive rates from trusted providers. We’re excited that these innovations create a more trustworthy shopping and selling experience for customers and sellers in our store.

The announcement comes shortly after the US Consumer Product Safety Commission (CPSC) filed a complaint against the e-commerce giant over the sale of hundreds of thousands of potentially harmful products, including carbon monoxide detectors that don’t work, hairdryers with no shock protection, and flammable sleepwear for children.

The CPSC wants Amazon to take responsibility for items sold by third-party vendors on its platform via the company’s Fulfilled by Amazon (FBA) program, noting that people “who purchase FBA consumer products on amazon.com may reasonably believe they are purchasing the products from Amazon.”

Amazon Employee, Warehouse

Amazon described the new claims process, writing:

Beginning September 1, for products sold through Amazon.com, Amazon will facilitate resolution of property damage and personal injury claims between the customer, the seller, and their insurance provider. Customers can contact Amazon Customer Service, and we will notify the seller and help them address the claim. If a seller does not respond to a claim, Amazon will step in to directly address the immediate customer concern, bear the cost ourselves, and separately pursue the seller. If a seller rejects a claim we believe is valid, Amazon may also step in to address the customer concern; in these cases, sellers will continue to have the opportunity to defend their product against the claim.

Amazon stated that in order to handle each claim, the company “will combine our advanced fraud and abuse detection systems with external, independent insurance fraud experts to analyze the claim. We will present valid claims to sellers and deny unsubstantiated, frivolous, or abusive claims. By doing this work on behalf of sellers, we save them from having to investigate these claims on their own.”