By Matt Lovell

eCommerce

Business

Insurance

Basics for your

Contents

Insurance Basics for your eCommerce Business

2

General Liability 3

Products Liability 4

Business Rating 5

Cyber Liability 6

Ocean Marine 6

Workers Compensation 7

Umbrella/Excess Liability 7

Executive Liability / D&O 8

Business Auto 9

Employment Practices Liability 10

Business Income Protection 10

Seller Expense Defense 11

3Insurance Basics for your eCommerce Business

General Liability

General Liability Insurance is the most basic form of business insurance

and is designed to protect a company’s assets and pay for financial

obligations due to losses from injuries, negligence and accidents that

could occur. It can protect the business from bodily injury and property

damage claims, legal fees, judgments and any settlements that could be

awarded should you be sued.

I’m often asked, “Does my online business really need this coverage?

The easy answer is every business needs a General Liability policy. We

live in a sue-crazy society these days and even if you think your business

is low risk, is it really worth

not paying the small

premiums associated with a

policy? Typically, these

annual premiums range

from $500 to $2,000

depending on the type of

business and risks associated

with it. That’s a lot less than

the cost of a potential lawsuit

which today often run into the hundreds of thousands if not millions of

dollars. And whether you prevail or not, the cost of representation can

be staggering. Attorney fees are typically covered in a General Liability

Policy.

4

Insurance Basics for your

eCommerce Business

Products liability coverage provides the manufacturer, or seller, liability

coverage in the even that one of their products were to cause bodily injury or

property damage to a third-party due to a defect or malfunction of the

product. This includes food, machines, toys, or any other goods sold by the

business to the public. Typical products liability claims includes manufacturing

or production flaws, design defects and defective warning or instructions.

Products Liability

5nsurance Basics for your eCommerce Business

Is your business rated correctly?

Not all insurance agents are created equally and because of this many

ecommerce businesses may not have the correct coverage. Even if you

have a current General Liability policy in force your business may be mis-

rated, over-insured or, more importantly, under-insured. Not everyone

who sells online should be rated as an Internet Retailer. For example, if

you’re selling privately-

labeled products that

are manufactured

overseas, you may

need to be insured as a

manufacturer. If you’re

selling someone else’s

products, you don’t

have this exposure. Be

sure your agent is

familiar with the

ecommerce business;

that they know the

difference between

FBA and FBM.

Business Rating

6

Cyber LiabilityCyber Liability insurance is important for any business that uses

electronic information, and if you have an eCommerce business, we

know you use electronic information. There’s a potential tat you

could be sued for data breach, identity theft or any other cybercrime.

Your standard General Liability insurance policy may not cover these

properly. Cyber Liability policies are continuing to evolve to keep up

with the ever-changing

nature of the threats.

Not only do these policies

pay for legal fees and

judgments, they also

help to repair the brand’s

business and/or brand

reputation.

Ocean Marine is a basic cargo policy which covers ocean and air

shipments, protecting the seller’s merchandise for physical loss or

damage from external causes, shore-to-shore. Enhancements to the

policy include Domestic and Foreign Inland Transit, Warehousing and

Stock Throughput and Goods in Process. As an internet seller, the

odds are very strong that you need Ocean Marine insurance.

Insurance Basics for your eCommerce Business

Ocean Marine

7

You probably know about Worker’s Compensation, but I would be

remiss if I failed to mention it. This is a required policy that helps pay

for work-related injuries that may occur to an employee. The rates

are based on actual payroll figures for the business. Each state has

regulated coverage and some policies may cover employees from

various states in one policy. Other states require that you buy

insurance directly through an in-state program. Your agent will be

able to help you navigate each states’ requirements.

Umbrella/Excess Liability is a separate liability policy that provides

excess insurance should the business be brought into a lawsuit or is

facing a judgment in excess of what the General Liability limits offer.

For example, if a business has a $1M limit on their General Liability

policy and is facing a $1.5 million judgment, the General Liability

policy will cover the first $1M and the Umbrella will pick up the

additional $500,000. If an Umbrella Liability policy had not been

purchased, the business could end up coming out-of-pocket for

$500,000.

Worker’s Compensation

Umbrella/Excess Liability

Insurance Basics for your eCommerce Business

8

Executive Liability policies, including Directors & Office Liability (D&O)

insures there is coverage in place for claims arising out of an

allegation that the corporate officers and/or directors performed

their duties improperly. Generally these types of lawsuits generate

large awards against a board member and company if any wrong-

doing is found. Most D&O policies provide coverage for three types

of exposures:

• Coverage A – Directors and Officers Liability covers a

director or officer for damages and expenses that could

arise out of improper duties on behalf of the company.

This coverage will help to protect officers’ personal

assets.

• Coverage B – Indemnification reimburses the corporation

for monies paid to directors or officers or on their behalf

for indemnification

• Coverage C – Corporate Liability covers claims or suits

filed directly against the corporation

Although most types of business liability policies are Occurrence

forms (you’re covered if you have a policy in place when the action

bringing the claim is committed). Directors & Officers policies are

Claims-made, which means that the policy must be in force at the

time the claim is brought. Continual coverage, i.e., no gaps, can be

very important in a claims-made policy so be sure to ask your agent

about this.

Executive Liability /Directors & Officers

Insurance Basics for your eCommerce Business

9

Insurance Basics for your

eCommerce Business

Most people think that they don’t need Business Auto coverage unless their

business owns an automobile or truck. Ask yourself this:

Do you go to the post office or UPS on company

time? The bank? How about a trip to the warehouse?

If you answered yes to any of these basic questions, then your business needs to

have, at the very least, minimum coverage for Hired and Non-Owned Auto

Liability. This will protect the company in the event that an accident should occur

during company time.

Business Auto

10

Employment Practices LiabilityEmployment Practices Liability Insurance, otherwise known as EPLI,

was created to provide coverage for claims or lawsuits brought

against a business, its officers/directors, and/or its employees and

managers for discrimination, sexual harassment, wrongful

termination, or any other employee-related allegation that could

arise. Most of us think that we could never get hit with this type of

suit as we treat our employees

well. Don’t forget, an allegation is

all it takes to cost you thousands

of dollars in attorney fees, even if

you are ultimately exonerated.

Revenue Protection for your brick & mortar stores is called Business

Income Protection. This can be provided under a General Liability or

Business Owners Policy (BOP). The provides coverage is you

experience a covered loss to your business and it is forced to

temporarily close. It can help you with

• Replacing lost net income

• Normal operating expenses, such as payroll, mortagage

and other day-to-day expenses

• Temporary location expenses and any advertising fees

associated with the move.

Insurance Basics for your eCommerce Business

Business Income Protection

11

The very first of its kind, the Amazon Seller is now able to purchase

coverage to help with expenses should their Seller Central Account be

suspended. Amazon considers every buyer who buys from Amazon

to be their customer and therefore they police their sellers and make

certain their standards strictly adhered to.

Sometimes a business will get notices prior to a suspension to fix

a certain issue, so the seller is able to respond in a manner

satisfactory to Amazon

and move forward without

interruption. Other times it

can be difficult to know

what Amazon is asking for

or worst yet, the

suspension comes with no

prior warning at all, and

oft times through no

wrong-doing of the account holder.

Amazon Seller Expense Defense is amazingly affordable,

ranging in premium from about $27 to $130/month, dependent

on the level of daily expenses you need covered. If you, as an

eCommerce Seller, rely on Amazon sales for any part of your

business income, this is a type of coverage you should

definitely check out.

Seller Expense Defense

Insurance Basics for your eCommerce Business

12

Matt Lovell is a Founding partner at WELL Insurance in

Morganfield, Kentucky and a partner and Vaughn, Geiger &

Associates where he has been insuring businesses for 18

years. Seller Expense Defense was conceived of by he and

his partners, including an Amazon Seller. You may contact

him or anyone else at WELL Insurance at (855) 324-0911.

Insurance Basics for your eCommerce Business

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