Courts continue to disagree as to whether Amazon is liable for defective products sold by third parties on its website. Amazon does not neatly fit into the traditional definition of “seller” in products liability law, which historically involves conveying title or possession of the product to the customer. Although Amazon often is involved in the sale of and/or logistics for third-party products, Amazon does not pass title to the customer and sometimes never touches the product. It is crucial for subrogation professionals to understand the ways in which third-party products are sold on Amazon because it is often a determining factor for courts in defining Amazon for purposes of products liability.
There are two ways in which third-party products are sold on Amazon:
- Fulfilled by Merchant: When a product is fulfilled by the merchant, Amazon has the lowest involvement in the transaction. The merchant maintains possession of the product and stores it until it is purchased, at which time the merchant packages the product and delivers it to the customer. When the merchant fulfills an order, Amazon does not convey title or possession of the product to the customer.
- Fulfilled by Amazon: Amazon offers a logistical service to third-party sellers called “Fulfillment by Amazon,” which is often referred to as “FBA.” When third-party sellers are part of the FBA program, Amazon provides storage, packaging, and shipping for the products of third-party sellers. When a product is sold through the FBA program, Amazon conveys possession, but does not convey title (because Amazon does not own the product).
In Skaggs v. Amazon, 2021 La. App. LEXIS 1941 (La. App. 1 Cir 12/15/21), a laptop battery purchased from a third-party seller on Amazon exploded and caused personal injuries to a graduate student, Cassandra Skaggs (Ms. Skaggs). The battery sale was fulfilled by a third-party seller, called “Talented & Gifted.” Ms. Skaggs alleged that Amazon was liable for her injuries because she purchased the battery on Amazon’s website. The Louisiana trial court granted summary judgment in favor of Amazon and the appellate court affirmed the decision.
Ms. Skaggs alleged that Amazon was a “seller” of the battery under the Louisiana Products Liability Act (LPLA), which defines a “seller” as “a person or entity who is not a manufacturer and who is in the business of conveying title to or possession of a product to another person or entity in exchange for anything of value.” LSA-R.S. 9:2800.53(2) (emphasis added). The court ruled that Amazon was not a “seller” because Amazon did not convey title or possession of the battery to Ms. Skaggs. Rather, both title and possession of the battery were conveyed by the third-party seller, Talented & Gifted.
Ms. Skaggs also argued that Amazon was liable because it knew or should have known the battery was defective because Amazon monitors the safety of third-party products and provides warnings to consumers if a risk is identified. However, there were no safety-related reports to Amazon regarding the battery prior to Ms. Skaggs’ injuries. Accordingly, the court held that Amazon had no prior knowledge that the battery was potentially dangerous to Ms. Skaggs.
Although Skaggs was decided in favor of Amazon, the decision suggests that a subrogating carrier may be able to pursue Amazon for defective third-party products in Louisiana in two ways. First, Amazon may be considered a “seller” of third-party products sold through the FBA program because Amazon arguably conveys possession and, therefore, may be considered a “seller” under the definition of LSA-R.S. 9:2800.53(2). Second, Amazon may be liable for claims involving products that Amazon knew or should have known were defective, depending on whether reviews and/or customer complaints notified Amazon of potential issues prior to the sale to the subrogating carrier’s insured.
Determining Amazon’s liability for a defective third-party product is a case-specific analysis that depends upon: (i) the products liability law in the jurisdiction where the loss occurred, and (ii) the specific facts of the case, including whether the product was sold through the FBA. The subrogation profession must have adequate knowledge of both issues to have a chance at recovering from Amazon in Louisiana.