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E-Bike Dealer Insurance

With nearly 20 years of experience in the insurance industry, Scott has earned his reputation as a trusted and committed business partner to his clients. His consultative manner, thoughtful evaluation and client-first attitude allow him to make honest, objective recommendations that help ensure the long-term health of his clients’ business and employees. His reputation within the industry has led numerous bike and ski events and organizations - including the American Birkebeiner, the Chequamegon Fat Tire Festival, City of Lakes Nordic Ski Foundation - to seek him out for his advice and knowledge.

Risk is part of running a business, but so is protecting against that risk. It’s important that you understand what exposures you are actually facing so that you can intelligently decide whether to assume those risks or take measures to reduce or eliminate them. This is basic risk management theory, and something I know a bit about, as I’ve been a commercial insurance agent specializing in helping bike industry businesses do exactly that for many years.

Unfortunately, many bike retailers that sell e-bikes end up unknowingly assuming more liability than they would have simply because they make a few inaccurate assumptions. Essentially, bicycle retailers should never assume that they are protected against product liability claims for the products they sell without doing some due diligence first.

Product Liability Insurance

Product liability insurance is used to compensate for injury caused by defective merchandise that it has provided for sale. So, for example, if a bike fork snapped and one of your customers was injured, the product liability insurance policy would pay for damages and defense costs.

The product manufacturer should be responsible for providing this type of insurance on the products they sell, but they don’t always.

So what happens if one of the manufacturers that your retail shop represents does not have product liability coverage and there is a claim? Likely, the plaintiff’s attorney will sue you to recover damages. There may or may not be coverage available to you for this through on your commercial general liability policy as most business owners policies are rated for retail sales and assume that all of the products sold are already covered by a product liability insurance policy

Retailers also have a product liability exposure, but it is generally limited to the work they do on the bicycle or product.  

A Mini Case Study

I recently had a discussion with an e-bike retail client. We talked about the types of products they were going to be selling in their new retail shop. I was familiar with and had worked with two of the products they mentioned, and knew the manufacturers had been operating for a few years without product liability insurance coverage. Since I knew this, I suggested they ask each of the manufacturers for proof of insurance. Eleven out of 18 products had the proper coverage; seven did not. 

They were surprised. I was not. Many e-bike or other similar-product manufacturers operate for years without purchasing a policy.

Steps to Protecting Yourself

So, how can you, as a retailer protect yourself against this type of risk?

1)      Ask for Certificates of Insurance from each of your vendors, including wholesalers.

2)      Inspect the Certificate of Insurance to see whether the “Insured” is domiciled in the United States. If there is not a U.S.-based importer listed, there may be a problem because foreign insurance carriers may not be financially secure. In fact, some are a complete fraud.

3)      Ask the manufacturer to verify that their product liability policy provides “Worldwide Coverage.”   Many foreign product liability insurance policies do not provide coverage for the United States marketplace. Certificates of Insurance generally do not show whether this coverage is provided, so you need to specifically ask about this coverage

Once you identify which manufacturers have the proper product liability coverage, you can choose to do the following

1)      Request or require the manufacturer to purchase product liability prior to selling any of their products.

2)      Ask your own insurance carrier to provide a policy or endorsement that will cover you for product liability stemming from the uninsured manufacturer’s product(s). Basically, you, as the retailer, would be treated as the manufacturer from a rating and coverage standpoint. This will likely result in a higher premium, but, in the event of a claim, you will have coverage.

In an attempt to differentiate themselves from their competitors, retailers often seek unique products to sell. While a great idea to potentially boost sales, these lesser-known products are often built by smaller manufacturers—many of which are foreign-owned companies—which may not carry product liability coverage.

It’s important to talk with an insurance advisor who is knowledgeable about these kinds of industry-specific risks to ensure that your level of risk is acceptable for you as the business owner. This level of risk can quickly eliminate any increases in sales you may experience in the event of a claim.

-Scott Chapin
Bike Industry Risk Specialist

Marsh & McLennan Agency
7225 Northland Drive North │ Suite 300 │ Minneapolis, MN 55428

Direct 715-634-6513 │Cell 715-492-6030│Fax 866-200-7327│Main 800-378-4318

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