Amazon most certainly has a clause protecting them from claims of lost data.
There's no need to repurchase the books. They can be redownloaded from the user's kindle account page.
This happened to my wife’s Kindle this morning. Everything was wiped out. It took my 10 minutes to restore all settings and documents to the prior condition. Nothing was lost. I did have to re-download a few books though. No real harm done.
You do not need to re-purchase anything.
You have ‘digital rights’ with Amazon for all your eBooks. If your Kindle gets wiped, just re-log in to your Kindle with the same Kindle/Amazon userID and password used to buy books and re-download your titles.
Recently Amazon asked users to download an update for their Kindles before March 20. Since many users turn 3G/wifi off to extend battery life Amazon also asked users to keep their Kindles on-line.
I think they are doing something on their system, and they had a small ‘accident’