Claims Update: Lithium-Ion Batteries

Lithium-ion batteries dominate the market because of their power density. However, lithium-ion batteries also combine high-energy materials with (often flammable) electrolytes that can result in thermal runaway – when a mechanical failure or short circuit causes the lithium-battery to heat up, which decomposes the cell materials, reducing its ability to release heat. As the decomposition continues, the cell’s ability to dissipate heat drops and the temperature rises rapidly, leading to fires and explosions.

Given the widespread use of lithium-ion batteries, all residential and commercial properties have some exposure, especially if lithium-ion batteries are located (or stored) near flammable materials. Also, lithium-ion battery fires are harder to put out (they burn too intensely for traditional, water based fire extinguishers, while gel extinguishers are not yet widely available) and even once put out, they can flare again and again due to internal heat and so must be monitored and kept cool for hours after.

Widely used, and potentially flammable, lithium-ion batteries impact multiple coverages, including property (homes and businesses), commercial general liability & umbrella, personal and commercial auto, cargo and marine. As Steve Kerber of the Fire Safety Research Institute says, “The more batteries that surround us, the more incidents we will see.”

• In 2021 lithium battery fires cost U.S. and Canadian waste operators $1.2B. That same year, AGCS reported fires and explosions (including those caused by lithium-ion batteries) were the most expensive cause of marine claims (18% of $9.2B in total losses).
• New York’s Fire Department is so concerned about the rising number of fires involving e-bikes, e-scooters, and other battery-powered mobility devices, they hosted an insurance event to help educate the industry on the dangers.
• CNN noted “the number of lithium-ion battery-based fires is growing with enormous frequency in both the United States and internationally.”

Recognize the risk as an essential first step to being prepared (see Further Reading).

Research is underway to reduce the risk of thermal runaway. The University of Maryland has developed a way to both increase energy storage and decrease the risk of overheating, by suppressing the creation of lithium dendrites (magnetic microstructures) within the cell. (Dendrites have been shown to cause battery failure).

Innovate – new extinguishers are coming to market – the Firechief Lith-Ex Extinguisher cools the fire source and encloses it to prevent the fire spreading. New lithium-ion-specific fire blankets and suppression kits are also available.

Underwriting discipline – in response to the increasing frequency of events, insurers are increasing the price of coverage and/or limiting it. Many cargo insurers now specifically exclude lithium batteries or limit the size or volume of batteries covered.

Communication – for insured risk managers to better identify, understand and manage the risks, insurers must clearly explain the scope and nature of coverage, and then work together to design a mutually acceptable program to address those risks.