Simple precautions can limit the potential fire risk from lithium-ion batteries
After sitting in six to eight inches of flood saltwater following Hurricane Helene, an electric vehicle’s (EV) battery caught fire in a garage in a suburban house in Florida, causing the entire building to burn down and raising new concerns about what happens to EVs and their batteries when exposed to saltwater. Officials in Florida’s Pinellas County later advised residents that if their electric vehicle(s), whether a car or golf buggy, had been exposed to saltwater flooding, then they should move it at least 50 feet away from their home. In total, Florida’s State Fire Marshal confirmed that there were “sixteen lithium-ion battery fires related to the storm surge from Helene, with six of those fires associated with electric vehicles”.
For insurers, it highlights a broader risk from lithium-ion batteries that needs careful monitoring and management says Hiscox’s Joseph Pennyfather – Binding Authorities Line Underwriter: “Given the growing frequency of flooding events converging with the rapid rise in the use of EVs, the risk of fire and explosion spreading to homes and offices from flooded batteries poses a threat to businesses and livelihoods. But it’s not just a problem related to flooding either, with evidence of fire risk when charging or using an EV, electric scooter, or any household item that uses lithium-ion batteries.”
Batteries on fire
The occurrence of battery fires both in the home and impacting businesses is being reported with increased regularity. In April 2022, lives were lost in a house fire in Pennsylvania apparently caused by an overheating lithium-ion battery pack on a self-balancing hoverboard; an incident that led to a product recall of 53,000 of the devices. Last year, Los Angeles and Long Beach container terminals were closed when a vehicle carrying lithium-ion batteries overturned and caught fire, while data from the US Federal Aviation Administration says that US flights now see lithium battery fires related to items like laptops and tablets “nearly twice a week”.
Outside the US the problem is no less acute with Australian fire and rescue services in New South Wales reporting that they attended nearly 300 battery-related fires in 2023, while other authorities in the country say they respond almost every day to a battery fire. The UK’s Fire Industry Association says that since 2020, nearly 200 people have been injured in lithium-ion battery related fires, with 10 people losing their lives.
According to a recent study it’s expected that the global demand for lithium-ion batteries will grow by as much as 27% annually to reach 4.7 TWh by 2030, highlighting the central role that lithium-ion batteries will play in the global shift towards net zero, mitigating climate change and achieving a needed reduction in pollution. On the flip side however, the growth in lithium-ion battery use means there is a need to better educate users to safely manage the emerging possible risk of fire or explosion.
Growing liability
For insurers, it’s becoming clear that the use of lithium-ion batteries is a potential cause for concern across different areas. “Owners of public, commercial or residential premises face the possibility of fire and property damage that could trigger first party property insurance, plus third-party liability in respect of occupants/visitors of property, as well as third-party property damage,” says Hiscox’s Lara Frankovic – Line Underwriter for US General Liability. “And manufacturers face a potential liability from their customers’ use of the product if a defect can be proven or there is no effective warning of the associated risks.”
While EVs are already contributing to a reduction in emissions, increases in auto liability could be a particular area of concern not just in terms of EVs catching fire when charging or in flood situations, but also when involved in an accident adds Frankovic: “It’s not yet proven whether EVs are more likely than petrol or diesel powered vehicles to catch fire in the event of an accident but when they do, the potential for battery explosions could create more liability exposure for the auto industry particularly in relation to bodily injury. Battery fires can be much hotter creating more risk of burns, an area where social inflation in relation to big jury verdicts is often most pronounced.”
Mitigating the exposure
Given the risk to lives and property, what can the insurance industry do to help better manage the risk both for the benefit of policyholders but also to prevent losses becoming unsustainable? “As an industry we cannot simply exclude battery fire risk from policies and nor would we want to given the important part they have to play in meeting net zero commitments,” says Pennyfather. “But we can continue to work closely with policyholders, agents, coverholders and others along the insurance chain to educate policyholders about the potential fire risk from lithium-ion batteries and how they can minimise the risk of something going wrong.”
For instance, Pennyfather adds, minimising the installation or use of charging stations in integral garages or integrated out-houses could avoid potential tragedy if a problem occurs. Being aware of the dangers in the event of an impending storm too could save homes and prevent loss of life. Not leaving household items powered by lithium-ion batteries charging overnight or in an empty home can also help to prevent a potential fire.
Better awareness equals better risk management
“Given that upward trajectory in battery use, the more we can do to raise awareness of the risk and therefore reduce potential losses is critical,” concludes Frankovic. “While we should be proud of how the insurance industry has risen to the challenge of insuring this emerging risk and has kept providing coverage where lithium-ion batteries are involved, helping to make sure more individuals and businesses take simple steps to reduce the risk in how they charge and use lithium-ion battery powered cars and devices can save lives and costs.”
