Lithium-Ion Batteries: Exploding in the Present, Fired Up for the Future!

A White Paper by Neal Novak

Lithium-ion batteries are transforming industries and everyday life, but they are also creating new legal, regulatory, and insurance challenges. In this white paper, Partner Neal Novak takes a comprehensive look at the risks, liabilities, and coverage issues associated with this rapidly evolving technology. Click the link below to read the full paper and gain deeper insight into a developing area that continues to impact insurers and policyholders alike. 

Since the first lithium-ion battery was commercially produced by Sony in 1991, the demand has grown exponentially – from portable electronic devices to power tools, to electric vehicles and more, their ubiquity is undeniable. But if mishandled, abused or defectively constructed, they can become explosive fireballs of toxic gas with devastating consequences.

This note looks at the challenges of attempting to manage the insurance risks presented by lithium-ion batteries, a product with an upside of unlimited social benefit but also with a deadly downside. The advancements in information technology in the 1980s increased the demand for energy in small packages. Initially these devices were powered by nickel cadmium and alkaline batteries, but the rechargeability feature of lithium-ion batteries made handheld devices immediately more desirable.

The increasing number of property damage and bodily injury losses caused by fires has made lithium-ion batteries one of the fastest growing risks in the insurance industry. The U.S. Consumer Product Safety Commission (“CPSC”) has stated that over a five-year period ending in 2022, there were at least 25,000 reported incidents of batteries overheating and catching fire resulting in over 140 injuries and more than 19 deaths.

Since then, there have been over 800 fires in New York City alone increasing the death toll to over 30 and the number of injuries to over 400. In 2023, New York City became the first city in America to enact safety legislation reducing the exposure of lithium-ion battery losses to the public with the passing of Initiative 663-A.