Battery Risks

Exploding Exposures

From fire risk to defective counterfeits, lithium-ion batteries present insurers and risk managers with a variety of property and liability challenges. 
By: | August 3, 2016 • 5 min read

From personal items such as e-cigarettes, cellphones and laptops to power tools, hoverboards, electric vehicles and alternative energy storage, rechargeable lithium-ion batteries (LIBs) come in all shapes and sizes, and are integral to modern living.

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But despite their increasing application, the fire risks associated with LIBs have gained publicity of late, piquing the interest of insurers across a range of disciplines, from property and casualty to supply chain to product and environmental liability.

If overheated, LIBs can enter “thermal runaway,” emitting flammable material — sometimes in the form of small explosions; the bigger or more powerful the battery, the more impactful the event.

LIBs include a number of safety features to minimize the risk of thermal runaway. However, overcharging, damage to the battery, using an improper charging device or even excessive discharge can all trigger the problem.

After a UPS plane carrying a bulk LIB cargo caught fire and crashed in 2010, at least 18 airlines, including Cathay Pacific, Emirates and Qatar Airways, banned the bulk haulage of such cargo, causing supply chain headaches for companies transporting LIB products.

There have also been incidents when personal items have ignited in the carry hold on passenger flights.

A study by the Federal Aviation Administration (FAA) showed that gas venting from the batteries had the potential to “rocket” the battery away from the heat source. In a bulk storage facility, this could send batteries off into other parts of the warehouse, spreading the fire.

“If you are selling lithium batteries, it is even more important to have detailed instructions and warnings because there are so many things that can go wrong.”  — Paul Owens, products liability manager, Sadler Products Liability Insurance

Indeed, bulk storage situations pose the biggest threat due to the risk of contagious overheating when multiple batteries are in close proximity.

“When you have a lot of these batteries together, fires can grow very quickly and be very damaging,” says Lou Gritzo, vice president of research at FM Global.

However, Gritzo’s firm said it made a major research breakthrough in April that could help mitigate LIB fire risk.

Lou Gritzo, vice president of research, FM Global

Lou Gritzo, vice president of research, FM Global

In partnership with the National Fire Protection Agency and the Fire Protection Research Foundation’s Property Insurance Research Group, FM Global conducted a first-of-its-kind warehouse fire test on the type of LIBs used in electric cars and energy storage. The test, he said, identified a sprinkler configuration that provides an “adequate fire protection point.”

Gritzo hopes the test results, which he expects to be published in a few months following data quality assurance checks, can be taken on board as an industry standard.

The results do not resolve the issue of air cargo safety, though some findings may be extrapolated out to develop in-flight fire extinguishing systems and improve safety for LIB cargo transportation.

Beyond the warehouse environment, LIB-powered devices present a product liability risk for manufacturers, importers, distributors and retailers. The biggest hazard lies in importing products that have been installed with defective or even counterfeited batteries that have been repackaged and rebranded to look superior.

In February, for example, U.S. Customs and Border Protection seized 3,500 hoverboards worth $1.8 million that reportedly contained substandard counterfeit batteries that posed a safety risk.

“If you are an electronics manufacturer, it is essential you know who and where you are buying your batteries from, that you are getting high quality batteries, and that they have high thermal runaway thresholds,” said Morgan Kyte, senior vice president and technology team leader at Marsh. R8-16p50-51_9Lithium.indd

Detailed Warnings Required

The importer of defective goods is considered the manufacturer in the eyes of the law, and in the eyes of insurers in the event of a claim, said Paul Owens, products liability manager at Sadler Products Liability Insurance.

“Importers are top of the pyramid in the U.S. as no one is going overseas to recover,” he said. Most importers are buying from companies whose product liability policies won’t respond in the United States.

“Warning and instruction defect is a common entry into a product liability lawsuit,” Owens added.

“If you are selling lithium batteries, it is even more important to have detailed instructions and warnings because there are so many things that can go wrong.”

“When you have a lot of these batteries together, fires can grow very quickly and be very damaging.” — Lou Gritzo, vice president of research, FM Global

Retailers and wholesalers who purchase from U.S. manufacturers at least know they have a route of recourse in the event of a claim, though it is likely they would be dragged into litigation.

When e-cigarette user Jennifer Reis was set on fire in 2015 when the battery in her device exploded, the e-cigarette’s distributor, wholesaler and even the Tobacco Expo store where she bought it were all named in the lawsuit. Reis was awarded $1.9 million in damages.

“Retailers and distributors should ask their suppliers to name them as additional insureds on their policies,” said Owens.

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“If you are named as an additional insured, the importer’s policy is primary and yours is secondary, which is an important step for retailers and wholesalers.”

However, Owen noted, not all insurance carriers are comfortable writing coverage for LIB-powered products.

“You have to be very careful with the policies you buy as some can be very narrowly written — some have full health-hazard exclusions, and for items like e-cigarettes this leaves very little coverage.”

It is not always easy to determine whether a thermal runaway event has been caused by a defective LIB, a defective electronic device or human error, Kyte said.

“Often there is not much material left after one of these, though there are certain tests that can be done and sometimes it is possible to extrapolate a sequence of events to determine the cause.”

Quality Verification

The best way to avoid expensive product liability claims is to only buy and sell LIBs and chargers of the highest quality.

“This will cost you and your customer a little more, but it’s nothing compared to the increase in premiums after a product liability claim,” said Owens.

Lithium manganese (lMR) and hybrid (NiMH) batteries are considered chemically safer than most LIBs and do not require protection circuits, he said.

“Importers need to be good engineers. They should make sure they buy from reputable sources and it is advisable to batch test products that contain LIBs,” he added. &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Absence Management

Establishing Balance With Volunteers

It’s good business to allow job-leave for volunteer emergency responders, whether or not state laws apply.
By: | January 10, 2018 • 7 min read

If 2017 had a moniker, it might be “the year of the natural disasters,” thanks to a phenomenal array of catastrophic or severe events— hurricanes, tornadoes, wildfires, ice storms and floods.

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Combined with smaller-scale fires and other emergencies, these incidents tax the resources of local and state emergency services, often prompting the need to call volunteer emergency responders into action.

But as lean as most organizations are already running, volunteer activities can sometimes cause friction between employees and employers. Handling conflicts the wrong way can potentially lead to legal headaches, harm employee morale and batter a company’s reputation.

State by State Variations

Most employers are aware of the various federal and state leave laws protecting their employees, including family and medical leave, pregnancy leave and military leave. But leave laws that protect the livelihoods of volunteer emergency responders are more likely to fly under the radar of some HR managers and risk managers.

Such laws don’t exist in every state, but more than 20 states do have some type of law in place to protect volunteers including emergency responders, firefighters, disaster workers, medical responders, ambulance drivers or peace officers.

Marti Cardi, vice president of Product Compliance for Matrix Absence Management

The laws vary broadly. Nearly all specify that such leave be unpaid, and that employees disclose their volunteer status to employers and provide documentation for each leave. But there is a spectrum of variations in terms of what may trigger an eligible leave. Some, for instance, apply for any emergency that prompts a call from the volunteer’s affiliated responder group. Others may require a government declaration of emergency for the law to be triggered.

While many of the laws do not explicitly require employers to let employees leave work when called to an emergency during a shift, most specify that an employee may be late or even miss work entirely without facing termination or any other adverse employment action.

Some states mandate a maximum number of unpaid leave days that a volunteer can claim. But others may place more significant burdens on employers. In California, for instance, employers with 50 or more employees are required to grant up to 14 days of unpaid leave for training activities in addition to any leave taken to respond to emergency events. For multistate employers, keeping on top of what obligations may apply in each circumstance can be a challenge.

Significant Risks

Large or mid-sized employers may rely on absence management providers to keep them in compliance. For smaller employers though, it may be as simple as looking up a state’s law via Google to find out what’s required. However, checking in with the state department of labor or the company’s attorney may be the best way to get the correct facts.

“I would caution that just because you don’t find something [on the internet], it doesn’t mean it’s not there,” said absence management and employment law attorney Marti Cardi, vice president of Product Compliance for Matrix Absence Management.

For example, Cardi said, an obscure Texas law provides job-protected leave for volunteer ham radio operators called into service during an emergency.

Cardi said employers should task HR to investigate the laws in each state the company operates in, and to ensure that supervisors are educated about the existence of these laws.

“If a supervisor is told by one of his or her employees, ‘Sorry I’m not coming in today … I’ve been called to volunteer firefighter duty for the [nearby region] fire,’” she said, you want to be sure that the supervisor knows not to take action against the employee, and to contact HR for guidance.

“Training supervisors to be aware of this kind of absence is really important.”

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An employer that does terminate a protected volunteer for responding to an emergency may be ordered to pay back wages and reinstate the employee. In some cases, the employee may also be able to sue for wrongful termination.

And of course, “you don’t want to be the company in the headlines that is getting sued because you fired the volunteer firefighter,” she added.

If an employer bars a volunteer from responding, the worst-case scenario may be a third-party claim. Failure to comply with the law could give rise to a claim along the lines of “‘If you had complied with your statutory obligation to give Jane Doe time to respond, my loved one would not have died,’” explained Philadelphia-based Jonathan Segal, partner at law firm Duane Morris and managing principal of the Duane Morris Institute.

“That’s the claim I think is the largest in terms of legal risk.”

Even if no one dies or is seriously injured, he added, “there could still be significant reputational risk if an individual were to go to the media and say, ‘Look, I got called by the fire department and I wasn’t allowed to go.’”

The Right Thing to Do

What employers should be thinking about, Segal said, is that whether or not you have a legal obligation to provide job-protected leave for volunteer responders, “there’s still the question of what are the consequences if you don’t?”

Employee morale should be factored in, he said. The last thing any company wants is for employees to perceive it as insensitive to their interests or the interests of the community at large.

“Sometimes employers need to go beyond the law, and this is one of those times,” — Jonathan Segal, partner, Duane Morris; managing principal, Duane Morris Institute

“How is this going to resonate with my employees, with my workforce, how are people going to see this? These are all relevant factors to consider,” he said.

There’s an argument to be made for employers to look at the bigger picture when it comes to any volunteer responders on their payroll, said Segal.

“Sometimes employers need to go beyond the law, and this is one of those times,” he said. “Think about the case where’s there’s not a specific state law [for emergency responders] and you say to a volunteer, ‘No, you can’t leave to deal with this fire’ and then people die. You as an employer have potentially played a role, indirectly, because you didn’t allow the first responder or responders to go,” he said.

The bottom line is that “it’s the right thing to do, even if it’s not required by law,” agreed Cardi.

“I feel that companies should have a policy that they’re not going to discipline or discharge someone for absences due to this kind of civic service, subject to verification of course.”

Clear Policy

While most employers do strive to be good corporate citizens, it goes without question that employers need to guard their own interests. It’s not especially likely that volunteer responders will try to take advantage of the unpaid leave allowed them, but of course, it could happen.

That’s why it’s important to have policies that are aligned with state laws. Those policies could include:

  • Notifying the company of any volunteer affiliations either upon hire or as soon they are activated as volunteers.
  • Requiring that employees notify a supervisor as soon as possible if called to an emergency (state requirements vary).
  • Requiring documentation after the event from the head of the entity supervising the volunteer’s activities.

If at some point it becomes excessive – someone has responded to emergencies five times in nine weeks, then it’s time to examine the specifics of the law and have a discussion with the employee about what’s reasonable, said Segal. It may also be time to ask specifics about whether the person is volunteering each time, or are they being called.

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In some cases, the discussion may need to be about finding a middle ground, especially if an employee has taken on an excessively demanding volunteer role.

“We encourage volunteers to pick the style that best fits their schedule,” said Greta Gustafson, a representative of the American Red Cross. “Disaster volunteers can elect to respond to disasters locally, nationally, or even virtually, and each assignment varies in length — from responding overnight to a home fire in your community to deploying across the country for several weeks following a hurricane.

“The Red Cross encourages all volunteers to talk with their employers to determine their availability and to communicate this with their local Red Cross chapter.”

Segal suggests approaching it as an interactive dialogue — borrowing from the ADA. “Employers may need to open a discussion along the lines of ‘I need you here this week because this week we have a deliverable on Friday and you’re critical to that client deliverable,’” he said, but also identify when the employee’s absence would be less critical.

No doubt there will be tough calls. An employer may have its hands full just trying to meet basic customer needs and need all hands on deck.

“That may be a situation where you say, ‘First let me check the law,’” said Segal. If there’s a leave law that applies, “then I’m going to need to comply with it. If there’s not, then you may need to balance competing interests and say, ‘We need you here.’” &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]