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

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

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