The transport of lithium batteries presents significant safety and liability risks for insurers. The batteries have been linked to fires, explosions, and other hazardous incidents, making them a major concern in cargo, aviation, and personal consumer use. As global regulations continue to evolve to mitigate these risks, insurance carriers must understand the regulatory framework, liability exposures, and risk management strategies necessary to provide effective coverage.
Regulatory Landscape Governing Lithium Battery Transport
The transportation of lithium batteries is subject to strict international and domestic regulations aimed at reducing safety hazards. The International Air Transportation Association (IATA) has established Dangerous Good Regulations (DGR), which set forth specific packaging, labeling and transport requirements. These regulations classify lithium batteries as follows:
- UN 3090- Lithium metal batteries
- UN 3091- Lithium metal batteries in or packed with equipment
- UN 3480- Lithium-ion batteries
- UN3481- Lithium-ion batteries contained in or packed with equipment
CFR §173-175 (2025).
Exemptions apply for similar lithium batteries, such as lithium-ion cells under 20Wh and lithium-ion batteries under 100Wh, as outlined in the European Agreement concerning International Carriage of Dangerous Goods by Road (ADR). However, even these smaller batteries can pose risks if improperly handled. i
In the U.S., lithium battery transportation falls under the Hazardous Materials Acts (HTMA), enforced by the Department of Transportation (DOT) and its Pipeline and Hazardous Materials Safety Administration (PHMSA). The Federal Aviation Administration (FAA) has implemented additional restrictions on air travel, prohibiting spare lithium batteries in checked baggage due to their fire hazard.
In the United Kingdom, lithium battery transport is regulated under the Carriage of Dangerous Goods and Use of Transportable Pressure Equipment Regulations, which align with international standards. The UK Civil Aviation Authority (CAA) enforces air transport rules similar to FAA regulations, requiring passengers to carry spare lithium batteries in hand luggage rather than checked baggage.
Liability and Insurance Considerations
The primary liability for compliance with lithium battery transport regulations falls on shippers, who must ensure proper packaging, labeling, and documentation. However, insurance carriers also face significant exposure, including:
- Cargo Damage and loss- fires caused by lithium batteries can lead to the total loss of shipments, resulting in large claims under cargo insurance policies.
- Third party liability- if a fire or explosion causes property damage or injury insurers may be required to cover substantial liability claims.
- Product Liability- Manufacturers and sellers of lithium battery-powered products may face claims alleging defective products, requiring insurers to provide coverage under product liability policies.
- Business Interruption- logistics companies and retailers may experience losses due to shipment delays, regulatory non-compliance, or recall events leading to business interruption claims. ii
Recent incidents have heightened regulatory scrutiny and increased the risk of claims. For example, after a fire aboard an Air Busan flight, South Korea tightened restrictions on lithium battery transport. iii Similarly, in New South Wales, Australia, new regulations now classify certain e-mobility devices as "declared electric devices" requiring compliance with international safety standards. iv
Real World Claims Examples
- Felicity Ace Cargo Ship Fire (2022): The cargo ship felicity Ace, transporting vehicles from Germany to the United States, caught fire and subsequently sank in March 2022. The incident resulted in the loss of approximately 4,000 vehicles, including luxury brands like Porsche, Audi, Bentley, and Lamborghini, with and estimated cargo value exceeding $400 million. v
- Moss Landing Battery Fire (2024): A significant battery fire occurred at the Moss Landing energy storage facility in Monterey County, California, leading to chemical releases, water pollution, and evacuations. A lawsuit alleges that PG&E and Texas energy company Vistra failed to implement necessary safety measures to prevent the fire, highlighting the risks associated with large-scale lithium-ion battery installations. vi
- Hurricane Milton's Impact on EVs in Florida (2024): Following Hurricane Milton, electric vehicle (EV) owners in Florida were cautioned about the fire hazards posed by lithium-ion batteries exposed to saltwater. Authorities advised relocating flood damaged EVs away from structures and other vehicles to mitigate potential fire risks. vii
Mitigating Lithium Battery Risks: Strategies for insurers
To manage the risks associated with lithium battery transport, insurers should consider the following strategies:
- Policy Review and Risk Assessment: Work closely with brokers and policyholders to evaluate whether existing policies adequately cover lithium-battery-related incidents. Some policies may exclude certain consequences, such as pollution from battery fires or delays due to regulatory violations.
- Enhanced Cargo Liability Coverage- Ensure cargo insurance policies specifically address lithium battery shipments, including provisions for misdeclaration of goods and proper packaging standards.
- Product Liability of Coverage for Manufacturers- Require manufacturers and distributors of lithium battery-powered devices to carry product liability insurance to mitigate exposure to claims from fires, explosives, or malfunctioning batteries.
- Specialized Coverage for Electric Vehicles (EVs)- Given the rising adoption of EVs, insurers should tailor policies to address the high costs of battery repairs and replacement, as well as fire risks associated with large lithium battery packs.
- Safety Compliance and Training Requirements- Encourage policyholders to implement strict compliance measures, including certification for lithium battery shipping and training programs for employees handling hazardous goods.
- Monitoring and Maintenance Requirements- Promote the use of battery monitoring systems to detect overheating or early signs of malfunction, reducing the likelihood of catastrophic incidents.
- These incidents underscore the importance of stringent safety measures. Proper handling, and adequate insurance coverage when dealing with lithium-ion batteries across various applications.
Looking Ahead
As lithium batteries become more prevalent in consumer electronics, electric vehicle, and industrial applications, insurers must proactively address the risks associated with their transportation. Regulatory compliance, cargo liability, product liability, and EV-specific policies must be continuously evaluated and adapted to mitigate exposure. By working closely with policyholders, implementing safety measures and tailoring coverage options, insurers can better manage the growing risks posed by lithium batteries in transit.
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i European Agreement Concerning the International Carriage of Dangerous Goods by Road (ADR) ch. 3.2, United Nations Economic Commission for Europe (2023), available at https://unece.org/transportdangerous-goods/adr-2023-files.
ii IATA Dangerous Goods Regulations (DGR), Section 1.3 and Packing Instructions 965-970. https://www.iata.org/en/programs/cargo/dgr.
iii Air Busan Airbus plan catches fire at South Korea's Busan airport. Reuters (January 29, 2025). https://www.reuters.com/world/asia-pacific/plane-catches-fire-airport-busan-south-korea-with-no-casualties-yonhap-reports-2025-01-28/.
iv NSW Australia Publishes Mandatory Regulation for E-Mobility Devices and Their Batteries. SGS (November 19, 2024). https://www.sgs.com/en/news/2024/11/safeguards-16324-nsw-australia-publishes-mandatory-regulation-for-e-mobility-devices-and-batteries.
v Consequences of the fire on the cargo ship Felicity Ace over the global supply chain. Freight Forwarding & Logistics Blog, Conquer Freight Network (February 23, 2022). https://www.conquerornetwork.com/blog/2022/02/23/consequences-of-the-fire-on-the-cargo-ship-felicity-ace-over-the-global-supply-chain/#:~:text=More%20than%20100%20of%20the,Bentley%2C%20Porsche%2C%20and%20Lamborghini.
vi Colthorpe, Andy. Fire at Moss Landing Energy Storage Facility: What We Know So Far. Energy Storage News (January 24, 2025). https://www.energy-storage.news/fire-at-moss-landing-energy-storage-facility-what-we-know-so-far/.
vii Murphy, Aislinn. Electric vehicle owners impacted by Hurricane Milton urged to use caution- here's what to do now. New York Post (October 10, 2024). https://nypost.com/2024/10/10/us-news/what-electric-vehicle-owners-impacted-by-hurricane-milton-should-do-now/.