This article was originally published in Insurance Day, August 2023.
Lithium-ion batteries have given rise to a number of fires recently and are the subject of considerable concern throughout the logistics industry.
Typically, lithium-ion battery fires occur for a number of reasons including internal manufacturing defects; physical damage; electrical abuse; and thermal abuse. These then cause a “thermal runaway” in a cell which propagates through other cells and gives rise to explosion or fire.
Such batteries, and the products in which they are used, need to be moved, stored and handled. The logistics industry cannot simply refuse to deal with lithium-ion batteries, despite the risks involved. Those forwarders dealing with the motor industry, electronics industries and the movement of consumer products will have to adapt to the carriage of lithium-ion batteries (or products which include such batteries) if they intend to stay current and continue in business.
Most forwarders, carriers, warehouse keepers and others in the logistics industry will trade subject to standard trading terms. These terms, typically, address dangerous goods and prohibit the carriage or storage thereof unless the customer has notified the forwarder that the goods are dangerous and provided the forwarder with the information and documentation needed to safely carry, store or otherwise handle the goods in question.
At common law, there is an implied undertaking the shipper is not handing over dangerous goods to the carrier unless the shipper expressly notifies the carrier of the dangerous nature of the cargo, or the carrier is (or ought to be) aware of the dangerous nature of the cargo.
Most contractual clauses tend to impose a strict obligation and indemnity on the customer handing over the dangerous goods for carriage or storage. These clauses concentrate on the nature of the goods rather than the knowledge or reasonable care of the cargo owner, which reflects the strict liability duty imposed at common law – and so the cargo owner’s knowledge of any manufacturing defect or damage to the lithium-ion batteries will not be relevant to the exclusion or the indemnity.
A forwarder will, however, still be expected to exercise reasonable skill and care in the carriage of those batteries. While an exclusion clause may be sufficient to protect a forwarder from unexpected risks arising from the dangers of the cargo, it is unlikely to protect the forwarder from loss or damage occurring by reason of its own negligence or other failure to properly care for the goods.
Lithium-ion batteries are so prevalent in electronic goods that there may be a point at which forwarders should appreciate that a request to carry battery operated goods may well involve the carriage or storage of lithium-ion batteries.
Thus, if a forwarder negligently causes damage to lithium-ion batteries during the course of transit or storage and this causes those batteries to become dangerous, the forwarder will struggle to rely on an exclusion of liability unless it can show it has expressly excluded liability arising from its own negligence. Most of the standard trading terms do not go that far as it is, commercially, a very difficult position to sell.
Lithium-ion batteries are clearly here for the long-run and the batteries and associated risks are developing. As more and more information is published about the batteries and the risks associated with such handling, the forwarding industry will be expected to demonstrate some knowledge of those risks and to handle the batteries and associated goods appropriately.
Forwarders who knowingly handle the batteries (whether on their own or within vehicles, computers, mobile phones, scooters, vapes or other electronic products) will increasingly struggle to persuade a court they should not reasonably have been aware of the risks associated with the products.
However, these risks are likely to extend only to the ordinary risks associated with carriage, storage and handling of lithium-ion batteries in good condition unless special warnings are issued to the forwarders. The design of lithium-ion batteries is developing rapidly. Some batteries are designed for safety, some for performance and some for storage capacity. The safety of the batteries may vary considerably, depending on its design and construction.
Even though the general risks behind lithium-ion batteries may be reasonably well known to the logistics industry, if a particular type of battery poses a special or enhanced risk, the cargo owner may still be under a duty to flag that up before handing the goods over.
Most lithium-ion batteries, when in good condition, pose limited threat of fire if properly handled. As such, the forwarder, when agreeing to carry the goods, is not accepting all risks associated with damaged or defective batteries. Such damaged or defective batteries are likely to be considered dangerous goods and cargo owners should not be handing these over to a forwarder without express agreement and appropriate information.