As Canada adopts sustainable energy solutions, emerging exposures from lithium-ion batteries pose new challenges for your commercial property clients. For brokers, understanding these risks is crucial to safeguarding clients from an evolving threat that many building owners are still unaware of. Jason Ostapeic, Unica Insurance’s Senior Risk Control Consultant, explores this emerging issue and shares risk mitigation insights to help advise your clients.

In an increasingly battery-powered world, lithium-ion batteries are becoming indispensable as Canada embraces greener energy solutions. From powering electric bicycles (e-bikes) and electric scooters (e-scooters) to vacuums and power tools, these batteries are rechargeable and efficient — and becoming more popular in commercial properties, including office buildings, retail spaces, condos, and apartments.

However, their increasing presence comes with new risks that brokers and their property owner clients can’t afford to overlook, says Jason Ostapeic, Senior Commercial Risk Control Consultant at Unica Insurance.

“We’re seeing a spike in fire losses involving lithium-ion batteries, which can cause significant property damage and business interruption. And, unfortunately, they’re putting people’s lives at risk, leaving your building owner clients exposed,” explains Ostapeic.

There have been several incidents involving lithium-ion batteries recently, including an e-bike fire in a Toronto parking garage in October that ignited over 20 other e-bikes and left a woman seriously injured.

According to the Canadian Association of Fire Chiefs, fires caused by lithium-ion batteries are on the rise across Canada. Toronto alone saw a 90 percent increase in 2023, with a total of 55 fires, up from 29 the prior year.

Understanding Lithium-ion Battery Risk

Losses are often linked to either electrical, thermal, or mechanical failures in lithium-ion batteries, Ostapeic says.

“One of the primary concerns with these batteries is thermal runaway. This is when a battery rapidly self-heats, causing a release of stored energy. Factors like the battery’s state of charge, cell capacity, and chemistry all play a role,” he explains.

Not all lithium-ion batteries use the same materials, and their ignitable electrolytes add another layer of risk. “Unlike nickel or lead-acid batteries, the electrolytes in lithium-ion batteries are flammable, making them more prone to fires.”

These risks are particularly pronounced during charging or immediately after a battery is fully charged, often due to internal defects, improper charging, inadequate ventilation, or physical impact.

“Even in storage, external heat or mechanical impacts — like being dropped or hit —can lead to failures and trigger thermal runaway,” he adds.

Improper storage and charging are common risk factors. “We’ve seen incidents where batteries are stored near combustible materials or charged in areas without adequate ventilation. In warehouses and retail plazas, for example, a lack of separate fire-resistant storage can significantly increase risk,” Ostapeic says.

Another growing concern is the use of aftermarket replacement batteries, he adds; for example, replacing a cordless vacuum battery with a cheaper, third-party alternative.

“These batteries often don’t meet the same safety standards as the original equipment manufacturer [OEM], which significantly increases the risk of something going wrong. Such batteries have caused fires in homes and apartments, and these same batteries are being stored or charged in commercial properties,” Ostapeic explains.

When it comes to fire risk, brokers know that commercial buildings with inadequate fire safety measures, such as insufficient sprinkler systems, are highly exposed. But a common oversight in risk mitigation is understanding tenant operations.

“The broker’s client might be the building owner, but it’s the tenant who is storing or using the batteries,” Ostapeic says. “If the building owner isn’t aware of what their tenants are doing, the risk increases exponentially.”

Small oversights can lead to significant losses, Ostapeic says. A single battery failure could result in smoke or fire damage to the entire building.

Comprehensive Coverage, Expert Risk Control

Unica offers a comprehensive solution, including tailored coverage and proactive risk control expertise backed by best-in-class claims service.

“Whether it’s a contractor managing multiple sites, a retail building owner overseeing tenants, or an apartment owner with e-bikes on the premises, we’re committed to helping brokers protect their clients’ unique needs,” Ostapeic says.

Through Unica’s Commercial Building Owners Connection™, clients who own office buildings and commercial, retail, and industrial plazas receive comprehensive protection for their physical assets, business income, liability, and employees.

Unica’s Contractors Connection^® provides comprehensive coverage for your clients, their employees, tools, equipment, installation materials, and design or workmanship errors — protecting contractors against losses, damage, and project-related liabilities across Canada.

These features collectively provide commercial property and contractor clients with robust protection against a multitude of risks they face today — including the specific risks posed by lithium-ion batteries — helping to ensure business continuity and financial security.

Peace of Mind When They Need It Most

Beyond protection, brokers trust Unica’s Claims Team to help give their clients peace of mind when the unforeseen happens.

“Transparency, consistency, and empathy are the cornerstones of our claims process,” Ostapeic explains. Unica’s dedicated adjusters handle 97 percent of claims, providing clients with a trusted point of contact to reduce confusion and stress. “Our adjusters are technically trained and certified as IICRC Master Restorers, giving them the expertise to address complex claims while maintaining empathy throughout the process.”

What to Tell Your Clients

Unica recommends the following ways brokers can help their clients mitigate lithium-ion battery risks:

Encourage the use of OEM equipment: Use only manufacturer-approved and CSA-certified batteries and chargers.
Implement proper storage: There should be a 10-foot (3 m) space between stored batteries and combustible materials. Nothing should be stored above these batteries, especially in-rack storage without in-rack sprinkler protection. “For warehouse clients handling defective or returned batteries, ask if they’re storing the batteries in a separate fire-resistant room. Similarly, when talking to apartment or condo owners, ask whether there’s a designated safe storage area for e-bikes and e-scooters.”
Check for adequate ventilation: Charging areas must be well ventilated to prevent batteries from overheating.
Ensure proper charging: Avoid storing batteries above 60 percent charge to minimize thermal risks. Charge batteries at room temperature and away from direct sunlight.
Educate owners and tenants: As part of broker questioning to clients, help building owners understand tenant operations and identify hazards associated with these batteries, and ensure they have risk mitigation in place for tenants. “Awareness is the first step in prevention,” Ostapeic says.
Read up on fire safety and regulations: Stay up to date on safety best practices and risks through the Canadian Fire Safety Association and the Canadian Centre for Occupational Health and Safety.