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Exploding batteries causing severe burns and potential links to serious health problems have made most insurers skittish about covering electronic cigarette products.
Sizable claims are emerging due to personal injuries caused by malfunctioning e-cigarette devices or their batteries, while potential health hazards are likely to trigger litigation if definitive conclusions are made linking the products to respiratory and other diseases.
Limited products liability coverage is offered by Lloyd’s of London syndicates and a few domestic insurers on a claims-made basis, but the policies often exclude key risks, with insurers paying particular attention to e-cigarette juices and components imported from China, experts say.
“The insurability is still there, but it’s shrinking from the standpoint of the carriers that are willing to do it and able to do it,” said Cameron Allen, wholesale insurance broker for Veracity Insurance Solutions LLC based in Pleasant Grove, Utah.
The main concern from a products liability perspective has typically related to the risk of the batteries in e-cigarette devices overheating and exploding, experts say.
Between January 2009 and Dec. 31, 2016, 195 separate incidents of explosion and fire involving an electronic cigarette were reported by the U.S. media, resulting in 133 acute injuries, according to a report tracking such incidents published by the U.S. Fire Administration, a division of the Federal Emergency Management Agency, in June 2017. No fatalities were involved in the incidents covered in the report, but a Florida man reportedly died due to an e-cigarette explosion in May 2018.
Lawsuits have been filed against e-cigarette firms over battery-related injuries. In 2015, a California woman was awarded $1.9 million for severe burns she sustained when her e-cigarette battery exploded.
“I see more claims with batteries than anything else right now,” said Jeff Vick, Chicago-based vice president and underwriter for Blue River Underwriters.
Insurers are also paying particular attention to e-cigarette juice products manufactured in China, adding that question to their forms in the last six months, with some insurers charging more for coverage of juices coming out of China while others simply exclude the risk, Mr. Allen said.
Insurers are starting to draw a line in the sand on covering the liquids, said David Andrews, Chicago-based producer with insurtech firm and online insurance agency Insureon.
“For stand-alone product liability, you could have specific exclusions for just the liquids, not the batteries,” he said. “It jumps back to us making sure we articulate what’s included and excluded.”
The uncertain health risks of e-cigarettes, which have traditionally been marketed as a safer alternative to tobacco but have become an increasing concern for public health experts and regulators, especially as their popularity rises among minors, is a growing area of concern, experts say.
“The future litigation is going to be over disease claims” when “the science progresses to the point where it becomes irrefutable” that there is a connection between diseases and e-cigarette use, said Annesley DeGaris, a partner at personal injury law firm DeGaris & Rogers LLC in Birmingham, Alabama.
Insurers are concerned about the “next diacetyl,” said Edward McNenney, executive vice president and excess liability practice leader at Willis Towers Watson PLC in New York. Diacetyl is a buttery-flavored chemical previously used in foods such as popcorn that was linked to deaths and hundreds of cases of bronchiolitis obliterans, a serious and irreversible lung disease, according to the American Lung Association.
The condition, known as popcorn lung, led the major popcorn manufacturers to remove the chemical from their products, but exposure still exists through e-cigarette vapor, the association said.
“You want to know what’s in your products and where your products are coming from and make sure everything is up to standards,” Mr. Andrews said. “You want to make sure you are obtaining products from someone who is taking their risk management seriously.”
Buyers should make sure their policies do not have health hazard exclusions and ask for it to be removed if they do, experts say.
“What happens if the most dangerous part of the device is something you fail to insure?” Mr. DeGaris said. “For the (insurance) industry, it’s a smart exclusion. For the claimants, it’s bad, especially for smaller companies. They will lose the opportunity to recover for injuries that are directly linked to product use.”
Premium rates have declined for the e-cigarettes coverage, with product liability capacity in the $5 million to $20 million range and deductibles ranging from $25,000 to $100,000, Mr. McNenney said.
The policy can be purchased with a minimum premium as low as $2,500 for a limit of about $250,000, Mr. Vick said.
“I don’t think that’s too expensive, but there are insureds that don’t want to pay it,” he said. “They don’t want to listen until there’s a claim, and then they want to buy.”
Regulatory efforts to curtail children’s access to flavored electronic cigarettes could have limited insurance implications, experts say.