This article is written as an extension to our marine team’s previous exploration of the risks of transporting lithium-ion batteries by sea, featured in Maritime Risk International, October 2024. In that article, we looked at increased lithium-ion battery use and the challenges to the industry, particularly in the context of contracts of carriage, where issues of dangerous goods and seaworthiness arise.
The general rule in marine insurance is that the insurer is liable, and only liable, for losses “proximately caused” by an insured peril, unless the policy provides otherwise (Marine Insurance Act (“MIA”) 1906, s. 55). If the insured proves, on a balance of probabilities, that a peril covered by the policy was the proximate cause of any loss incurred, the insurer will be liable to indemnify the insured. The challenges of proving causation, however, where the destruction is catastrophic makes it exceedingly difficult to pinpoint the causation of fire.
(Having trouble) proving causation
The challenge of proving causation where lithium-ion battery fires are involved has everything to do with thermal runway – a self-accelerating chain reaction within the cell that causes a rapid and sharp rise in temperature. Thermal runway is often explosive, can occur without warning, and once it has ignited, it is nearly impossible to extinguish. These fires expend toxic, flammable gases that are corrosive and result in extensive damage, if not complete destruction, which in turn makes it difficult to preserve physical evidence.
Where evidence is compromised or irretrievable, reconstructing the sequence of events to prove the proximate cause becomes speculative. Investigators face limitations with voyage data recorders and sensor systems, which may be damaged or irretrievable post-incident. As we saw with Felicity Ace, a cargo ship carrying circa 4,000 cars from Volkswagen Group brands which caught fire in February 2022, thermal runway can spread to neighbouring cells in seconds, resulting in total loss of the vessel and cargo on board. The exact cause of the fire remains unknown, but fingers are being pointed at the lithium-ion batteries in the EVs, which were on the same deck as where the fire is believed to have started. Indeed, in March 2024, Mitsui OSK Lines (MOL) filed a $32 million lawsuit against Porsche, claiming that the lithium-ion battery of a Porsche model was to blame for the fire, and that Volkswagen Group did not properly inform MOL about the risk of EV fires.
Problematically, lithium-ion batteries not only pose a primary explosion hazard but can also aggravate unrelated fires, which makes it harder to distinguish whether they were the proximate cause or merely a contributing factor. This dilemma is compounded by the fact that post-fire, battery cells are often indistinguishable from those damaged by external heat sources.
Equally, given the lithium–ion battery fires are very much headline news, it is also now almost instinctive to point the finger at the lithium-ion battery as the cause of the fire when incidents occur. But fires have occurred on board vessels long before the carriage of lithium-ion batteries and so there can often be a number of other potential causes, which is then exacerbated by the lithium-ion battery cargos. The Fremantle Highway fire in July 2023 is illustrative on this point. This case similarly involved a cargo ship carrying nearly 4,000 cars which caught fire off the coast of the Netherlands and resulted in the loss of one crew member. There being EVs onboard, lithium-ion batteries were quickly blamed as the culprit of the blaze, until an inspection of the freighter months later revealed that the circa 500 EVs on board were “in good condition”.
Recent cases
The fire which devastated the Morning Midas in June 2025 further highlights these issues. The cargo ship, carrying over 3,000 vehicles – including 800 EVs and hybrids – burned for nearly three weeks before sinking in the North Pacific Ocean. The vessel sank to a depth of approximately 16,400 feet, making physical recovery of evidence, such as battery components or wiring, or underwater Remotely Operated Vehicle (ROV) surveys, effectively impossible.
While preliminary reports suggest the fire originated near the stern, on the same deck as where the EVs were stored, the precise ignition source remains unconfirmed due to total loss of the vessel and degradation of forensic evidence. With over 3,000 vehicles on board, this complicates liability attribution. Allianz Commercial, which led the vessel’s hull and machinery cover, and Steamship Mutual Club, which provided cover for P&I insurance, are facing a multimillion-dollar exposure, reports claim.
Similarly, the Flagship fire in Miami earlier this year was traced to a faulty lithium-ion battery bank which destroyed the vessel and required more than 100 firefighters to extinguish. Here, the lithium-ion batteries had been installed around mid-2023, during the final stages of the yacht’s construction and long before the fire in April 2025, which raises questions about proximity, especially given the time lapse post-delivery.
Liability
The legal implications are significant. In the absence of evidence that can clearly pinpoint causation, liability is difficult to apportion between manufacturers, shippers, operators and handlers. Under all risks policies, which typically cover loss unless excluded, insurers may invoke exclusions for inherent vice, improper packaging, or misdeclared cargo when causation is speculative. If a fire is traced, for example, to a counterfeit battery lacking certification, liability may shift to the shipper for breach of declaration obligations.
Even minor container breaches, such as inch-wide gaps caused by cranes, can exacerbate water ingress and compromise battery integrity, triggering thermal runway. Alternatively, if there is mishandling by the crew, liability may fall on the carrier under the Hague-Visby Rules unless they can prove due diligence in stowage and handling. In some cases, fire caused by improperly stored batteries led to total container loss, with insurers denying coverage due to non-compliance with International Maritime Dangerous Goods (IMDG) packaging standards. Sedgwick, a global provider of claims handling and loss adjustment services, has similarly reported incidents where defective or counterfeit batteries – often lacking manufacturer certification – ignited during transit, which shifted liability to the shipper for breach of declaration obligations. These examples demonstrate how even small lapses in handling or documentation can materially affect liability under marine policies. Where exclusions for misdeclared or improperly packed cargo apply, insurers may reject claims outright, leaving carriers or shippers exposed to full financial responsibility.
As looked at previously, the carriage of these types of cargo then also raises a number of seaworthiness issues and, in particular, the extent to which the vessel was capable of carrying this type of cargo. For example, do they have adequate fire fighting equipment to tackle this particular type of fire?
Cargo classification
To address (some of) these risks, the IMDG Code Amendment 42-24 introduces strict rules for lithium-ion battery transport, effective voluntarily from 1 January 2025 and mandatory from 2026.
The amendment introduces new UN numbers – such as UN 3556 for lithium-ion battery-powered vehicles – to clearly distinguish between battery types and configurations. The aim is to improve cargo identification, helping carriers, handlers, and emergency responders to assess risks more accurately and respond more effectively. Each classification comes with specific requirements for packaging, labelling, and handling, including new rules for damaged or defective batteries, which must now be isolated and packaged under controlled conditions. These changes aim to reduce ambiguity in cargo manifests and improve traceability in the event of an incident.
In parallel, IUMI and TT Club are encouraging operators to adopt enhanced safety measures, including thermal imaging, AI-based fire detection, and high-expansion foam systems. Insurers are increasingly requiring proof of compliance with these standards during underwriting. While the amendment is a step towards harmonising safety protocols for battery cargo, its effectiveness will ultimately depend on consistent enforcement and the willingness of stakeholders to invest in the systems and training needed to meet these new expectations.
Evolving policies
Marine insurers are facing mounting underwriting challenges as lithium-ion batteries introduce a risk profile that, while chemically similar to lead-acid batteries, carries far greater destructive potential. To mitigate exposure, insurers are implementing targeted measures that directly address the volatility and unpredictability of lithium-ion battery fires. Higher deductibles for battery-related claims shift more initial risk to the insured, discouraging poor handling and incentivising better risk management. Policies may, for example, impose elevated deductibles for EV cargo unless specific containment protocols are met. Insurers are also routinely writing exclusions tied to manufacturer warranty compliance, to ensure that only batteries meeting strict production and safety standards are covered under the policy, thereby reducing exposure to defective or counterfeit cells which are more prone to thermal runway.
Further, mandatory inspections by certified electrical experts are now increasingly required before loading, particularly for older or retrofitted battery systems. These inspections assess long-term system integrity, identifying risks such as damaged cells, improper installation, or inadequate cooling systems. TT Club and UK P&I Club’s joint whitepaper (2022) recommends these inspections as part of a broader strategy to prevent incidents like those seen on the Felicity Ace and Fremantle Highway, where poor visibility into battery condition and stowage contributed to catastrophic losses.
Lithium-ion batteries have proved to be inexpensive way of powering almost everything in modern technology. Until other technology might usurp them, they are here to stay and the shipping industry must, as it has always done, adapt to their carriage, insurance and how the inevitable claims are handled.
Recent regulatory amendments and underwriting practices have significantly heightened the focus on lithium-ion battery risks in marine transport, with stricter classification, packaging, and inspection requirements now in force. Non-compliance or mishandling can result in denied claims and substantial liability exposure for shippers and carriers under evolving insurance policies.
Our experts should closely review the new IMDG Code requirements, insurer expectations, and best practices for battery cargo handling to ensure full compliance and minimise operational and financial risks.
The complexity of them highlights that early intervention and assessment is key for the purposes of securing as much evidence as possible to be prepared for disputes around causation and liability.
