Property Insurance Concerns When Leasing to Lithium-Ion Battery Companies


The demand for lithium-ion battery technology has surged in recent years, driving an increase in facilities dedicated to their production and storage. However, for building owners considering leasing their properties to lithium-ion battery companies, there are unique concerns and considerations with regards to property insurance that must be addressed. The nature of lithium-ion batteries poses specific risks that need careful assessment to ensure adequate coverage and risk mitigation strategies.


Understanding the Risks:

While integral to various industries, lithium-ion batteries present inherent risks such as thermal runaway, fire, and potential chemical reactions that can lead to significant bodily injury and property damage. If mishandled, these batteries can trigger fires that are difficult to contain and extinguish, thereby causing extensive damage not only to the existing building - but also to neighboring properties.


Insurance Coverage Considerations:

  1. Specialized Coverage:

Building owners leasing to lithium-ion battery companies must seek specialized insurance coverage tailored to the unique risks associated with battery operations and storage.  Traditional property insurance carriers may not fully cover the specific perils linked to lithium-ion batteries and building owners may incur increased premiums with their existing carriers or be cancelled by their carrier altogether.


  1. Property Valuation:

Accurate valuation of the property is crucial. Given the potential for high-value equipment and technology housed within the facility, it's essential to ensure that insurance coverage reflects the replacement cost of the specialized equipment in case of damage or loss.  It is important that the limit for the building insurance includes the value of any improvements that the tenant has made to the property.  Why?  Because failing to add such values to the insurance limit may subject the landlord to a coinsurance penalty.


  1. Liability Coverage:

Comprehensive liability coverage is vital to protect against potential third-party claims arising from accidents or damages caused by battery-related incidents. This includes coverage for bodily injury, property damage, and business interruptions resulting from such events.   The landlord’s General Liability and Umbrella policies likely have a pollution exclusion – thus any bodily injury or property damage resulting from pollution will not be covered.  If the landlord has an Environmental Liability policy in force to cover this gap, will it respond and does it have high enough limits to cover a catastrophic loss?


  1. Compliance and Safety Standards:

Insurance providers may require evidence of compliance with safety standards and protocols specific to lithium-ion battery storage and handling. Compliance with regulations can positively impact insurance premiums and coverage terms.


Risk Mitigation Strategies:

  1. Risk Assessment and Prevention:

Prior to leasing to a lithium-ion battery company, lessees should conduct thorough risk assessments to identify potential hazards. Implementing preventive measures such as fire suppression systems, advanced monitoring technologies, and strict safety protocols can mitigate risks and reduce premiums.


  1. Contractual Agreements:

Clear and comprehensive lease agreements should specify the requirements related to compliance with safety protocols, maintenance of equipment, and adherence to regulatory standards. These agreements can specify insurance obligations, including requirements for the tenant to maintain adequate coverage and name the property owner as an additional insured party.  If the landlord’s and nearby tenant’s premiums increases due to the lithium-ion battery operations, is the additional premium the responsibility of the lessee?  Further, how does the landlord quantify the additional premium associated from the lessee’s operations versus market conditions to enforce this provision?


  1. Continuous Communication:

Establishing open communication channels between the building owner, tenant, and insurance provider is crucial. Regular updates on changes in operations, technology, or safety procedures can help insurance companies better understand and adjust coverage as needed.  The landlord’s insurance carrier(s) will want to conduct property risk engineering site visits to understand the risks associated with the lithium-ion battery company.


  1. Professional Guidance:

Seeking advice from insurance experts and legal professionals experienced in dealing with lithium-ion battery-related risks can provide invaluable insights into securing appropriate coverage and mitigating potential liabilities.



Leasing property to lithium-ion battery companies can be a lucrative opportunity, but it comes with distinct risks that necessitate specialized insurance coverage and proactive risk management. Building owners must engage in comprehensive risk assessments, secure tailored insurance coverage, and establish stringent safety measures to safeguard their assets and mitigate potential liabilities arising from the unique challenges posed by lithium-ion battery operations. Collaboration between all stakeholders is pivotal in ensuring adequate protection against the specific risks associated with this industry.

By addressing these concerns proactively, property owners can navigate the complexities of insuring buildings leased to lithium-ion battery companies while safeguarding their investments and ensuring a secure environment for all involved parties.


BlueStone Advisors is a specialty commercial insurance broker that has provided insurance and risk management services to the lithium-ion battery industry for over ten years. BlueStone Advisors delivers advanced brokerage solutions that reduce the total cost of risk and insurance while leveraging best practices that strengthen an organization's risk profile.

Additional information can be found at or by emailing

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