The Explosion in E-Cigarette Battery Explosion Litigation: Tips and Tactics for Manufacturers, Distributors, & Retailers

The U.S. Fire Administration reports that “electronic nicotine delivery systems” (ENDS), which include products like e-cigarettes, e-cigs, personal vaporizers, vape pens, and mods, have been growing in popularity since they became available for sale in the United States in 2007. In fact, there were 466 e-cigarette brands available as of January 2014 along with 7,764 unique vapor flavors. Moreover, by 2015, there were approximately 2.75 million e-cigarette smokers in the United States alone who spent more than $2.8 billion on e-cigarette devices and accessories.

The dynamic growth the e-cigarette industry has experienced has not been without various legal issues of which e-cigarette manufacturers, distributors, and retailers need to be aware as their markets expand. Notably, the regulatory environment for ENDS has been continually evolving as federal and state governments wrestle with whether to treat e-cigarettes and related products as “tobacco products” or “medical products,” which in turn will affect how e-cigarette manufacturers are able to obtain approval for and market their devices. Manufacturers, distributors, and retailers might also encounter various state and local taxes and licensing requirements that are designed to minimize children’s access and exposure to e-cigarette products.

In addition to government regulations, e-cigarette businesses are now encountering product liability litigation that primarily focuses on injuries that occur when the lithium-ion batteries that power the devices explode. These lawsuits have sparked a need for e-cigarette insurance, a market many insurers are hesitant to enter in light of their prior experience with traditional combustible tobacco products. This article’s goal is to provide e-cigarette manufacturers, distributors, and retailers with background on recent regulatory, litigation, and insurance developments in the e-cigarette industry and to provide recommendations to e-cigarette businesses on navigating through what for the most part are currently uncharted waters.
I. The Constantly Evolving E-Cigarette Regulatory Environment in the United States

Federal Regulation
Currently, the Food & Drug Administration’s (FDA) guidance on whether and how it intends to regulate e-cigarettes is not entirely clear. The regulatory plan for e-cigarettes had its origins with the Family Smoking Prevention and Tobacco Control Act, which President Barack Obama signed the Act into law on June 22, 2009. Nearly seven years later, on May 5, 2016, the FDA issued a rule extending the Agency’s regulatory authority to additional devices that meet the statutory definition of a tobacco product, including ENDS, e-cigarettes, and vape pens.

Under the new 2016 rule, e-cigarette manufacturers had to submit a Pre-Market Tobacco Application (PMTA) by August 8, 2018, for any product that entered the market after February 15, 2007. Significantly, some commentators suggested this PMTA requirement would result in a ban of more than 99% of the e-cigarette products that were available because of the time, cost, and expense involved with putting together an application.

Just 10 days before the PMTA deadline, the FDA extended until August 8, 2022, the date by which e-cigarette manufacturers were required to submit their PMTAs. The delay was intended to “afford the agency time to explore clear and meaningful measures to make tobacco products less toxic, appealing and addictive,” and to explore how e-cigarettes could benefit people who smoke combustible tobacco products. Additionally, the deadline’s postponement enabled the FDA “to develop product standards to protect against known public health risks such as electronic nicotine delivery systems (ENDS) battery issues and concerns about children’s exposure to liquid nicotine.”

Although the FDA’s reprieve was welcome news to e-cigarette manufacturers, a number of questions remain about how e-cigarettes will be regulated. For example, while the FDA’s final rule describing the circumstances surrounding whether a product made or derived from tobacco will be regulated as a drug or device suggests e-cigarettes will probably be considered “tobacco products,” the rule also seems to leave open the possibility the products could be considered drugs or devices if they are intended as smoking cessation aids. On the other hand, an FDA decision to regulate e-cigarettes as “tobacco products” could conflict with a number of state statutes that do not include e-cigarettes in their “tobacco products” definitions.

Regardless, whether a device is regulated as a “tobacco product” or as a “medical product” is significant from a regulatory standpoint because the approval process for medical devices is more burdensome. Notably, medical device manufacturers must demonstrate their product’s “safety and effectiveness” in order to obtain FDA approval to market the product. This process can be complicated, time-consuming, and expensive. New medical products are also frequently approved for a particular indication, virtually always require a prescription, and, unlike e-cigarettes, may not be used recreationally. Further, the United States Supreme Court has said “tobacco products” would have to be removed from the market if they are considered medical devices because the FDA has concluded tobacco is “inherently unsafe.” While the prospect seems unlikely based on the safety data currently available, e-cigarettes could nevertheless face a ban if they are determined to be medical devices and studies later establish the health risks from with e-cigarettes are similar to combustible tobacco products.

State Regulation
Most e-cigarette regulation at the state level has focused on preventing youth exposure to the products. Several states and municipalities have enacted e-cigarette taxing policies designed to make e-cigarettes more expensive in an effort to discourage the products’ use, though some experts have advocated that e-cigarettes should be taxed at a lower rate than tobacco products to encourage users to move from combustible products to less hazardous noncombustible devices. Other states have attempted to control e-cigarette marketing and advertising by supporting efforts to extend restrictions on traditional tobacco products to e-cigarettes or by suing e-cigarette businesses for selling to minors or for making unsupported health claims. A few states have imposed tobacco-related licensing requirements on e-cigarette manufacturers and retailers to ensure these businesses’ manufacturing processes conform to minimum good manufacturing standards, to restrict the sale of flavored processes, and to address consumer and worker safety concerns from mixing e-liquids. E-cigarette manufacturers, distributors, and retailers should make sure to conduct a careful analysis of the law before doing business in any state to ensure they do not run afoul of any applicable licensing, taxing, and marketing rules.
II. E-Cigarette Litigation: Defense Strategies
Much of the litigation that has accompanied the rise in e-cigarette production and usage has focused on fires and explosions involving the lithium-ion batteries that power the devices, which can cause oral cavity burns, lost teeth, eye injuries, traumatic tattooing, and even shrapnel wounds. The U.S. Fire Administration has observed, “The e-cigarette/lithium-ion battery combination presents a new and unique hazard to consumers. No other consumer product places a battery with a known explosion hazard such as this in such close proximity to the human body. It is this intimate contact between the body and the battery that is most responsible for the severity of the injuries that have been seen. While the failure rate of the lithium-ion batteries is very small, the consequences of a failure . . . can be severe and life-altering for the consumer.”

When suing businesses for injuries from exploding e-cigarettes, plaintiffs’ lawyers typically assert strict product liability, negligent product defect, negligent failure to warn, and breach of warranty theories against manufacturers and distributors. Specifically, lawsuits often allege e-cigarettes are defectively designed because they can overheat, are prone to thermal runaway, and do not contain short-circuit protection, overload protection, or voltage control protection. In addition to claims based on e-cigarettes’ manufacturing materials and design, plaintiffs’ attorneys contend e-cigarettes do not contain adequate warnings about the products’ supposed propensity to explode even when operated properly or if stored in a user’s pocket with other items.

Plaintiffs’ lawyers in the future might assert consumer fraud or merchandising practices violation claims similar to those lodged against tobacco companies in which the lawyers allege e-cigarette manufacturers’ and distributors’ advertising does not disclose the health risks that may be related to their products or contains language designed to mislead consumers regarding the benefits and dangers connected with e-cigarette use. E-cigarette manufacturers could also be exposed to liability if research later establishes a link between flavoring chemicals and disease.

Retailers are not immune from litigation and have been sued for selling batteries that do not contain short-circuit protection, overload protection, or voltage control protection. They have also been sued for selling batteries without warning purchasers about the dangers of using incompatible batteries or about the dangers relative to carrying e-cigarettes in pockets along with change or other contents.

E-cigarette manufacturers, distributors, and retailers have several defenses available to combat plaintiffs’ claims. For example, a significant number of e-cigarette explosions occur when purchasers modify their devices with spare batteries they incorrectly believe are compatible with their devices’ protection circuitry or by using salvaged lithium-ion batteries from old laptop computers or power tool battery packs. These explosions probably could have been prevented if the users simply followed the manufacturers’ instructions and used the batteries and charging appliances that accompanied their devices. Additionally, many e-cigarette retailers sell plastic cases for storing and carrying spare batteries, which are intended to prevent battery short-circuits if the battery terminals contact keys or spare change in someone’s pocket.

In the meantime, e-cigarette manufacturers can take steps to minimize the already low explosion risk connected with their products. For example, manufacturers can affix text or graphic elements to their products with the following language the FDA recommends:

(1) “Consider using vape devices with safety features such as firing button locks, vent holes, and protection against overcharging.”

(2) “Keep loose batteries in a case to prevent contact with metal objects. Don’t let batteries come in contact with coins, keys, or other metals in your pocket.”

(3) “Never charge your vape device with a phone or tablet charger. Always use the charger that came with it.”

(4) “Don’t charge your vape device overnight or leave it charging unattended.”

(5) “Replace the batteries if they get damaged or wet. If your vape device gets damaged and the batteries are not replaceable, contact the manufacturer.”

Manufacturers, distributors, and retailers can also provide battery specifications, voltage ranges, and wattage ranges for e-cigarettes with consumer-replaceable batteries to ensure users have information that will allow them to select the right substitute batteries to minimize the risk for explosion.

When designing these informational texts and graphics, manufacturers, distributors, and retailers should be mindful of the American National Standard Institute’s (ANSI) standards published in ANSI Z535, ANSI Z535.4-2007, and ANSI Z535.6-2011 for guidance on warning language, signal words, and color schemes. E-cigarette businesses should also consider whether to publish their warnings and instructions in owner’s manuals or on the product’s container since e-cigarettes are probably too small to carry conspicuous, effective language on the devices themselves.

In addition to these warnings, e-cigarette manufacturers should make sure the companies supplying e-liquids adhere to the American E-Liquid Manufacturing Standards Association’s good manufacturing processes, which could help limit the potential for litigation involving allegations that might focus on e-liquid contaminants exploding or catching fire. Further, manufacturers should take care to keep a record not just of who supplies their e-liquids but of everyone from whom components are purchased so the manufacturers can seek indemnification from these entities in the event a particular accident can be linked to a specific e-cigarette part.

E-cigarette businesses must also be mindful of the language they use in their advertising and marketing material regarding e-cigarettes’ effectiveness as smoking cessation aids and regarding the risks that might be attributable to e-cigarettes. Ultimately, manufacturers should continue with their already diligent research efforts to identify which uses and foreseeable misuses are most likely to cause lithium-ion battery overheating, fire, and explosion during operations, charging, storage, and transportation, and to identify health risks and benefits from e-cigarette use through additional scientific and clinical studies.

III. E-Cigarette Insurance: What Manufacturers, Distributors, and Retailers Need to Consider in Order to Protect Themselves

Selecting the appropriate insurance policy is an important issue for e-cigarette manufacturers, distributors, and retailers because conventional commercial general liability policies often contain language that could exclude coverage, at least with respect to claims for possible health consequences from e-cigarette use. For example, many general liability policies contain endorsements that explicitly exclude coverage for tobacco-related claims and that might be triggered if the FDA decides to regulate e-cigarettes as “tobacco products.” These “tobacco exclusions” may very well provide a basis for insurers to deny coverage not only for e-cigarette users’ claims, but for claims nonusers might assert for secondhand vaping exposure.

Coverage might also be unavailable if e-cigarettes are determined to be “inherently dangerous” products or if the health risks from the devices are found to be as significant as the risks combustible cigarettes pose. In particular, virtually all insurance policies issued after 1966 provide that an insurer “will pay those sums that an insured becomes ‘legally obligated to pay as damages because of . . . bodily injury . . . to which this insurance applies, caused by an occurrence.” “Occurrence” is typically defined as “an accident, including repeated exposure to conditions, which results in bodily injury neither expected nor intended from the standpoint of the insured.”

As far as e-cigarettes are concerned, insurers could look to these definitions to deny coverage if e-cigarettes, like combustible cigarettes, are determined to be “inherently dangerous” products because injuries from “inherently dangerous” products often are not considered “accidents” for which coverage is otherwise provided. Insurers might also contest coverage under the “expected or intended” clause contained in the definition of “occurrence” if health risks from e-cigarettes prove to be as significant as the risks combustible cigarettes create and if courts determine the e-cigarette industry knew or should have known of these risks.

Most if not all of the aforementioned insurance language excluding coverage for “tobacco products” or for “inherently dangerous products” that do not meet the definition of an “occurrence” would appear to be inapplicable to bodily injury caused by e-cigarette lithium-ion explosions. Nevertheless, when e-cigarette manufacturers, distributors, and retailers evaluate their insurance needs, they should generally avoid traditional carriers who have been hesitant to enter the e-cigarette market because of concerns these carriers may have from their experiences with tobacco manufacturers. Instead, e-cigarette businesses should look to insurers offering policies written to address the specific liability situations e-cigarette businesses can expect to encounter.

Importantly, e-cigarette businesses should take care to avoid policies that contain “tobacco exclusions.” To the contrary, businesses should look for policies that expressly omit e-cigarettes and comparable ENDS products from the definition of “tobacco, tobacco products, and tobacco byproducts” to ensure the arguments insurers used to limit coverage for health issues combustible products cause are not asserted against e-cigarette claims. Further, e-cigarette businesses should look for policies that do not contain health hazard exclusions, do not contain battery exclusions, and do not have provisions that limit coverage for sickness or disease e-liquids are alleged to have caused. Retailers should take care to avoid policies that exclude coverage for “products-completed operations hazards” since these exclusions usually do not provide coverage for accidents that occur away from the retailers’ places of business. Punitive damage coverage should also be considered, though the availability of such an endorsement will vary considering some states prohibit insurers as a matter of public policy from covering punitive damages.
In addition to selecting the right insurance policy, e-cigarette manufacturers, distributors, and retailers should assess whether to limit their battery purchases to United States organizations who are willing to list the e-cigarette manufacturers, distributors, and retailers as “additional insureds” on any policy the battery makers might carry. This “additional insured” status should provide another coverage layer for claims associated with exploding Lithium-ion batteries.

IV. Conclusion
The law surrounding e-cigarettes is at this point relatively undeveloped and should experience significant change in the next few years. While the federal government might regulate e-cigarettes as “tobacco products” for regulatory purposes, a number of states may treat e-cigarettes differently for taxing and licensing purposes. E-cigarette businesses can also expect plaintiffs’ attorneys to explore new liability theories as testing and research continue on the health risks related to e-cigarettes and on preventing lithium-ion battery issues. The potential for new, currently unidentified liability theories means e-cigarette manufacturers, suppliers, and retailers need to be careful when selecting insurance in order to avoid policies containing exclusions that carriers previous used to deny coverage for claims against combustible tobacco businesses.

The lawyers at Sandberg Phoenix & von Gontard P.C. include dozens of attorneys with a wealth of experience representing manufacturers, distributors, and suppliers in high-exposure, multi-party mass tort and class action matters at the regional and national level involving a wide range of products and chemicals, to include matters involving drugs, medical devices, tobacco, talcum powder, lead, asbestos, benzene, Diacetyl, silica, PCB contamination, and groundwater contamination. Many of these actions involve not only traditional product liability claims, but also claims alleging consumer fraud and merchandising practices act violations. Sandberg Phoenix & von Gontard P.C. also maintains a group of lawyers who specialize in insurance disputes and who can quickly and efficiently evaluate whether an insurance policy covers a particular loss. Our expertise has equipped Sandberg Phoenix & von Gontard P.C. to handle all of your needs in defending litigation involving your e-cigarette products and components and in providing guidance with navigating your insurance coverage. SVBS

Andrew Ryan is a shareholder with Sandberg Phoenix & Von Gontard. He has more than 20 years’ experience with litigation throughout the country defending manufacturers of various products, to include drugs and medical devices, industrial equipment, and potentially toxic chemicals. Additionally, he represents clients in the railroad, transportation, and construction industries.

2018-01-19T10:17:59+00:00 January 19th, 2018|Featured Editorial, Recent Posts|Comments Off on The Explosion in E-Cigarette Battery Explosion Litigation: Tips and Tactics for Manufacturers, Distributors, & Retailers