ESG drive puts product recall market resilience to the test

23 Sep 2021

The push to create and sell more sustainable technologies is rapidly changing the dynamics of the product recall market, with claims rising and the demand for capacity greater than ever, reports Insurance Insider.

The focus on ESG – like in most industries – is a hot topic in insurance. But for a market that uses history as such a vital component when underwriting its risk, the drive among both consumers and corporations to be more sustainable has begun to throw a few curve balls for recall underwriters.

Lithium-ion batteries are an established technology commonly used in rechargeable devices such as phones, laptops, and electric toothbrushes, but they are also now being used on an industrial scale in electric vehicles.

The main risk with lithium-ion batteries is that they are fire prone, and this risk only increases when the battery required needs to be bigger and more powerful, as is the case with electric cars.

The risk has been brought into focus for (re)insurers by a massive recall by General Motors (GM). All of GM’s Chevrolet Bolts produced between 2017-2022 are being recalled at a possible cost of $1bn to the company because of the risk of a battery fire.

Discussing the issue, Jason McNerlin, Partner and Head of Product Recall and Liability at BLM, said:

“The lawsuits are reminders that product safety issues can involve a broad spectrum of loss and claims, sometimes extending way beyond the costs and expenses of conducting the recall itself.

“There have also been investor class actions alleging, for example, that company statements about risk, reserves and product controls were misleading, and caused loss of share value.”

“Whether insurance policies provide any relevant cover, such as defence costs, will of course depend on the claims and the policy concerned” 

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to clients of BLM. Specialist legal advice should always be sought in any particular case.

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Jason McNerlin

Jason McNerlin

Partner and Head of Product Recall & Liability,

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