Vape Companies Sue Kinsale Insurance After Battery Coverage Was ‘Quietly’ Excluded

Four companies that sell vaping devices have filed a federal lawsuit against Kinsale Insurance Co., claiming the insurer dropped coverage for batteries but failed to fully inform the policyholders before denying a claim.

If it goes to trial and appeal, the case could potentially help clarify insurers’ and insureds’ responsibilities when policy wording is changed or exclusions are added.

“Defendant owed a fiduciary duty to plaintiffs based on trust and good faith that required defendant to act in the best interest of plaintiffs, its customers,” reads the lawsuit complaint, filed in April in U.S. District Court in Nashville. “It is reasonable for the insured to assume the policies provided the requested coverage.”

Kinsale Insurance, based in Richmond, Virginia, offers casualty and specialty casualty insurance for cannabis, transportation and other industries. It has not yet filed an answer to the complaint. But industry experts said that the practice of changing coverage without fully notifying customers is not uncommon and is rarely challenged.

And Tennessee law may be less than crystal-clear on how far an insurer must go in notifying policyholders of changes.

Battery fires from tobacco and marijuana vape devices or electronic cigarettes are relatively uncommon but have become a worldwide concern for consumers, fire departments and insurers. In October 2022, Michael and Elisha Schmidt suffered a fire, reportedly from a vape pen battery, and sued the four vape companies.

The companies, Isabella Industries, Maelynn Industries, Sancia Industries and Illumivaption Inc., all had umbrella and general liability policies with Kinsale. But when the vape sellers renewed their policies in October 2022, Kinsale quietly excluded batteries and battery-fire claims from the policies, while raising premiums, the suit claims.

“Defendant led plaintiffs to believe that the batteries were covered after the renewal,” the complaint reads. “Defendant did not inform plaintiffs that it had removed batteries from the coverage.”

The plaintiffs also argue that the policy wording was ambiguous and illusory, and thus, unenforceable under Tennessee law. The companies had always paid their premiums on time and had been loyal customers to Kinsale, they noted.