EV Charging Stations: Risk Management and Insurance Planning

Before installing an electric vehicle (EV) charging station on your commercial property, carefully research the risks and insurance implications. The risks vary, depending on your location and whether you buy the equipment, lease it, or outsource to a third party. Consider these scenarios and tips as you’re planning.

What could go wrong?

Here are seven potential risks that can turn your EV charging station investment into a liability:

1. Fire: Equipment malfunction can spark a fire, which can spread to other vehicles and buildings.
2. Other property hazards: Vandalism, theft, and natural disasters can disable EV charging equipment.
3. Liability issues: Electrocution or trip and fall accidents can occur at charging stations.
4. Product mishaps: An equipment defect could damage a user’s vehicle or personal property.
5. Environmental harm: A fire, along with efforts to extinguish it, can lead to environmental contamination that you’ll need to clean up.
6. Cybersecurity breaches: Criminals can hack into charging stations and access customers’ or tenants’ personal information.
7. Regulatory non-compliance: Building codes, zoning laws, environmental regulations, and safety requirements differ by location. Failing to comply can lead to fines and legal action.

Though not all-inclusive, this list provides a starting point for discussion. You want to identify all potential EV charging station risks and how you will manage those. Do you have the right insurance, risk management precautions, and safety training in place?

What are options for installing a charging station at a commercial property?

After identifying the risks, use them as a lens for evaluating charging station options. Generally, commercial real estate owners can choose between three business models:

Buy and own the charging stations

The property owner purchases the charging stations outright and assumes full responsibility for installation and maintenance. Though this approach can require a higher upfront investment, property owners have more control over the charging stations. And potentially, they can recover costs by charging fees to users.

Lease the charging stations

Leasing enables a commercial property owner to install a charging station without hefty upfront costs. You pay a monthly fee to the leasing company, which typically includes maintenance and support services. Some property owners choose leasing for convenience or because they are unsure about long-term demand.

Partner with a third-party provider

In this scenario, you simply provide the space. A third party handles everything else — installation, maintenance, and customer support. You’re adding value for visitors or tenants, without the financial and administrative obligations.

Here’s the catch: No matter which option you choose for EV charging, the charging equipment sits on your commercial property. This means you may have liability if something goes wrong.

Choosing the right arrangement for your property can make the difference between red ink and a strong return on investment.

What are the insurance considerations?

Your insurance decisions depend on the approach you take (buying, leasing, or third-party). Owning the charging station might require comprehensive coverage — liability, property, environmental, cyber insurance, and so forth. If you're leasing or using a third-party provider, the other party may cover some of the risks, potentially reducing your insurance needs.

Look at the fine print in your leasing agreement (or third-party contract) and insurance policies to make sure you have the correct protection. Examine the terms and conditions for the following:

Liability insurance: This helps protect you from potentially costly lawsuits and compensation payouts related to accidents, property damage, or legal claims.

Property insurance: If a vandal damages your charging station beyond repair, will your insurance cover the loss?

Business interruption insurance: If your business relies on income from the charging station, you may want to consider coverage that replaces lost revenue (from downtime due to a covered event).

Environmental insurance: Do you have insurance to cover remediation costs if an EV charging station fire causes environmental contamination?

Cyber liability insurance: Does your policy cover the costs associated with a data breach?

Shared responsibility

Leasing (or utilizing a third party) involves a shared responsibility model. As part of your planning, identify all the activities involved with a charging station. Then, make sure your contracts clearly spell out who manages what (installation, maintenance, customer support, insurance, and so forth).

Also, explore these 11 risk management questions:

1. Who will help you determine the safest place on your property to install the charging station?
2. Do you need to upgrade your property’s electrical infrastructure to accommodate EV charging?
3. Who is responsible for ensuring regular inspections and maintenance of your charging station — and that it continuously meets all safety standards?
4. How will you safely evacuate customers or tenants if a charging station catches fire?
5. What is your liability if injuries occur on your property? If you are leasing or relying on third-party equipment, how do you make your customer or tenant whole?
6. What steps can you take to prevent accidents?
7. Does proper signage, good lighting, and regular monitoring protect you from liability? Or do you need to take further steps?
8. What is the warranty on the charging equipment? Are there any factors that could void the warranty?
9. Will your EV charging station(s) meet the demand? (High demand can lead to expensive, premature wear and tear.)
10. Who will oversee software updates and cybersecurity monitoring?
11. If a charging station data breach occurs, who is responsible for investigating the breach, notifying customers, speaking to the media, etc.?

Making the decision

Attracted by federal, state, and local incentives, many commercial property owners have installed EV charging stations for customer and tenant convenience. Drivers can plug in and recharge their EVs at numerous shopping centers, office towers, event venues, and other high-traffic locations. But before jumping into a new EV charging station project, spend ample time evaluating the risks and how to manage them. Proactive risk management protects users and your business.

To learn more or to brainstorm, please reach out:

Connect with Stacy T. Eickhoff on LinkedIn.

Connect with Marshall Heron on LinkedIn.

About the authors

Stacy T. Eickhoff helps commercial property owners evaluate the insurance aspects of EV charging stations. A risk management and insurance expert, she has been advising construction businesses and real estate investors for over 20 years.

For more than 25 years, Marshall Heron has been collaborating with commercial real estate investors, developers, and owners to design insurance and risk management strategies. He specializes in finding innovative solutions for complex real estate exposures.