This common misconception stems from confusing primary (non-rechargeable) Lithium metal vs. secondary (rechargeable) Lithium-ion batteries. Metallic Lithium - which is used in the anode of Lithium metal batteries - reacts violently with water, air etc. But Li-ion batteries contain Lithium mostly in ionic (vs. metallic) form so there is no need to worry about such volatile reactions when using water to fight Li-ion battery fires. Water is know to be very effective method for extinguishing Li-ion battery fires, e.g. it is a recommended method by the US DOT and FAA - see below (where I have emphasized “water”).
Excerpted from a US DOT/FAA safety alert SAFO 09013, dated 6/23/2009
Thanks for the reference material! That is always appreciated.