As electrical contractors install ever-greater amounts of wiring into modern buildings, the rising incidence of dangerous counterfeit cabling should be of serious concern to insurers, builders and homeowners, says Roger Brown.
Copper prices rose by an astounding 24% this quarter. Since this metal is an essential — and by far the most expensive — component in electrical wiring, the relentless rise in price over the past three years is having a huge effect on parts of the construction industry.
A little-known by-product of this price rise, however, and one which insurers have so far failed to note, is the creation of a whole new industry in counterfeit cabling for homes. These cables have lower levels of copper content, which results in reduced resistance that can, in turn, lead to failure and even electrical fires. The difference in resistance is startling: counterfeit cables 'rated' to two hours have failed after two minutes.
Last year, the UK government estimated that more than 27% of all electrical fires are caused by either electrical products or faulty cables. In response to this, the Approved Cables Initiative was launched in late 2009 to address the issue of unsafe, non-approved and counterfeit cabling entering the UK market.
In order to stamp out this problem, providers, installers and end users must stay vigilant and know how to spot such cabling, as well as its potential consequences, because they are either unmarked or carry all the markings of accredited cables, making it very hard to distinguish them from a genuine product. According to the ACI, an estimated but alarming 20% of the £2bn electrical cables market in the UK currently consists of counterfeit, unsafe or unapproved cabling.
Liability for loss
Due to the fact counterfeit cabling is hard to spot, and without the necessary facilities at their disposal, distributors and installers often have to blindly trust that the manufacturer or supplier is providing them with cabling that meets the requisite standards.
Even though installers and distributors are often unaware they are dealing with unsafe or counterfeit cabling, it is they who will face the financial and legal costs if damage results. This could be damage to electrical appliances, damage to a property, injury to persons or even loss of life.
So, what insurance protection can a builder or contractor obtain against this issue? As yet there is little specialist focus on this specific risk. Builders and contractors need to discuss their insurance policies with their broker or intermediary to check they are covered for counterfeit cabling issues. Every insurer has its own policy wording and format and these can differ widely. Furthermore, different parts of the risk may trigger different insurances that a contractor holds, due to the different potential scenarios and depending on whether the installation causes damage or injury to property or people.
For example, if an employee sustains injury when installing or testing counterfeit or faulty products, this would be indemnified under an employers' liability policy. If the product liability aspect of contractor's cover is triggered, then the insurer will pay for third-party damage or injury losses. But product liability policies will typically not make any contribution towards reinstating faulty works and, of course, the loss of a contractor's reputation is uninsurable. Specialist policies are, however, available that protect against the risk of rectifying faulty products supplied.
Under most contractors' all-risks policies, the contractor will be responsible for rectifying defective work or items. However, should faulty cabling be the cause of damage to other work — say by fire — this damage would be covered, apart from the faulty or counterfeit goods themselves, which as a works defect are specifically excluded. The contractor's product liability policy would normally be expected to respond to any damage to the building or other property.
It is not the intention of a professional indemnity policy to protect in respect of counterfeit goods, although mis-specification, in the form of ordering the wrong parts, could be covered. We might also see an imposition by the courts of a duty to check goods and materials but that is not presently the case. Naturally, the extent of cover all depends on the scope of an individual policy and brokers should review any specific policy terms and conditions for applicability.
The end users are the ultimate casualties of this unsafe trend. Unfortunately, in most cases, the problems are not discovered until the cables have been put in and used. Once the counterfeit or unsafe cabling has been installed, the costs of replacing it are often considerable, since most cabling is located inside the walls of a building.
If the fault is not discovered quickly enough, an electrical fire may result in substantial damage to the property. But aside from financial implications, counterfeit and unsafe cables carry an enormous threat to personal safety, with the potential to cause serious injury and even loss of life. Even if this worst case scenario never happens, where faulty wiring is identified, the value of a property will be eroded by faulty or dangerous installation issues, the cost of which to correct is substantial.
Recourse against the installer
Homeowners will be covered by their buildings insurance for damage to their property arising out of faulty cabling causing a fire. But, where the cause of a fire is traced to faulty cabling, the cost of making good the cable runs themselves will not be covered; the householder would normally have to find the cost for that outside of any insurance settlement.
There may also be recourse against the installer of the faulty cable. For the householder, the issue is about safety and confidence in their wiring system. Homeowners should ask about this issue and look to use a reputable electrical contractor who is a member of a recognised industry association, such as the Electrical Contractors Association.
For property insurers the issues are considerable. Put simply, faulty cabling entering the UK market on the current scale means more fire losses are likely. If the installer is at fault, such losses may lead to protracted litigation in trying to recoup losses from the contractor who performed the installation — if they can be traced.
As yet, there are no mechanisms to check the quality of cabling in a building as a standard part of issuing cover. This is a new issue and one that insurers should be taking seriously. We need insurers to add industry weight to the ACI and support similar initiatives. Counterfeit cabling is a risk to insurers, building and contracting professionals and homeowners — and it is one set to get significantly worse.
Where does the issue originate?
There have been several recent cases where cabling made abroad was either counterfeit, with all the appropriate markings, or unsafe and failed to meet the British standards once tested. Suppliers from India, Turkey and China have been identified and the majority of their products quarantined by the Approved Cables Initiative. Despite this, once the dangerous product has entered the UK supply chain, it is extremely difficult to track and recall, and sometimes just as hard to trace it back to an original manufacturer.
In the case of Turkish manufacturer Atlas Kablo, more than 11 million metres of its cables were withdrawn from the UK market this year after being deemed unsafe by the British Approvals Service for Cables, which suspended and then cancelled its product certification licence. However, it is unclear how much of the cable remains in the supply chain or how much has already been installed. Certain cables marked 'Kaydour', which entered the UK market in 2009, and are understood to have originated in India, were found to have serious problems, making them unsafe for use and were thus quarantined. However, the industry has also seen a rise in substandard or counterfeit Chinese cables sold on Ebay, where the distributor and any controls during import are bypassed. These often end up in the hands of people who have far less knowledge and opportunity to verify the authenticity of the product.
Roger Brown is managing director of Electrical Contractors Insurance Company
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