Gartner Inc. has predicted that the “smart home” market will grow from 339 million applications in 2016 to more than a billion by 2018.1 In anticipation, property insurers have partnered with companies offering smart home technologies to promote the use of smart devices in the home.
However, with all the apparent benefits of smart home technology come a number of potential risks. Dumb products made smart by connection to the Internet present a new layer of complexity when a failure occurs.
In 2016, Elliot Kaye, chair of the U.S. Consumer Product Safety Commission (CPSC), reported that the CPSC was assessing the risks to consumers posed by emerging technologies, including the Internet of Things (IoT), and identified concerns with the safety of devices that can be hacked or can fail if a software update to fix a problem is not installed.2
When fires occur in homes, property insurers investigate to assess the first-party loss suffered by the policyholder and then to address the potential for a recovery of monetary damages by seeking subrogation against a responsible third party, such as a product manufacturer if the product is thought to have played a role in causing the fire.
One of the primary reference guides used to aid with the investigation of fires is the National Fire Protection Association’s NFPA 921: Guide for Fire and Explosion Investigations (NFPA 921). However, the current edition (2017) does not address the potential for a fire when “smart” product software malfunctions in previously dumb products. The next edition will not be published until 2020.
In addition to software or sensor failures, NFPA 921 will eventually have to address cyber-based attacks on Internet-connected products as a potential cause of fires. Thus, going forward, the investigation of a fire that may involve an IoT product will need to take into account not only software failures but also the vulnerability of the device to hacking.
Additionally, safety organizations such as Underwriters Laboratories (UL) are lagging behind the technological revolution taking place with home appliances, consumer electronics, and home-building systems. Currently there are no safety requirements with any UL standard for home appliances to address software applications and connectivity to the Internet.
The potential for an Internet-connected product to experience a software or sensor malfunction that can cause a fire is something that will have to be addressed by manufacturers, insurers, and other stakeholders in the IoT marketplace. In addition, because IoT products are vulnerable to cyberattacks, manufacturers, insurers, and other stakeholders will have to address the deliberate actions of hackers that can induce a failure leading to damage. Hence, when the failure of a smart product leads to a fire, the challenge of how the smart home application should be evaluated and examined as a potential cause becomes a more complex undertaking than the failure of a similar but dumb product.
More information on this topic is available in the author’s article, “The Impact of the Smart Home Revolution on Product Liability and Fire Cause Determinations.”3 u
2. Emily Field, CPSC Chair Kaye Eyes Safety Risks in New Technologies, Law360 (Aug. 8, 2016), https://www.law360.com/articles/824104/cpsc-chair-kaye-eyes-safety-risks-in-new-technologies.
3. H. Michael O’Brien, The Impact of the Smart Home Revolution on Product Liability and Fire Cause Determinations, Wilson Elser (Sept. 12, 2016), https://www.wilsonelser.com/writable/files/Client_Alerts/product_liability_fire_science_.pdf.