A legal perspective on contractor liabilities

April, 2012 Issue of Cabling Installation & Maintenance Magazine

Tort and product-risk attorney provides information about the legal pitfalls of installing noncompliant cable.

by Patrick McLaughlin

A seminar hosted by Cabling Installation & Maintenance and delivered via the Web on February 1, 2012 focused on some of the risks and potential liabilities that cabling contractors face if they install cable that is out of compliance with building codes. The seminar was sponsored by the Communications Cable and Connectivity Association (CCCA; www.cccassoc.org), an organization that has been on an aggressive awareness campaign to shed light on issues surrounding noncompliant cable. The seminar included presentations delivered by Todd Harpel, director of marketing for Berk-Tek, a Nexans company (www.berktek.com), who presented on behalf of the CCCA; Steve Galan of Underwriters Laboratories (www.ul.com), who discussed the authentication of labels and marks that appear on cables; and Natalie Medley, an attorney with the Washington, D.C.-based law firm Crowell & Moring (www.crowell.com), who specializes in torts and product-risk management and presented on the potential legal liabilities contractors face for installing noncompliant cable. Medley’s presentation generated significant question-and-answer dialogue with individuals who attended the event. This article will summarize her presentation. The seminar that was the basis for this article is available for on-demand viewing at www.cablinginstall.com.

Medley stated early in her presentation that it “provides an overview of potential liability but is not and should not be construed as legal advice. Potential liability for any individual may differ depending on facts, circumstances or jurisdictions. If you have any particular questions about liability, consult your own attorney for advice.”

For the purposes of the seminar and this article, the concept of cable “compliance” or “noncompliance” means compliance with the requirements of the National Electrical Code. The idea that such compliance is a legal matter lies in the fact that many jurisdictions adopt the NEC into their building codes. Once such adoption takes place, the requirements within the NEC take on the force of law because building codes are laws within jurisdictions. Medley noted, “Each jurisdiction has the opportunity to examine the NEC and other standards in effect. They can add terms to them or adopt them wholesale. The NEC has been adopted wholesale by many jurisdictions. But because the NEC may be adopted differently from place to place, it is important to understand that wherever an installation takes place, the laws of that jurisdiction should be understood.”

Enforcement mechanisms

Medley detailed several enforcement mechanisms available in the event that the standards set within building codes are breached. She also cautioned that, “In general, knowledge of noncompliance is not required. In other words, if an installer purchases and installs cable, and doesn’t necessarily know whether or not it complies with the NEC, that is not a defense in most cases against liability and penalties for these violations.”

While enforcement measures vary from one jurisdiction to another, four measures are most common. 1) Stop the installation—an enforcement agent stops the installation before it is complete. 2) Repair—enforcement body can order the contractor to repair the project. 3)Criminal penalties—generally misdemeanors with fines of up to $1,000 or $2,000, but also potentially a jail term of up to six months. 4) Private right of action—private citizens can pursue lawsuits against the contractor to recover damages, other costs and penalties. Medley pointed out that many jurisdictions provide just one of these four enforcement mechanisms, but some may have multiple options. Contractors will be best served to know the enforcement possibilities in place in the jurisdictions in which they work.

Negligence and fraud

The preceding enforcement steps and penalties relate to building-code violations. The next topic discussed was the potential civil liability contractors may face. As Medley described it, “one private party suing another private party for damages sustained as a result of noncompliant cable that was installed.” She brought up the potential scenario of “a fire that was the result of, or made worse by, the installation of noncompliant cable.” In such a situation, “There may be a viable cause of action for damages that could be filed by the property owner, the inhabitant, whoever was in the building at the time it happened.”

The forms in which these claims can arise are also matters of state law, she explained. But in general, three forms of action apply across many states: 1) negligence, 2) fraud, and 3) breach of contract and warranty.

A negligence cause of action has four elements the plaintiff must show in order to claim damages: 1) a duty existed, 2) that duty was breached, 3) causation, and 4) damages were suffered. In cases of negligence from the installation of noncompliant cable, “the damages are limited to damages caused to something other than the cable itself,” Medley said. “In the case of a fire, for instance, a house burned down, a building was damaged, et cetera. That is the root of the damages that could be recovered.”

In a fraud case, the plaintiff would be required to show that a contractor made a false representation of fact and knew the representation was false. Medley provided this scenario as an example: “If the contractor has actual knowledge it installed noncompliant cable but told the customer that the cable complied with the NEC or building code, that could be enough to show fraud.” Because a fraud claim requires a “heightened showing” as Medley described it, a cause-of-action of this kind brings with it the potential for additional damages available to the plaintiff.

Breach-of-contract and breach-of-warranty causes of action “in many cases depend on the agreement between the parties,” she said. As an example, “A contract between parties may be that the cable complies with the law. That’s a very general term, but when you’re in a jurisdiction where the NEC is adopted, and the installer installs noncompliant cable, that could potentially be a breach of that contract.” Also, in many jurisdictions warranties are attached to certain work that is done. “In most jurisdictions, construction contracts say that the construction will meet building code requirements,” she pointed out.

The negligence and warranty claims described here “are viable in most jurisdictions,” according to Medley, but “there are others. So many jurisdictions and many localities have enacted laws, statutes, that provide other types of causes of action for certain types of fraud and consumer protection. These should be evaluated.” Also, in many cases, multiple claims “may be brought together in one action against an installer. When dealing with civil liability, it can be a whole slew of causes of action. Some may stick, some not. But you have to think about all of them,” she said.

Medley concluded by reminding the audience, “Always be aware of state and local government laws and building-code requirements. As we’ve seen, that can affect enforcement by government and civil liability.” Also, she said, “Be proactive to select compliant cable, and do due diligence. Understand what you need to do to comply with the law.”

Patrick McLaughlin is our chief editor.