Electricians know they need Public and Product Liability Insurance to protect themselves from claims, but what about efficacy? Why is it important?
Efficacy cover is most often defined as insurance against the legal liability for injury to third parties or damage to third party property arising from a product or service failing to perform its intended function. It is also referred to as “inefficacy insurance” or “failure to perform insurance.” It is vital for electrical contractors involved in mission critical tasks such as fitting fire and security systems, control panels, and computer networks.
It is widely but wrongly thought that product themselves need to be covered. But what if the product is fine – it simply fails to perform as intended. A good example would be a fire alarm. There are many scenarios that could play out in the event of a catastrophic blaze. The alarm may not go off because it was installed incorrectly, or perhaps the installation is fine and it simply isn’t monitored.
Think back to Western-Super-Mare pier catching fire in 2008. Subsequent investigation showed that a failure in monitoring the alarm system meant the fire service wasn’t alerted until 5 hours after the blaze started, by which time the structure was almost totally destroyed. Since there was no fault with the product itself – the alarm worked fine – efficacy cover is the only way the electrical contractor could have protected themselves.
Efficacy is excluded by the majority of UK insurers for the Fire, Security, and Electrical sectors. That’s because of the high-risk work undertaken. The only way you can be sure of being covered is by scrutinizing your policy documents. If efficacy is excluded this should be clearly noted in any endorsements.
Electrical contractors may often take on specialists to undertake Fire and Security work on their behalf. Such sub-contractor’s need to prove they have valid efficacy cover. Of course, the main contractor will still be seen as responsible for the work (they are the ones invoicing and getting paid), so may also need to prove efficacy insurance is in place.
Contact us if you need further guidance. We will help wherever we can.
10th September 2018.