‘Connected’ Homes: Trends and Key Legal Issues

Filed in Legal, Technology by on September 6, 2017 4 Comments

For most home shoppers, owning a smart home is no longer a dream — it’s an expectation. Particularly among younger generations who have lived most of their lives in the digital era, staying connected is a way of life. So it’s no surprise they want their homes to be connected, too.

We’ve reached a point where the majority of consumers are not only willing to invest in it, but they are expecting their next home to be connected.

But with the potential for massive data collection, a gaping variance in product quality, and a dependence on software and software updates, there are some pretty important ramifications to consider.

Here is a look at the emerging trends in connected-home technology and potential liability concerns and ways to make sure you are properly conveying to customers any risks associated with this new and expanding market.

Stephen Embry, a partner with the law firm of Frost Brown Todd in Lexington, Ky., and Grayling Love II, product line manager at Eaton Corporation in Peachtree City, Ga., discussed these issues with NAHB’s Construction Liability, Risk Management and Building Materials Committee at the 2017 Midyear Meeting. Here’s what they had to say. Note: The full text of this Q and A is available on the NAHB website.

What does the exploding use of smart technologies mean for home builders?

Home owners and purchasers will no doubt be asking builders more and more about smart homes and devices, and will expect builders to be knowledgeable, Embry said. How builders answer home owners’ questions is a not just an issue of customer relations, but may also carry some legal risk avoidance ramifications as well.

In fact, a builder’s best protection against exposure may be what they are able tell home owners about these devices. One challenge we have with smart homes and the “Internet of Things” (IoT), however, is that there are not yet standards governing these devices. To the extent that there are some standards, they are not necessarily consistent and the law is not well developed.

To truly deliver a smart home to a customer, a builder needs to consider a number of different factors, Love added, including installing a smart home hub and devices such as door locks, light fixtures and appliances that can communicate over the same protocol as the smart home hub.

What are some of the risks associated with smart home devices?

Some of these risks are presented by the hardware — the device itself, Embry explains. Some are presented by the software that runs them. And some are presented by the massive amounts of data generated and collected. So there are several concerns:

  • There are no real consensus standards governing design, manufacture or performance of these devices. UL and other bodies are just beginning to look at these things.
  • To the extent there are laws and regulations, they are being enacted by all sorts of different agencies, leaving a hodgepodge of rules with no consistent regulatory or legal direction. And there are very few cases outlining liability and how judges and juries may treat liability questions.
  • Some of these devices are poorly designed and made. Often we don’t know the useful life of these devices because there is little independent product assessment of anything. This means that there could be lots of potential failure modes that exist for a long time, with results that range from annoying to catastrophic.
  • Often there is no commitment by the developer to patch and update the software. Think about how often you must update the software of your laptops, tablets and smart phones. These updates provide security from vulnerabilities and problems that are discovered. In the case of smart devices, we often don’t know how long the company plans to support a product with software security upgrades or what a consumer must do to install them.
  • Some devices are being designed and made without considering the risks of the devices being exploited or, in common parlance, hacked. This can result in devices like baby monitors or TVs being hijacked.
  • Finally, and importantly for builders, there are few if any installation quality controls or standards for the qualification of subcontractors installing these things. How do builders make sure they are installed correctly? How do builders satisfy their supervisory obligations? Most reported problems result from home owners — who don’t understand the security implications — trying to install devices based on limited, nonexistent or unread instructions.

The best answer to all of these risks and unknowns related to smart home technologies, Embry and Love agree, is to have a good knowledge of the products you are installing, choose the products wisely, and diligently inform and educate your home buyers.

To learn more, including advice on ways to reduce the chance of smart home product issues and liability concerns, read our full-length Q and A with Embry and Love on NAHB’s website.

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