Sudden loss of trailer brakes nearly caused me to rear end vehicle in front of me. The more concerning part is when I went to an RV dealer to disgnose, they pulled the break away emergency brake to test if brakes applied. They did not apply, however about 1 minute after the breakway was pulled the switch began to melt, then almost immediately there was smoke coming from inside the battery compartment and a fire was started by the power wires melting due to a short. The fire then damaged a hydralic line and hydralic fluid was leaking right next to the flame. Luckily we had a fire extinguisher handy and quickly disconnected the battery. Grand Design had an investigator come on site to survey the damage and interview the dealer and myself. I was told that pulling the breakaway cable will cause the wires to overheat and could start a fire. I might agree if it was left for a long period of time, but not in 1 munute. If this would have been an actual emergency situation where the traler disconnected while driving, the brakes would not have applied and I am sure would have burned completely as it would have taken more time to get access to the fire location. Being told that this is expected behavior makes me very nervous to continue to use this trailier as I beleive it could happen again. A letter was sent to Grand Design and I have yet to get a response and having difficulty getting them to approve the repair and send parts