In the aftermath of the anthrax attacks in the fall of 2001, the Postal Service needed biohazard detection equipment but almost didn’t get it. The company that could produce it feared a class-action lawsuit and excessive liability if a biohazard slipped past.

Technology is key to protecting the homeland against terrorist attacks. However, many companies have been hesitant to market anti-terrorism technologies for two primary reasons: (1) the costs of potentially devastating jury verdicts should the technologies fail and (2) the costs and scarcity of adequate liability insurance. To address these problems, Congress passed legislation known as the SAFETY Act, which is intended to help limit that liability and make it an insurable risk. Now it’s a matter of making the existence of this legislation better known to industry.

Unsafe Stumbling Blocks

From the White House to Congress, technology is seen as key to protecting the homeland against terrorism. Scientists agree. “America’s historical strength in science and engineering is perhaps its most critical asset in countering terrorism,” states a National Academies of Science report, Making the Nation Safer: The Role of Science and Technology in Countering Terrorism. The report also details how technology can be used in homeland security.

Many anti-terrorism technologies already exist. For example, to enable secure information sharing across agencies, new computer technologies can allow varying degrees of network access and can trigger denials, alarms, and even armed responses when unauthorized access occurs. Robots with high-pressure water jets can help first responders neutralize explosives. Construction technologies can mitigate bomb blasts (which is recommended by a National Research Council committee for the commercial building industry).

The makers of such technologies have readily made them available to the Department of Defense but have been more hesitant to market such technologies for homeland security applications due to liability risks. In the aftermath of 9/11, the Department of Defense issued a broad agency announcement requesting innovative technologies that could help in its global war on terrorism. It received 12,500 responses.

Some companies have been slower to offer such technologies for homeland use, however. The reason is best exemplified in one corporation’s report, which addressed the potential use of its anti-terrorism technology: “A mishap involving the use of such a system in anti-terrorism operations could result in various damages which could exceed available insurance coverage.”

That’s because the insurance industry fell into seeming disequilibrium after 9/11. Insurance payouts for those attacks have been estimated at $40 billion to $50 billion. With fears of another attack, insurance companies either withdrew coverage or dramatically increased the premium for terrorist coverage. For example, casualty and property insurance for Milwaukee’s Miller Park Stadium went from $225,000 in 2001 to $2.5 million in 2002. Insurance firms became very nervous about clients that might face class-action lawsuits after a terrorist attack. Thus, many companies are concerned: what if we sell an anti-terrorism technology and it fails?

This concern had a potentially chilling effect on the provision of anti-terrorism technologies for homeland use. During the anthrax scares, for example, the Federal Government agreed to indemnify the makers of Cipro, which treats the disease. In addition, one company that may produce scanners capable of detecting explosives in cargo has been hesitant to market the technology due to liability concerns.

Consequently, there was an irony in America’s security market prior to the SAFETY Act. While the Pentagon bought anti-terrorism technologies to protect its personnel, places like the Pentagon City Mall across the street might not have had access to adequate homeland security technologies to meet the terrorist threat. Fears of uncontrolled liability could have impeded the development and deployment of anti-terrorism technologies in places where they are especially needed, such as shopping malls, sports arenas, theaters, and transportation centers. Al-Qaeda has reportedly expressed interest in such “soft targets.”

SAFETY Provided by Congress

In 2002, as part of the Homeland Security Act, Congress enacted the “Support Anti-terrorism by Fostering Effective Technologies Act of 2002,” or the “SAFETY Act.” Legislators believed that the stakes were too great for homeland use of anti-terrorism technologies to be impeded by companies’ fears of protracted litigation and catastrophic jury awards. Also, policy makers recognized that makers of anti-terrorism technologies face a dilemma, one that’s much like that of a pharmaceutical company introducing a new drug. There’s only so much testing that can be done to prove effectiveness, and too much testing can cause excessive costs and delays. Slowing introduction of these technologies was not in the best interest of a nation facing a rapidly evolving threat.

The Department of Homeland Security, specifically its Directorate of Science and Technology, is responsible for administering the SAFETY Act. The act creates systems of “risk management” and “litigation management” for anti-terrorism technologies. The term “technologies” is used broadly to encompass products, equipment, services (including support services), devices, and information technologies.

The SAFETY Act provides two levels of liability protection to sellers of anti-terrorism technologies. It is important to note, however, that the SAFETY Act’s protections are triggered only if there is an “act of terrorism.” If a seller’s anti-terrorism technology causes harm and there was no act of terrorism, or if the technology failed and caused harm during a “false alarm,” the SAFETY Act’s protections are not applicable.

The first level of SAFETY Act protection is for those technologies that have received a “Designation” from the Department of Homeland Security as “qualified anti-terrorism technologies.” This level of protection limits liability from claims arising from the deployment of a seller’s anti-terrorism technology during an act of terrorism and includes:

• Exclusive jurisdiction in federal courts for suits, rather than in state courts where such claims are typically addressed.
• Complete prohibition against recovery of any punitive damages, which are intended to punish or deter.
• A prohibition on non-economic damages unless the plaintiff suffered physical harm, and then only in a proportion to the defendant’s responsibility for the harm to the plaintiff.

Sellers who receive a Designation are required to maintain insurance in an amount specified by DHS, which must not “unreasonably distort” the price of the technology. In certain cases where insurance in appropriate amounts is not available on the market for a particular technology, the seller may be allowed to self-insure.

The second level of SAFETY Act protection is even greater and is called Certification. Certification establishes a rebuttable presumption that the “government contractor defense” applies to defend the seller from claims arising from the deployment of the anti-terrorism technology during an act of terrorism. As long as the seller did not act “fraudulently or with willful misconduct” in seeking this protection and the technology conformed to the seller’s specifications, the “government contractor defense” should apply.

It is important to note that the SAFETY Act provides an umbrella of liability protection, which confers protections far beyond just the seller. Because DHS interprets the SAFETY Act as providing that only the seller may be sued for claims arising out of a deployment of a technology, all other companies in the manufacturing and distribution chains should enjoy immunity from liability.

Getting SAFETY Act Protection

DHS drafted the rules and regulations for implementing the SAFETY Act. An interim set of rules, “Rules Implementing the Support Anti-terrorism by Fostering Effective Technology Act of 2002,” was published in the Federal Register on 16 October 2003. Prior to drafting the interim rules, DHS considered 43 comments from industry solicited during a public comment period. DHS received and considered additional industry comments on the interim rules and is finalizing the rules. Until the final rules are published, the interim rules have the force of law.

These rules provide a process for companies to apply for SAFETY Act protection.

DHS also has an applicant help desk at (888) 788-9318 that can assist with the administrative completion and submission of these forms. The time to complete these applications in most cases has been no more than 150 hours, according to a survey of applicant companies. Additionally, DHS has solicited comments from industry applicants to streamline the application even further.

To help industry even more, DHS provides a “pre-application” process. It’s not mandatory. Rather, it’s a short-form, trial run intended to give companies feedback on any information gaps in the applications. In responding to the pre-application, DHS will tentatively rate the likelihood of a complete application’s being considered as “promising,” “doubtful,” or “uncertain.” The DHS pre-application quick-screen process nominally takes about 21 days.

The formal application process is intended for companies seeking one or both levels of SAFETY Act protection. Although DHS will consider applications for Designation and Certification at the same time, Designation as a qualified anti-terrorism technology is a prerequisite for Certification. The application review process is overseen by DHS. Those technologies seeking the first level of protection (that is, Designation as a “qualified anti-terrorism technology”) are evaluated using the following criteria:

• Whether the technology has been previously used by the Federal Government or whether there is demonstrated substantial utility and effectiveness.
• Whether the technology is available for immediate deployment in public and private settings.
• Whether there is extraordinarily large or unquantifiable liability risk to the seller or other provider of the anti-terrorism technology.
• Whether there is a substantial likelihood that the anti-terrorism technology will not be deployed unless SAFETY Act protections are provided.
• What the magnitude of risk is to the public if the anti-terrorism technology is not deployed.
• Evaluation of scientific studies that can be feasibly conducted to assess the technology’s ability to substantially reduce risks of harm.
• Effectiveness of the anti-terrorism technology in facilitating the defense against acts of terrorism, including preventing, defeating, or responding to such acts.
• Any other factors that DHS may consider relevant.

If the application is approved, DHS will issue a Designation to the seller. The Designation will describe the technology; prescribe the scope of its use, terms of coverage, and liability insurance requirement. The Designation will be good for five to eight years and is renewable.

Once their technology is designated as a “qualified anti-terrorism technology,” companies may seek the second level of protection (that is, Certification) for establishing the “government contractor defense.” Before granting Certification, DHS conducts a comprehensive review of the technology to determine whether it will perform as intended, conforms to the seller’s specifications, and is safe for its intended use. In addition, the applicant must provide a safety and hazard analysis for the technology. Applicants may apply for a Designation and a Certification at the same time.

The Real Safety From the SAFETY Act

Here’s the bottom line for the SAFETY Act: For the makers of anti-terrorism technologies and their suppliers and customers, it means lower potential losses from liability arising from claims resulting from an act of terrorism and a lower burden from liability insurance. For the public, it means faster development of anti-terrorism technologies and thus increased defenses against terrorist attacks. That’s the real safety that the SAFETY Act will provide.