Industry fears new liability bill

Companies would <@SM>lose protection for <@SM>anti-terror technologies

The board of directors of a company that produces anthrax-detection sensors said last fall that it could not sell the technology to the U.S. Postal Service because its liability protection was too low.

Another company with a $300 million homeland security contract was only able to get a one-year, $50 million insurance policy, said David Colton, vice president of strategic initiatives for the Information Technology Association of America in Arlington, Va.

After the terrorist attacks of Sept. 11, 2001, these and other firms could not get enough insurance to cover their potential losses if an act of terrorism jeopardized the operation of their technologies.

"With acts of terrorism, you have huge, incalculable costs of lives and property," said Jon Etherton, vice president of legislative affairs for the Aerospace Industries Association in Washington. If businesses are put "in a position where they are betting their companies by responding to a [request for proposals], there is no motivation for them to bid, and the government may not have access to a full array of technologies or the best technology solution."

Congress addressed this concern in the Homeland Security Act by giving IT firms limited protection, so they can offer their anti-terrorism technologies to the government without fear of unlimited liability.

Now, however, a new Senate bill, S. 41, would strike seven so-called "special interest" provisions of the Homeland Security Act, including liability protection for anti-terrorism technology providers.

The legislation, introduced Jan. 7 by Sen. Joseph Lieberman, D-Conn., would strike the Support Anti-terrorism by Fostering Effective Technologies Act, or Safety Act, a provision of the Homeland Security Act that requires firms to obtain the maximum amount of insurance available and also limits their liability in the event of a terrorist attack.

To qualify for protection, a firm's technology must be deemed an anti-terrorism technology by the secretary of homeland security. The designation criteria include:

* Availability for immediate deployment;

* Extraordinarily large liability risk to the provider;

* Substantial likelihood the technology will not be deployed unless protections are extended;

* A high risk to the public if the technology is not deployed.

Lieberman said he opposes the Safety Act because it provides "broad liability protection from any claim arising out of, relating to or resulting from an act of terrorism, no matter how negligently, or even wantonly and willfully, the company acted."

Lieberman "agrees that we need to make sure that liability concerns don't keep innovative anti-terrorism technologies off the market, but he also thinks that the Safety Act ... threatens to let bad actors off the hook at the expense of innocent victims," said Leslie Phillips, Lieberman's spokeswoman for the Senate Governmental Affairs Committee.

The senator is not working on an alternative to the Safety Act that addresses industry's concerns about unlimited liability, she said.

Industry representatives disputed Lieberman's claim that negligent companies would be protected.

The act does not allow protection to companies that engage in willful misconduct, said Steve Phillips, a lawyer and lobbyist at Piper Rudnick LLP in Washington.

"If a company knew there was a problem with a product and didn't do anything, I suspect a judge would find willful misconduct, and the company would not qualify for the government contractor defense" offered in the act, Phillips said.

One industry lobbyist said Lieberman's effort is a serious concern, but that concern is tempered "because the House leadership firmly believes in the Safety Act, has ownership of the issue and will fight to defend it."

Colton said ITAA would watch the legislation vigilantly.

"To the extent people may try to sneak it on an appropriations bill at three in the morning -- we are going to be watching very carefully," he said. *

Staff Writer Gail Repsher Emery can be reached at gemery@postnewsweektech.com.

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