Infotech and the Law: Anti-terrorism law protects tech companies from lawsuits

Devon Hewitt

The Homeland Security Act of 2002 signed into law by President Bush in November also included provisions that make it easier for the federal government to procure anti-terrorism technology. These provisions were included in the Support Anti-terrorism by Fostering Effective Technologies Act of 2002, also known as the Safety Act, which was enacted as part of the Homeland Security Act.

The Safety Act protects contractors producing anti-terrorism technologies from claims and damages filed by third parties as a result of a terrorist act. Specifically, it minimizes a contractor's legal exposure in the event its technology fails to detect or deter a terrorist act.

These protections not only apply to products procured through a federal contract, but to any contracts in which anti-terrorism technology is procured, irrespective of whether the buyer is the federal government, a state or local government, or a private entity.

By offering these limitations on liability, the Safety Act seeks to promote greater participation by the technology industry in developing and deploying these products.

The protections afforded contractors under the act are substantial. Among them is a requirement that any tort suit be brought only in federal courts under federal law. The Safety Act also prohibits a third party from claiming prejudgment interest or requesting punitive damages. A claimant seeking pain and suffering or other noneconomic damages must provide proof of physical harm.

The Safety Act links the amount of recovery to the degree and amount of fault by the contractor, and caps the total recovery possible to the amount of insurance held by the contractor.

To be entitled to these protections, the contractor's product must be designated as qualified anti-terrorism technology; it then goes on an approved product list. The Safety Act identifies several criteria the technology must meet before its accepted and included on this list, including:

*If the product has been used by the federal government before or has "demonstrated substantial utility and effectiveness."

*The product's availability for immediate deployment in public and private settings.

*The existence of an "extraordinarily large" risk of third-party claims if the technology is used.

*The likelihood the technology will not be used because of these liability risks.

*Risk to the public from not using the technology.

*Scientific studies assessing the technology's capability.

*The technology's ability to prevent, defeat or respond to acts of terrorism.

The Safety Act also requires a contractor to maintain reasonable amounts of insurance. However, a contractor is not required to obtain liability insurance of more than the maximum amount reasonably available from private sources on the world market, at prices and terms "that will not unreasonably distort the sales price" of the anti-terrorism technology.

Further, to be entitled to the legal protections of the Safety Act, the contractor and any of its subcontractors or suppliers must waive the right to pursue legal claims against each other for damages resulting from a terrorist attack.

While regulations are still needed to clarify many of these issues, the Safety Act goes a long way to assuage the legal worries of contractors developing anti-terrorism products, as well as of other companies considering entering this niche market. *

Devon Hewitt is a partner of Government Practices at ShawPittman in McLean, Va. She can be reached at devon.hewitt@shawpittman.com.

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