Eileen Kiefer is one of the brains behind the Response Escape Hood, a state-of-the-art portable gas mask designed by Mine Safety Appliances Co. of Pittsburgh. It comes complete with a clear laminate hood and an elastic neck seal that can, for a short time, protect a wearer from a nuclear, biological or chemical attack.
Holding up a prototype in MSA's western Pennsylvania research labs, Ms. Kiefer, a project engineer, predicts it will be perfect for U.S. embassy staff overseas or anyone, anywhere, who might one day need protection from the unthinkable in a hurry.
But what if one or more of the gas masks should prove faulty during an attack?
That possibility, however remote, greatly concerns MSA, a leading manufacturer of personal-protection equipment for firefighters, emergency medical services and lawenforcement agencies -- which is why it now is weighing whether it should submit the hood for product-liability protection newly afforded by a landmark piece of federal legislation.
The Support Anti-Terrorism by Fostering Effective Technologies Act, better known as the Safety Act, was formulated to provide broad protections from liability for products designated by the Department of Homeland Security as "qualified anti-terrorism technology" if they fail to prevent injuries or damage caused by a terrorist attack. The aim of Safety -- which Congress slipped into the law creating the Department of Homeland Security last year -- is to encourage innovation by entrepreneurs, who might not be eager to create better bomb-detection machines or gas masks if they risked being sued for
hundreds of millions of dollars should their products flop in their hour of greatest need.
"There was a widespread concern in Congress after 9/11 that liability might keep various life-saving technologies off the market or make them too expensive to make a difference," says Penrose "Parny" Albright, an assistant secretary for science and technology at the insurance premiums for antiterrorism products and riders exempting terrorist attacks attached to many policies bolstered the argument.
In a nutshell, the new law encourages sellers to apply to the Department of Homeland Security to have their products evaluated. The law then authorizes the secretary of homeland security to limit the liability of sellers of approved technologies to an amount of insurance coverage that the company is required under law to maintain. The legislation went into effect last month, and Homeland Security has only just received its first handful of applications.
The law shields not only sellers of the technology but also subcontractors, suppliers and purchasers. Only the seller can be taken to a federal court, and there are no punitive damages. And that's not all. Perhaps most significantly the law codified the "government-contractor defense," hitherto a common-law immunity from litigation for companies doing business with the federal government. The defense arises from the notion that companies supplying the government receive specifications for their products from Washington and shouldn't be held liable if products built to those specifications malfunction.
Under the Safety law, a device can be awarded a "certification" that it will function as designed and will meet all seller specifications, granting the manufacturer the governmentcontractor defense whether it sells the product to the federal government or to the commercial market.
The codification of the contractor defense was the brainchild of Washington lawyer Ray Biagini. His firm, McKenna Long & Aldridge, represents America's largest and most powerful defense contractors: Raytheon Co. and Lockheed Martin Corp. among them. In June 2002, clients asked Mr. Biagini if there was a way to extend the product-liability protection that they enjoyed in the defense arena to the commercial market. "I scribbled a few thoughts on paper codifying the contractor defense which my clients then took to
Congress. It later became the centerpiece of the legislation," he says.
But if big companies initiated the law, Assistant Secretary Albright and others in the Department of Homeland Security, see smaller companies with big ideas as the ideal candidates for the act.
"The Safety Act is about someone in a garage shop somewhere in the boonies with a good idea who might not otherwise have a chance to develop and deploy his technology because the liability costs would be just too high," says Dr. Albright. He also notes that the law's benefits can be triggered only by an act of terrorism. Injuries and damages resulting from false alarms aren't covered. And if a manufacturer deviates from approved design specifications or misrepresented a product's capabilities, the benefits are canceled.
The American Tort Reform Association has endorsed the act as a big step forward in reducing litigation. But champions of consumer protection are concerned. "It is clear that companies do respond to threats of liabilities," says Scott Nelson, acting director of Public Citizen's Litigation Group, a consumer-advocacy organization. "If they feel that there is no longer any threat, they might devote fewer resources to risk management."
Insurance companies -- which the department hoped would be moved to make liability insurance more affordable for antiterror technologies -- have yet to lower their rates. The insurance industry is most concerned about the ability of a few government officials to cap liability.
"That's a lot of power," says Lance Ewing, president of the Risk Insurance Management Society, whose 8,000 members are mostly major corporations. The main question, he says, is whether caps set in today's tight insurance market will stand the test of time. "I think the intent is positive," he says. "However, if there is another attack in three or five years and
these devices do fail, we will see whether the act was really beneficial or not."
Some companies are also skeptical, saying that the application process demands too much proprietary financial information. Large defense companies are also gearing up for a possible showdown with Homeland Security because they are worried that their ability to afford big insurance bills might be used to exempt them from the Safety law's protection. Mr. Biagini, the defense contractors' lawyer, says his clients might not sell their
technologies without Safety coverage.
MSA, maker of the Response gas mask, is going to press ahead marketing its product even if it decides not to pursue Safety protection. "We have been selling products to protect peoples' health and safety for 89 years," says William M. Lambert, MSA's president, North America. "The Safety Act is a nice plus but it doesn't change our business model dramatically."