Risk And Opportunity

Developing and selling antiterrorism goods and services can be risky business. If a company’s technology fails in the event of a terrorist attack, the company can face enormous potential liability from lawsuits filed by injured people and families of those killed. And buyers of the antiterrorism product, such as a chemical weapons sensor, or a service, such as a specially trained security force, can face legal claims in the event of an attack as well.

However, under a federal law enacted in the wake of the Sept. 11, 2001, attacks, producers can limit their liability from antiterrorism technology. This coverage also protects their customers from lawsuits.

That law is the 2002 Support Anti-terrorism by Fostering Effective Technologies Act, nicknamed the Safety Act and administered by the Department of Homeland Security (DHS). The goal of the statute is to facilitate the development and use of antiterrorism technologies.

Chemical manufacturers, especially small ones, should take advantage of the law to unleash their creative potential to develop and deploy new antiterrorism goods and services, urged Bruce Davidson, deputy director of DHS’s Office of Safety Act Implementation. He discussed the statute at a session organized by the Small Chemical Businesses Division at the ACS national meeting in Washington, D.C., last month.

Chemical makers are starting to seek Safety Act protections for their products and services, Davidson said. For instance, Honeywell gained protections for a fertilizer that fuses ammonium sulfate with ammonium nitrate (C&EN, Sept. 29, 2008, page 35). This product is less able to detonate than regular ammonium nitrate fertilizer, Davidson pointed out. Ammonium nitrate fertilizer was a key component in the bomb that ripped apart the Oklahoma City federal building in 1995, killing 168 people and injuring hundreds more. Honeywell’s new fertilizer has Safety Act designation, one of two levels of liability protection offered under the law. The other level is called certification.

Under the designation level, technologies that DHS declares as having proven effectiveness earn their seller a cap on potential liability in federal court in the event of a terrorist act, Davidson explained. In addition, courts cannot assess punitive penalties or prejudgment interest against companies selling technologies with Safety Act designation. DHS requires each seller of a designated antiterrorism product or service to carry insurance at a level equal to the liability limit set by the department for the technology, Davidson said. Liability protections for Safety Act-designated technologies extend for five to eight years, with DHS establishing the exact time frame.

To acquire designation, a business must provide DHS with data demonstrating why the product or service is useful and effective for antiterrorism efforts. The company must also show that it faces exposure to a large risk of liability, Davidson said. In addition, the firm has to demonstrate that there is a substantial likelihood that the technology would not be deployed unless the company obtains liability protections under the Safety Act.

“People shouldn’t be applying for the program unless they feel they’re going to have an extraordinarily high risk and that they would be deterred from deploying or further deploying their technologies without the benefits of the program,” Davidson said.

Technologies that are in the prototype stage and not ready for commercial deployment can get short-term liability caps, Davidson continued. These limits last up to three years during the testing and evaluation of antiterrorism products and services.

A more sweeping legal protection, certification, is also available under the Safety Act. It requires a great deal of documentation to obtain. It essentially provides legal immunity to companies against lawsuits claiming that their technology failed during an act of terrorism and led to injuries. Certification allows sellers to assert what is called the “government contractor defense,” a legal shield used by military contractors against allegations that they supplied defective products or equipment under a government contract.

Certification under the Safety Act is reserved for goods and services with consistently proven effectiveness and safety, Davidson said. Certifications are good for five to eight years.

As of July 30, DHS had conferred Safety Act certification or designation on 300 different antiterrorism technologies, according to the department’s website. These include four goods or services from the chemical sector that earned designation. One is Honeywell’s fertilizer.

A second is the American Chemistry Council’s Responsible Care Security Code, which received its designation in January. The industry trade group’s security code requires each participating company to implement security programs that are designed to deter, detect, delay, defeat, or respond to physical or cyber attacks, according to DHS. The standards apply to plants and transportation of chemicals. The code is “the most stringent security program in American manufacturing,” according to ACC.

The other two designations in the industry belong to Dow Chemical. The company earned separate designations for its facility security services and its rail transportation security services.

“We think that’s a good validation of the robust nature of our security process,” both at plants and in distribution and delivery of the company’s products, said Timothy Scott, Dow’s chief security officer. And Safety Act designation is a selling point, serving as “a good validation that we can then present to our customers and our suppliers to strengthen our business continuity program,” Scott told C&EN in an interview.

Companies, Davidson said at the symposium, are increasingly finding that Safety Act designation or certification for their technologies gives them an edge in the marketplace. In part, that’s because a purchaser of designated or certified products or services cannot be sued if the technology fails during an act of terrorism, he explained.

Meanwhile, DHS is encouraging chemical companies to expand their thinking about antiterrorism measures beyond just beefing up perimeter security at plants, Davidson said.

“We’re actually trying to make the Safety Act an opportunity for those companies that are seriously looking at coming up with safer products, safer processes, substitution,” Davidson said. DHS is encouraging the development of compounds used as safer replacements for more hazardous substances, he said.

Davidson also urged those who want to get more information about the Safety Act to visit safetyact.gov.