The SAFETY Act of 2002
Does Its Decision to Protect Antiterrorism Technologies From Tort Lawsuits Make Sense?

Congress has made a promise to the makers of gas masks, emergency radios, and other anti-terrorist devices. The promise is this: If such products fail during a terrorist attack, their manufacturers will be protected from American plaintiffs' lawyers, who could otherwise bring products liability suits on behalf of those include. That promise is contained in the "Support Antiterrorism by Fostering Effective Technologies Act of 2002" ("SAFETY Act"), which is part of the Homeland Security Act.

Does the SAFETY Act sound to you like another special interest giveaway in the guise of patriotism? I must admit that this was my first reaction -- and I have criticized other measures as "sneaky tort reform." But on reflection, I think the SAFETY Act, while flawed, is well-intentioned and, at a minimum, probably better than nothing.

After 9/11, all insurance for terrorism-related risks became very expensive. Consider, for instance, a gas mask manufacturer. After 9/11, insurers could predict the company's products would be more likely to be used. And insurers could also predict that the consequences of the masks' failure would be greater, in part because after 9/11, terrorist acts on a greater scale had become more plausible and imaginable.

The SAFETY Act responded to the increased cost of insurance by attempting to protect the incentive to manufacture (or continue to manufacture) certain products designated as "Qualified Antiterrorism Technologies" (QATs) by the Secretary for Homeland Security.

According to Department of Homeland Security regulations, a given technology must fulfill a set of criteria to be a QAT. The criteria judge whether the technology is useful and effective; whether if deployed, it could give rise to extraordinarily large or unquantifiable third-party liability; and whether failure to deploy it would increase the risk to the public by some significant order of magnitude.

Somewhat oddly, as the Wall Street Journal noted in a November 26 article, many manufacturers have not chosen to submit their products to the DHS to become QAT. Apparently, lots of companies seem to be able to find the insurance they need even after 9/11. Nonetheless, the basic idea behind the SAFETY Act is a good one: To make sure that lack of insurance -- and the prospect of liability -- does not impede the development of effective anti-terrorism technologies.

What protection does the manufacturer or seller of a QAT receive? First, if the QAT fails, and a claim based on that failure "aris[es] out of an act of terror," the claim would have to be made in federal court. (Typically, tort claims are state law, and state court, claims). There, the claim would be litigated under a highly pro-manufacturer set of rules.

First, the manufacturer could invoke the equivalent of the "government contractor defense." To survive this defense, the plaintiff would have to prove, in essence, that when the QAT was submitted to the Secretary of Homeland Security, the manufacturer lied -- or, put more technically, that it acted fraudulently or with willful disregard toward the qualification process.

Second, even if a plaintiff can overcome that defense, and then wins his or her tort case, he or she can only recover limited damages. For one thing, the plaintiff cannot recover punitive damages at all.

In addition, the plaintiff can only recover noneconomic damages (for example, damages for pain and suffering) if he or she also suffered physical harm (such as, say, a broken ankle). And even then, the plaintiff can only recover such damages then in proportion to the degree of responsibility of the QAT's failure for the plaintiffs' injuries.

If the rule were joint and several liability, the QAT manufacturer and the terrorists could both be held 100% liable. But this rule is different: If the terrorists were 90% responsible for the plaintiff's injuries, and the QAT's failure only 10% responsible, then the QAT manufacturer only pays 10% of the damages. This might sound fair if it were realistic to recover the rest from the terrorists -- but, of course, it probably won't be.

As I noted above, the basic idea behind the SAFETY Act makes sense: Protect the development of antiterrorism technologies by reducing liability risk, and keeping insurance affordable. But the way this idea is implemented in the Act itself is deeply flawed.

First, why limit pain and suffering awards? Limitations on punitive damages may make sense: They are among the most unpredictable and potentially devastating of damages to a defendant. But pain and suffering awards are more predictable, and American juries seem to think that many plaintiffs deserve them, which is why juries award them. Depriving only terrorism victims of pain and suffering awards seems wrong, when other tort victims do recover these damages.

Second, why limit damages only in personal injury cases? What about the claims that would be made by businesses that might lose property as the result of the failure of a QAT? After all, shouldn't we be worrying more about personal injury plaintiffs than property damage plaintiffs?

Third, suppose a defendant did lie, or make statements with willful disregard as to the truth, when it presented its product to the Secretary of Homeland Security? Under the Act, it then cannot invoke the "government contractor defense." But it still benefits from the damages limitations. That seems extremely odd: The lying company ought not to enjoy any special privileges as all, least of all concerning the damages they might have to pay if their product is proven defective.

Given that relatively few companies are taking advantage of the SAFETY Act, its real significance may be primarily symbolic. And that significance lies in the new way in which it applies the old government contractor defense.

The government contractor defense used to simply mean this: When a soldiers is killed based on a product defect -- say, a faulty gun -- he cannot sue the Pentagon's suppliers. Now it also means this: When a civilian is killed based on a defect in a Qualified Anti-Terrorism Technology -- say, a gas mask -- he cannot sue the mask's manufacturer, even if it is a purely civilian company.

The symbolic message is clear. America is a battlefield. We are all soldiers, even civilians. And civilian suppliers of antiterrorism technologies are like Pentagon suppliers, for they too prepare us for war -- the war on terror.

We are no longer consumers buying products who can then file product liability suits. We are soldiers provisioning ourselves with supplies, and we do so at own risk; we cannot sue our suppliers, for this is war, and they must continue to produce our supplies at all costs.

This symbolism does have some logic to it. When America can be attacked, it is in a sense a battlefield. The war on terror does invoke civilian targets -- Al Qaeda is reportedly interested in shopping malls and subways. And part of Homeland Security is civilian preparedness. But there is a crucial problem with the way this logic plays itself out in the SAFETY Act.

If civilians are like soldiers, then the government is treating its "soldiers" shabbily, when it passes measures like the SAFETY Act. In the military, injured soldiers benefit from pensions and medical care (and are provided with protective technologies; they do not purchase them). Thus, what the government takes away with one hand -- the chance to sue -- it gives with the other.

But civilians who are injured by defective products, under the SAFETY Act, have their rights to sue taken away, without getting anything in return. That's not right. By comparison, the September 11 Victims' Compensation Fund, though it limited the right to sue, gave the victims of that attack something in return: A compensation award.

It is inexplicable why the SAFETY Act does not include, at least, some similar tradeoff. Instead, it simply cuts off terrorism victims rights to bring product liability suits without giving them anything at all. It should be amended to ensure a more equitable solution.

One way that might work is Israel's: There, the victims of terrorism are guaranteed pensions, and their families are guaranteed compensation, if they are struck down by an act of terror. While we cannot be sure we will not be victims of terrorism nowadays, at least we should know -- as soldiers do -- that if we are, we and our families will not suffer from the economic consequences, as well as the terrorist act itself.