Rule limits anti-terror liability

The Homeland Security Department issued a proposed rule today that would limit the liability for companies providing anti-terrorism technologies to the federal government.

The proposed rule is part of the Homeland Security Act of 2002 that mandated a system to encourage companies to keep developing anti-terrorism technologies without fearing they would be sued if their products failed during a terrorist attack. DHS expects the rule to go into effect in September.

While the proposed rule does not limit liability for anti-terrorism technologies when no act of terrorism has occurred, it does require companies to apply for protection for specific technologies. It also bars the award of punitive damages in lawsuits brought against companies that make the technologies.

The success of the new rule "depends not only upon encouraging sellers to provide existing anti-terrorism technologies but also upon encouraging sellers to develop new and innovative technologies to respond to the ever-changing threats to the American people," according to DHS.

Joe Tasker, senior vice president for governmental affairs and general counsel at the Information Technology Association of America, said many technology companies have been reluctant to seek some contracts because of the absence of liability limits.

"It should make it easier for government to get contractors to do business with the government," Tasker said. "It should have a positive impact on the insurance market."

Nevertheless, officials at industry groups said the proposed rule leaves many issues unresolved.

"Given the critical role that insurance coverage plays in the law, greater details regarding the estimated type and amounts of coverage that would be sufficient under the regulations for specific technologies or categories of services would be significantly beneficial," according to the Professional Services Council, which represents 150 companies providing IT and other services to the government.