New York University

Intercep: International Center for Enterprise Preparedness

Recent Events

InterCEP Hosts National Roundtable on Legal Incentives and the Business Preparedness Standard

November 30, 2004 9:00 AM

The International Center for Enterprise Preparedness held a national roundtable on the 9-11 Commission’s recommendations on legal incentives for private sector preparedness. The 9-11Commission recommended in its final report that the Emergency Preparedness Standard (ANSI-NFPA 1600) be acknowledged as the legal “standard of care” that businesses owe to their employees and shareholders.

Summary of the Roundtable Discussion on Legal Ramifications of the 9-11 Commission’s Recommendation on Private Sector Preparedness

The International Center for Enterprise Preparedness at New York University hosted a national roundtable discussion to identify legal ramifications of the Federal 9/11 Commission’s recommendation relating to private sector preparedness.

The 9-11 Commission recommended in its final report that the Emergency Preparedness Standard (ANSI-NFPA 1600) be acknowledged as the legal “standard of care” that businesses owe to their employees and the general public. In “The Final Report of the National Commission on Terrorist Attacks Upon the United States,” the Commission stated:

“We endorse the American National Standards Institute’s recommended standard for private sector preparedness. We were encouraged by Secretary Tom Ridge’s praise of the standard, and urge the Department of Homeland Security to promote its adoption. We also encourage the insurance and credit-rating industries to look closely at a company’s compliance with the ANSI standard in assessing its insurability and creditworthiness. We believe that compliance with the standard should define the standard of care owed by a company to its employees and the public for legal purposes. Private sector preparedness is not a luxury; it is a cost of doing business in the post-9/11 world. It is ignored at a tremendous potential cost in lives, money and national security.”

Further in recent literature and symposia, it has been suggested that there is a new potential cause of action called “negligent failure to plan” which could be a significant risk to any enterprise in theory. Pursuant to such a claim, the courts may hold that many emergencies are "foreseeable" and that advance planning and preparation in accordance with an acknowledged "standard of care" is required.

The Roundtable assembled subject matter experts and stakeholders including representatives from major corporations, their corporate counsel, law firms, a national corporate counsel association, NYU Law School, and a large federal government agency to address this issue. To facilitate frank discussion, a ground rule of these discussions was that there was to be no attribution of specific comments. The focus was on identifying issues and insights as well as general consensus opinion where achievable.

The central question posed for the Roundtable was: “Is the Emergency Preparedness Standard (ANSI-NFPA 1600)” now a “standard of care” for private sector organizations and if so what ramifications does that have for organizational planning?”

The Roundtable discussion reflected a diversity of view points. After a review of the history of the standard and the 9-11 Commission’s recommendation, initial discourse addressed the requirements of a “standard of care” for legal purposes. Several propositions were advanced including propositions that a “standard of care” reflect a consensus of opinion in the industry, be actionable, valid and trustworthy (i.e. an organization can rely on the standard from an operational perspective to reasonably assure an acceptable outcome), be well established over time (time tested), be flexible and be adaptable to specific situations (e.g., a targeted audience or environment).

The consensus of the Roundtable was that the Emergency Preparedness Standard (ANSI-NFPA 1600) had definitely risen to a significant level of prominence. It was noted that this prominence was due to a combination of factors including
 the Standard had a history of development dating to 1991
 the Standard’s development reflected a consensus-based process in accordance with ANSI standard development requirements and incorporating participation by both public sector organizations (including FEMA) and a diversity of private sector organizations culminating in 2000 with its designation as an American National Standard
 the recommendation by the American National Standards Institute to the 9-11 Commission that ANSI-NFPA 1600 was an appropriate National Preparedness Standard for the Private Sector (April 2004)
 the separate endorsement of the Standard by the U.S. Department of Homeland Security (May 2004) by Secretary Tom Ridge and
 the subsequent 9-11 Commission recommendation of the Standard to the President and Congress in its final report (July 2004).

A significant number of participants asserted that this prominence alone was sufficient to establish ANSI-NFPA 1600 as a “standard of care.”

Others participants however asserted that the concept of a “standard of care” was only relevant in the context of a potential suit alleging negligence. In this regard it was posited that we must first address the basic elements of negligence tort law. These, it was suggested, were:
1. A duty of care is owed by an entity
2. This duty of care is owed to specific parties
3. There is a breach of this duty by the entity which results in damages being suffered by the party to which the duty of care was owed

It was posited that it must be shown that there was in fact a duty of care to undertake emergency efforts by a business/private sector entity, and that this duty was owed to its employees or other members of the public at large. Ordinarily, there is no tort duty running between an employer and employee due to the workers' compensation laws.

It was subsequently argued that a specific duty to care with respect to emergency preparedness was not necessary in that
 the basic principles of negligence law require the exercise of reasonable care under the circumstances to prevent and minimize the risk of accidents
 this duty of care is generally accepted as being owed to both employees and the general public

It is important to note that NFPA 1600 is an all-hazards preparatory guide, and extends beyond the accidental. Natural/weather/environmental emergencies and criminal/terrorist attacks are included, and are largely outside the entity's direct control. Without the specificity normally contained in regulatory mandates, the NFPA 1600 is simply a process guide.

It was further argued that the specificity of ANSI-NFPA 1600 (in citing particular functions / activities to be undertaken) could be viewed as advantageous to the typical business or other private sector entity. This specificity in terms of particular activities to be undertaken in accordance with the Standard was posited to be more easily implemented than the general charge to the entity of undertaking "reasonable care." Reasonable care, it was suggested, is so broad that it can be difficult for the entity to determine whether it has satisfied such a duty.

This was thought to be especially relevant in the context of a jury trial when an entity must demonstrate after the fact that it had used reasonable care in mitigating the damage or injury which now before the jury. In addition, it was further argued that businesses benefit from the inclusion in Standard 1600 of a cost-benefit analysis approach by providing the organization with the opportunity to justify a decision not to undertake a potential action to mitigate risk based upon financial and/or other constraints.

Exposure to law suits alleging negligence were generally agreed by the participants as a major motivating factor for any organization to undertake voluntary compliance with a “standard of care.”

Given the generally agreed prominence of the ANSI-NFPA 1600 standard and its potential status as a “standard of care,” the consensus of participants requested that a future Roundtable be held to discuss the use of the standard in a “safe harbor” strategy for corporate planning.

In this regard, it was generally acknowledged that such a safe harbor strategy might not be a complete shield against any and all liability. Rather, it was suggested that advance compliance with the standard may be used in demonstrating “reasonable care” on the part of the entity through compliance with a generally accepted standard of care. Such a strategy, it was argued could be used to significantly mitigate potential liability on the part of the business in the event of a crisis resulting in damage or loss to others.

In closing the session, InterCEP Director Bill Raisch agreed that the Center would undertake to hold another Roundtable to address a “safe harbor” strategy in the near future.