It is important to clarify that in a business context, we must address the word that scares businesses but is loved by attorneys, namely liability. Liability as a word carries with it, in a legal context, the words damages and harm. Damages and harm extend beyond just personal injuries that can happen to employees or customers at a given business location. Damages and harm must be understood additionally as the failure to receive or transfer goods, provide services, and/or failure to perform or be productive in pursuing the set purpose of a business organization. In the context of a terrorist attack or natural disaster such as a hurricane, harm and damage is going to occur. The question becomes who is going to pay to restore a party to their original state under state or federal law.
In simplified terms, a business cannot be liable for harm and damages unless there is a breech of some legal duty. In the 21st century, every business is liable when there is a failure to provide appropriate precautions to mitigate the impact of a terrorist attack or catastrophic emergency that results in liability issues for your business (hospital, bank, university, etc.) – especially if an area or environment has experienced similar occurrence, warnings, and threats. While such a standard seems daunting in its wording and complex in its nature, it is rather simple. Every business has a duty to mitigate danger, that is to prevent additional harm after a terrorist attack or when an emergency situation is a foreseeable risk.
The difficult part for some businesses to grasp is that the concept of forseeability is no longer a warm legal blanket of protection. In the past, a business could argue that new and creative terrorist attacks or unusual secondary damage from natural disasters offered a degree of protection under the law since they were unforeseeable. Today, a terrorist incident anywhere in the United States is now a particular foreseeable risk. Any type of natural disaster prone to the region of the country such as a tornados or hurricanes that happened with some degree of regularity or frequency is considered foreseeable risk that legally must be addressed by a business.
Additionally, living in a major city or near a major potential target such as a power plant makes an attack foreseeable, regardless of the fact that an attack or incident has never occurred in that area. Next time you walk into a small clothing store or a restaurant near a high risk or target area, ask yourself if you think they have considered their legal pitfalls. I once spoke to a pizza parlor owner in a Wal-Mart shopping plaza and asked him what he would do if a terrorist incident affected the entire shopping complex which was located on Long Island. He made a point of saying that since Wal-Mart is a bigger company, they would have to lead the response to any incident and subsequent solution, and ultimately he would follow their lead. That can be fatal thinking especially when you are assuming a larger business nearby will be responsible for anything that goes wrong just because their patrons take up more space in the parking lot. Chances are that small or medium businesses haven’t considered the nature of terrorism, but if something does occur, they are depending on the larger business to provide some shelter or possibly take the brunt of any plaintiffs lawsuits that follow.
Also consider that while small or medium businesses may have considered emergency procedures for a hurricane or tornado, often they have not gone the extra step and figured out how to contractually mitigate with suppliers or customers under civil law if a secondary problem caused by a natural disaster arises. Many small or medium businesses have addressed if their physical plant has no electricity or has flooded significantly, but how about addressing a situation when you cannot have employees show up for work and you cannot send/receive goods due to major delays because a tornado has dropped broken 18 wheel trucks on every major highway in the area? It is interesting that many small business owners, even those who operate through Web sites on their own or through sites such as eBay are now learning the hard way about disruption of services and shipping due to secondary problems as a result of natural disasters.
In terms of forseeability of liability, the concept of the law or proportional damages can add to another burdensome legal problem and make it much worse. The law of proportional damages is a concept in civil law that breaks down the damages in a case based on the level of fault for each party. This concept is often used in tort/personal injury cases such as a car accident but can be applied to businesses.
To give you an idea how such a concept works, we must look to one of the first cases of the law of proportional damages and terrorism, although it is a government organization being sued not a small or medium business.
In terms of paying damages as a result of the 1993 World Trade Center bombing, liability was determined by the court in a very surprising way for the port authority. Sixty-eight percent of liability was handed to port authority versus 32 percent to the actual terrorists. Why? Because security consultants warned the port authority the World Trade Center garage was vulnerable to attack by terrorist bombers. Since 1993 and 2001, American governmental organizations and all forms of businesses small and large can possibly share a portion of the damages when sued even without consultants telling them that they are facing major legal liabilities.
Going back to the Wal-Mart/pizza parlor example, imagine that an incident occurs in the area of the shopping plaza parking lot and people sue Wal-Mart as a result of being hurt in that area. The lawsuit could continue for years on end and with extreme legal expenses that could result in the pizza parlor being brought into the lawsuit at some point in time and a possible determination of liability for the pizza parlor along with Wal-Mart. While Wal-Mart may be found liable to a larger degree, if the pizza parlor is found just 5-10 percent liable, the damages that would have to be paid could be in the hundreds of thousands. Such damages could put an organization such as the pizza parlor out of business. Keep in mind mitigating damages such as the image of the business in the public eye and the reputation of the business which are also vulnerable and may not be considered until the damage is irreversibly done.
The mindset for all business organizations today is to be vigilant. Whenever you hear of a news report that is relevant to your organization, you should consider having a meeting, discussing or determining if you can increase your legal protection. In increasing legal protection, you do not always need to run to a lawyer. As a business professional, you often can take steps on your own to protect your business. Keep in mind, as a business you should consider the standard of care in your industry as well as a finding out how other business in your area are prepared for terrorism/natural disasters. If you get sued at a later date, you do not want to discover you fell below the standards set by other businesses of a similar nature.
Additionally, as part of your BCP planning, consider the role of lower level employees in identifying difficulties and/or problems that may occur after a crisis emerges. Often the people at the ground level of an organization can think of scenarios upper management may not even consider. Examine the interior and exterior designs of your building. Common sense can go a long way, and if your business is located in an area being discussed as a target for attack in the newspapers, how is your building design (inside and out) create or mitigate risks?
Finally, the use of better technology, policies/procedures, and communications should be discussed not just in terms of effectiveness but from a legal standard:
... but/for this piece of equipment, policy, or communication, etc. – would people be hurt or the business unable to make profit if a situation arises?
Ultimately every business must consider terrorist and natural disaster threats as having the potential to increase liability. While you may not need to seek an attorney for every difficulty you face, it never hurts to think like an attorney as part of your business planning.
"Appeared in DRJ's Winter 2008 Issue"