Risk Management

Risk management in the context of university research has to do with protecting SFU from assuming unreasonable risks associated with what may arise from the research. These include injuries to persons, damage to property, breach of contract, breach of confidentiality, and allegations of copyright or patent infringement. However, there is also the protection of the researcher from personal liability as well.

A researcher should not be at risk of personal liability, but they can be. When SFU accepts a research grant or enters into a research contract with a sponsor, the researchers at SFU are performing the work in their capacity as SFU employees. Thus, they are "protected" from being held personally liable for actions taken in the course of their employment. However, there are times when contracts arrive from sponsoring agencies that name the researcher rather than SFU as the other party to the agreement, requesting that the researcher sign and return it. In such cases, the researcher, by signing the agreement, might be entering an agreement personally while thinking he or she is entering it on behalf of SFU. In circumstances like these, should something go wrong, liability could fall upon the researcher.

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Faculty members, as principal investigators for research grants and contracts, are protected in their capacity as SFU employees. The students and individuals who are employed under those grants and contracts are considered the equivalent of University employees for legal and insurance purposes. This automatically provides SFU Liability Insurance coverage to those students and individuals. SFU faculty, staff and employees are provided coverage for claims or legal action that arise from the course of their employment at SFU.

SFU has issued Indemnity Approval Policy AD 3.14 governing in part SFU's ability to grant indemnities. An indemnity is a legal transfer of risk within a contract whereby one party agrees that it will provide compensation for loss or damage already suffered, or that it will secure against loss or damage that may occur in the future. The SFU Indemnity Approval Policy sets out the procedure for reviewing contract language for indemnities and other liability issues. The University, while recognizing the importance of research, also needs to balance the risks inherent with the research along with the legal liability, indemnification and insurance clauses contained in the contracts being presented to us. In recent years, many organizations, including some government agencies, have increased their attempts to transfer many types of risk to institutions performing research under contracts, in some cases including risks of consequential loss not directly related to the research. As this practice became increasingly common, the need for SFU to institute a formal indemnity approval policy became more apparent.

When an organization that is sponsoring research attempts to transfer certain risks to SFU through the contract, that organization is seeking to reduce its exposure to potential liability. In other words, the sponsor will seek an indemnity from the University. Through that risk reduction, the organization is able to reduce its insurance premiums, administrative costs and legal expenses - all by effecting such risk transfer through the contract.

In some instances SFU will give indemnities to sponsors of research contracts. Some of the risks that sponsors would like to transfer to SFU through contracts are reasonable, and some are not. It should come down to which of the parties is in a better position to assume the risk. Of course, in many commercial ventures, there might be a trade-off to the party assuming the risk. In contracts that fund research, there is rarely such a trade-off. It comes down to whether assuming the risk is reasonable under the specific circumstances.

SFU will be responsible for its acts or omissions while the sponsor should be responsible for its acts or omissions. Certain government contracts contain "difficult" indemnity clauses that require negotiation. We have had some success in having these deleted from agreements. The primary consideration for a university in determining whether to grant an indemnity is the risk versus reward equation. Assuming liability for resultant loss or consequential damage could potentially result in multi-million dollar claims and legal actions.

SFU manages its exposure to risk both by limiting this exposure in contracts through negotiating indemnity language and other such provisions, and by purchasing Liability Insurance in sufficient amounts to protect University employees and the institution itself. The SFU risk coverage summary information can be found on the SFU Safety and Risk Services website.

Insurance coverage is not the answer to managing risk, particularly "negotiated" contractual risks. Insurance is a risk financing tool that contains exclusions, limitations and deductibles, so insurance doesn't cover everything. The Liability Insurance coverage that SFU maintains is broad in scope and provides protection for a wide variety of potential claims situations. However, research can involve areas of exposure where insurance coverage may not be there, or coverage may only be partial, such as nuclear liability, gradual pollution, and infringement to copyrights, patents, trademarks or violations of other intellectual property rights.

A research contract for a small dollar amount, if written in a certain way, can expose the University to huge potential liability. It is really not the dollar-value of the contract that matters when it comes to risk management issues. That's why all research contracts have to be thoroughly reviewed, irrespective of the amount of funding involved.

The consequences of assumption of liability under research contracts can be so severe that the advantages from accepting the funding are overshadowed. In these situations it is only reasonable that the contract be modified to reduce or remove the exposure - if necessary by re-negotiating other aspects of the contract _ before the contract is signed for the University. It is inappropriate for the University to assume certain contractual obligations that involve assumption of unreasonable risks and potentially large liability.

For further information, please contact Greg Sasges.