Certification and accreditation programs (collectively referred
to herein as "certification" programs) sponsored by trade
and professional associations are increasingly common. Whether it
is the certification of individuals, products or services, the
credentialing of professionals, or the accreditation of programs,
services or institutions, these programs confer an array of
valuable benefits not only to associations and association members,
but also to industry, government, and the general public. However,
as the recent litigation involving the National Spa and Pool
Institute and other associations remind us, standard-setting and
certification programs are not without liability risk –
potentially significant risks.
Fortunately, proper care in establishing and operating
certification programs can go a long way toward minimizing those
risks. As association certification programs continue to play an
increasingly important role in our society, it is more critical
than ever to ensure that associations are not deterred from
sponsoring such programs as a result of legal risks that can be
effectively managed. This article is designed to outline the
principal liability risks facing most association certification
programs, and to suggest steps to limit these risks.
Overview
In general, courts are extremely reluctant to interfere
with certification programs operated by trade and professional
associations. Courts generally are hesitant to second-guess the
reasonableness of association standards, policies or decisions,
recognizing that professionals in associations have far greater
experience than judges in formulating and applying standards of
industry or professional excellence. Associations have prevailed in
the vast majority of certification disputes. Moreover, courts often
have found in favor of associations at the summary judgment stage
– in other words, the association prevailed based on a motion
at the close of discovery and thus avoided the risk and expense of
trial.
However, despite associations' impressive track record of
success in certification-related litigation, the significant risks
of litigation cannot be ignored. Even if an association ultimately
prevails in court, the costs, burdens and distractions of mounting
a defense can be overwhelming. Although clearly in the public
interest and beneficial to members and others, self-regulation
programs such as certification programs raise risks of legal
liability under the antitrust laws, under the Americans with
Disabilities Act ("ADA"),and under common law
theories of negligence, warranty, due process, and defamation,
among others. Fortunately, there are steps associations can take in
structuring and administering a certification program to minimize
the risk of being sued in the first instance, and, if a lawsuit
does materialize, to ensure that the association will prevail. In
addition, appropriate errors and omissions insurance can help
protect the association against the financial costs of such
litigation.
Areas of Liability Risk
Following is a brief discussion of the five principal
areas of liability risk for associations in connection with the
operation of certification programs: antitrust, negligence
(liability to third parties), due process, defamation, and ADA
compliance. Other theories of liability exist as well – such
as theories of warranty and enterprise liability – but these
five areas make up the majority of claims filed against association
certification programs.
1. Antitrust.
Unsuccessful applicants for certification or those whose
certification is revoked may seek to use the antitrust laws to
obtain certification or to obtain damages for the failure to
certify. An association could be held liable under those laws if
the challenger can demonstrate (i) that certification is essential
in order to effectively compete in the market, and (ii)
that the program's exclusion was the result of unreasonable or
invalid standards or criteria or of unfair or inappropriate
procedures. In addition, certification programs that require
membership in the sponsoring association as a prerequisite to
obtaining certification may be challenged as an illegal
"tying" arrangement, among other antitrust theories.
Certification programs that are anticompetitive, discriminatory,
unrelated to objective standards, or implemented without fair
procedures are most likely to attract antitrust challenges.
Moreover, certification programs that charge an unreasonably high
price to apply for or receive certification or recertification
similarly are subject to and likely to attract antitrust
challenge.
As with all antitrust actions, the key factor in an antitrust
challenge to an association's certification program or decision
is whether the association's actions are unreasonably
"anticompetitive" within the meaning of the antitrust
laws. In other words, courts will look at all of the facts and
circumstances to determine whether the certification program, on
balance, restrains competition in the relevant market more than it
promotes it. A certification program that, in purpose and effect,
is designed to, and does in fact, further, protect and promote the
economic health of, or consumer welfare within, a particular
industry will generally be deemed to be more procompetitive than
anticompetitive – even though those who fail to achieve
certification may find it more difficult to compete in the
market.
Certifying bodies generally have broad discretion in setting and
implementing certification requirements. Courts are particularly
reluctant to second-guess technical standards – such as those
used as the basis for certification decisions – as long as
the standards are objectively established and substantively
justifiable. Courts also recognize that certification programs are
generally procompetitive in nature. Most importantly, court
decisions in this area suggest that taking the steps set forth
below in structuring and administering certification programs will
significantly limit the antitrust risk arising from such
programs.
2. Negligence (Liability to Third Parties).
Reliance on the certification of a professional, entity,
product, or service can, in some cases, cause the association that
granted the certification to be held liable when a patient, client
or customer suffers harm (physical, financial or otherwise) at the
hands of the certified individual, entity, product, or service. The
most common claim is that the certifying association was negligent
in granting the certification and should therefore be liable for
resulting injuries.
This liability risk to third parties generally means negligence
liability (a form of tort liability), but is sometimes couched in
claims such as misrepresentation, failure to warn, warranty, strict
liability, and enterprise liability. For instance, the injured
party may allege that the association warranted or
guaranteed the individuals, entities, products, or
services certified by the association, and therefore should be
responsible (under a breach of warranty theory) for resulting
injuries to those who purchase, utilize or participate in
them.
Fortunately, court decisions holding certifying bodies liable in
tort for loss or injury caused by the certified individual, entity,
product, or service remain a rarity. This type of liability is
subject to a number of conditions and remains infrequent. In short,
the certifying body generally will be found liable under the tort
of negligence only if the injured party can prove all of the
elements of negligence liability – duty, breach of duty
(negligence), reliance, and causation, along with proof of damages
(injury). If any one of these four elements cannot be established,
then liability will not result.
Duty. The first question courts ask is whether or not the
certifying association owed a duty of care to the third party (the
injured plaintiff who utilized the services of a certified vendor,
for instance). While there is generally no duty of care owed to
third parties, some courts have held that once an organization
undertakes to set standards or inspect, test or otherwise certify
individuals, entities, products, or services, it should reasonably
know that third parties might rely on those standards or
certifications, and therefore must exercise reasonable care in
doing so.
Breach of Duty (Negligence). The court will next determine whether
the certifying body failed to act with reasonable care
(i.e., acted negligently) in granting the certification or
in setting a particular standard. In other words, the association
is obligated to use due diligence and reasonable care in
promulgating the certification standards and in applying them to
applicants for certification. For instance, a
"mail-order" certification program that establishes no
meaningful standards or that exercises no real scrutiny in
evaluating applicants could be at risk for breach of its duty of
care.
Reliance. It must be proven that the plaintiff relied
upon the association's certification in utilizing the certified
individual, entity, product, or service. It generally is not
sufficient for a plaintiff merely to show that the association
certified a vendor, for instance, and later an injury occurred; the
plaintiff must establish that it was because of the
association's certification that the vendor's products or
services were utilized. If the association can establish that the
plaintiff did not know of the association's certification or
that the certification was not a material factor in the decision to
utilize the vendor's product or service, then it may be able to
avoid liability.
Causation. The negligence of the certifying association must be
considered to be a "proximate cause" of the injury to the
ultimate user (the plaintiff). While the most direct cause of the
plaintiff's injury generally is the negligence of the certified
party or product – not the certifying association –
where the certifying body expects the public to rely upon the
certification, and the injured party does just that in selecting
the certified party or product, the causation and reliance criteria
both may be met. In other words, if reliance is established,
causation likely will be as well.
Damages (Injury). There must be measurable injury (physical,
financial or psychological) to the plaintiff for any damages to
exist.
3. Due Process.
Certification bodies must provide fair procedures in both
setting and implementing standards. It is critical to carefully
establish and strictly, consistently and objectively follow written
rules and procedures for the administration of the certification
program. Certifying bodies are legally bound to follow their own
rules and regulations in making certification decisions. While this
duty is sometimes described in contractual terms, the obligation is
more often labeled as a matter of common law due process or
fundamental fairness.
Common law due process has two elements: (i) substantive fairness,
and (ii) procedural fairness. Substantive fairness requires the use
of objective standards reasonably related to a legitimate
organizational purpose. Procedural fairness refers to the
procedures of decision-making.
Courts are much more likely to defer to substantive standards
established by a certifying association. However, standards and
decisions by a certifying association may be overturned if they are
arbitrary, capricious or discriminatory, or where they are
influenced by bias, prejudice or where they lack good faith. Courts
are more likely to scrutinize the fairness of the procedures more
closely because these are matters with which they are more
familiar.
There is no definitive rule as to what due process requires, but
at a minimum it would include notice and an opportunity to respond
to an adverse certification decision. In addition, fundamental
fairness requires that similarly situated persons and entities be
treated the same.
The recommendations below set forth more detailed guidelines for
ensuring the satisfaction of common law due process
requirements.
4. Defamation.
Defamation is the oral utterance (slander) or written
publication (libel) of false or misleading facts, or false or
misleading implied facts, that are derogatory or damaging to an
individual's, entity's or product's reputation.
Accusing someone of dishonesty or other moral deficiency, or of
professional or business deficiency, raises particularly
significant risks of defamation liability. In the certification
context, this risk is most likely to arise: (i) when an individual
or entity is denied certification, and then damaging statements are
made (to one or more third parties) by a representative of the
certifying body about the individual or entity and the failure to
be certified; or (ii) when sensitive, potentially damaging,
information about an applicant for certification becomes known to
the certifying body during the certification process, and that
information is subsequently disclosed to one or more third parties
(intentionally or unintentionally).
Generally, defamation may be committed even by those who
believe they are communicating the truth. For a statement
to be defamatory, it must be actually communicated to a
party other than the speaker or author. Anyone who republishes a
defamatory statement can be equally responsible with the original
speaker or author. The defamed individual or entity may sue anyone
who publishes, prints or repeats the defamation, and, depending on
the circumstances, may recover from the speaker(s) or author(s)
money damages to compensate for the harm to reputation, and to
punish the speaker(s) or author(s) as well. Truth is an absolute
defense to virtually any defamation claim.
In some circumstances, legal "privileges" apply that may
protect the speaker or author from liability even where a statement
might otherwise be defamatory. The three principal privileges in
the ./ association context are: (i) where the speaker takes
reasonable precautions to ensure accuracy in every derogatory
detail, including making reasonable inquiry; (ii) where the
statement concerns a public official or figure, the speaker will
not be liable unless the speaker actually knew the
accusations were false and made the statement in reckless disregard
of its truth or falsity; and (iii) publication or communication of
a derogatory statement within an association – at least
within the governing body or bodies of an association – for
the purpose of promoting a common interest may be protected by a
"qualified privilege." For example, deliberations among a
certification board concerning certification-related proceedings
are likely protected by this qualified privilege. Where this
privilege applies, derogatory statements may give rise to
defamation liability only if motivated by spite or ill-will, or if
communicated to persons outside of the management or governing
group.
The recommendations below set forth guidelines for avoiding
defamation liability, as well as ensuring protection of the
qualified privilege.
5. Americans with Disabilities Act Compliance.
Private, nonprofit organizations generally are subject to
the requirements of the federal Americans with Disabilities
Act with respect to their general operations – including
the sponsorship and administration of certification programs. The
requirements of the ADA of most relevance to certifying bodies are
the specific and extensive standards contained in the law for
private entities that conduct examinations and courses relating to
applications, licensing and certification, or credentialing for
educational, professional or trade purposes. The U.S. Department of
Justice's regulations require that certifying bodies
"offer such examinations or courses in a place and manner
accessible to persons with disabilities or offer alternative
accessible arrangements for such individuals."
Note that the ADA does not apply if an individual seeking
certification does not have a covered disability. For instance,
recent U.S. Supreme Court decisions have clarified that available
corrective and mitigating measures, such as medication or medical
aids, must be considered in determining whether or not an
individual has a disability under the ADA. Thus, for example, the
Court held that correctable myopia is not a disability, nor is high
blood pressure controlled with medication.
A certifying body is responsible for selecting and administering
the certification examination in a place and manner which ensures
that the examination tests what the examination purports to
measure, rather than testing the individual's disability, such
as impaired sensory, manual or speaking skills (unless those skills
are what the examination is designed to test). This means ensuring
that: (i) testing places are accessible to individuals with
disabilities; and (ii) auxiliary aids and services are made
available to enable individuals with disabilities to take the
examination, in accordance with the ADA's requirements.
For example, for individuals with hearing impairments, oral
instructions or other orally-delivered materials could be provided
through an interpreter, assist of listing device, or other
applicable means. For individuals with visual impairments, the
examination and answer sheets could utilize large print or Braille,
could be provided via audiotape, or could be provided through the
use of qualified readers and transcribers to read questions and
record answers.
A certifying body does not have to provide auxiliary aids and
services in all cases. If providing a particular auxiliary aid or
service would fundamentally change the examination or result in an
undue burden on the certifying body, it does not need to be
provided. This determination is case-specific.
Regarding who decides what type of auxiliary aid or service should
be provided, when possible, the individual with the disability
should be consulted to determine the type of aid or service that
may be needed. When more than one type of auxiliary aid or service
will enable a person with a disability to participate effectively,
a certifying body may choose what aid or service to make
available.
Aside from auxiliary aids or services, other types of
modifications may be required. For instance, it may be necessary to
modify the manner in which the test is administered. For example,
if an individual has an impairment that makes writing difficult, it
may be necessary to give that individual more time to complete the
exam or to permit the typing of answers.
The individual with a disability may not be required to
bear the cost of the aid or modification. The certifying body must
bear the cost of the aid or modification. However, a certifying
body is required only to provide auxiliary aids or modifications
that do not pose an undue burden on a certifying body and
do not fundamentally change the examination.
Examinations must be administered in facilities that are
accessible to disabled individuals or alternative accessible
arrangements must be made. If the facility in which the examination
is offered is not accessible, it may be administered to an
individual with a disability in a different room or another
location. The alternative location should provide comparable
conditions to the conditions in which the test is administered to
others.
All testing locations need not be accessible and offer specially
designed exams, however, if an examination for individuals with
disabilities is administered in an alternative accessible location
or manner, it must be offered as often and in as timely a manner as
other examinations. Examinations must be offered to individuals
with disabilities at locations that are as convenient as the
location(s) of other examinations.
Individuals with disabilities cannot be required to file
their applications to take the examination earlier than the
deadline for other applicants in order to enable accommodations to
be made. However, a certifying body may require individuals with
disabilities to provide advance notice to the certifying
body of their disability and of any aids and/or modifications that
might be required – so long as the deadline for doing so is
not earlier than the deadline for others applying to take the
examination.
A certifying body may require applicants to provide documentation
of the existence and nature of the disability as evidence that they
are entitled to an aid or modification – so long as the
request is reasonable and limited to the need for the modification
or aid requested. Appropriate documentation might include a letter
from a doctor or other health care professional, or evidence of a
prior diagnosis or accommodation (such as eligibility for a special
education program). The applicant can be required to bear the cost
of providing such documentation, but he or she cannot be
charged for the cost of any modifications or auxiliary aids
provided for the examination.
Finally, the rules for courses are similar to those for
examinations. They generally require that modifications be
made in courses offered by private entities to ensure that the
place and manner in which the course are given are accessible to
individuals with disabilities. The most significant difference is
that the general rule for courses applies to all
individuals with disabilities – not just those with
"impaired sensory, manual, or speaking skills."
Modifications in courses may include changes in the length of time
allowed for completing the course, substitution of course
requirements, or adapting the manner in which the course is
conducted or materials are distributed. Advance notice of the
opportunity to obtain materials in alternative formats must be
provided to disabled individuals. Appropriate auxiliary aids also
must be provided, unless to do so would fundamentally alter the
course or create an undue burden. If courses cannot be administered
in a facility accessible to individuals with disabilities,
comparable alternative arrangements must be made. Such arrangements
may include offering the course through videotapes, cassettes,
CD-ROM, the Internet, or prepared notes. The selection or choice of
courses available to individuals with disabilities may not be
restricted.
Guidelines for Minimizing Liability Risks.
Court decisions involving association certification
programs suggest that taking the following steps in establishing
and administering certification programs will significantly limit
the association's liability risks for such programs:
- Certification standards should be clear and unambiguous, reasonable, fair, and objectively grounded – care should be taken to ensure that valid, objective bases support each certification standard. Standards should be based on data or on a respected body of industry or governmental opinion linking each particular standard to the qualities that the certification purports to measure. Where possible, standards should be directed at and focus on the ends, not the means. Where the means are specified, they must be legitimately, demonstrably and directly related to the objectives. Alternative means to achieve a given objective should be permitted where possible. Standards should never be arbitrary or capricious, or vague or ambiguous, and procedures should be developed that document the development and reasonableness of, and the objective basis for, proposed standards.
- Certification standards should be no more stringent or rigid than necessary to ensure that minimum competency or quality levels have been attained.
- Certification programs should be open both to association members and non-members on the same terms and conditions. Moreover, nothing in excess of a reasonable price should be charged to apply for or receive certification or recertification.
- Specific commercial or economic considerations should play no role in the setting or application of the certification standards. In addition, certification programs should never be created or used for the purpose of raising, lowering or stabilizing prices or fees, excluding competitors from the market, or limiting the output or supply of products or services.
- Prior to finalizing certification standards, provide interested parties with notice of the proposed standards and an opportunity to comment. Fairly and objectively consider such comments in finalizing the standards.
- Where appropriate and feasible, consider utilizing and participating in the standard-setting procedures of the American National Standards Institute ("ANSI"), and, where a certification program is involved, consider obtaining accreditation of the certification program by ANSI.
- Establish equivalent standards or alternative paths to certification wherever possible. As with the standards themselves, the determination as to whether the standards have been satisfied should focus on the ends, not the means. There must be valid, demonstrable and reasonable bases upon which to determine that applicants for certification have met the standards.
- Periodically review and update all certification standards to ensure that they are current and reflect new legal, technological and other developments. Provide appropriate opportunities for public notice and comment whenever standards are modified, and carefully consider such comments in the revision process. In addition, document any and all complaints or concerns about the standards and revise the standards accordingly if appropriate.
- Ensure that participation in and use of the certification program is completely voluntary.
- Widely publicize the availability of the certification program and permit application by all who choose to apply. Do not limit participation in the certification program to only members of the sponsoring association. However, fees charged to non-members for certification may be higher than those charged to association members to reflect any membership dues or assessments that contribute to funding the program.
- There must be no bias, partiality or inconsistency in establishing or operating the program. The certification process must be objectively and uniformly administered, without subjectivity, favoritism or discrimination. The rules of the certification process must be scrupulously, consistently and objectively followed by those administering the program.
- Due process should be built into the program. Before certification is denied or revoked, those who seek the certification should be provided with: (i) notice of an adverse decision and a meaningful opportunity to respond to the notice, (ii) a hearing before a panel of peers, none of whom has a direct economic or personal interest in the outcome of the proceeding, (iii) the right to be represented by another person, including an attorney, and to submit evidence and arguments in defense, (iv) the right to examine the evidence and to cross-examine witnesses (if applicable), (v) the right to a written decision explaining the reasons underlying it, and (vi) the right to appeal an adverse decision to a higher-level decision-making body within the association. Proceedings of this nature should remain strictly confidential.
- Require full disclosure by those involved in the certification process of any factor that might be considered bias or a conflict of interest. Require recusal or removal if a bias or conflict is particularly severe or pervasive. Full disclosure and appropriate checks and balances generally are effective mechanisms for safely managing most potential conflicts of interest. Generally, reduced volunteer involvement and increased association staff involvement may assist in objectivity and the absence of bias.
- All certification decisions should be based completely and exclusively on the record of the review and not on extraneous, anecdotal, subjective, or other outside sources of information.
- "Grandfathering" of those who do not meet all current certification standards generally should be avoided.
- Require regular recertification as appropriate to ensure that those who are certified continue to meet the program's standards. In addition, review the certification process itself on a periodic basis to ensure it is being properly administered.
- While nothing prevents a certification program from publicizing the names of, and information about, those who are certified, care should be taken to avoid any explicit or implicit disparagement of those who are not certified. Maintain strict confidentiality with respect to all adverse allegations, complaints, actions, and proceedings that arise in connection with the certification program. While it is acceptable for a certifying association to verify that an entity is not currently certified, no further details should be provided.
- Ensure that all certification examinations – as well as all courses that prepare applicants for certification exams – are administered in strict compliance with the specific requirements imposed by the federal Americans with Disabilities Act and implementing regulations.
- Maintain strict security regarding all aspects of the certification process. Any missing, stolen or copied examination booklets, for instance, can have a severe impact on the integrity of the certification process.
- To minimize the risk of copyright infringement, maximize copyright rights, and facilitate enforcement of such rights, use a copyright notice on all certification program materials (e.g., standards, applications, brochures) and register such materials with the U.S. Copyright Office. Be sure that the association owns or has the right to use the entire contents of such materials. In addition, as listings of certified entities generally are not protectable under U.S. copyright laws, use a "shrinkwrap" license or other form of contractual commitment to place explicit, binding limits and conditions on the use of the list. The shrinkwrap license also can be a useful vehicle to disclaim any endorsement or guarantee of the certified entities by the association.
- To minimize the risk of trademark infringement, maximize trademark rights, and facilitate enforcement of such rights, use a trademark notice in connection with the certification logo or seal and register the mark with the U.S. Patent & Trademark Office (either as a certification mark or as a service mark). Be sure the association's use of the mark does not infringe anyone else's trademark rights. In addition, codify the terms and conditions of, and limitations on, use of the mark by certified entities in a written agreement, possibly as part of the certification application form or in connection with distribution of the mark. Be sure to include provisions, among others, designed to prevent false or misleading use of the mark and to prohibit any further use upon decertification. Note that the federal Lanham Act, and similar state laws, prohibit the use of any false or misleading terms, names or symbols, or any other false or misleading descriptions or representations, that are likely to deceive the public with respect to the affiliation of the user with a particular organization.
- Include binding limitation of liability and indemnification provisions in the certification application form (or other document) to absolve the association from liability to those who are certified, and to hold the association harmless from lawsuits by those injured by the acts or omissions of certified entities.
- Avoid any implicit or explicit guarantee or warranty of certified products, services, individuals, or entities. To this end, avoid "puffery," do not overstate how a product, service or professional performs, and do not use superlatives such as "never fails" or "safest" in describing those that are certified.
- Use written disclaimers where appropriate – such as on marketing materials, in the application form, and on the association's Web site – to clarify the association's limited role with respect to, lack of responsibility for, and absence of guarantees or warranties of, certified products, services or entities. If and where appropriate, require use of similar disclaimers by those that receive certification.
- Maintain sufficient insurance to cover the liability risks of the certification program. Some association professional liability insurance ("APLI") policies provide coverage for certain claims arising from certification programs as part of the basic policy, although some with coverage sublimits. Other APLI policies will not cover such programs without an endorsement to the policy. Importantly, APLI policies do not cover bodily injury or property damage claims arising from these programs. Stand-alone certification insurance policies are available and necessary to insure against these risks. Adequate insurance should be a prerequisite to the operation of any association certification program.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.