limitation on liability and would be vulnerable to challenge on constitutional grounds.

There have been suggestions to eliminate the concept of an "extraordinary nuclear occurrence." What is the industry's position on this?

Under Price-Anderson an accident is classified as an extraordinary nuclear occurrence (ENO) when there is substantial off-site contamination and damage that meets criteria published by the Nuclear Regulatory Commission. In any suit for damages in the case of such a severe accident the utility is required to waive certain defenses that would be available in the absence of Price-Anderson. The purpose of requiring such waivers is to simplify the legal process in anticipation of large numbers of claims. Accordingly, there is no need to apply the special ENO rules to lesser accidents. This would serve only to encourage individual claims. including many that may not be meritorious. State and Federal laws already provide adequate redress for claims involving lesser nuclear incidents. This was demonstrated by the Three Mile Island accident, which did not meet the criteria for "extraordinary nuclear occurrence," and yet immediate payments were made to qualified evacuees and compensation has been awarded to most claimants.

Is Price-Anderson a disincentive to safety?

No With or without Price-Anderson, a utility company's first and foremost objective is to assure that its nuclear power plants are safe and reliable so as to avoid any undue risk to the general public and its employees.

While there were no off-site fatalities or injuries to the general public as a result of the Three Mile Island (TMI) accident, the accident vividly demonstrated the disastrous financial effects for a utility that are likely to occur as a result of a serious nuclear power plant accident. The potential for financial loss for a utility is significant and includes the loss of the capital cost of the plant in the rate base, replacement power costs, and decontamination and restoration costs. The potential for financial loss is of such magnitude that it provides a direct and powerful incentive for utility companies to assure that their nuclear power plants are designed, constructed and operated safely and reliably so as to avoid any possibility of an accident. In light of this potential for significant financial loss, the existence or nonexistence of Price-Anderson is not a determinative factor in terms of a utility company's operating philosophy and approach to safety.

Why should homeowners be precluded from buying nuclear insurance protection?

eruption, flood and nuclear damage. Earthquake and volcanic eruption protection can sometimes be purchased through a seperate rider, flood insurance is provided by the Federal Government, and protection to homeowners for nuclear loss is provided by the nuclear and insurance industries pursuant to the Price-Anderson program. There is nothing in Price-Anderson that specifically requires the nuclear exclusion in homeowners' policies, however, the insurance companies, with the full knowledge and consent of Congress, have channeled all nuclear liability insurance capacity through the nuclear insurance pools to the nuclear industry for the benefit of the pubic. This was done to maximize protection to the public in a situation like nuclear damage where there is no actuarial basis for calculating premiums and no practical way of making coverage available directly to the public because the hazard is not only very remote, but localized. If the Price-Anderson law were repealed today, these considerations would still apply and some other special government supported mechanism would need to be devised to deal with nuclear damage, as is the case with flood damage.

Under the Price-Anderson system now in place, not only are the resources of insurers made available to protect the public, but these are combined with large sums also committed by reactor operators. Presently, $570 million of this combined insurance coverage is available. Through this approach, rather than spreading insurance coverage and its costs among individual owners of homes, cars and businesses, the public is protected by coverage which is paid for by the nuclear industry. In the unlikely event that the loss to the public should exceed the amount of private protection, the Congress has obligated itself to review the event and is to take whatever action it deems appropriate to protect the public.

Why is so much more property insurance available than liability insurance?

At Three Mile Island there was very substantial onsite property damage affecting the utility, yet no off-site damage. On-site property damage exceeded $1 billion and the cost of off-site compensation (evacuation cost and economic loss payments) to the public was about $29 million. The lesson learned was that damage is mostly on-site rather than off-site. As a result, the need for large increases in property insurance were apparent. The utility industry and the pools responded to this need with an expanded program for property insurance, while also increasing the first layer of liability insurance protection from $140 million to $160 million. It must be remembered that the public, that is, the rate payers, also benefit from the property insurance coverage. If funds for restoration of the damaged plant are not provided by insurance, electric power rates in the area could be adversely affected.

Should nuclear insurance policies and the PriceAnderson system protect against liability for precautionary evacuations?

There was, of course, a precautionary evacuation advised by the Governor of Pennsylvania at the time of the Three Mile Island accident in 1979, and the nuclear insurance pools did respond by advancing funds to evacuees. Because the pools had always anticipated taking such action they were prepared to respond promptly, as they are authorized to under their insurance policies. The pools' response is to the "imminent danger" of contamination of property which is therefore withdrawn from use or evacuated. The "imminent danger" test is a reasonable and workable means of distinguishing compensable from non-compensable events.

Do the nuclear insurance pools' policies issued to nuclear plant operators cover injury or damage caused by sabotage or terrorists acts?

The nuclear insurance pools have made very clear in the past that the nuclear liability insurance they provide with respect to a nuclear power reactor under the Price-Anderson law will protect the public from injury or damage caused by dispersal of nuclear material from the reactors into the environment, even if caused by sabotage or terrorist acts. The policies do not cover the resulting injury or damage if the sabotage or terrorist acts were related to war, insurrection, or civil war. Also, if nuclear material is stolen and removed from an insured facility and is subsequently used to threaten or cause harm to the public, the resulting injury or damage would not be covered by the pools' nuclear liability policies. Compensation to the public for the results of such terrorist activity is clearly outside the scope of a system that compensates from private resources. If the Congress addresses the question of compensation for such criminal activity it may be appropriate that compensation to those injured or damaged might come from public funds.

What is the insurance pools' position on excluding the costs of investigation and defense from the limit of liability of their policies?

One objective of Price-Anderson is to maximize private insurance capacity. Congress recognized that the expense of paying claims cannot reasonably be separated from the claims payments themselves, nor from there being a limit on liability.

Insurers that commit capacity to the nuclear insurance pools do so for a specific amount of dollars which cannot be exceeded. Generally the amount that they commit represents the maximum loss the insurer has the financial resources to absorb with equanimity. If claims expenses were not included in the maximum sum an insurer commits to the pools, and the insurer were asked to also be responsible for additional undetermined sums for claims expense, all insurers in the pools would reduce the amounts they commit to the pools to allow for the unknown expense factor, and some insurers are likely to withdraw because of the uncertainty that would be created.

To encourage the greatest amount of insurance from insurers around the world it is necessary to include claims expenses within the amount of the sums they commit to nuclear liability.

What is the opinion of the insurance pools regarding issuing one policy which combines property insurance and nuclear liability insurance under a single limit or liability?

Insurers believe that it is not feasible to combine property and liability as one coverage. Any attempt to do so would undoubtedly result in a substantial loss of total capacity. Insurance and reinsurance from insurers worldwide is committed to either property or liability coverage, and some divide their participation between these coverages in particular proportions; perhaps to have the benefit of some small spread of risk. Generally, insurers and reinsurers tend to favor the coverage they are most heavily committed to in their other insurance activities. If the nuclear pools compelled insurers and reinsurers to participate in both coverages for the full amount they declare there is certain to be a substantial loss of total capacity.