Background, Assumptions, and Observations
The Price-Anderson Act (the Act) became law in September 1957 as part of the Atomic Energy Act of 1954 as amended.1 Congress enacted Price-Anderson to meet two basic objectives:
to ensure adequate funds would be available to satisfy liability claims of members of the public in the event of a nuclear accident; and
to remove the threat of potentially large liability claims in the event of such an accident, a risk that would have limited private sector participation in the development of nuclear power.
To accomplish these objectives, the Act provides a system to ensure the availability of funds for the payment of personal injury and property damage claims for members of the public affected by a nuclear accident. Under this system, utilities operating commercial nuclear power plants are required to provide proof to the Nuclear Regulatory Commission (NRC) that they have financial protection. This requirement has been met by all utilities by providing approved policies issued by the private nuclear liability insurance pools.
The insurance system for nuclear power plant liability consists of two tiers .2 Utilities operating large power reactors pay premiums each year for a fixed amount of primary nuclear liability insurance coverage. The coverage in this first layer is currently $200 million for each reactor station. If an accident occurs that exceeds the $200 million in primary coverage, the second level of the system requires each licensed nuclear power plant operator to be assessed a prorated share of damages in excess of the primary insurance (in essence, deferred premiums), up to $63 million per reactor per incident, but no more than $ 10 million per year per reactor. With 115 nuclear power reactors currently in the system administered by the NRC, these prorated premiums added to the first layer of insurance bring the total coverage over $7.3 billion for any accident.
Two nuclear insurance pools provide the nuclear utility industry with the primary layer of nuclear liability insurance and, under insurance contracts with the utilities, would collect the deferred premiums and administer the claims settlements for the secondary coverage. One pool, American Nuclear Insurers (ANI), is composed of investor-owned insurance companies. Policyholder-owned mutual insurance companies make up the other pool, Mutual Atomic Energy Reinsurance Pool (MAERP). A large portion of each pool's capacity comes from foreign sources. In its more than 30-year history, Price-Anderson has been used in only one major event involving the general public, the accident in March 1979 at the Three Mile island station in Middletown, Pennsylvania.
Because there has been only limited experience of application, the Commission invited Mr. Joseph Knotts, later retained as a consultant to the Commission, to prepare testimony looking at other possible scenarios. Therefore, Appendix K includes Mr. Knotts' testimony, which explains how the Price-Anderson system would work in three representative scenarios and provides, through illustration and working definitions, clarification of some of the terms of art essential to an understanding of Price-Anderson.
The Price-Anderson Amendments Act of 1988 (the Act),3 provides in Section 170(1) for the establishment of the Presidential Commission on Catastrophic Nuclear Accidents. Congress charged the Commission to conduct a study of appropriate means of fully compensating victims of a catastrophic nuclear accident that exceeds the amount of aggregate public liability provided for in other sections of the Act. That amount now totals more than $7.3 billion for an accident at a large nuclear power reactor.
More specifically, Congress directed the Commission under the Act to submit a final report not later than 2 years from the enactment of the amendment (or by August 20, 1990), setting forth:
recommendations for any changes in the laws and rules governing the liability or civil procedures that are necessary for the equitable, prompt, and efficient resolution and payment of all valid damage claims, including the advisability of adjudicating public liability claims through an administrative agency instead of the judicial system;
recommendations for any standards or procedures that are necessary to establish priorities for the hearing, resolution, and payment of claims when awards are likely to exceed the amount of funds available within a specific time period; and
recommendations for any special standards or procedures necessary to decide and pay claims for latent injuries caused by the nuclear incident.
There is little legislative history beyond statutory language pertaining to the Commission's purpose. In the amendments to the Price-Anderson Act introduced by Representative Morris Udall in 1985, a Nuclear Incident Compensation Commission (Compensation Commission) was proposed to receive damage claims and make recommendations to Congress on compensation issues.4 Mr. Udall envisioned the Compensation Commission as a body to be established after an accident to report on the extent of damages and on the requirements for full, equitable, and efficient compensation and relief for claimants whose right to compensation and relief might otherwise be abridged by Price-Anderson Act provisions, such as the limit of liability. This concept of the Compensation Commission was changed to the Presidential Commission on Catastrophic Nuclear Accidents later in the same year in the House subcommittee deliberations and was established in the 1988 statute.
Two provisions included in the responsibilities of the Compensation Commission are similar to those of this Commission. As with the proposed Compensation Commission, the Commission is required to submit compensation plans to Congress containing recommendations for the processing and payment of latent injury claims. The second provision calls for recommendations for legislative authorities necessary to implement such compensation plans. However, in its claim settlement role, the Compensation Commission was given original jurisdiction and the authority to divest courts of jurisdiction over claims.
When the House Committee on Interior and Insular Affairs reported favorably on an amended H.R. 3653 in 1986, it stated in its report that the Presidential Commission had been substituted for the original Compensation Commission because the former raised numerous legal and practical questions that could not be resolved without thorough and extensive analysis. The Committee's report also stated its intention that the commission consider, among other alternatives providing public compensation, the feasibility of establishing a compensation commission as proposed by H.R. 3653 as originally introduced.5
The statutory language pertaining to the Presidential Commission substituted in the 1986 House Interior Committee report was retained in H.R. 1414, the bill that was ultimately passed by Congress and enacted into law. There is no record of further analysis or debate of this provision through all the committees and subcommittees that considered it from 1986 through its passage in 1988.
There was, however, floor debate in the House of Representatives pertaining to the Commission. In the general debate on amendments to H.R. 1414 on July 29,1987, Mr. Udall described what he called the three-level system being proposed in H.R. 1414. In comments on the last level, he stated:
The third layer is the disaster layer. Let us say the Indian Point Nuclear Plant in New York has a meltdown or some very serious matter affecting whole cities and regions. We could not decide whether that ought to be $20 billion or $50 billion or $ 100 billion or what, so we decided that third layer will be determined by a commission appointed by the President and given two years to come up and say how we should handle claims above the $7 billion or $8 billion. Obviously you would have to have a large amount of money, and it should not be the ratepayers of the nuclear utilities who paid for the first two levels. We believe, and so wrote the bill, that the third level will come from ratepayers everywhere and taxpayers everywhere, and the commission will tell us in advance how we ought to finance this and set it up and distribute the available money.6
The following day, the House rejected an amendment by Representative Philip Crane to strike from the bill the language establishing the Presidential Commission. Mr. Crane argued that it would be an extraneous and wasteful expenditure of taxpayer money to call for this special Commission when those responsibilities are vested in Congress and are based upon a potential contingency that may be irrelevant after this Commission expires. He argued further that if such an accident were to occur in the future, Congress would have to create a new commission or redo the work itself.
In his response, Mr. Udall reviewed the three-level approach of the legislation, with particular emphasis on the third level. He said:
Nobody is smart enough or good enough to figure out 10 years from now what will happen if you have a real major disaster with several reactors involved and $7 billion is peanuts. So we set up a commission and we say, let us not have that happen and have to go back to the drawing board and figure out how we accomplish that. Let us put in place a structure now so that we will have the ability to sort out the different factors and decide what is a fair way of payment on this third level, this real disaster level.
The Commission does not cost very much, it does not last very long, and it might be the most important thing in our national life if it ever really comes to a serious disastrous event.7
Although this study focuses principally on accidents that might take place at large nuclear power stations licensed by the NRC where nuclear liability insurance is virtually the exclusive source of funds for the aggregate liability levels under the Act, it is important to note the Price-Anderson system also provides for nuclear liability coverage in a different manner and for varying amounts of coverage for smaller reactors licensed by the NRC (including those facilities operated by universities, research organizations, and federal agencies), for high-level nuclear waste facilities and for transportation related to covered facilities. The government provides an amount of protection for Department of Energy (DOE) domestic contract activities equal to the amount provided by nuclear insurance for large power reactors.8 There is also some coverage for NRC-licensed and DOE contractor activities abroad. While the Commission did not consider the application of its proposals in any detail to nuclear accidents beyond those of licensed nuclear power reactors, it believes that the whole process that it is recommending could be applicable to these other facilities (except for activities overseas that would be subject to other considerations and treatment in view of the interplay with international liability conventions and other countries' national liability programs).
The Commission's Operation
The members of the Commission brought a wide variety of backgrounds and experience that could be applied on the problems to be studied. Two members of the Commission have been associated with Price-Anderson since the 1950's when nuclear liability protection was in its conceptual stages. Three Commission members have been involved with Price-Anderson questions entailing protection to the public from accidents arising out of licensed nuclear power plants since the 1970's, including the Chairman, who successfully argued the constitutionality of the Price-Anderson Act before the Supreme Court of the United States in 1978. Two members have an extensive background in the use of nuclear energy in government facilities. In addition, a nationally-recognized expert on nuclear risk assessment is a member of the Commission.
Two members have no prior connection with specific nuclear questions. One directed the claim activities, including those relating to catastrophic events, for a major insurance company. The other played a leading role in developing compensation systems for such mass tort actions as Agent Orange, asbestos, and Dalkon Shield.
The staff and consultants, drawn from legal practice, academia, government, and the insurance industry, have also assisted the Commission. This support contributed over 50 years experience in Price-Anderson theory and practice. In addition, one of the Commission's consultants participated as a court-appointed special master in implementing the priority scheme and payment classes for the settlement in the Agent Orange mass litigation, and another has been a consultant to the Federal Court Study Committee and has co-authored a leading casebook on civil procedure.
The Commission heard from a broad spectrum of witnesses at eight public meetings, which lasted one or two days each. The Commission heard testimony on the Three Mile Island accident from both the nuclear insurers and counsel for the defendants and from counsel for the claimants in the class action suits. Leading scientific experts provided information on the Soviet nuclear accident at Chernobyl Witnesses described the use of scientific expert panels, perspectives on the use of probability of causation tables, and the relationship of dose to risk, as well as the possible implementation of a system of medical monitoring after a nuclear accident. Spokesmen from the insurance industry, the American Red Cross, the Federal government, and a state official described the response to Hurricane Hugo and the 1989 Loma Pietra earthquake.
The members heard a wide variety views on mass tort, process and product liability litigation, and settlement from individuals involved in studies being conducted by the American Law Institute, the American Bar Association, the New York City Bar Association, the Administrative Conference of the United States, and the Institute for Civil Justice. In addition, the Commission heard from practitioners in mass ton litigation, mass tort reform advocacy, plaintiff's bar, federal agencies defending the government in mass tort litigation, Public Citizen's Congress Watch, and United States Public Interest Research Group. The judge who presided over the Agent Orange litigation and settlement also addressed the Commission. The Commission received statements from the President of the Association of Trial Lawyers of America and from a former chairman of the NRC who is an expert in Price-Anderson.
In the belief that the oral and written statements received represent a useful fund of knowledge and experience on nuclear liability compensation and mass tort litigation, the Commission has included in Appendix K the hearing record of the testimony presented at the public meetings and the resulting discussions held with the speakers.
II Commission Assumptions
A. Size of nuclear incident involved
Other than Mr. Udall's references to the third level of the Price-Anderson system, there is virtually no legislative guidance relating to the size of the nuclear accident that should be considered by the Commission in fashioning its recommendations.
A literal reading of the words catastrophic used in Section 170(l) of the Act and reference to an accident that exceeds the aggregate public liability could suggest that the Commission's recommended system would apply only above the aggregate liability figure, currently $7.3 billion. Consequently, the Price-Anderson system as it stands now would apply for all other claims for the same accident up to the aggregate liability figure.
The Commission does not believe that bifurcation of claims for the same accident would be feasible or equitable. Some witnesses also expressed concern about such an approach. For example, Professor Robert Rabin of Stanford Law School stated:
It seems to me that, arguably, no system should be put in place which creates two classes of claimants, one being the under $7 billion claimants and the other being the over $7 billion claimants. I think there is a substantial equitable argument for some sort of uniform approach.9
Considerations of uniform treatment of all claimants in a particular accident do not, of course, mandate that the same system apply to all nuclear accidents. Nuclear incidents covered by the Price-Anderson Act could range in severity from those that are inconsequential in terms of personal injury or property damage to members of the public to those having regional or national effects. There is no compelling reason to apply the proposed system to low-consequence accidents. Nuclear insurers would pay those claims, totaling less than $200 million, from reserves accumulated through annual premiums paid by utilities for liability insurance. Accidents of this size, although large, are no different from those routinely covered by liability insurance provided for any enterprise. In the Three Mile Island accident, the nuclear insurance pools and the insurance industry demonstrated the ability to respond to claims in a timely, fair, and efficient mariner.
Assuming, then, that the proposed system will not apply to all accidents, where should the cut-off point be? One logical alternative would be accidents determined by the NRC to be extraordinary nuclear occurrences. Under the Price-Anderson Act, the NRC presently has the authority to determine, for its licensed nuclear reactors, an extraordinary nuclear occurrence for any event causing a discharge or dispersal of nuclear material from its intended place of confinement in amounts offsite, or causing radiation levels offsite that it determines to be substantial and that it determines has resulted or will probably result in substantial damages to persons offsite or property offsite. The NRC has established specific criteria in Part 140 of its regulations against which it would assess whether an event met the statutory standards for an extraordinary nuclear occurrence (ENO).
An event could meet the current criteria for an ENO and still affect very few members of the public, with claims totalling less than $200 million. While the ENO determination is important to the question of what legal defenses will be available to the defendants (see the testimony of Joseph Knotts in Appendix K for an explanation of ENO and its triggering of waivers of defenses), the criteria for finding an ENO are not necessarily the appropriate criteria for deciding that the Commission's proposed system should be put into effect.
The Commission believes that the appropriate trigger for application of its proposed system should be a finding by the court that there is a reasonable likelihood of claims exceeding the first level of insurance and that there is a multiplicity of claimants.10 When claims exceed the $200 million level, the nuclear insurance pools will. start to draw on the deferred premiums of all utilities operating nuclear reactors. Even if radiological effects of the accident were limited to one state, there would be nation-wide financial ramifications. The collection of funds to pay up to $7.3 billion in claims could continue under the judge's supervision, and the nuclear insurance pools could continue to provide the claim settlement activities assigned to them in the Act. While any cutoff chosen will be somewhat arbitrary, the trigger suggested is a logical point at which the proposed system could be effectuated. The choice of a particular trigger is not critical to the operation of the system. What is essential is that, before the accident, some point be established for activating the system and that, once that point is reached, the system apply to all claims relating to that accident.
B. Source of funds
As noted earlier, the commitment to provide additional funds if the ceiling on liability is exceeded has been a fundamental premise of Price-Anderson since its enactment. A decision as to the source of funds beyond the amount of aggregate public liability currently provided for in the Act will have to be made by Congress if it is ever called upon to discharge this commitment. The task of the Commission did not include the identification of sources of funds.11 Indeed, there is no special expertise in the Commission membership to address this essentially political question. The Commission simply notes that it has not come upon any new source of funds not already considered in the Congressional deliberations related to the last extension of the Act.
C. Claim-handling activities
The Commission has assumed that the judge with jurisdiction over the catastrophic accident will determine the mechanism to be used to make payments when judgments are rendered. It also assumed that, as envisioned under the terms of the Price-Anderson Act, the nuclear insurance pools will carry out the role of providing the mechanism for making payments, not only for the first level of $200 million drawn from insurance reserves, but also for the second level of deferred premiums.
The claim-handling activities of the nuclear insurance pools described to the Commission in connection with the Three Mile Island accident and the claim-handling procedures of the insurance industry in response to Hurricane Hugo and the Loma Pietra earthquake appeared to the Commission to be prompt and effective and consistent with the public interest.
The Commission is concerned that the appropriate guidance for making payments above the insurers own $200 million, prior to coming under court direction, may not exist. Remarks from insurance representatives indicate some doubt or hesitancy, at least among some members of the insurance community, that their customary practices will be suitable when they are spending funds provided by electric utilities subject to state regulation throughout the country. 12
The Price-Anderson Act permits the insurers to make payments of up to 15 percent of the limit of liability without prior approval of the court. Before the 1988 amendments, the emergency payments would all come from insurance funds (i.e., 15 percent of $700 million = $105 million). With the limit of liability being raised to over $7 billion, the emergency payments without prior court approval could equal $1 billion, of which $800 million would come from utility funding. Any hesitancy to make emergency payments above $200 million could have serious consequences, and Congress may wish to provide specific guidance.13
The focus of Price-Anderson is financial protection. Questions of emergency response such as evacuation, temporary shelter, etc. have been regarded as outside the ambit of the statute. The Commission was, nevertheless, interested in questions of emergency response, particularly in the Chernobyl accident in the Soviet Union, the largest nuclear reactor accident in history. Professors Marvin Goldman and Richard Wilson provided extensive information on the consequences of the accident (see Appendix K), and the Commission questioned other speakers as to the responses that might occur if this country were faced with a catastrophic nuclear accident.
The Commission discovered some unanswered questions about responses to an accident of Chernobyl's magnitude in the United States. While these issues are not directly related to compensation itself, they are pertinent since this Commission was concerning itself with a level of accident considered well beyond one for which emergency responses are planned or exercised.
While Radiological Emergency Response Plans are prepared for every nuclear power station in accordance with requirements of the Federal Emergency Management Agency (FEMA) and the NRC, it is not clear that these plans extend to long-duration accidents that have impacts over large land areas or involve large populations. The Commission was not able to draw any conclusions, based on the testimony it received, as to how large numbers of citizens could be sheltered over an extended period of time or permanently relocated. Even large natural disasters in the United States offer little help in postulating a response in the United States equivalent to the need at Chernobyl of evacuating over 135,000 people, most of them permanently. And no planning for such a possibility was brought to the Commission's attention.14
While an accident at a nuclear power plant would initiate the response of the utility, state and local government, federal government, volunteer organizations, and insurance groups, it is not at all clear what organization would be in charge of prolonged, extensive evacuations, and of restoration of governmental infrastructures and overwhelmed state and local response capabilities that might follow a large nuclear accident. While the court would take charge of the payment of claims, its authority to act could not extend to executive branch powers. The Presidential declaration of an emergency leads to rather limited financial assistance being made available through FEMA, and the FEMA representative who addressed the Commission believed the potentially more useful Presidential declaration of a major disaster was limited to natural events.15
In a related matter. a witness with broad experience in nuclear accident emergency response planning testified that the United States might not be able to respond in a timely manner to a medical emergency where immediate monitoring and specialized care would be needed for a large number of people who had been exposed, or possibly exposed, to radiation.16 At Chernobyl, medical facilities staffed with trained and dedicated medical personnel were available almost immediately for the large number of patients suffering possible radiation exposure.17 According to the Commission's witness, American facilities might be overwhelmed in such circumstances.18 Though the Commission lacked the background to determine the seriousness of these concerns, it believes that if this assessment of lack of preparedness is accurate, the response to a catastrophic accident could be seriously impaired.
Finally, while the damage from the Chernobyl accident was serious in terms of deaths, land contamination, etc., there was no nonradiological damage away from the reactor. As Professor Wilson stated:
I think there is a very important difference between an earthquake and any nuclear power plant accident Unless you were right at that power plant, there was nothing which appeared to be untoward to the naked eye. You could get them. You could drive your car. There was nothing to stop it.19
But what if the accident was the result of a natural disaster that seriously impeded relief efforts? The risk of nuclear power facility accidents that are precipitated by causes external to the plant site is dominated by the threat of an earthquake. Although such an accident is itself extremely unlikely, if it were to occur, the ability to carry out extensive evacuations could be impaired and the effects on communications and utilities services could be similar to what was described in South Carolina following Hurricane Hugo.20
The Commission does not make these observations out of any sense of alarm but simply wishes to point out that because the unique focus of its attention was the catastrophic accident, it probed areas of accident response that went beyond its members' experience. There may well be good responses to these questions that remain open in the mind of the members. But these are beyond the specific areas we were directed to consider, and the Commission was not the right party to pursue them even if time would have permitted it.
IV. Contents of the Report
The body of the report that follows is organized to parallel the directions of Congress with respect to the subject matter to be considered. Chapter 2 addresses the Commission's considerations of and recommendations for procedures that could be followed for the equitable, prompt, and efficient resolution and payment of claims determined to be valid. The next chapter discusses priorities for hearing, resolving, and paying claims, with particular emphasis on the question of what types of claims would be compensable. Chapter 4 completes the main body of the report with discussion of a system for deciding and paying claims for latent illnesses caused by a nuclear incident. Appendices to the Commission's report include the formal statements received by the Commission and the text of oral statements made to the Commission, as well as the questions and answers that followed these statements. In addition, there is a summary on the nature of severe nuclear accidents prepared by Dr. Norman C. Rasmussen, an illustration of a possible use of probability of causation tables for paying latent cancer claims, descriptions of latent radiation injury settlement techniques used in other countries, a list of all the parties who addressed the Commission, a glossary, and a bibliography. Transcripts of Commission meetings in which there were speakers and minutes of the Commissions working sessions were prepared and are a part of the Commission's official records.
Because the Commission did not receive appropriated funds from Congress, it was dependent, in accordance with Section 170(l)(4)(C), on other agencies of the government for funds. The Commission wishes to thank the Secretary of Health and Human Services and the Director of FEMA whose support made the study possible. The Commission would also add its thanks and appreciation for a job well done by its staff, Jerome Saltzman, the Executive Director, Susan Beach, the Deputy Executive Director, and John Imber. In addition, its consultants, Rochelle Dreyfuss, Peter Woodin, and Joseph Knotts, performed their duties with a high degree of professionalism and dedication.
Atomic Energy Act Of 1954, as amended [hereinafter Act] § 170.42 U.S.C. § 2210.
In fact, the Act provides for both nuclear liability insurance (called financial protection") and contracts of indemnity between the NRC and licensees. Act §§ 170(b) and (c), 42 U.S.C. §§ 2210 (b) and (c).
Price-Anderson Amendments Act of 1988, Public Law 100-408 (102 Stat. 1066).
H.R. 3653. as introduced by Rep. Morris Udall, 99th Cong., 1st sess., October, 1985.
Price-Anderson Amendments Act of 1986, H. Rep. 99-636 Part 1. 99th Cong. 2nd sess. 1986, p.22.
133 Congressional Record H6768.
The Price-Anderson Act provides contracts of indemnification between DOE and its contractors. Act § 170(d). 42 U.S.C. § 2210(d).
Prof. Robert Rabin, Stanford Law School, Meeting Transcript, Oct 26, 1989, p. 98.
Since, under the Act, the ENO determination brings the waivers of defenses into effect, the use of a trigger other than the ENO determination Will require some change in the Act.
However, the Commission does note Mr. Udall's comment in the floor debate: We believe, and so wrote the bill. that the third level will come from the ratepayers everywhere and taxpayers everywhere and the commission will tell us in advance how we ought to finance this and set it up and distribute the money. See 133 Congressional Record H6768.
Richard E. Marrs, Senior Vice President, The Travelers, Meeting Transcript, Dec. 1, 1989, p. 148.
The NRC commented on this topic in a letter to the Commission stating:
The only interest that the NRC has regarding the disbursement of funds from the secondary layer of financial protection is that those funds be equitably distributed consistent with the intent and specific provisions of the Price-Anderson Act. The NRC does not have the expertise necessary to establish a system of priorities between various claimants or classes of claims. This is something that the insurance industry is better equipped to handle. If the insurance industry believes that it needs guidelines to follow when expending funds from the secondary layer of financial protection the NRC staff thinks that a panel of experts composed of representatives of both the insurance industry and nuclear power plant licensees should be convened to develop such guidelines.
Letter dated Feb. 20. 1990. to the Presidential Commission on Catastrophic Nuclear Accidents from Stuart A. Treby, Assistant General Counsel for Rulemaking and Fuel Cycle, Nuclear Regulatory Commission.
See Robert Vessey, Director of Disaster Services. American Red Cross. Meeting Transcript, Feb. 7. 1990, p. 323.
Dennis Kwiatkowski, Assistant Associate Director, Office of Natural and Technological Hazards, Federal Emergency Management Agency, Meeting Transcript, Nov. 30.1989. p. 135.
Dr. Roger Linnemann, Radiation Monitoring Consultants. Meeting Transcript, Jan. 11, 1990, pp.218, 234.
However. continuing medical care of the victims of Chernobyl has been criticized by even the top Soviet leadership. See Shevardnadze, Shevardnadze: 'Will We Be a Land of Power - or Kindness?', Washington Post, May 13, 1990.
Linneman, Meeting Transcript, p. 232.
Prof. Richard Wilson. Harvard University. Meeting Transcript, Oct 25. 1989, p. 76.
See Stan McKinney, Director of Public Safety. Office of the Governor, State of South Carolina, Meeting Transcript, Feb. 8. 1990, p. 202.