Mr. DAVENPORT. I must say at this time that we have not had official notification of the rates proposed by the pool policies to permit us to study in the degree that it would be necessary to make a recommendation before this committee.

I can only say that the atomic industry is in a sense fighting an uphill battle, a competitive battle with other fuels for position in this country and anything which adds to the costs of doing business in the atomic field further places it down the ladder with respect to the problems of doing business in competition with other fuels.

The CHAIRMAN. It certainly places it in a competitive way in a less favorable position.

Mr. RAMEY. Are you presently covered third-party liabilitywise under your existing insurance in your present operations covering your nuclear energy work?

Mr. COHEN. We presently have $10 million of product liability coverage. However, it is our understanding that when the new pool policies become operative we will receive a rider to that policy that will exclude nuclear incidents from the coverage.

I might add that $10 million is, to the best of our knowledge, the most that is available today for such coverage.

Mr. RAMEY. Do you think that is adequate for your operations in your fuel fabrication business?

Mr. COHEN. We think it is all we can get. We think it is not adequate by any means to cover all possible product liability. It may be adequate conceivably to cover our present site liability.

But we feel that the potentialities of a reactor catastrophe as a result of which we may conceivably be held liable for all damages are such that this policy is not adequate in the absolute sense of the word.

The CHAIRMAN. Is it the purpose of your company and intent, of course, to get into the production of reactors; is that correct? Mr. DAVENPORT. No.

The CHAIRMAN. Or just equipment?

Mr. DAVENPORT. Our position in the industry is that of a fuel and components supplier and possibly an operator of a reprocessing plant. We at the present time are not concerned with the problems that face the reactor suppliers.

Mr. COHEN. It is in connection with our supply of components and fuel elements that we are so seriously concerned with the Government contract provisions of the present bill.

We feel that as worded and as suggested by the Commission they would not cover many aspects of our operation from the product liability point of view.

The CHAIRMAN. Are you in that work at the present time?

Mr. DAVENPORT. We are.

Mr. RAMEY. Has the Commission ever written you saying that they do not have authority under the present law to extend indemnities as far as you would wish them?

Mr. COHEN. We have never received anything in writing to that effect.

However, we have been told this: when we have requested full indemnification in certain specific situations we have been told it at all levels of the Commission.

Mr. RAMEY. Of course, the Commission has a mandatory contract article system of administration where they can put in certain contract articles that each regional office is supposed to follow in its negotiations. I am sure in dealing from the other side of the table that it has been to the advantage of the contractor that an operations office has some flexibility in negotiating contracts.

What you are saying here is that the Commission as a mandatory matter should be told by Congress that they ought to extend these indemnities.

Would that not possibly have some drawbacks also that you would get some things that you do not expect through a mandatory system? Mr. COHEN. I think there is probably a twofold answer to that question, Mr. Ramey.

On the one hand, as far as the contractor is concerned, the problem of potential liability has now become such a vital issue to those companies who are cognizant of what that potential liability may be that it has pretty much come to the point where we either take the job or we don't, depending on whether we get adequate indemnity coverage from the Government.

This means that under present policy you are permitting the regional office in effect to determine who stays in this industry and who does not.

No. 2, from the public's point of view, if the public is to be protected against potential losses, I would think that it would be in the public interest and that Congress would be interested in ascertaining that the public was protected irrespective of what the different points of view or the bargaining position might be on any contract with respect to any particular regional office.

I want to emphasize and agree completely with what Dr. Davenport said a few moments ago. We are not criticizing the Commission. They honestly believe as they have told us that they have no authority to go beyond giving indemnities that they think they absolutely must give if the job is to be done.

We only point to this as illustration of the problem they feel they are confronted with and the results that have arisen from this.

The CHAIRMAN. Do you receive all the reports or information from the Commission to perform your duties in a way you feel is safe? I mean with respect to radiation hazards?

Why I ask that question is that you said that the Commission at the present time was operating the best they could under the law as they interpreted it. Do you receive all of the information necessary to carry out the duties performed for the Commission?

Mr. COHEN. We do and we, as any other responsible company in this field would do, conform to the very best of our ability to all the health and safety regulations pursuant to information we receive from the Commission.

I don't think we or any other company can claim that we are perfect in the sense that there may not be a human failure at some point. It is the possibility of some human failure and the fact that it may conceivably lead to a reactor excursion and the potentially unlimited liability that might result from that that concerns us.

The CHAIRMAN. We have had such an excellent operation of our reactors, of course, that I feel that information would be highly im

portant to an operator of any type of facility that produces radiation. There is no question that based on that information which you receive you still feel, of curse, there is a hazard involved that you should carry more indemnity insurance.

Mr. COHEN. We fell, as Mr. Harrison, Sylvania's vice president in charge of finance, testified last year before the executive session of this committee, that we completely agree that the possibility of a reactor excursion approaches zero if these health and safety standards are adhered to.

However, we also agree that no responsible management would unqualifiedly recommend that its company take a risk for an unlimited period of time, no matter how small the probability of its occurence, if the potential liability involved were unlimited.

Mr. RAMEY. In your comments as to some of the gaps in the insurance policy you mentioned that the policy covers only certain types of injury caused by source, special nuclear or other byproduct material. Does that same comment apply to the coverage of the indemnity bill, as such, which has the language somewhat similar? Apparently it does not.

Mr. COHEN. Are you referring to the bill or the indemnity policy of the Commission?

Mr. RAMEY. I meant the bill.

Mr. COHEN. I think the bill is fine in this respect. The bill uses the language "caused by," I believe, or "arising from," and I assume the words "arising from" were intended to cover this point.

Mr. RAMEY. I think that was our understanding.

Mr. COHEN. The policy uses the words "caused by" in covering section and "arising from" in the exclusion section.

Mr. RAMEY. That is something that Mr. Haugh may be requested to comment upon at a later time.

The CHAIRMAN. Thank you very much, Mr. Davenport.
Mr. DAVENPORT. Thank you, Mr. Chairman.

(Amplification of Mr. Davenport's testimony follows:)

Hon. CARL DURHAM,

SYLVANIA-CORNING NUCLEAR CORP., Bayside, Long Island, N. Y., April 4, 1957.

Joint Committee on Atomic Energy,

United States Senate, Washington, D. C.

DEAR REPRESENTATIVE DURHAM: In my testimony before the Joint Committee on March 27 on the proposed indemnity bills, I outlined a number of areas which we felt the proposed pool insurance liability policy would leave uncovered. One such area which I did not mention at that time, and which has subsequently come to our attention, is the area of product liability of a supplier to the Government.

Paragraph g (6) of the "exclusions" section of the policy excludes from the coverage of the policy any nuclear incident arising out of special nuclear or byproduct material sold or distributed by any insured to the United States of America or any agency thereof, if the bodily injury or property damage occurs after delivery of such material at any premises of the United States of America or any agency thereof, or after arrival of such material at any other premises where it is to be delivered.

Paragraph g (6) would appear to exclude from the coverage of the policy any liability of a supplier to the Government resulting from a defect in any product supplied by him which contains special nuclear or byproduct material. As indicated in the Columbia report, a supplier of a defective product to a reactor might very well be held liable for all of the potential damages resulting from a reactor excursion. While recognizing this fact, it is apparently the intent of

the insurance pool to exclude from the policy all product liability of a supplier to the Government. The insurance pool has apparently reasoned that such liability will or should be covered by a direct indemnity from the Government. However, as indicated in my testimony, indemnity has in fact been granted by the Commission only in limited instances. Furthermore, the Anderson-Price bill, by its present terms, would not authorize indemnification of all direct suppliers of the Government. Even in those circumstances where indemnification is authorized by the present wording of the bill it is not mandatory. I believe that the terms of the proposed insurance policy and the apparent intent of the insurance pool point up further the necessity for extending the provisions of section 170 (d) of the Anderson-Price bill along the lines suggested in my testimony.

I want to thank you once again for the opportunity of appearing before your committee.

Cordially yours,

SYLVANIA-CORNING NUCLEAR CORP.,
LEE L. DAVENPORT, President.

The CHAIRMAN. The next witness is Mr. Arthur Berard, president of the National Electrical Manufacturers Association.

STATEMENT OF ARTHUR BERARD, PRESIDENT, NATIONAL ELECTRICAL MANUFACTURERS ASSOCIATION

Mr. BERARD. Mr. Chairman and members of the committee. My name is Arthur A. Berard. I am president of the Ward Leonard Electric Co. of Mount Vernon, N. Y., and also president of the National Electrical Manufacturers Association. I appear today on behalf of the members of the National Electrical Manufacturers Association to add their support to the bills introduced by Senator Anderson and Representative Price, S. 715 and H. R. 1981.

The National Electrical Manufacturers Association is an unincorporated trade association with a membership of 563 companies engaged in the manufacture of electrical products of all kinds, from hydraulic turbines to fuses.

These companies are by no means all large ones. Based on the results of a survey recently conducted by the association it is estimated that about 70 percent of our member companies have a net worth of less than $5 million, and about 30 percent of the entire membership a net worth of less than $1 million.

The association is thus truly representative of a considerable segment of the electrical manufacturing industry, and I wish to emphasize that I am here today very much as a representative of the smaller companies in the industry, including my own company, Ward Leonard Electric.

At the very outset I would like to make it clear that I am by no means an expert on liabilities connected with atomic energy. My information concerning the industrial hazards connected with its use comes largely from the final report on Financial Protection Against Atomic Hazards, prepared by the Legislative Drafting Research Fund of Columbia University and published in January of this

year.

After reading that report, which I understand is the latest and most authoritative survey available, I have become profoundly concerned about the possible effects of damage caused by atomic hazards on the atomic energy program, the electrical manufacturing industry, and the public.

There are many different kinds of electrical equipment, ranging from alarms through wire and cable, which are, or may be, used in connection with atomic reactors, and I am attaching to this statement for the Joint Committee's perusal a list of that equipment, together with a representative sampling of some of the companies which manufacture it.

The failure or malfunction of almost any one of these electrical components may result in the catastrophe of a runaway reactor or similar hazard in a nuclear system, with damages to person and property which are well nigh incalculable.

The Columbia University report which I have referred to points out that:

*** The maximum damage which might be done is unknowable. For the purposes of this report, it is sufficient to assume that it would be of a very high magnitude.

I wish to point out here that the many electrical manufacturers for which I am speaking, as with other manufacturers of nuclear components, occupy a rather special position with respect to this risk of a failure which might cause such awesome damage.

We do not, with a very few notable exceptions, participate directly in the construction of atomic reactors, or facilities for fuel fabrication, fuel processing, and waste disposal. We merely manufacture a variety of component parts which are used, frequently without our knowledge, in assembling the overall system.

Let me illustrate my point:

We are told that nuclear reactors contain an immense amount of radioactive material, and that they are regulated by control and safety rods which are driven in to the nuclear material or taken out to reduce or increase activity or to shut down operation entirely.

We are also told that these rods are controlled by common industrial devices such as pressure switches, undervoltage relays, and pushbuttons, devices which are used for hundreds of other purposes in nonatomic industrial operations and which may be freely purchased in the open market, at a relatively low price, and generally without the manufacturer ever knowing or having any particular reason to know that his device is to be used in connection with, or as part of, a nuclear system.

It may be presumed that all reasonable precautions have been taken by the builder or operator of an atomic plant to provide adequate protection to the public against the possibility of catastrophic accidents and that the chance of such an accident is slight. But because atomic energy matters are somewhat secret, it is probable that the manufacturer of an electrical component will not know how, or where, or for how long a product of his manufacture will be used and what safety measures will be adopted.

We do know, however, that if an accident should occur-remote though that possibility may be the possible damage is almost beyond human comprehension. And such staggering damage might be simply the result of failure on the part of an electrical control or safety device, costing perhaps less than $50, and used in the nuclear system without the prior knowledge of the manufacturer.

The resultant liability of the manufacturer, in the absence of some law limiting liability and providing for indemnification to persons