available for the general public, I do not feel that the Joint Committee should recommend to Congress the adoption of the proposed amendment without a reconsideration of the whole subject of liability for damage to onsite property. Representative PRICE. On that, Mr. Murphy, you say at the present time you are not convinced that such liability is adequately provided for. Would you expand a little more in this area? Because this subject has been one that has been cropping up all through these present hearings. Mr. MURPHY. The problem has changed to some extent from the beginning, but basically, the problem which exists for the supplier is that of finding some method of assuring himself that if he supplies something to a reactor he will not be subject to the burden, this enormous burden, of liability. The industry has suggested on a number of occasions to the insurers a number of different methods by which this might be accomplished. One method, which provides a partial solution to the problem, is a provision by the insurers that they will consent to a waiver of subrogation in the physical damage policy. This is all right, provided that somebody takes out insurance to begin with. It is all right to the extent that the physical damage policy covers the kind of liability as to which the supplier might be subjected. It would not cover, at least as I understand the latest policy, damages for loss of use, for example; although sometimes this may be brought in. I have not gone into this subject in a couple of years, but it seems to me there is at least a possibility in some States that the owner might be able to proceed against the supplier. I guess in all States he could, if he chose, proceed against the supplier rather than the insurers, and in some States he might even be able to proceed in two directions. We have always thought that it ought to be possible to devise an insurance policy for physical damage coverage which provides the same kind of multiperson insurance that the liability coverage did. I think that you will recall that at the time the Price-Anderson Act was passed, we went through a long period of time in which we argued with the insurers that we simply did not understand why they could not write a liability coverage policy which would cover, as the then proposed indemnity under the act would cover, all persons who might be liable. I can remember that the last time I appeared Mr. RAMEY. They came around to that? Mr. MURPHY. Yes. We had a long discussion. I think it was Mr. Cole, before he took up the international atom, and I, who had a long discussion on this particular question and the conclusion to which we both came was that we could not understand why they did not do it. Subsequently, just before the legislation was introduced, they did come through with a policy, or at least they indicated that they then saw their way clear to come through with a policy, which would do this. Now, I admit that there may be problems in writing physical damage coverage which are different from the coverage problems which liability insurers have, but I honestly do not see any reason, at least in theory, why you could not, in a single policy, cover the interests of all suppliers. 73747 0-61 Mr. RAMEY. Were there not some assurances along this line as they were discussing this problem? Mr. MURPHY. Well, there were discussions of this, and I was under the impression that they had indicated to this committee that such protection could be afforded; however, I have not followed it as closely as I did a couple of years ago and that the latest word from the physical damage insurers is that although the waiver of subrogation is perfectly all right, the suggestions which have been made to write this kind of multiple coverage are not feasible. So that you do have a problem. Mr. RAMEY. What is your thought on the waiver of subrogation? That is where the insurance company waives its right to sue the supplier? Mr. MURPHY. Actually, the insurance company permits the insured to waive his rights of subrogation against a third party. The insurance company has no rights against the supplier, for example, if the insured waives his rights against the supplier. But the problem which the suppliers have, and it is the problem which caused us so much trouble in the public liability situation, was that we tried to develop a system under which, as a matter of law, everybody would know, from the time he got involved in this business, that his public liability would be taken care of. It seems to me that ultimately this is what the supplier needs with respect to liability for damage to the reactor. Although, as I say, I felt very strongly at the time that the interpretation of the Commission was an erroneous one, I do not think the problem has been adequately solved in the intervening 4 years, and I think maybe we should not be too hasty in deciding how to go about it. There are a number of ways of going about it which would accomplish what we are after. Actually, the way that the Commission has done it, in its regulations with respect to people buying pool insurance, which requires them to waive liability against the supplier, is a feasible method of doing this within the framework of the act. Representative PRICE. Do you think the proposed amendment would have any adverse effect on investments in the reactor business? Mr. MURPHY. I just do not think I can answer that. Mr. RAMEY. I would like to comment that I agree with Mr. Murphy's interpretation on this onsite property question. Representative PRICE. Mr. Murphy, as you know, the Commission has not to date required financial protection of its contractors. However, during the course of the hearings, it has been suggested that the Price-Anderson Act be amended to make it mandatory for the Commission to require such financial protection. Would you recommend this? What would you recommend? Mr. MURPHY. I would not recommend it. I think that the question of whether the Government decides it will take all of the burden in such cases or will insure part of the burden is a question which the Commission ought to decide in terms of its own budget and how they want to operate. I think that from the point of view of the Government, this is a question of budgetary or financial policy. I can see reasons, from the point of view of the insurance industry, why they would like to get more risks covered under their policies than they presently have, but I do not think it would be a wise idea to hamstring the Commission in this regard. Representative PRICE. Does the staff have any further questions? Thank you very much, Mr. Murphy. This will conclude the open hearings on this subject. The committee will stand adjourned subject to the call of the Chair. (Whereupon, at 11:52 a.m., Thursday, July 20, 1961, the subcommittee was adjourned, to reconvene upon the call of the Chair.) APPENDIXES APPENDIX 1 Hon. CHET HOLIFIELD, Chairman, Joint Committee on Atomic Energy, CONSUMERS POWER CO., Jackson, Mich., May 10, 1961. DEAR MR. HOLIFIELD: I wish to renew the suggestion which I made last June, in the course of the hearing by the Subcommittee on Legislation on our Big Rock Point project, that the Joint Committee consider a clarifying amendment to the Price-Anderson Act. The purpose of the amendment would be to make clear that the law provides indemnity protection for damages caused outside the United States as a result of nuclear incidents occurring within this country. We believe that such protection is intended by the existing law and we are proceeding with the Big Rock Point project on this basis and in reliance on the "Opinion of General Counsel" published last May by the Commission confirming our understanding of the law. At the same time, a clarifying amendment would put to rest doubts which have been expressed elsewhere about the intent and effect of the present law and which grow out of the wording of the Joint Committee report that accompanied the Price-Anderson indemnity legislation. By letter of June 14, 1960, I submitted to the counsel of the Joint Committee, as requested by the Subcommittee on Legislation, a draft of clarifying amendment, which I repeat below for your convenience. Our proposed amendment would revise the definition of "nuclear incident" contained in section 1 o. of the Atomic Energy Act of an 1954 as follows: "o. The term 'nuclear incident' means any occurrence within the United States causing (within or outside of the United States) bodily injury, sickness, disease, or death, or loss of or damage to property, or for loss of use of property, arising out of or resulting from the radioactive; toxic, explosive, or other hazardous properties of source, special nuclear, or byproduct material: Provided, however, That as the term is used in subsection 170 1., it shall mean any such occurrence outside of the Unted States rather than within the United States" (material italicized has been added to present law). We have recently reexamined our proposal in the light of the amendments drafted by Mr. Clark Vogel at the request of the Joint Committee, dealing with indemnity protection of AEC contractors for nuclear incidents occurring outside the United States. The changes submitted by Mr. Vogel are intended, of course, to serve a quite different purpose from our own proposal, but are entirely compatible from the standpoint of legislative drafting with the changes we suggest. Yours very truly, JAMES H. CAMPBELL. APPENDIX 2 STATEMENT OF THE BABCOCK & WILCOX CO. ON NUCLEAR HAZARD LIABILITY INDEMNIFICATION In general, we have been pleased with the performance of the Atomic Energy Commission in implementing section 170 of the Atomic Energy Act. We feel that the Commission's policies regarding nuclear indemnification are sound and that, within the discretion permitted, Commission personnel have been fair and equitable in their determinations regarding inclusion of nuclear indemnification provisions in contracts with Commission contractors. It is our opinion, however, that the growth of the atomic energy industry both in the United States and abroad has created potential liabilities for the 129 |