The United States Federal government passed the Price-Anderson Nuclear Industries Indemnity Act in 1957. It covers the issue of liability for nuclear accidents and problems for non-military nuclear facilities. Prior to the passage of the act, there was a liability coverage of sixty million dollars per reactor which was considered to be inadequate by the industry.
Under the Price-Anderson Act, each owner of nuclear reactors in the United States is required to carry the maximum available private insurance for each reactor they own. Currently the private insurance carriers will only provide three hundred and seventy five million dollars per reactor. The Act then requires each reactor owner to contribute a maximum of about one hundred and twelve million dollars per reactor following an accident that exceeds the three hundred and seventy five million dollar insurance threshold. The owners are obligated to pay up to seventeen million five hundred thousand dollars per reactor per year until the ceiling of one hundred and twelve million dollars is reached or until the cost of the accident is paid off. In order to pay off claims under the Act, the administrators of the fund are allowed to borrow money following an accident.
When an incident occurs, the NRC has to submit an estimate of the cost of the incident and plan to deal with payments to claimants. If the cost exceeds the insurance coverage and the money in the fund created by the Act, then Congress must submit a plan to recover the additional money from the owners of nuclear reactors. If Congress fails to act, the federal government can be sued by the claimants under the Tucker Act. In this case, or in the case of default on the obligated funds by reactor owners, the U.S. tax payers would be liable for the remaining money owed to claimants.
The Price-Anderson Act provides for changes in normal civil court proceedings. It moves jurisdiction to federal court, consolidates all claims and claimants for a single incident into one suit, states that companies cannot deny responsibility, allows claimants three years to join the suit and prohibits punitive damage awards to individuals.
The Price-Anderson Act was considered to be necessary in order to convince the nuclear industry to proceed with the construction of nuclear reactors. It was first intended to last for ten years until 1967. By 1966, it was decided that it was still needed to support the nuclear industry. The Act was extended in 1975 for 12 years, in 1988 for 15 years, in 2003 it was extended to 2017 and in 2005 extended to 2025. The required donations to the pool and the maximum insurance coverage were expanded several times to reach today’s numbers. The Price-Anderson Act has survived court challenges to its constitutionality.
Critics of the Act say that a major nuclear accident could cost more than five hundred billion dollars. This is over ten times the combine insurance and federal pool of the Price-Anderson Act. There could very well be a domino effect from a major nuclear accident in the United States. First a cost in the hundreds of billions could be estimated. This would have to be borrowed by the Federal government. Insurance would have to be paid out which could result in the bankruptcy of insurance companies, cancellation of nuclear insurance policies and/or steep rises in insurance premiums. Payment to the pool, cancellation of insurance or higher premiums might result in nuclear companies declaring bankruptcy and defaulting on their Act obligations. And when the dust settled, hundreds of billions might be drained out of the U.S. government’s general fund resulting in the cutting of funding to import programs and an increase in the deficit. There could be a collapse in the nuclear industry which would result in the reduction of electrical generation capacity in the United States.
