ML19338B906

Transcript of 790913 Hearing by PA House Select Committee on Tmi.Pp 1-91.Reporters Certification & Agenda Encl

ML19338B906
Person / Time
Site:	Crane
Issue date:	09/13/1979
From:	Jason Wright PENNSYLVANIA, COMMONWEALTH OF
To:
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TASK-TF, TASK-TMR NUDOCS 8001300389
Download: ML19338B906 (92)

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j HOUSE OF REPRESENTATIVES s

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COMMONWEAtTH OF PENNSYtVANIA 3

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4 September 6, 1979 MEMO sucJECT:

S CIIED U LE OF TMI WITNESSES-SEPTEMBER 12 and SEPTEMBER 13, 1979 To:

MEMBERS, Sele t Committee-TMI FRCH:

James L.

Wrigh Chairman

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r The following will appear before the Select Committee TMI on September 12 and September 13,-1979.

The Ilearings will begin at 10:00 A.M.,

each day, in the llouse Majority Caucus Room.

SEPTEMBER 12, 1979 i

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Dr. Ilarold R.

Denton, Director, Office of Nuclear Reactor Regulations, U.S.

Nuclear Regulatory Commission, Washington, D.C.

Mr. Ila r o ld E.

Collins, Assistant Director, Emergency Preparedness, Office of State Programs, Nuclear Regulatory Commission V [EPTEMBER 13, 1979 Honorable llarvey Bartle, III, Insurance Commissioner, Commonwealth of Pennsylvania Mr. Joseph Marrone, General Counsel, American Nuclear Insurers, Farmington, Connecticut Mr. Ambrose Kelley, Manager, Mutual Atonic Energy Liability Underwriters 1 East Wacker Drive, Chicago, Ill.

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~'t COMMONWEALTH OF PENNSYLVANIA v'

HOUSE OF REPRESENTATIVES HOUSE SELECT C0:01ITTEE - THREE MILE ISLAND In re:

Three Mile Island Hearing 4

Verbatim record of hearing held in the Majority Caucus Room, Main Capitol Building, Harrisburg, Pennsylvania, on

Thursday, September 13, 1979 10:00 A.M.

HON. JAMES L. WRIGHT, JR.,

Chairman Hcn. Bernard F. O 'Brien, Vice Chairman Hon. Nicholas B. Mochimann, Vice Chairman Hon. Eugene Geesey, Secretary I_ )

fEMBERS HOUSE SELECT CCMMITTEE - THREE MILE ISLMTD Ucn. James D. Barbar Hon. Ivan Itkin Hon. Reid L. Bennett Hon. Stanford I. Lehr Hcn. Kenneth E. Brandt Hon. Joseph C. Manmiller Hon. Mark Cohen Hon. Marvin E. Miller, Jr.

Hon. Kenneth J. Cole Hon. Harold F. Mowery, Jr.

Hon. Ronald R. Cowell Hon. Jeffrey E. Piccola Hon. William DeWeese Hon. Samuel Rappaport Hen. Iiudolph Dininni Hon. Stephen R. Reed Hon. Donald W. Dorr Hon. John E. Scheaffer Hon. A. Carville Foster, Jr.

Hon. C. L. Schmitt Hon. Stephen F. Freind Hon. Ted Stuban Hon. Joseph M. Hoeffel, III Hon. Noah W. Wenger Hon. William K. K1ingaman, Sr.

Hon. Paul J. Yahner Reported by:

Joyce Rae Schwarz Dorothy M. M Ane

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Rest...J P~f nional R. po te.

155 S. Lank St~.t M u mmelstown, P.nnsylvania 1703o s--

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%W ALSO PRESENT:

Fred Taylor, Esquire Counsel thrchall Iloc'c Assistant Director of Research Peg Foran Administrative Accictant

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George Ellic Mike Bernic Insurance Committee Staff

_INDEX TO WITITESSES Witnesses:

Page

(-)s Hon. Harvey Bartle, III, Incurance Commissioner, 3

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Cant.cnusalth cf P3nnsylvania Jorcph Marrone, Can?ral Ccuncel,.ar.a '.c a n Nu c ie n r 46 Insurers, Farmington, Connecticut Ambrose Kelly, Manager, Mutual Atomic Energy Liability 52 Underwriters fl Fact ' <.cher Drive, Chica c, Illinois c.

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Eichard Schr.altz, 0:ner:11 Coun2cl, Hartfard Accident and Life Charles Eardes, Vice President, Mutual Atomic EnerEy 46 Liability Underwritorc 1

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J CHAIRMAN WRIGHT:

Today the Select Committee on Three Mile Island continues its hearings with review of the insurance aspects and ramifications of the Three Mile Island inc ident.

Our first witness is the Honorable Harvey Bartle, Insurance Commissioner of Pennsylvania.

Mr. Bartle, would you stand and. raise.your right. hand.-

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• HONORABLE HARVEY BARTIE, III, called as a witness; being duly sworn, testified as follows:

1 CHAIRMAN WRIGHT:

You have a statement you would like to make?

COMMISSIONER BARTLE:

Yes, I do, Mr. Chairman.

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Chairman Wright and members of the House Select Committee, thank you for the opportunity to testify before the House Select Committee on the Three Mile Island nuclear incident.

I hope my remarks and responses to your questions will assist you in your deliberations 'on a 'most complicated que~stion." ' ' ' "

I am prepared to tell you what the~ Insurance Department did and what we know today about the insurance implications of TMI.

I intend to address several areas which I uncarstand are of interest to you.

(1)

What did the Insurance Department do during the TMI incident?

(2)

How did we inter-relate with the Pennsylvania O

h sU Emergency Management Agency or other state agencies?

(3)

What insurance claims information do we have?

(4)

What alternatives might be considered to the present nuclear insurance marketplace?

The nuclear incident at TMI o'ccurred on Wednesday, March 28, 1979..' Based on information he received from the 5u 9

Federal Nuclear Regulatory Commission, Governor Thornburgh shortly thereafter advised pregnant women and families with pre-school aged children to relocate outside the five mile radius of TMI.

During the weekend following March 28, we contacted the Nuclear Insurers, to voluntary pools which provide I

liability insurance on the nuclear facilities of TMI as required

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by tha NRC, and learned that they were on their way to Harrisburg to handle possible insurance claims as a result of Governor Thornburgh's relocation directive.

The Nuclear Insurers set up emergency headquarters on Saturday, March 31, 1979 at the offices of United States Fidelity and Guaranty 'iri Harrisburg.

The Insurers, af ter discussion with General Public Utilities and Metropolitan Edison, had made a decision to provide advanced payments to those persons asked to relocate.

The basis for the advanced funds ranged from $10 a day for food and lodging for a child staying with relatives to $90 a day for a family with one child staying at a motel.

Additional funds were allowed for each additional person.

Later, when the O

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relocation directive was lif ted, Nuclear Insurers notified the persons who had relocated to file for additional travel expenses as justified and for wage losses suffered during the relocation.

I and several of my staff were present at the USF&G office in Harrisburg on Sunday, April 1, 1979 and arranged for the advance group of staff and adjusters to secure larger, more convenient headquarters at Pennsylvania National Mutual Casualty Insurance Company in Harrisburg.

We were also instrumental in securing expedited installation of sufficient funds by the evening of Sunday, April 1, 1979 in order to acccamodate the large number of expected calls.

My staff also t'i handled telephone inquiries that day from persons who were L.)

relocated and needed claims information.

In addition, we secured maps of the affected area from the Pennsylvania Emergency ManaEement Agency so that adjusters could identify those claimants who lived within the five mile radius of TMI and were therefore eligible for the emergency relocation i

payments which the Nuclear Insurers were making.

On Monday, April 2nd, my staff, contac ted Secre tary l

of Banking, Ben McEnteer, who agreed to alert local Pennsylvania banks to honor checks from the Nuclear Insurers.

By this time, the Insurers were also advancing funds j at the Hershey relocation center as well as at Penn National in Harrisburg.

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6 7.0 Two of my staff worked around the clock at Pennsylvania Emergency Management Agency in the Transportation Building to' facilitate any insurance questions that arose.

For example, we squc1ched one rumor implying that vandalism or burglary coverage would not apply to persons' homes or businesses if they left the five mile radius.

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In the days following the TMI incidant, I also kept in close touch by phone with top officials of the Nuclear Insurers on the progress of their efforts.

I also had several meetings with them to make sure that their payments were being made promptly and without a lot of red tape.

I might also add that on several occasions, I visited the office of Penn I

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National where the Nuclear Insurers had' set up their office to see how things were going.

I am happy to report that the Insurers did a superb job in getting money quickly to those who relocated as a result of the Governor's directive.

• ' Subsequently, the Governor initiated a socio-economic task force to determine the impact of the TMI incident upon 1

Pennsylvania and its people.

TP!s task force is under the leadership of Lieutenant Governor Scranton and is comprised of representatives of several state departments and agencies.

The task assigned to the Insurance Department is to

" collect and tabulate in reports all claims against the insurance carriers of Met Ed.

These reports will include summaries of claim disposition, showing claims filed, paid, r

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rejected, and unresolved.

Included will be a special itemization of the status and disposition of the claims filed by government agencies and other bodies."

Our reports are to be made July 15, August 24, 3

November 15, 1979 and a final report on May 15, 1980.

We have submitted the first two reports which I will summarize briefly.

.s As of August 10, 1979, 3,751 relocation expense and wage loss claims have been paid by the Nuclear Insurers for a total of $1,298,324.

In addition, there have been approximately 15 class i

and individual acticns filed aEainst the General Public Utilities and Metropolitan Edison.-

There have been 27 claims filed by governmental agencies ac well as some 113 claims by I

businesses.

At this time, many of these claims have not specified the amount of damages suffered.

None of the claims I

have as yet been paid or rejected by the Incurers.

It may well be a number of years'before.we know the outcome of these lawsuits and claims.

There has been and surely will continue to be much I

discussion on the appropriate machanism to provide nuclear contamination protection, f

I With the ConEressicnal enactment of the Atomic Energy Act of 1954 and the Price-Anderson Act of 1957, which permitted l the private sector to develop nuclear power for peaceful l

purposes, the need for insurance to protect utilities and other O

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O users from liability suits was and is being met by pools of insurers who voluntarily agreed to provide the financial responsibility limits set by the then Atomic Energy Commission (now Nuclear Regulatory Commission) in accordance with the provisions of those acts.

Price-Anderson set the liability l

limit.due.to,a nuclear; accident at $560 million per site with

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the Congressional authority to provide additional funds if necessary.

While initially the pools provided 60 million of the 560 million Price-Anderson liability limit, their capacity has risen steadily to insofar as TMI is concerned, $140 million.

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3 The second layer is provided by assessing each nuclear l

reactor in the United States up to $5 million.

With 68 reactors this would provide $340 million.

The third and final layer of

$80 million is available through the federal government.

As the pools capacity increases, the federal government's layer is similarly diminished.

The Nuclear Regulatory Commission establishes the financial requirements for each nuclear site.

As I mentioned, J

TMI is required to provide $140 million of financial responsibility limits, the maximum currently available from the pools.

I understand the maximum from the pool is now 160 million for some sites.

In addition, the Nuclear Insurers provide property damage insurance for the site itself.

TMI has 300 million in coverage for repairing the damaged reactor and other property at the Island.

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9 I have been named as chairman of a special task force of the National Association of Insurance Commissioners to consider the feasibility of a National Disaster Insurance Plan.

That task force will have its first meeting on October 19th.

The NAIC has also asked the insurance industry to provide data c.which will be relevant on the question of whether any modifica-

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-,t tions should be made in the Price-Anderson Act or whether other altertiatives should be implemented.

Where the nuclear contam-ination insurance should be considered as part of a national disaster insurance plan depends, in part, upon the outcomeof the inductry's study.

In conclusion, the Insurance Department is working

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closely with the Governor's socio-economic task force and the NAIC to learn about the TMI incident from an insurance stand-point.

We hope that some concrete recommendations will result, but it is too early at this stage even to guess as to what those recommendations will be.

Thank you,'

BY CHAIRMAN WRIGHT:

Q Thank you.

Would you explain for us what is the national disaster insurance plan?

A There is a move afoot in the NAIC to develop a plan whereby endorsement would be offered for national disasters under one's homeowner's policy.

There are a lot of ramifica-tions to it.

One, what disasters should be included.

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ally, we thought in terms of floods, earthquakes and hurricanes.

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10 The question now becomes whether or not nuclear disasters should be included and whether it would be feasible to do so.

Q Is this similar to flood insurance or an extension of?

A Well, we do have, as you know, Representative Wright, federal program which offers flood insurance.

This would either

-complement or replace it,' depending on what the results of the i-findings would be.

Q We have heard that there has been an increase in sales solicitation of cancer insurance following the incident.

Some allcEations is that the solicitation of which does not conform with some of the laws of the Commonwealth.

Do you have any com;nent on that subject and what was your department's

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reaction to that?

A We have had some complaints about more extensive solicitation of cancer insurance in the area, either the five mile radius or central Pennsylvania.

We have investigated

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some of those.

We have issued press releases and'bave been*

on the radio and television to urge people not to be taken in 4

by unauthorized solicitation.

We have had some reports that people were impersonating government officials and urging them to buy this type of insurance.

So, we have taken steps to counteract this problem.

Also, I might add, Representative, that at the end of July the minimum standards law in Pennsylvania went into effect, which now requires certain minimum standards under y

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cancer policies which didn't exist before.

So, that should help in ameliorating some of the problems.

Q Were you able to apprehend anybody who was violating the laws?

A I don't know that anyone has been apprehended in the sen.se that they have been arrested by a district attorney.

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4 very difficult to pinpoint these incidents.

What has happened is that someone will go to the door and it's been particularly serious with respect to elderly people.

We have tried to solve the problem, at least in part, by extensive publicity, which I understand has some effect in those areas.

The number of complaints have diminished greatly.

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Q Does the department have a policy that concerns the sales of dread disease type insurance?

4 A

Our policy is to follow the law of the Commonwealth and commit cancer insurance to be sold, assuming that it meets the standards, meets the. requirements,of, the. minimum standards law which were enacted by the Legislature a year or so ago.

Q Can I assume then that scme insurance carriers have approached the department for approval of types of insurance that they are selling?

A Yes, absolutely.

They have to have approval from the department.

Their policies nust be approved and beginning on 4

the 24th of July, the standards were Ereatly restricted.

The policies now have to contain certain benefits which they didn't O

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have to contain before July 24th.

Some companies have asked us to extend those deadlines and to mcdify them.

We have remained steadfast, believing that the intent of the Legislatur,e I

should be carried out.

We believe that insurance such as cancer insurance is really no substitute for comprehensive basic j

health insurance.

We urEe people-that that'ought to be;their'

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first consideration.

Q From time to time, you know, we notice via the Sunday newspaper or inserts in a magazine selling various types of insurance.

Have these people selling dread disease gone that route?

I guess to follow that up, these out-of-state companies which are advertising Sunday supplements, do they go through

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your department?

A No insurance companies as far as I know obtains prior approval from the Insurance Department with respect to i

their advertising.

We can only take action after the fact.

This is because of the First Amendment problem, prior' restraint.*'

I With those limitations, it's very difficult to enforce standards because someone will publish a big ad in the paper or even if it's deficient in some way where we could take action, they will change it slightly.

They will put a new ad in the paper and then we have to move against that.

By the time we start taking action there, they will modify it again.

So, it's very easy for people to keep one or two steps ahead of any regulatory l

body when it comes to advertising.

We may also want to take w

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another look at the laws we have on the books with respect to i

advertising of insurance.

Maybe those could be tightened up.

Q I would assume your problems -- you tell me if I am right or wrong.

Your problems are probably more compounded by the company that is housed out of sthte than the ones that are in state?

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A I think that is a fair assumption.

Q Is there any requirement that the company with 4

selling insurance in Pennsylvania, but who may be housed in another state as to get some sort of approval from your department?

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A Absolutely, yes, they must be approved.

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Q Do they all do it?

A I can't think of an instance now where a company doesn't have the approval to operate in the Commonwealth of I

Penncylvania.

Of course, after the company is approved to write business in Pennsylvania, thosetpecific policy forms must also be approved with respect to cancer insurance.

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example, we have to approve the forms that are used.

We have

! now with the tools that were given by the Legislature last l

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year, we have required the companies that particularly sell j

f uancer insurance on the most of them had to modify their policies because they were not in conformity with the new law. !

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Let's assume that a company is housed outside of l

Pennsylvania and advertises in a magaaine that is not printed

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Do you have problems there?

Are there companies using that kind of a situation who may be 1

violating a Pennsylvania law?

a A

It's always more difficult to take action against a company the further they are from Pennsylvania.

It depends'on whether they are licensed with us or not.

There are a lot of factors involved.

How much business are they doing in Pennsylvania?

How much business aren't they doing?

These are problems that do exist and it may very well be that additional Legislation will be needed.

This is just not in the cancer l

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area.

This is in the Insurance area generally, how to have l ()

effective control over those few unscrupulous companies who operate from afar in Pennsylvania.

CHAIRMAN WRIGHT:

Representative Bennett.

i BY REPRESENTATIVE BENNETT:

,s Q

Mr. Chairman, it's refreshing for us to have the commissioner come before us and indicate that he is doing his utmost to comply with the wishes of the Legislature.

A Thank you.

Q Your testimony is excellent.

I had some questions.

that arose in my mind, as you went through it and I would like to drill you on a couple of those.

A Fine.

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Q On page three of your tas_timony.,__1f_you_can follow,

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you indicated that you kept close touch with top officials of the nuclear insurance.

Just, if you would tell the Committee who those insurers are.

I am not sure it's important, but I would like to know who they are.

A Well, there are two pools, insurance pools, made up

'of come 253 companies.

One pool,'the larger"of the two'is

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comprised of stock companies and the other smaller pool is comprised of mutual insurance companies.

I don't have a list before me, but I can certainly get it for you.

There are some of the largest companies in the country.

Q That will be fine.

How many stock and how many mutual?

A I don't know.

I just know that the larger pool is I

the stock company pool.

There are 250 some companies altogether i

and I don't have the breakdown on the numbers, but it is quite '

a large group of companies, obviously, that are involved in this program.

Q On the bottom of that page, I made a note.

You said that reports would include summaries of claim dispostion, showing claims filed, paid, rejected and unresolved.

Then on the next page, as you go through your notes.

How many of those to date are unpaid?

What I am really searching for is on the

. constituent level, on the personal level of people who were told to -- sugEested that they should evacuate.

Are there any substantial number of those claims that are unpaid?

A In my view, my understanding is, maybe subsequent V

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witnesses can clarify that, the payments were made promptly.

The insurers on the days following the TMI incident had to make a judgment as to whether a person that within a five mile radius and had to decide whether a woman was pregnant or whether she wasn't.

Q* That 's sonietimes difficult.-

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A Well, it's sometimes difficult, but you are either pregnant or you are not, I understand, but that's correct.

In the early days of the incident, the companies bent over back-wards from my personal observation to make payments and in most instances would take the word of an individual.

Sometimes you knew if they were pregnant or not if they were pretty well advanced in their term.

In other cases, rather than have a lot of disputes about it, they felt it was in the public interest to make these pay.ments, relying on the integrity of I

the people who applied for the benefits.

On the occasions when I was'there, the reports from my staff was that the whole process went very smoothly.

There were very few altercations, very few problems.

As the days went on, I think the insurers set up more elaborate procedures to determine whether someone lived within the five mile radius or whether a woman was I

pregnant.

I think they did require them to bring their children in with them.

The important thing was speed and not a lot of technicalities.

Q Conversely, have there been instances to date where l

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A I have not heard of any.

I doubt very much that the Nuclear Insurers have gone back to check to see whether or not the money was actually due.

I am sure there were probably

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some that shouldn't have~been paid under their' standards,"but -

4 you had to make a choice of whether you wre going to have to have detailed investigations or you were going to make quick payment.

You couldn ' t have both, because it would take time to make detailed investigations.

I think the Nuclear Insurers cperated on the concept of gocd faith and I think for the most part, the people of central Pennsylvania are to be commended

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for not taking advantaEe of the system.

In fact, there were a number of instances reported to me where people actually i

returned money to the insurance carriers because they didn't l

need it all.

They would come back a few days later and that

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i really makes one feel good, ' tha t' the people in this ' area"had '

t such integrity, 1

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The point that I am -- well, in conclusions chat I I

see could be possible in a future incident that the radius was j 1

extended and we could enter into a huEe timely evacuation kind j

l of thing.

The insurance companies would pay off a creat many i

Il claims and then Eenerally what happens, at least it's been my experience and those of my constituents that tell me about it, !

t that when they file a claim, they get their rates increased.

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I am not making this as an accusation.

It's an allegation.

So, I am curious as to how you, as a Commissioner, have looked upon that ncw and in a future instance.

That's what this Committee is charged to do, to try to come up with recommenda-tions for some futuce incident, which we hope won't happen.

Now,sI am just wondering what'your position, as a Commissioner,

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a would be on those insurance companies that came back later and said, now, we have to raise all the rates because we had to pay all of you off.

A I think it would have to depend on the situaticn, Representative Reed.

In this case --

Q Excuse me, it 's Reid Bennett.

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A I'm sorry.

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The Chairman forgot my last name, j

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A I think it has to depend on the situation.

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it has to depend on the specific situation.

Here we were dealing with a ' set of circumstances which had never been faced before.

I think the public good was paramount here.

I have no doubt in my mind but that the American Nuclear Insurance and Mutual Insurance Group made the right decision in making i

payments at this time and not worryinE about the great I'

consequences later.

We had a situation where the Governor had direc ted people with small children, preEnant women to leave the area.

I think that directive came out on a Friday.

People don't necessarily keep a lot of cash on hand.

Where are they I

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It costs money to live in these areas and it was an emergency situation.

I have nothing but the highest confidence for the incurance industry.

Any time monies are paid out, it's EoinE to be reflected some*ihere along the line, very possibly in the rates, one way or another.

Here we were dealing withra relatively small: amount of money.c A little over

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a million dollarc isn't much when you are talking about a potential nuclear disaster.

It was received very well by the people of central Pennsylvania.

Those who deserved it and need-ed it came in and got it.

I think it helped to reduce their anxiety and concern, knowing they had some money to live on away from the area.

Many of them were going to areas where

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they knew no one.

I think it was extremely important for the American Nuclear Insurers and Mutual Insurers to make those payments.

In my opinion, they did absolutely the r1 ht thing.

E We encouraged them during the immediate few days af ter the TMI incident to make 'these payments ~as promptly ' s'possible 'and not a

to be overly concerned about technicalities.

Q Also, on page four, you indicated that the NRC, in accordance with provisions of the Act, set a $560 million site s

maximum.

How do they come to arr'ive at that figure?

2 A

That's a statutory limitation.

Congrens decided that.

Q I understand that.

Do you know how or why they arrived at that?

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A I assume, Representative, that it was a compromise.

We have never had a major nuclear accident and it's really the best guesstimate that they would come up with, I assume.

Q On page five, you indicated that the task force that you have been appointed to as Chairman will conduct a meeting on October 19th. _ Will you. tell us..where.that. meeting,will.be?.

i A

That will be in Philadelphia.

Q Philadelphia?

A Yes.

Q Do you suppose that members of the House Insurance Committee might be allowed to sit in on that meeting?

A Absolutely, and I will be happy to send the members

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of this Committee an invitation, if you'would like Q

Representative Yahner is Insurance Chairman of the Committee.

A House Insurance Committee?

Q Yes.

I am not on that, but I think they would be cu-interested.

A What I can do, if you would like, is to send a letter to both Chairman WrJght and Chairman Yahner, advising them of this meeting and inviting them to attend.

Q Finally, Mr. Commissioner, it was I who raised the question at a previous meeting of this task force about the nuclear insurance similar to flood insurance.

You'have commented on it in your testimony.

I don't know what else can

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be said about it, other than the fact that I am curious about it.

I am wondering what kind of rate schedule might be set on somethinE like that and perhaps it's too early to ask you that question.

A I don't knew the answer to that question and I am

, not sure anybody knows.

One of the reasons is that fortunately we have not had any major nuclear disasters.

The insurance company 'oased rates on experience, at least in part of what's happened in the past and what they project for the future.

Thls is cuch an untraveled road, thank goodness, that it's very difficult for any insurance company to come with any finite premiu:a achedule for this sort of thing.

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Then, in addition to that, you have to take into consideration what benefits should be provided, who should provide them.

Chould it be the federal governm2nt?

Should we view it through the private insurance mechanicm?

If so, what would it cost?

Again, you are into areas as to reasonable' jud mants.

Reasonable men can differ as to whether the Price-E Andercon Act cucht to be 500 million or billions and billions or what.

If we had a major nuclear disaster in this country that covered a number of states, I can't imaEine any private industry being abic to pick up the tab.

The government may be even hard pressed, if it were a big enough disaster.

Q Would I then be safe in my feeling that you would ensure thin Committee and other House Committees that you, as

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V the Commiscioner_of Insurance, would not act hastily and give all due consideration in setting some kind of rate schedule 4

on nuclear insurance?

A Yes, with this cav>at.

At the moment, we do not set the rates.

They are paid by GPU and Met Edison.

That is idone-throughithe federal government.

Also,:in our law we have an exception for very unusual types of risks where there is no experience and where we don't set the rates because of their unique nature.

At this time, now --

l Q

Excuse me, who does then set those rates for those excepticnal circumstances or is there any rate?

A You mean other than nuclear, you are speaking about?

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Q No, you said that you have an exception in your law where you do not set rates for certain insurance.

A It's a highly unusual and unique situation.

That is usually a negotiated rate between the parties.

REPRESENTATIVE BENNETT:

Thank you.

Thank you, Mr.

Chairman.

CHAIRMAN k'RIGHT:

Representative Geesey.

BY REPRESENTATIVE GEESEY:

Q Commissioner, have you taken any surveys as to real estate values within a five mile radius or ten mile radius or 20 mile radius?

A We have not.

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Do you have any opinion as to the existing limits on x/

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the Price-Andersen Act?

A I do not have any opinions at this time, Representative Geesey.

It's just too early.

I want to study it with the NAIC and get some further input from the Governor's task force on it Q

Then, you wouldn't have an opinion as to the present

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u time whether or notrit 's,been.satisfac tory or.,. :..,q.

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I do not have an opinion.

Q Okay, on the subject of adding nuclear coverage to the homeowner's policy, although it's interesting and possibly should be considered, the immediate thought comes to my mind inasmuch as the people who live in near proximity of a nuclear plant and had to stay in its location, who should pay for the

()

cost of that additional coveraEe?

Should it be the homeowner, one more time?

^

That's a question that would have to be answered.

You are absolutely right, whether it ought to be the people in the immediatetarea or whether it'ought to be the other-citizens

' a-who should share in that cost who do not live near a nuclear site.

Of course, when you are talking about nuclear plants, it's difficult to know what the area is of potentia,1 contamin-l ation, if we have a major nuclear accident.

Where do we draw the line?

You are absolutely right that all of these factors 1

are going to have to be~ considered.

It may very well be that offering endorsements will not be feasible as an economical matter.

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Well, I would have problems with it if they then say to the ' homeowner, we created a hazard for you that you didn't necessarily want, but you are going to have to pay the bill.

I really have problems with that.

A I am not advocating that system, but --

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Your concern is well taken.

Q That's food for thought.

The other question that would come to mind is would it be the intention of those who are advocating this to replace the Price-Anderson Act with this type of coverage?

I can't speak for those who are advocating 16.

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don't knou that there is anyone who is specifically in an orEanized way advocating that we have endorsements to homeowner 's policies for nuclear insurance, either in lieu of or in addition l

to the -Price-Anderson Act.

It's just one idea that has

' ' ~ '

surfaced and I don't knowthat it'has any strong partisans at j

this point, until studies are made.

Q It's just one question, I belb ve, for you to take under consideration.

I would have problems if we would expect i

that the homeowners would be required to have that coverage endorsed to his homeowner's policy and then forget about the Price-Anderson Act and let the Euy out to swim on his own.

If he doesn't feel that he wants the coverage and can't afford i

the coverage or whatever, he doesn't have it and a disaster

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occurs, he is going to have problems and it really isn't fair to him.

On the subject of unethical out-of-state practices by the insurance companies, they. are licensed in the state and if they are unethical, you can't --

A Oh, absolutely.

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Q af 4The problem that weshave and it was a very severer i

problem for those involved.

You had a five mile map.

The insurance companies had a five mile map.

PEMA had a five mile map.

The municipalities, many of them did not have a five mile i

map and when they finally did get a five mile map, it was not precise.

It was.just a circle on a map without any kind of road indications.

The people who live in the area didn't have

()

that five mile map and there are instances of people who just'

-live, as it turned out, over the edce of t.iat five mile line that evacuated, thinkinE they ware within the five mile line tha t didn ' t ge t paid.

If we are going to use a five mile map,

^

' I don't'have a' problem uith4that, but if we are~ccing to, it better be a detailed five mile radius map with streets and complete information so that everybody involved knows exactly who is within a five mile radius and who isn't.

Although in many instances the insurers did a rather decent job of the whole thing, there are also instances where people who were not paid that really, I think, should have been paid because through no fault of their own they didn't know that the five mile line stopped at their neighbor's house, 1 ( -).

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A There is no question that there were some difficult questions in many specific instances.

I also do know that the insurers did, at least in the early days when I was directly involved with it, if there was any doubt about where a person l

was, they would make the payment.

I~..-Q oIntmany instances they.did. (In other instances,'they

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4 d idn ' t.

Are you working on a detailed five mile map?

Is anybody working on a detailed five mile map?

A I don't know if anyone is.

The Insurance Department is not because that applied to that specific situation.

If it should ever occur again, it might be seven miles or three miles i

or whatever and I dcn't know that we can assume that the next

()

time around, if we ever have one, I hope we never do, that we are going to be talking about five miles.

Q That's absolutely correct, but if you are going to establish a basis for claims, there has to be some sort of precise maps and precise' boundary 11 nest 'If we don't. have that, o

then we really are shooting into the dark and some people who ought to be considered, really aren't going to be considered in terms of claims.

If you have an automobile accident, you can see the damage.

A Right.

a Q

You are ordered to evacuate because of potential or impending nuclear disaster, then there ouEht to be precise maps saying who is and who isn' t.

1 l 2_ :

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27 A

That 's absolutely right.

Q Because there are people who are out of a lot of bucks of their own pocket, who could not afford it, just because they just live over the line.

I really don't think that from that standpoint, it's fair Although in many other ' instances, they

.d id a.: good - job.- I agree with you, but there. are.some, people me ss-u -, #.,

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r who need.

Thank you.

A You're welcome.

CHAIRMAN WRIGHT:

Fred Taylor.

i BY MR. TAY1DR:

Q Mr. Secretary, during the course of the many, many hearing that the Committee has had, I think it's become very O

apparent that this Committee in the Commonwealth of Pennsylvania may have a duty to assure people who live near a nuclear plant that they are really insured and it's become rather apparent that one of the concerns of the people that live in the

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surrounding area of the nuclear plants aren't assured that they are insured.

I am sure you have thought about it, but let me start out by asking the first question.

As a result of the Three Mile Island incident, which we have heard variously described as a bad accident, as an accident that never should have happened; but as a result thereof, we all have the experience of having that accident and hopefully it will never 4

happen again.

As a result of that accident,'do you feel that

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the industry could or would be in a position to now make that

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a calculable risk as far as establishing an insurance program and policies for these types of accidents?

A I don't know the answer to that.

We have asked --

that is we, the National Association of Insurance Commission for which I am a part, have asked the insurance industry to

-w., 2,.c4,, g aprovide, us with data, more data than we have..at this..t.ime.. So, I am just not in a position to say at this time whether they 3

do have sufficient data.

Q Someone is working on that?

A They have been asked to collect some data.

I believe Ambrose Kelly is here today, who is going to, testify.

.I think i

he might be able to provide you with some more information on that.

Q All right, then I reserve that question for him.

A Yes.

Q Let me take it one step further.

It's-apparent that ther0 w a concern of the Committee and concern of the citizens

~+

around Three Mile Island about what kind of coverage that they l

do have under Price-Andersen and Representative Geecey said homeowner's policies and so forth.

My question is, has the department constdered any alternative insurance, insurance l

program, that might be available or could be thought about or i

could be recommended to be undertaken by the Commonwealth or i

by the federal government?

Let me -- number one, take a look at Price-Anderson and complaints thereof; the possibility of a

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' O federal proEram similar to the flood insurance program which went into-effect as a result of Agnes; thirdly, the possibility cf a pool of insurance-that is funded by the utilities, them-I selves?

In other words, funded in excess over and above the 4

Price-Anderson Ac t?

Ad Sp'ec'ifically, the'5: Pennsylvania Insurance Departmenti5

'^4 has not done that.

ile are ivorking throuch the National Association of Insurance Commissioners.

There are many states i

that have nuclear plants and it seems to me that it's much more efficient if-we werk on it on a national level to deal with i

this problem.

I think that's the way it really has to be j

addressed.

The caounts are Eoing to be so big, if we had a

()

serious nuclear accident, that I'think lt would be better to work en a national level rather than try to deal with lt on a i.

specific lecr ' level harc.

Q I am not tryins to pin you down to an exact answer, just an ' opinion; but'I have hnd "a lineor questions going 'on i

j for several weeks, now.

That is, the fact that I think right l

now in the entire country, about 14 percent of electric energy is cenerated by nuclear power.

I think I am probably safe in i

saying that the great majortty of people in this country, either i

j directly or indirectly benefit from that.

My question is, do you feel that whatever insurance risk has to be taken, it l

should be paid for by the nation as a whole or any particular company or the federal government or taxpayers or. consumers or l

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utilities?

A I dcn ' t mean to avoid your question.

It's difficult to answer, because when you say who should pay for it, we have to decide first of all how big is the b111' going to be.

In order to determine how big the bill is Eoing to be, you have to i

.know. exactly-what. kind of riskss.you.are. going to insure against, g

z There are a lot of different limitations that one could put on what is being covered for a nuclear accident.

So, you have to define what you are going to insure, number one.

After that, you are going to have to make some determination as to what the likalthood of the accident occurring, r.id we have very little 4

experience, thank goodness, in this country as to what might

(

happen.

In the nuclear area, as I say, we have very little e7perience and the extent of it could be infinite.

Floods, ever since the flood of Noah, have been contained in various smaller areas.

Tha': may not be true of a nuclear accident.

It's a different kind ofaa situation that..we.,so j

have had experience with before.

So, once you decide what

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kind of benefits you are going to have and you have some i

reasonable estimates of what the potential damdce is, than you 4

have to determine what the cost is going to be and sit down and make come determinations based on those fi6ures.

Quite frankly, I don't have that basic information to come to a i

l conclusion at this time.

Q Uell, would it be realistic for me to say that as a

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31 I

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result of Three Mile Island, that the resources are there to 4

come up with some reasonable answers to the questions you just posed?

i A

I an sure we can come ~up viith a reasonable answer.

Q I will reserve the question later for some of our later witnesses.

l. o :i. e.o% u n us

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I'think also realistically, from what I know now, the federal covernment is Eoing to have to be involved in some way or another Q

Thank you.

1 MR. TAYLOR :

Thank you, Mr. Chairman.

CHAIRMAN WRIGHT:

Mike Bernie.

1 BY ME. EERITIE:

i Q

, Commissioner, I wonder, do you believe that the event s

j that occurred March 2Sth and following was extraordinary in the s

history of thic area and the country?

4 A

lt was certainly extraordinary in the sense that I I

don't think it ever happened before.

4 I imagine you are familiar with the definition in the su Price-Anderson of what's an extraordin&ry nuclear occurrence?

A I don't, I'm sorry, j

Q Well, what I am wondering is whether the task force 4

i that you are envisioning under NAIC will include in its study, a' study of what should be defined as an extraordinary nuclear cccurrence by which people are entitled to recover damages or 1

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i 22 10 losses without proving a certain guilt on the part of utilities?

4 A

Well, the NAIC is-gatherin$ data now, from the insurance industry as I an sure that astoon as possible, it's going to consider all of the ra.nifications of it.

j Q

Can you give the Committee an indication of what data i

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O hds'biien requested'from the industry?

i A

There is a resolution that was passed by the NAIC.

j It runs on for.saveral pages and I uould be happy to furnish you with a copy.

It might be easier to do it that way than to raad throu h the three or four pages, i

MR. BERNIS:

Thank you, Mr. Chairman.

CHAIRMAN M1IGHT.

Representative Piccola.

(

REPRESENTATIVE PICCOLA:

Thank you, Mr. Chairman.

1 BY REPRESENTATIVE PICCOLA:

4 Q

On page four, you indicated that there are 27 claims that haye,been filed by. governmental agencies.

Are those all state agencies or are they local government agencies and could you tell us -- could you enumerate those for us?

A I can't tell you what the 27 are at this point, but i

I know one of them is the BorouEh of Middletown.

I think they i

are local government as opposed to state agencies.

[

Q Has the state government made any claim?

A Not that I am awara of.

Q Do you know if the -- for example, the evacuation

()

center that was established at the Hershey arena, was the cost l

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of that paid by the insurers?

A I don't know.

They paid, of course, for the -- the I

facilities. in IIarrisburg at Penn National, I believe, were donated by Penn National for the use of the Nuclear Insurers.

They had soma extra space at that tima and the two days before USF&G permitted;the American Nuclear Insurers to use their ve v ;# -

1 fac ilitie s.

Q But the evacuation centor that was established at the Hershey arena was-for pregnant women and pre-school, children.

I am sure the owners of that arena, I am sure, at the very least,

(

paid the utility costs to keep that place operating and so forth.

You don't knou if that has been covered or if there have been

()

claims made for that?

A I have no idea.

Q Well, then how do you arrive at these -- hcw dc you knew that there are 27 cleims, if you don't know individually which ones are who made them -

I juct don't know who thay are from the top of ray bead.

That's what I'm saying.

i Q

You do have that information in your --

A Yes, we do, oh yes.

Q Uell, could you provide a listing, I won't ask you to detail, but could you provide us with some kind of an indication as to what governmental agencies made claims and the nature of the claims?

Maybe you could tell us a little bit i

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34 q_s about what kind of things they are claiming re lmbursement for.

A Yes, we can do that.

That's no problem.

We will supply that to you.

O Do you 970u that nou, for example, what the Borough of Middletown, what they would be claiming for?

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..A? w I can't tell you right off hand,-Representative

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Piccola.

Le t me se e if I have t ha t.

I den't have the information right before me.

4 You could provide that to us?

A

'le will provide what we have.

O Ac.to the buciness claims, cculd you provide like informa tion ?

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A Yec.

Q,/

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Cn the 13 business claine?

A Yoc, a lot of thoce deal with business interruption and loca of bucinecc during the time of the inc id e n t.

2" 0

I assumed as much, 'but I would 'like to know cpecifically who ir claiming and the kind of renconc; not necaccarily the amcunt if they claimed a cpecific amount.

You indicate that they have not.

A A lot of them have not specified the amount.

REPRESENTATIVE PICCOLA:

I don't have any other quentienc.

CHAIRMAN KRICHT:

Any other questionc from members of the Ccmmittee?

A 1

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19 (No responce.)

CHAIRMAN URIGHT:

'de thank you, Con.missioner Eartle, for appearing before us tcday.

Your testimony will be most helpful.

CO:@iISSIGIER 2t.RTLE:

Thank you, Chairman '4right.

..,.,CHAI, RMAN UR.IGHT :

At this point I think it would be

, :1 appropriate to take a five minute break and at the end of that break, will you Eentlemen from the industry take a seat at the front table.

(The hearing recessed at 11:00 A.M. and reconvened at 11:05 A.M.)

Ci? AIRMAN TEIGHT:

Our seccnd crcup cf witnesses today are regrasentatives of the industry involved with insurance of nueJear power plar:t.c.

W'th ut teds,y are Mr. Joseph Ibrrone, Generr.1 Counsel, I mric at ISeleer Insurers; Mr. An.brose Kally, Manacer of the Mutusl Atcmic EnerEy Liability Uaderwriters; Richard Schmalta, Cenaral Cour.ccl of H1rtford Tsceident and Life Insurance Company; and Charles Bardes, Vice President, Mutual Atomic Fnercy Liabilit:/ Underwriters.

Nould you fot.r please ctand while I swenr you in.

JOSEPH MARRONE, Ai1BROSE KELLY, RICHARD SCIDIALTZ AND CHARI23 BARDE3, called as witnesses, having Deen duly sworn, testified as follows:

T 36 n

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CHAIRMAN URIGHT:

Uho is going to speak first?

Mr. Schmaltz, it might be helpful if.you identify yourself for the stenocrLpher.

MR. SCHMALTZ:

I am Richard Schmaltz, General Counsel for the Hartford Accident and Indennity Company.

On my left sewv.P

+"

<1s Ambrose~ Kelly = of tthe Mutual Atomic EnerEy insurance pool; " b on ny near right is Joseph Marrone of American Nuclear Insurers; and on my far right is Charles Bardes of American Nuclear Insurers.

I propose that we give you just a brief description of how the Price-Anderson insurers and indomnity system operaten under the. role of private insurers and then we wculd bc very pleased to answer any crestions that you might have in this

()

area.

Commissioner Eartle has covered much of the ground in detail, so we wl11 just touch sone of the highlights.

One of the major considerations in connection with insurance for either natural or man-caused catastrophes is how

~

te handle claims if there are moltiple number 'of claims from' a serious event.

Years ago, shortly after the beginning of the Price-Andercon program in 1957, the insurance industry establiched a comprehensive plan for responding to a nuclear emergency.

The plan had never been tested in action until the Three Mile Island accident, but with some outstanding cooperation and help from Commissioner Bartle and his staff, for which we are very grateful, we think the emergency program that we set up many years ago functiened smoothly and well.

i i.w a.~

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i 37 i

O Mr. Marrcne and Mr. Bardes, who are with us today, personally took part in bringing in a team of claims personnel from our member companies. ~Uithin hours after the Governor's evacuation recommendation, we were able to begin advancing funds to those affected.-

Payments totalling over a million i

i + dollars were made-to more than-3,ooo familien fbr, evacuation j

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expenses and wage loss.

At the peak of cur Harrisburg i~

operations, 51 claims representatives were on the scene.

If mora were needed, we would have furnished them promptly.

i-The emarzency program is all but completed.

The remaining claims are being handled in a master class action which is nou pending in the United States District Court.

If

()

you wish, :Ir. Marrone or Mr. Bardes can give you further i

i details of our emergency program, but Commissioner Bartle has 37 ready given a very connrehensive report.

I An emergency asststance I.fogram ic only one part of l

the Price-Anderann insurance and indemn'ity' program. ' The ~ " '

).

program uas orig:.nally put Lnte place in 1957 for the dual purpose of protecting the public against the financial consequences of a possible catastrophic accident and to encourage the development of nuclear power by private industry.

At that time this was an important element of our national i

energy policy.

Although that policy is curre.ntly under review, it is likely that in the near future, at least, it will-be i

nearly impossible to do without nuclear power in some areas of

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our country, without substant tal reduction in our present living standards.

Thua, it is important to focus attention on the aspects of the Price-Anderson program which are designed to protect the public.17ainst the financial consequences of a sarious incident in the future.

The program has been aranded from time. to time to improve this protection.

A major change in 1956 was to require a vaivar of all of the usual negligence law defenses, if there is an extraordinary nuclear occurrance as determined by the Nuclaar Reculatory Commincion.

In effect, this change imposes absolute liability on the operator of nuclear power plants for a carious nuclear acc i<len*.

/m()

The proar un also sets up three tiers of solid financial rascurcos.

Firat, there is a primary layer of private financial protecticn which nust equal under Price-Anderson, for large scala power reactors, th2 amount of private insurance available.

Presently, the two nuclear pools make A160'mt111on of nuclear

• enerEy liability insurance availabic for this purpose.

Co:amins toner Bartle 's statement rcnt toned 140 million, but this was recertly iricreased to 150.

Seccndly, there is a second layer cf financial protection required from the operators of nuclear pcwer plants.

This layer consists of retroactive assessmants of not more than 65 millicn in any one year for each nuclear incident, There are now 67 nuclear power plants operattnrr under this i

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cystem, producing a total of 0335 million of cecondary financial protec ticn.

Ohird, the Nuclear Reculatory Commission provides government indemnity of $65 million, in addition to the total of M95 million ava t.lable in the form er incuranca or retrospective premiums.

The total funds immediately available-to the public from all sourcec are $560 million for each nuclear incident.

The financial protect $on and government indemnity covar ths )labillt'/ of plant operators and their suppliers.

In fact, t'.uy cover any person who may be legally liable for nuclear in f ury or d uace.

Thic neans that the persons *.njured (3) will have a broad 1ccal renedy which ic backed up by solid 7

financ'al racourcan.

It also enables the insurance industry to fac:c ccvarage on the oparntorc of the nuclear power plants, wh'ch, in turn, enablen it to maxim 12c ccverage for the protectinn of the pubite.

'"hr Price-Andercon program 91co establishes a limitation nn th) 11B111tyofallperscnswhomayberesponsib1h for a nuclear inc ident at $5$0 milllon or the total amount of primary and secondary f'nancial protection, whichever is greater.

As more power plants come on line, the total of the primary and secondary financial protacticn will operate to reduce the indemnity availabic frcm the covernment to zero.

'Iach increase in the funds available from private sources t's NI e

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,&+ve b 4JMe. mA m e %eph.m me va a,---.==m%.-e-=e.~ow.

40 AV carries with it a correcponding reduction in government indemni l;y.

"he limit:ation on liability is often criticized on a number of grounds.

Perhaps the most cerious it; that it will leave scme victime of a major catocthrophe without compensaticn for their injuries.

The conctitutionality of the limitation on liability was challenged on this ground.

Last summer, a..,..

houever, the &preme Court of the United States held that the limitatien was ccnctitutional.

The Suprene Court looked at the Price-Anderson program as a whole.

After taking into considera*1cn the amount of compensation prcvided by private finsncial protection arti covernment indemnity, the case of remedy, the provicion for concclidation of cut ts and errergency anciatance

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(~a) payments, the court reached the conclucion that prospects of raccvery and the uncunt of reco'/ery were at least as great as thay would be under ordinary local principles.

The court

?ctn:;2d out that the removal of tiie limitation on liability would not c,2arantee that financially recponsible defendants ec ;1d 'n foun J to pay the full amount of the damarec.

There uculd be, indeed, a r2a1 li!cclihood that a maJar utility, even of cren t ci: c, tcu]d beccme bankrupt in the process, without being able to catlefy all claimc.

Perhapc even nore important, however, was the court's vicw that the Congreca han made a ctatutory commitment in the i

Pric 3-Anderson Laclciation to review any cerious accident in i

l which the damagen exceed the limitation on liability and to l

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us take appropriate acbion to provide financial relief for those who wculd not be compensated in full.

The limitation on liability han thus never been regarded by the Congress as an absciuta cut-off of financial assictance for those injured in a major nuclear accident.

Although the chances of an i+

fJ-accident producing damages in excess of the $560 million prasent.11mitation ab!11 remains c::tremely remote, de.cpite inflation.

It la difficult to estimate the full consequences of the Three illle Is knd claims.

Th? pools currently have approxinately $73 million in a reserve fund which has been cccumulated ovar the last ten years.

It is their best estimate

/^5

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that this wil? M far more than the amount requirad to co.npensate claims which h:ive nou been consolidated in a single cla ss ncticn.

Same havo

• nj icated that prclonged litigation may be necessary bafore cla t.ns are dirposed cf for any major w:elear incident.

Ve think the experience at Three Mile Island shaus, houaver, t'r.t the pr:cecs can be handled without undue delay.

Tha pools, "ith the assistance of various state and national officials, uera able to process the emergency assistance claims en tha spot.

Class actions were promptly filed to roserve th' rights of all injured persons within a 25 mile radius.

Th, attorneys for both sides are enr, aged in Simp 1fying the procedures in an effort to reach a disposition of meritorious claims that will protect the interests of all.

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'de are precently under a resbraining order from the Magistrate in the action from making any furthar payments, except emergency assintcnce paymenta, until an approved procedure la developed.

Ma are alco restricted by court rules from diccussing the details of tha panding I,2ciala31on.

We will be pleased to respond bo any general questions that you may have about Price-o Andercon, the roli of th' insurance companies or, indeed, the Three Mile Island accident, itself.

CHAIRMMI '..'RIGHT:

Do any of you other gentlemen wish to maka a comment on this point?

(No response.)

/'S

(

l BY CHAIRMAN '.!?IGHT:

v 3

I hel mye in ycur testimony ycu indicated some 65 plants were part'.c ipante in this insurance pocl?

A lixty-noven, I believe, is the figure at this point.

9 There are more than 67 plants in operation in this-ce ntry.

A Yea.

9 Then uhy the d'.fference?

A The difference is that it is only the large scale poner reactorc, Three Mile Island would be among thone, which are required to have the retrospective secondary layer of financial protection.

There are now G7 of that kind of power plant in cparation.

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Q Can you explain in nome detail or give us a description of these who do not participate?

A Thene uauld be facilitiec which produce a very small amount of power.

They would be in univoralty reactors, experimental reac tors.

They would be come facilities other

,than power,r,c. actors for which financial protection _is required

.m by th3 Nuclear Re:OJlatory CcaminSica, but the caount haS Deen set much lower thcn th3 160 million maximum limit becauce in the Com.nicalen 'r opinion, they don't really reprecent any cerious threat of a major dicaster, I acau.w, then, that the Price -Andercon Act does not cover mill';ary inc talla t ionn ?

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A Che Price-?m :areen Act covers certain Lovernmant centract op2 rated facilitice, but thoro ic no private insurance involveJ.

He" cany of thoce are under the -- and they are alae cuajact tc $ 20 milltcn of covernment inder.nity.

How many-of those are in operation, I just don't-know.

~

I acsur e, if I urniarctand your tastimony correctly, the max!Lv;m liabilit.; 13 $500 million and it cannot be higher than that?

A Yes, it cannot be hi::hcr than that at this time; but en th3 other hand, an I indicated in :ry statement, that lir.itation floats upward ac the total amount of primary layer of finan:!al prc tacticn provided by the nuclear peclc and the cecondary layer provided by the utilities under the f

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hh t

V retrocpective program exc.acda 560.

For example, if there were

'O of there larco scale power reactors in operation at the present t ic:c, they wculd be abic to produce 500 millicn on their cecondary laycr of financial protection.

The pools, acauming that thair coverace remains the came, would prcduce an additional 160 rillion of primary financial protection and th7 total lin'.taticn on l'abill's vould then co "p to 660 million.

It'r not fixed for all tinec, in other words, at 560 million.

Q Are all utility ec ipanies and all reactorc in Pennnylvania covered?

All ef the p mer rcactore are covered, privately (m

()

owned T'.'er rcactors tre covnred in the United States.

~

How a bou t th onec in edjacent cratec, for example, Salem, z.rhich uould have an of rec t or, l'anncylynnie?

I

'/<f e, all priv itely ovned utiliti"s.

'0"" If ther? uac on accident that exceeded or was thought

~

^

tc "::ceed ':he 0560 million, I uculd accuae come priority would have to be cet up ac to who would cet paid f$ ret?

Has the t.ndustry or covern-ent ce t that -- and I thoucht I heard you say s :rething about come ecnference or acmethinc; coming up to ac!ca cc.ac deciciens.

I think I heard you say that the monies tha t you paid individuals for relocation have so ne priori Is there a priority cyctem set up on how to pay?

A Yes, whenever there is an extraordinary nuclear 7

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cccurrence and it looks as thouCh the total amcunt of the damages nay erceed the limitation of liability, the Price-Anderson prc; ran providen that all claims may be concolidated in a single federal dictrict court.

The judge in that court has the power te regnire parties to cubmit a comprehensive plan for dealing

- with the claima, including their prioritien. - He can, modify that plan, mke additiens to it or chang e in it, as he rees fit.

He in alac authorized to cet acide a portion of the funds fordela37ed injury claims and he is nlco empowered to establish prioritier of paynent.

A great deal of diccretion is C ven to i

the jud ge because it's virtually impossible to tell what pattern of claims will emerce.

It Iceka from the Three Mile hq Icland inc Ment, fer example, that perhaps numerically the property dc ige claims may be more numeroun than the onec for acute perccan1 injury, fer example.

Anothar incident might have a different pattern.

So, the ctatute alle m the judge a diceretion to ' tailor the nlan to what it needr.

The judre t:culd probr.bly not exercise his discretion until come time, and maybe come lonc period of time, af ter the accident hac cccarred.

!?culd thtt prohibit you from taking care of individual claims recordin;: the relocatien of people who, fcr example. need money within that first week?

A No, there in an exception for emercencf assistance payments.

In your 7::perience or your nFont's experiences out s -)

144 $

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in the field or during th.aae first couple of weeks and chort periods.cubcequcnt to that, what '<;are the problemn that your acentc e;:perience Lnd uhat -rare the Ocmplainto, if any, tha t yc u roc c ived frc:.- t'..c paople cn the othar cide of the table?

L

':c ll, I think I v'.ll ack ?.r. Marrore to respond to that.

.I assume-what-you are' talking abcut is the claim 4 +-

r~apro c en tat iv a c, nct incur..ncc acentc, but the claim re pre c en ta t iva.:.

I till ack hir. tc fill you in on that, if I nay.

. ~.;. ':. Ju hE :

I.l ht ctcrt by just referring back t

to hat ::c ' aticned t;ith the early witnecces.

'le haa some difficulty ccucc cf the early napc uc rcceivcd not being as

(%i accurate at

.c uculd h:.ve 111:2J them to be.

Thara was some sa err r in the pc and 1 think

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.:2 3 t'.;c or three days before that m e corr :c ted.

Sc,. e uarc not able tc dc ter:nine precisely t h a.' '_ v 2 cile railus.

lc. era not autre cf that until, perhaps; the second or third day.

I na notcrare of anything that was trcub..:::n e thar than that; b t Charlie Bard ac, v:ho worked diractly 1.n th; linc ;ith the claima, mQht be cuare of cc. : t:iin th:lt I ar. nut.

Pcrhaps Charlie can add to that.

M. J:U:DEd:

' c ll, I think that the Incurance Ccm:niceloner I'c.rtle and Mr. Ibrrcna have cutlined some of the things that -Je were faccd with.

'.tha t remains, really, are a eries of ver;- cmal L thingc that at the tima, beca re you are

.corkinc., unJer praccure cacmad r1ther larcc.

One of the s

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'O clascic examples was voiced before and it did deal with the

'!hile ne had a very crude map and we came in with basic

maps, cuppliar uith pra packaced and pre printed forma, checks, the uhale thinc, cc that ue could cturt the operationa, Cf course, we can't have a :.:ap of every area chawing one mile, five miles, 25 Uc cecured a map and one of the things when we went to Herchay trona, r didn' t even uce t'n aap.

' e want in on Saturcay.

That r.c Saturday morning at 9:30, which was less tiran 2k hours af ter the Governor rccur.tnanded the evacuation.

l

'lc rc; J.1 and ue tried to catab1'.ch the evacuation.

Zra P a a Cro n c '.* c Kry hcipful there.

,e provided them for e:.ici tency evacu t.u.. funds.

'..' hen <:; i;2nt back tc the of fice, AV

':e '.. arc star tin

.cvc tha peoplc that did evacuate and the i

c.ap uat a prc';12:..

Ju..:r tec icner Jar t12 aail t'.lat ue were very i ler.1:.nt in cur c..

' d cr:.t _cn of '.:ho cualified.

Tut was a l

i nce:ccity.

PeopL c re ev;;ua ted e;uickly.

Th y.are evacuated; withou t ceing int-

'nre they were Eclnt or uhy, exactly.

So, l we recpended accc:t :n31y.

t lin titre i_ct zy, culta fr.;nkly, ne tightened our j

require rnto simp 1',

ectuce af ter a ;ivan tire period, people would hava had 01:. 0

't

_ctablich identit*f, tc establich documente, to cctablich actual locat'.cn.

It s1culy got down tc a fine point and vnat alght have inppaned is t?.at comeone who uay have coce in en day eight, nine or ten

.: required to i

provifc..tre infara!3 tier thnn parhaps ccmacna <ho came in on

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1:8 Rj day one or two.

Acide frc"1 that, we were conctantly surpriced, pleasant.17 by tha attitude of the people that we uere serving.

CH.'.IEf!/4N URIGHT:

Acnuming that scmeone on day one and two 'i'i,d five and one-cuarter miles and you paid them.

'! hat nou" IG. BARDES:

Whot now?

CHAI: :1Mi "EI:1:IT:

Have ; ou cane back and asked them for ym r money back?

!!R. B/,RDFS:

' le 31, what ve hnve done to date is gone bac'< ar] c'a d e justiff. cation of expancen for thoce people to i

l which b '.v, nn.!e :uiv mc a c.

'le have no t concrally gone back j

i te rer' 'c 4 the $ r c' a : ' flo.e tie ns, but t'ry,ere reruired to be j

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Q Ju e ti'" cd for exponaec and th'y vere told that bercre they came:

in f r 'ivencec.

I

'G. WRRO'E:

Come of cur appliennte.to received fundr, clid, in fact, rcturn acncy that they did not need for livin" exmnsen.

About $6,000 bcc been returned to the pools from ? comb to whcm r advanced f':nds.

The relationship l

,i between curralvec and the applicantc really, from our point of l t

vicu, hac bcon eattraly raticfactory.

CHAIM1AH '!RIGliT:

Fred Taylor.

i IG. TAYLOR :

Thank you, Mr. Chairman.

BY la. TAYILR:

Q Mr. Schmaltc, in your testimony you talked about the i

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Jool.

The poc1, I assurr.e, am I correct, is a pool of private n

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incurance ccmpanies cimilar to A&I?

A Yec, there ate actually t'.o scola.

The stcck pool, I thin't Co:nmircioner R rtle mentioned, and the Har': ford Accident and Indemnity Co.1peny ic a aember of that pool, along with appro::1:utc ly 14 : oth3r ecmpanicc.

':'hore are siflarly a group 4 6

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s of mutual companies, ;very nurserous, perhapc not 'quite that many, who 20 on to th' prol thc:t 1: -ent ::d 'rj l'r.

ell;.

It's all privalo md the "a;. int they generata their capacity is througn

uhacriptions tc m.::1ber cocpaniec l'arouzhaut the United Statec and th2n to ccrr c;anding peels cni r2 ;naurarn and private insurance market ;rrund the world.

Je

' hu t t h: total capacity th,t tha; cet la

~ nz inun tha t ' ; au:;17.ab1: for nuclear (n-)

tnaurrnce et thic "'.

th'2cu7 out all k mun eclid financial h

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+Um, You *rcrtr2d F..a figurc $160 million 7 hhe c"211:bl. *- :rance t'r /__ bort thic private pon) no:.

You c100 said t'.mt this tote? figure of 560 fluctuates dependin n Icv <G cne tnd lavel two.

'y qu e s tic n 13 160 million the mesi

i l-th. pr '.v 2 P : incurance 'rdratry or pooln can come up wit'T <-r is thtt 01 "i in with Prie -inderron er in there any explancticn uhy $1CC :11]icn ficura a there?

t.

Diy it'c 150^

'le have alua;c had a tar ~ct before us that was given us by the ccmaittee cn Atomic Energ of the Centress to raice cr much incurence ac we cculd and in both d ir ec tien c.

On nr.e " 10 0, the liability incurance that is used

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G as financial protection under the Price-Andercon program that we have been deceribinc.

The other aide is property damage on th? nuclear pamr planta, themceives, to protect the accets of the utilit*.as.

Thace t.to figuroc jointly now come to 460 million.

Ther? 1r :)200. nil.1 lan of private insurance that 's availabic for coverinr; direct physical. damage to the power 4

plant.

Tha f'7ura han :rown ovor the ;*earr.

It wac originally 60 million per o'tch.

It went up in steps an experience contln n<1 to be ~ead for the nuclear industry and as insurance c u p c tt:r orcund th' icrld gr v i.

It's cart of an evolutionary thin.

"h ?r a ic no fornula that inbues te cet it.

It

,1ud mants of all repr-"aha th? son tota] of the undaruritin-T A{;

of th) (naar?r.7 and re-1.nm:rerc arouni the world as to what ble: c,n commib.

le put acme prencura on American insurers end world cources to do ac nuch n? they can.

M:r o m company, for ' m pla, p2ts mr3 money and risk in this nuclear area than for any other risk we insura.

We have strained to make as much s c 't? ce"1<i av711abla and the 150 represents the b2st that we can do at tSia t!me.

Ir cthar crda, that's the beat that'a available after you put out Tu call, please com? in, if you are willing to carry the rick, then the best we can do right now is 160

?.ill ion ?

Right.

R warding Price-Anderson, one quick question.

Not

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V having it in front of me, but having read it once or twice, I understand there is a clause in there that says something like, as Congress may decide, which I think affects what might be the 4

ultimate top limit.

At least, I have been told that may have been something to do with that.

Do you have any comment on

.that?.. +.

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A I am not aware of any provision exactly like that.

There is a provision, perhaps the one that you are referring to in the financial requirements, that the amount of insurance that the maximum is available from private sources at reasonabic costs and terms.

The Nuclear Regulatory Commission is empowered to decide what reasonable costs and terms means.

In other

()'

words, we couldn't quadruple or ten times our premiums and say j

this is what you should require people to have.

There has got to be some rationality to it.

1 IE. TAYIDR:

Mr. Marrone, do you want to comment?

MR. MARRONE:

No.

o

~

BY NR, TAYLO;R :

Q One other thing I'm going to ask you is the same question I asked Commissioner Bartle.

As a result of the Three Mile Island accident, which was a very unusual, unexpected thing.

Do you, and I would like an opinion, do you feel that an incident like this is now, from a rate making standpoint of view, is this now a calculable risk?

A Is it now a calculable risk?

}

4 52 O

Q Yes.

A Let me give you my personal opinion, because I am not an actuary, but let me give you just my personal opinion.

It is a calculable risk in one sense, that from an underwriting standpoint, companies such as the pools can make a decision

,to risk.$160,million or so many. dollars of-the total premium...

m,-

from the nuclear industry.

It's entirely insurable from that point of view and I don't think that Three Mile Island has changed that assessment.

As serious an accident as it was, it was within the scope of that type of insurance.

It's not calculable in the sense that you could assume a figure, I think Commissioncr Bartle outlined how difficult it is, assume a figure

[}

of damages that would apply for, say a typical reactor any-where in the United States and establish a premium that you are goin6 to collect from people living in the area that would

]

be sufficient to take care of any conceivable damages.

It's

..not like automobile insurances where you know you are going to get so many thousands of accidents every year and it doesn't vary tcc much.

The amount of each one is small and you have an awful lot of policyholders that want to buy the insurance to spread the cost over.

It's an indefinite thing which can't be predicted in the actuary sense that applies to automobile insurance, life insurance, homeowner's insurance.

MR. KELi?:

I don't know that I can reach -- I am Ambrose Kelly from the Mutual pool.

I am aware of your O'

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question, because I have just come yesterday from a meeting of our pool governing committee at which some of the questions you have in mind were discussed.

The point I would make to

~

you is that as far as the consequences of Three Mile Island are concerned and our ability to calculate its effect on the rates, this~is something'that's'well within our capacity. "It's'be'ing done.

The only reason we have not been able to announce what rates, what the effect on the rates would be is that at the moment we do not know what the losses are going to be.

In other words, there is a substantial question between ourselves and the owners of Three Mile Island as to the amount of property damages.

We are uncov ering new information every day with

()

respect to the questions of how badly it was damaEed and how much it will cost to decontaninate it.

We have calculated the effect on rates, all the way from our paying the first i

estimate, which was $140 million in property damage to higher amounts of possible loss, up to the full 11 sit of' policy. 'It is possible for us to calculate the results of this accident in terms of its effect on future rates.

For the owners of the utility plants, with reference to third party liability, we are in much the same situation.

We recognize that we have so far paid out less than $2 million, roughly $1,300,000 for evacuation expenses and our claims expenses to date.

How much we will ultimately have to pay when these class actions which are pending in the federal

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64 court are decided, I don't know any more than you do.

I know the ranges within which we guess and the ranges are so wide, there are those in our industry who feel that there was practically no third party liability, aside from the evacuation expense.

See, there is and now I am telling you '-

perhaps I ~

+,,

l shouldn't even be discussing this in view of the fact that the litigation is before the court.

We see very little evidence of either personal injury or property damage.

Now, it's going to be up to the court and up to those who claim that they have had a loss to demonstrate that loss.

If they do and the court is convinced that they have the loss, there is no question.

()

We pay it.

Right now, we don't know what that is going to be.

The answer to your question, it is possible for us to calculate the results of this accident.

Now, what Dick is talking about and very properly, i

l in that as a result of this, there are those in the-industry' who have said that under other circumstances, with a different type of accident in a different area, the claim could have been much higher.

If you are trying to determine rates to be charged for people, for example, if you are going to throw l

this at the homeowners, a question that was discussed earlier today, then you have a tremendously difficult question because you don't know -- wide as the ranges ' arc at Three Mile Island, we know what they are.

We know what the maximum is we can pay I

55 l ()

on property damage and we have a good idea what the maximum is we could pay on liability.

If you put together a hypo-j thetical accident in a different area with a different type of accident in a much more substantial release of radiation and th. you ask me what the consequences are, I am in trouble.

i" MR. TAYIDE :

Thank you, very much.'

• ^

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CHAIRMAN WRIGHT:

Mike Barnie.

BY MR. BERNIE:

i Q

I'm sorry, the microphone was law and I didn't get the)$f"?ourcompany.

Was it Hartford?

)

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A Yes, my cocpany is the Hartford Accident and Indemnity i

Company.

Q You have raised a question here in my mind and in your answer and that is that you have made the statement that the Hartford devotes more reserve, that of re-insurance in this area,than any other individual area that you cover.

Is-that l

what you said?

A Essentially, yes.

Q Now, does that mean that in effect, there has been a business judgment that this particular coverage is either more important or more potentially a risk than, say, property insurance generally or casualty insurance, generally?

A No, it doesn't.

It's a combination of a lot of factors.

I was making the point that we have been under

()

._ ressure to make as much capacity available as possible.

The p

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question that we usually get asked is why can't you make more available.

I would explain that in proportion, we are allocating at least as much to the nuclear ener6y hazard than we do to other hazards.

-Q All right, comparing the amount of your capacity that,goes towerd nuclear insurance with the amount that goes s.

to an automobile, you do automobile -

you do provide automobile coverage.

Is that right?

A True.

Q Is it more difficult for an individual to buy automobile insurance in Pennsylvania today because you have devoted a lot of your capacity to nuclear insurance?

O

^

n-Q Are you saying that reEardless of how much you devote of your capacity toward nuclear insurance, that would have no impact on how much of your capacity you would put toward auto insurance?

A No, because auto insurance is not a catasthrophe line.

Its rates are self-sustaining and actuarily predictable.

So, our deciclon with respect to nuclear does not affect the decision with respect to auto.

It will reflect the decision l

with respect to other catasthrophe lines or other lines that i

don't have the same degree of predictability as automobile insurance has.

Q Would you just quickly outline what those would be?

.=

57 O

A Well, earthquake, flood insurance, aviation insurance, off-shore oil rigs, pollution losses, things of that sort are all difficult catasthrophe lines; some product liability lines, for example.

Q The second question I have is, as I read the current Price-Anderson, Act,- it does not obligate you to provide any recovery for the cost of refueling a nuclear plant or the cost of reconstruction.

Is that correct?

A No, Price-Anderson applies to third party liability.

That's damage to the public.

Q Now, would you just quickly outline what the property damage comes under?

In there a separate property damage

()

coverage?

A There is a separate property damage cover.

This, however, is not compulsory.

The amount of this coverage is allocated to the owners of nuclear power plants and other nuclear facilities for damaEe essentially to their plant, thereby as much as they need or want.

There is no Eovernmental mandate as to what they should carry.

It's a voluntary commercial coverage, similar to any property coverage or industry, generally.

It's an all risk coverage.

It includes other hazards in addition to the nucleartnzards.

Q But that particular coverage does not include reconstru: tion and refueling, does it?

A I will ask Mr. Kelly to answer that.

He is more of O

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an expert on property than I am.

MR. KELLY:

I think we will cover the cost of replacing the destroyed core, for example.

That is, the fuel that was in Three Mile Island at the time of the accident represents a substantial element of value, over $70 million.

a When we can establish the degree to which it has been damaged, '

-+

^a, we will pay for the damage which essentially calls for our paying for replacing refueling reactor so that it can again operate.

This is a separate coverage, as Mr. Echmaltz has explained.

The reactor operator dces not have to buy property insurance.

He is not required by law to cover his own financial interests.

()

However, his stockholders and the bondholders who have provided their money for building the reactor will promptly change the management, if it doesn't buy all the private insurance available.

Now, a t the moment, the maximum amount of private. insurance'ava11able,'which is the two pools can give, is $300 million.

There.are reactors in the United States.

The TVA reactors, for example, are not insured.

In this case, the taxpayers who in the last analysis on TVA are scif-insuring the risk cf loss.

We had a very large loss at one of those TVA reactors in Browns Ferry.

That was not insured and did not fall on the pools and cannot come under our rate structure.

Where private industry is building power reactors,

59 fO it fee 1s an obligation to the stockholders and bondholders to buy as much insurance as is available, which is currently 300 million.

As a result of the TMI incident, our loss is going to be whatever loss we finally pay on the reactor, itself, including the fuel; plus the amount we finally pay to those

' people in Pennsylvania who establish a claim against TMI-3 a i

because this incident caused them either bodi1y injury or economic loss.

MR. BERNIE:

What's been the cost of cleanup, just if you know that, MR KELLY:

I don't know what the cost -- of course, j

the cleanup is really just done.

I know that we have made a O

epecia1 advance payment to oru for c1eanup of e20 m1111on.

MR. BERNIE:

Okay, thank you.

The last question is, j

was there any contact that you know of from any government official either in the executive branc5 or elsewhere, prior to

^

the evacuation order?

MR. KELLY:

There was no contact with us.>

What the Governor of Pennsylvania said to the people of the NRC was not something that we were a party to or had any voice in.

We did not know that the Governor was going to recommend an evacuation of this area, until he did it.

We knew that there had been an incident here.

We <:a21ed our claims committee together so that we would be in a position -- before the Governor's order, so that we would be in a position to act promptly.

Until the L

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l moment the order was issued, we had no advance notice at all.

Is that correct, Joe?

MR. MARRONE:

That is correct.

We did not have advance notice.

However, we did anticipate so that our first notice of the accident was Wednesday morning.

The next day, i

l 4..

yThursday,' was our annual meeting and reperbs indicated that' the accident might be more serious than we first thought.

Thursday, we sent representatives to discuss the matter with Met Ed.

We decided to open a disaster office on Thursday, I

before the Governor's order, and, in fact, prepared an office starting Thursday af ternoon.

Friday morning, we were ready to go ' efore the Governor's order, except for our pre packaged

()

claims forms and checks.

They were being flown by Charlie to Harrisburg and the plane was detoured.

He would have landed about noon, but he wasn't able to land.

The Governor's order

{

was at noon and our office was ready to go except for the checks.

Charlie' arrived that' evening and the next morning', we started our operation bright and early Saturday morning.

We did that by Charlie going to Hershey arena, since we couldn't get our press release -- we couldn't have people come to us first thing.

Charlie drove to Hershey arena with checks and offered to advance Ibnds for people to move to motels.

Dy 11:00 that morning, Saturday, the press release was read by Met Ed on our behalf, announcing that our claims office was open.

We did not have contact, except with the i G V

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61 i

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Commissioner.

The Commissioner was there Saturday, but prior to that, we did not have contact with the state authorities but we did anticipate it.

]

MR. BERNIE :

Thank you.

CHAIRMAN WRIGHT:

Representative Itkin.

.u.

s. o t

a BY REPRESENTATIVE ITKIN:

Q Mr. Schmaltz or any other tsambers of your group, could you advise the Committee whether you have returned any premium money back to the utility in the course of the Price-Anderson Act?

A Yes, we have what we call an industry credit rating plan that applies to all of the utilities as a group.

Under the terms of this plan, we hold premiums for ten years.

If the experience for that ten year period is favorable, we return a portion of the first year's premium to the utility.

This j

ten year lack of premiums keeps advancing.

Each year we go through a similar exercise.

We have returned premiums in every single year that the premium has been due.

That started in 1967 So, for the last 11 years, we have returned premiums.

That is because of the good experience accumulating during

.that period.

Q To the best of your knowledge or projection, do you r

think that particular situation would be in effect for this l

year?

l- ()

A It's hard to tell what the effect of the Three Mile

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1 62 GV Island incident will have for next year.

We will have to get a better feel on what the cost will be.

It's going b have some effect, but whether it uould wipe out totally any return is comething that I couldn't answer.

Q What was the total return for this year?

NR. BARDES:

It was slightly more tcan $2 million.

REPRESENTATIVE ITKIN:

$2 million?

MR. BARDES:

That was for 1968.

That represented approximately 85 percent of the money that was eligible for refund, if

.c had a perfect no loss record.

1 BY REPRESENTATIVE ITKIN:

1

!()

Q The second question has to do with what is the legal

=

basis for payment of the emergency assistance claims?

A Well, the Price-Anderson Act, itself, recognizes the desirability of emergency assistance claims which may be made without taking releases and without affecting any admission of liability.

When that provision was enacted, it was understood, Just as Commissioner Bartle explained ';oday, you are not going to be able to make an absolutely perfect assessment as to I

whether a claim is covered or not covered.

You do the best you can and the important thing, though, is to get the emergency e

assistance payments out as promptly as you can.

The basic, actually, is the fact that under our policy, we are permitted i

l to advance funds where there is eminent danger of contamination J{])

of property or eminent danger of injury to people.

That's kind l-x

63 1

i O

of an elastic period, an elastic clause, but that's the legal i

basis.

Q You mentioned that the claims were to be paid or advances were to be paid for those persons that live within a five mile radius of the accident.

Why is this so?

A We have responded to the Governor's recommendation.

He obviously felt that within that area, people should be moved out and we used that as the basis for our response.

Q Suppose I live six miles away and feel that the Governor had made an incorrect assessment and I feel that I am entitled to leave and entitled to recovery.

Why should I be rejected on the basis that one individual, who happens to be

()

the Governor, made the decision as to where the cutoff would be

?

A Well, you may still bring a claim.

In fact, the claims for all persons ]1ving within a 25 mile radius of Three Mile Island are reserved in this class action.

No doubt, some i-will take that position and if the claim is felt to be meritorious by the court, it will be paid.

Q Let me go to another question.

Why the 25 miles?

IG that the petitioners that have used the 25 miles --

A Yes, they have recognized as does everyone, I think, that the range of exposure has to be limited in some finite way in order to make an orderly processing of claims possible.

That was the radius that they picked, not the radius that.we picked or suggested.

()

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Q Let me go to the other side of the spectrum.

The Governor, deciding after he assessed the situation under those critical days to order an evacuation of all persons living within 20 milec of Three Mile Island.

Would you have immediateily honoredthepaymentofemergencyrelocationfor,Iwouldimagin}e, probably in the range of a couple hundred thousand people to relocate?

What would your reaction be to that?

Is there any legal basis on your behalf of honoring the Governor's evacuation order?

A No, we are not legally bound to honor anybcdy's evacuation orders.

It would depend, we think, on the reason-ablonens of the order.

In this particular case, the Governor's

(}

order wac entirely reaconable.

It is possible that someone, sometime, might make an unreasonable reccamondation.

We might have to recerve Judcment on it.

It would be very speculative, but there was no quection here.

Q>' And is the size of the finding interpret the degree of reauonability or reasonableness of it?

A Ho, I think it's not the size of the claim, it's the nature of the incident.

Uas there, in fact, a substantial releace of radicactive noterial on site.

Q Uell, for example, the Governor in his testimony before this Committee had been given advice by competent people to evacuate overyone within ten miles of Three Mile Island.

Now, had the Governor taken that advice, what would the position O

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• Ac of the insurance companies be in that regard?

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A I really can't answer a speculative question.

We 1

certainly would have examined it in the light of whether that J

was reasonabic and we might very well of come up with exactly the same answer that we did in'this case.

I just can't, you

~

know, I just'can't say that'wewo'uld automatic' ally'in"every l

case be governed by a Governor or other state officials' j

recommendations.

Q That's the line of questioning I was trying to get l!

at.

It's discretionary on your part as to whether you will 2

provide advances or not.

Although in this particular instance you took the Governor's suggestion of the recommendation as

()

far as the various colective groups to be evacuated within a prescribed area of a distance from the plant, you agreed to i

that.

That does not necessarily state that in the future that if there would be another accident requiring the same or even creater am5unt of evacuabion required ' that you uould fee'1' the same way.

There is no guarantee, no assurance that the residents that live in an area surrounding Three Mile Island will have immediate reimbursement, unless the only recourse of them uould be if you refused to be hardnosed about it, would be j

to seek Icgal redress in the court.

i j

A That's true and ue take that into consideration.

We know that the courts are also going to exercise a great deal of discretion on what is reasonable.

So, that is, of course, that

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it requires us to be reasonabic, also.

1 Q

And you said there was no advance conversation with any acency of the state in terms of what would be available for i

the people in' terms of evacuation?

In other words, the Governor, to the best of your knowledge, did not know when he issued that evacuation order that'.thoso". persons would2 receive.>

J advance payments for travel?

I A

I know of no communications, personally.

I have none i

and our other witnesses have said they are aware of none.

(

I cee someonc clse might wish to respond.

l MR. BARDES:

I will tell you what it was, j

Reprocentative Itkin.

When I went to the Hershey arena at

()

9:30 Saturday morning, first of all, the Red Cross asked me i

"you uill uhat" then various things, because the Governor was going to go to the arena, I contacted the Lieutenant Governor's office.

I had exactly the same thing, which was 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> after the evacua61on.

The only contact we had with the governmental-

- *+

j bcdy was that, that I know of.

Again, he asked, "what?

You are coing to pay money?"

So, this was not a chosen thing by any means.

i 4

MR MARR0NE:

The Nuclear Regulatory Commission was j

aware, however, that we had representatives to this area on Thurcday and they asked that we keep in teuch with them to lot them know what we are doing, which I was too busy to do.

My

- first contact was with Commissioner Bartle.

He ualked into our

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67 office with Mr. Simpson (phonetic) on Saturday.

REPRESENTATIVE ITKIN:

So, the Governor was not --

did not realize that this particular benefit existed or could exist?

W1. MARR0NE:

I don't know if he knew.

REPRESENTATIVE-ITKIN: -Well, I am just assuming from the reaction raised by another member of this panel here --

MR. MARR0NE :

Well, it's possible that there may have been discussions between some state authorities with the utility.

It may be possible that some state authorities had awareness of the Price-Anderson program and the insurance procram through their contact with the utilitics.

(s

(,)

REPRESENTATIVE ITKIN:

But the Governor made the ultimato decision and although it's hearsay ri;ht now or apparent conjecture on what was in the mind of the Governor, on the basis of how they reacted to a statement.

You know, it still leaves'some suspicion in my mind and other members of the Committee that the Governor was not aware that there would be any advances provided or through an insurance program to those people that had to evacuate.

Thank you, gentlemen.

CHAIRMAN URIGHT:

Representative Schmitt.

BY REPRESENTATIVE SCHMITT:

Q Gentlemen, I may be somewhat repetitious on some of the questions I am about to ask, because I was not here for the

[~')

full session through no fault of my own.

jIowever, if I get too

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4 68 O

repetitious, Mr. Chairman, don't hesitate to cut me off; I am somewhat specially interested in the insurance problem, because I spent 33 years of my life in my own insurance business and I am familiar with the basic insurances at least to the point that I can 'make some recommendations af ter we get the questions answered which may take some time.

The first question I would a.

like to raise and it may have been raised is the cutoff. point.

A five mile radius, for example, is one thing and a five mile and one foot is still another thing.

So, where do you reach a cutoff point?

How can you say to a person that's within the five mile limit that they may.be covered and then the person who taks one yard or one step or one foot further beyond that l( )

five mile limit does not get covered for his 1 css.

What did you do to correct this conditien?

A Well, I think that any time that you set a standard, whether it's five miles or six miles or five miles and a half, you are always' going to be faced with that problem.

You either have a standard or you don't have any and then ycu fall back on nothing to guide you.

It's simply reasonableness, which is a ver/ clastic thing.

I think we have to look at it two ways.

We were certainly guided by the Governor's recommendation who had far more information at his hand than wc did.

If the Governor thought that that was a reasonable recommendation, we were prepared to follow it.

This takes care of those who have the moet cause for emergency assistance.

They are the ones who M

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69 l()

are directly affoc,ted by the recommendation and presumably who you uoald expect to resp 6nd to it.

As far as people living outside of that radius, they may feel that they have a justifiable claim and that claim is being preserved, except that is not being treated on an emergency basis.

It is part of i

j those claims that are'being handled through the class action f

that has been filed.

Q Eut that claim that goes beyond the five mile limit is deluded, comouhat, from the person within the first quarter j

i or half mile or one mile.

At least, it is likely to be that i

way.

It's not necessarily so, but that perscn within the five 1

1 miles, from the extreme point of a five mile radius has more or

()

has less opportunity to get a large claim from the person who, say, has lived within the first half mile radius.

Would that j

be right?

A Well, that's true in one way, except that all of

}

these claims are relatively small.

They consist of actual out-l of-pccket expenses incurred for motels, transportation, lost wageo during the recommended period.

So, there will be ample i

funds to cover claims of this nature outside of the five mile l

limit, if they are established as being proper claims to pay.

They won't have a reduction, I don't believe.

It will be i

either whether they are entitled to the claim or whether they i

i are not.

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Q It would be probably less likely to be able to make l

62

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a claim, isn't that correct?

A They may be less likely, because they are outside of the ccope of the recommendation.

O This may be a redundant question, becauce I got the tallend of it when I came in.

Who officially pays the premiumE for the it.Jurance' thing?

A The pre. lum 10 paid by the operators of the nuclear power plantc.

Q Actually paid?

In other words, they write the checks-and so on.

Who actually pays the premium?

Does it not ultimately come back upon the consumer?

A Well, the only way that it would coma back upon the (n_)

con 3ucer, of course, would be indirectly as.a part of the operating coat of the utility, the same ac fuel oil or any other expanse.

Q Well, you are caying to me then that the premium that is being paid is actually 'being paid by the 'concume'r, b'ecause

~

it goca into the rata naking process and whatever your costs and expenaca are, comcona has to pay for it.

Therefore, that's who paya the premium, in other words, it's the consumer?

A Uell, I think that that's true in a general conse.

The concumera of any goods and product 3 indirectly pay the cost $

of --

Q You nou have the concumer that will be paying for incurance protection indir3ctly and you are getting the other 7_

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' person who is paying for insurance and get no benefits because he lives on the outside of the boundary.

Therefore, he is j

paying a premium fcr which he is receiving nothing, except that he may be helping his neighbors, cc to speak.

Do I make my point?

There are a lot of pecple that are going to be paying a premium for.which they cannot hope to'get'any" return $"$*'"'"

.y A

'iell, that fccucec on the problem of how you make incurance protection available.

This program puts the initial cost cn the operator of the nuclear power plant.

It's an l

operating cost which in borne ultimately by all of the rate 4

payers, wherever they may be.

The other way of making it the coverage available would be as some have suggested, to issue

({)'

direct policies to the people who feel that they are within the area of rick and have them pay for a premium.

Then, maybe they would have come kind of Icgal action over it.

This puts an immediate ccct on homeowners and property owners.

It really doubles the cost, in a way;~ perhaps 'not doubles it, but ErFatly increacos it becauce you are paying two premiums, one to the utility and one for each hemeowner or property owner that wants I

l to buy it.

I don't think that you can escape the conclusion that ult'mately thoce who purchanc electricity from a nuclear power plant must pay for the coct of the incurance and the claims that are produced.

Q Ic it general public information as to what that premium might be and what the loss might ce and in that

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i 72 availabic to this Committee?

l A

.We.have the premiums for nuclear power plants that we can make availabic to you.

Generally for the 1tibility coverage, it runs between 200 and $500,000 per year, which, of course, is subject to the credit rating plan that we will

' return *$p to tso-thfrd cI ^that 'hremium'if therd ar'e no 'lossch'.

i

~

Q That sort of leads into what are the component parts of a premium established for whatever amount of insurance is finally decided upon.

Is it not so that losses, well, overhead j

costs and expenses and so on, losses sp'ecifically simply or j

basically are what makes up'the premium.

Would that not be l

true?

(

A Well, the premium is set in the same fashion that i

liability premiums and property premiums are generally set.

The major portien is allocated for losses and then a portion is allocated to adminictrative expencec, commissions and so forth.

(

I will repeat the.o,uestien that I asked earlier.

Is this informatien availabic to us as a Committee er is it general public information or it it kept cecret?

A No, it's not kept secret.

He would be happy to make it available to ycu in any fashion you like.

1 i

Q At present, what is the per capita limit -

per capita isn't' exactly the right uord.

Uhat is the individual

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premium limit to the bect of your knowledce?

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A The maximum -that 's charged, you mean?

Q Either the maximum or the average.

The maximum is what I an reaching for.

A Maybe Lk. Bardes has the maximum of what we charge for the largest power reactor.

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v->uQ, mVhatsI am saying41s the amount of premium that"was'

/

mcdc for the protective locces that you might suffer, divided by the number of consumers that are involved in that particular premium paying incident.

What is the individual cost to him?

It was within your own cost and it becomes a part of the premiu,n.

A No, no calculations or computations of this nature are made in establiship; the premium, because the premium is

()

charged to the operator of the nuclear power plant.

It's not

-broken down in any way as to how much that would add, say, to a kilowatt hour of electricity.

If those computations could be made, it would be very, very small.

We don't do that or take that into account 'in establishing"our premiums.

Q However, if you would supply us with what I had requested, the things that go into making up a loss and the premium, we can do our own computing here.

So, I would like to have that information.

A We will be glad to supply you with the full details on the premiums.

4 Now, would you answer me this just roughly and basically, what are the clements of loss that you cover with the Q

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'The plans that ue have received from the Three Mile Island accident. break down into three categorics, I think.

The j'

-first of the energency assistance payments, which we have j

discussed.

w. s q..

Emergency = assistance ' what, + sir? ^ n'-

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A Those are the claims for the evacuation expenses and wage loss.

That 's the first category.

The second category j

are claims for perscnal injury.' That is either in the form of latent injury or latent cancer, for example, that might arise from the exposure or emotional distress.

1 j

The third category of claims is for property damage

()

and loss of use of property and loss of business profits, l

expenses and so forth, that are neither emergency assistance 4

nor personal injury.

Q All right, sir, futur9 loss, then, will be held

~' '"'

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~ scmednat' or would"be based "somewhat upon' the future = premiums?"

a i

I rr.can to say, will be based sencubat on your present loss, f

whether it to large or small; would that be a fair statement?

b A

Yes, the losses, as you know, have a large effect i

en the premiums.

Q Now, if they were salvaging there -- you made mention about salvaging the core.

It reminds me of the story of the fellow that lives in New York-and went on strike with I

the garbage cellection and things began piling up in his LO L

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75

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neighborhood.

His front yard was clear of garbage so somebody asked him how he did it.

He said, it's easy.

Urap it up with fancy paper, tie a bow on it and somebody will steal it.

I hate to have that apply to the core.

Seriously, now, that little joke was in order.

1 eSeriously,"what salvage is?possible from what you insure *and '

b

~

uhat is done about the salvago?

A l'm going to ask Mr. Kelly if he can answer that i

question for you.

MR. EELLY:

Representative, I can assure you that the salvage prohlem in this case is going to be somewhat difficult.

The first thing we have to do is get the core out j()

of the reactor containment building.

We now have the question of whether or not there are plants in the United States that can and will reprocess the core, salvaging the amount of unused fuel in it.

There are discrepancies between the technical experts, but there arethose who feel' that the core is, ~ pcrhaps,

)

over 50 percent still unable on reprccessing.

Uhen you are dealing with a $70 million piece of equipment, 50 percent is enough to be willint to work on.

One of the problems we have which I think hasn't been made clear, half of the capacity, I think Mr. Schmaltz did bring this out, is from foreign re-insured.

The German pool which has a very substantial interest in this loss has already advised us that there is a rep.focessinE facility in Germany that would be happy to work on the core, if

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76 AU we could get it over to them.

Now, we have a problem of convincing the State Department that we should ba permitted to cend the core to Germany for reprocessing.

In other words,

/cu are getting into international problems here, which are very Jifficult.

The whole point is that eur technical experts,

'and they are'cupposed to'bh very good, con' tend that"th'ere'is' Q20.nilllen.3alvage value in that core and over a period of t Lac thay would et it.

Il2?R3SEI!T!.TTIE S~;11:41??:

Twanty million?

MR. KE LLY:

TVenty million.

IiEPM:SENfaTIVE SCH:lI"T:

Is that after the efforts to recover cr --

A()

"Jl. :GLLY.

It would probably be reduced by the cost of rearacessing anj.;c haven ' t estimated tha t, because we still dcn't %ncu uhat it uoald be.

Their estinate is that the value of the ununed fual in that cere, if it can be cotten out is

~

at leest $20 million.

REPREGE!!?A?IVE 30ll'11T"':

Thunk you, centlemen.

I appreclate that.

Ik3 furth-ar questions, Mr. Chairman.

C:IAIIU4AII 'GIGIIT:

Frel Ttylor.

BY MR. TAYLOR:

Q Just one thing I forgot to ask when I was questioning ycu before.

Commissioner Bartle this morning said something about business claims.

What's the status of bustness claims?

(

)

I have seen a list of various claims that were filed.

I under-u.-

I v.-._-_._..,_~_.-_._._

77 t'

?'~'l stand you are thinking of emercency situations and then you have the business claims loss of business, business interruptions and so forth.

Are they being paid or are they all in limbo?

A They are all included in the class action.

What they are trying to do in the class action is to define the classes and give notice and so forth and while that's.being done, we are restrained from makinF any payment on that type.

Q In other words, the only payments you have made so far have been for perscnal --

A The emergency assistance program.

CHAIRMAN WRIGHT:

Representative Itkin.

LY REPRESEliTATIVE IThlh:

m) 4 There la a couple of points that I failed to make or questions tc ask, fhe firsi, one involves vendor liability.

Now, chere were several pieces of equipment that were not functioning properly whicn helped the accident to occur.

You are responsible to protect tae damage to the operator.

hhat now happens with respect -- can you make any claia against a vendor, if you beLieve that the cause of that faulty equipment, it contriouced to it in so:ca great measure or some significant maasure to the accident and the subsequenc damage that it crea ted ?

A La the third party liability si10, that's the Price-

'i,nderson progra.a, damage to the public.

All of the vendors are included as insured under the operator's policy.

So, we would

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not be able to make any claim against vendors.

The whole idea of the program is that the operators provide insurance for everyone who may be liabic in additicn to himself, as well as himself.

This provicion really is denirmed to protect the public by mal:ing certain that all of tha bases are covered, so to speak.

If the operator is not liable, -but some supplier-13, the operator's policy, the secondary layer of financial protec tion and covernment indemnity will all come into place.

O So, in other wordn, the vendor has a very, very limited liability and the only liability he may have is if the eculpment 'can fault'J that helped to cauce the accident, that all he i.e responcibic for is the -- I have a damaged valve.

,,;o)

I uill -ive you a new valve for free.

A Well, he muy very well have conciderable recponcibility with respect to components that he has warranted for the damage to the utility.

It nicht go censiderably beyond that.

O So, it may go beyond the valve?

la It may go beyond that, but th?ne are private contractual arrangemente between the suppliers and the nuclear -

epuratorc of the nuclear power plants.

Their scope varleE, from contrac t to contrac t.

O And you cre free of any type cf attempt to recover, for eyample, if you are acrecsed the full limit of tha liability which is $300 millien?

Ycu will take no efforte to try to i

recover sore cf that 1cas by trying to show blame or at least x_s

79 m

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infer blame on the part of a vendor who helped contribute to this type of an accident?

A Nell, I think that'c outside the ccope of our property coverage.

Would you 14.ke to renpand to that?

MR. M/,RiiONE :

I could help a little.

Vendora to

. 1 4

- utilitien, auppliers of parts or designs normally cecure from then contractual agreem?ntc tc the effect that the buyer for the utility will ualve any rights they may have against the nupply with roupect to potential damcre to on-citc property.

BY REPhESENTATIVE ITKIN:

Q Could you tell me why that is true?

Why is that an accepted facet in the industry?

O" I think I can respond to that.

The answer, I think, n

in very similar to what I gave wl-th respect to the third party liability.

There wac a desire to fccus responsibility and focus coverage on the operator to minimize the complexities of creca-action and the expences of multi-insurance and so forth, so that the operators of a nuclear power plant did requent un very early in the beginning of our property insurance program to waive any claims of subrogation against their suppliers.

We agreed to do that.

1 think that's the henrt of it.

Mr. Kelly may want to add a little bit.

MR. KELLY:

Schmalt: covered it basically, but 1

considering the actual cituation, ycu are manufacturing cotter

[ (3 pins.

You don ' t know where they are going.

One of the things L.)

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that is alleged to have participated, at least, in the incident at Three Mlle Island la the failure of a motor activated valve which stuck opan.

Suppcse on the investigation of the valve it is diccovered that that failure was due to the failure of a cottar pin.

Now, is the cuy 1:hc made the cotter pin liable for a loss which on our estimate is well over.$140 million and maybe a Ecod -- he can't possibly buy insurance for amounts like that.

When you are dealin; with his responsibility for the datace to the other equipment in the reactor, which can be that valve, for exemple, can be held recponsible for all of the dea > age to the core and the fuel.

He Just cannot buy insurance for it and if he feelz that he is coing to be posstbly held

('T lia bl e, he could refuce to perm!t his cotter pin, as far as he N/

can, frcm ever beinc used in nuclear reactors.

So, we have accepted the fact that tha, and as Mr. Marran? hac pointed out under the centrnetc bat *.??n the cuppliers and th? u tili ty, most of the. time the best we get is a contract under which they varrant their cwn coulp. Tent for the valu2 of that equipment.

In this case, we have hirad a Philadelphia lawyer to go over all of the ccntracte that were made by the major suppliers to ree th? d3Eree to which their 30uipment, which was under warranty becauce of the chcrt period of time that it had been used, can be taken cut from unior this cl.11m.

We are not tryin.7 to be nasty, but if the cupplier can be held rather than us, we are delichted if hic equipment was faulty let him bear O

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s at least that auch of it, which may not be very much but at least it's something.

RE?IiESE'ITATI'!E ITKIN:

Ic there certain levels of respcnsibility?

I have prescure industries make the pressurized valve.

Let hypothetically the valve fails to open.

Pressure builds upuin the. pressurizer and breaches the pressurization,,

carcinc a chutdcun.

Not enly in the valve inoperative and new to be replaced, but cc doec the precaurizer.

Doec the liability under the precent contractual arrangemente require that the manufacturer of that prescurizer be ultimately responsible for the damage caused to the prescurizer?

MR. KELLY:

Mott of the time, no.

Eut this will n(,)

(epend en the ucrd in~ cf the n. articular contract between Brett Bresser (phonetic) and the cuy who ic making the particular cen trac t.

See, these dreccer valves went into a whole raft of reactors.

REPRESENTATIVE ITKIN:

Then they were all bad.

MR. KELLY :

I am not prepared to say this.

You may.

In any case, we will be able, I think, to get out of paying fcr the valve, but 'eh?ther 1:e can cc beyond that will depend on the centract between Bresser and the people --

EEPRESUTTATIVE ITKIN:

I am not su~ceating that the manufacturer, when he delivered the valve, tha t it was not a properly manufactured valve.

I am saying what you have evidenced in this syctem, the valve in place, cauced it to malfunction.

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%i That is a situation that's been observed.

The concern I have and my concern about utilities are in a very special situation.

They hav3this opportunity in most instances to pass on their costs to the customars, which is basically the people.

So, they are not really -- dcn't really have to assume a loss to the same extent that a manufacturer would have s to assume 41oss, z

for defective canipment.

It just seems to me thet there should be some means of makin'; the manufacturer more renponsible for this prod' at than a simple replacement.

Then, you assess --

the chareholdere in thr' particular manufacturing company and therafere ycu put preocure on the management company to improve their prodret and make their product work better.

It seems (u,)

that th5s t;pe of arran7ement frees the vendor from assuming any Inr;e rarncncibilit: and therefere alac freec them from the prerstra cf encurin-that the componenta are des 1 ned to E

the best that they con do it.

In the nuclear industry, as you cre well aware, the components are so expensive and because they require auch,~rcat derrae cf tolerance, that that is Nmo thin <- that the manufac turinc and companics of the venders rhould he.ve in my jud r: men t, come responnibility for their product.

I dcn't see that now in the present assumption of liability in th.1 industry.

The other c;u.antion I would like to enh and that wan a point rained by fir. Bartle.

You said you had met with Met Ed.

MR. MARRCNE:

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REPRESENTATIVE ITKIN:

You me t with Mat Ed.

Did.you also meet with the insurance commissioner prior to Saturday?

M1, MARRONE :

I me t with M3t Ed Thursday af ternoon between tuo and six.

That wan Thurniay.

Friday we prepared our office.

Saturday mornin? late, I think Commissioner 3artle and Mr. Simpson walked into our office.

REPRESENTATIVE I KIN:

Walk 3d into your office that you set up?

PGl. M ARRONE :

The emergency effice.

REPRESENTATIVE ITKIN:

In the Penn --

IGl. :GLLY :

Penn National.

.Gl. MARDONE : Uith USF&O.

On Friday, Saturday and h

Sunday we were with USF/G.

Sunday ef ternoon tha Commiscioner a

helped us move to larcer quarterr at Penn rational, which we opened up on Monday morninr.

REPRESENTATIV~' ITKIM-Dat not rec 2 tre c k, for the record.

What was discussed at the meeting with Met Ed?

IU1. MARBONE:

I had with me an engineer, one of our nuclear engineers.

We asked them to describe what was taking place because we wanted to make an ascentment with respect to whether or not we should put an emergency office in place.

We spent several hours reviewing evente with them.

Things were still uncertain.

I had several conversations with the claims advisors, our claims advisors, telephone conversations and it was decided that it looked as if things were serious enouEh no p

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Ah (s./n) that ue should be prepared in the event that an evacuation would take place.

BEPRESE!ITATIV2 ITKIII:

That was on Thursday afterncon?

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?!r;rcSay af terncen.

Tharsday afternoon I colled USP&G and asked if u=2 could move in on them.

They said all richt." ' Friday morning we ' ent to USF60 and they

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helped uc to rent.i. uke, inutcli talcphones.

Charlie was on his e:oy fro:.1 Farminctcn, Connec ticut, with the checks.

We wore all ready to cc, really, Friday aftorncen except for the checkc.

REPRESENT.LTI'.~E ITKI?l:

Frid ay morning was the time that pecplc r2 ally Lc t concerned as cf the incident on rh

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clad no cd n ;.

Thursday o c a very, very quiet day.

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liet Ed cnd t, hey uere edvi: ins scu that thingc vere c;uita uncemfcrtable and you should etcy?

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fcll, ne, Uc ecked th:m to describe

hat une takin; place.

Ye made an evsluation, after consulting

"' 'h cur c t,::ff en -ine er r nd with cur c1cias advisors, that we thcu;ht the natter cc.uld develop badly.

Ue made the election te open the cffice.

REPI;ESE!ITI,TIVE ITKIII:

Heu did you make that assess-Did a nuclear ent neer advice you that thic could be a nent?

i rc'ully bad thinc and.ur cucht to stay?

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'v IEl. IW1RONE:

We thought that it had that potential.

REPRESEN"!,TIVE ITKIN:

Well, what rationale did you use?

After all, jou only got the infernation frca the

'Otropolitan Edison.

Ifl. IIARR0!F :

Yes, I trould also have to say this, we know -- we always kn3w that uith respect =to being prepared, ve would be road".

If te were going tc err, it was going to be en th? cide of caution.

So, even if it seems remote that ou r office was roing to be needed,

'e felt te '-cre going to open it.

'iEPRESENTATIVE ITKIN:

Did Mat Ed tell you that the chances were remote thIt thic uns going to be necessary?

MR. M ARROBE -

I don't recall their saying that to us.

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I de kno'r that we thourht it *:n:'

on31ble that the office might be urnd.

e felt th:tt if it ecc possible, we chould expend the enarty to be prepared on tirr.e.

REPRESENTfTIVE ITXIN:

' 'e ll, there must have been somethin~ that Met Ed communicated to you that led ' you to b311e"e th !t thin ~n were not r.~ cocure.

!G. MARRONE :

' dell, we knew that an accident was takin" place and that it had not been reco1ved.

That was

enough, i

l REPRESENTATIVE ITKIN:

Did 'ht Ed offor any l

Information to you that might have led that an evacuation l

mir ht be neconnary?

IG. MA RROF. :

Our en~1neer, staff engineer spent some b) o n.

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86 pw) time with their engineers describing what they were aware of with respect to what had taken place.

Aga in, factoring the feeling that

.'e wanted to be prepared, no matter taat the event might b' remote, Je ciaply went on the information that ue had.

There was an accident taking place.

It might be serious.

We wanted = to be ready.

RSPREST/TIV" ITHI":

Did : et Ed urce you to do this?

Nhy should yc.

do it on your own voliticn?

You are responcibit to pret2ct your clier.t'c interects, ycur policy-holder's intereste.

Here you are.

I...ean, my insurance agent dcean't c me to 7;y door and wait for coc.2 accident to happen.

Ut. MAERCNE:

Ue are a little rare, I suppose, m

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PEPhEGEN?"TIF: IT:CN:

I ara juc t wcndering, did IMtropol'. tan Edicon tnciarJe ycu to stay 1 FE. "AERONE:

I dcn ' t r netr.ber that t. hey encouraE;ed us.

They offered tc cocpertt?

n3 accist uc to tha extent that they could.

't.'e utad their telephones and -their offices for a t!:n th,t,f ternc :n.

Thu yve t'

co:ne advice with respect te ~he tha majcr incurann pclichs ;ere in to.en.

They heloed us to the extent tha t they could.

BEPRE ENT."TIVE ITXIN:

In your own words, deceribe to me wh it yot:r fealMen wore af ter talkin-to Metropolitan Edison with respect to the ability of the plaat on 5!cdnesday af ternoon MR MARR0NE:

Thursday.

BEPRESENTATIV ITKIN:

Thurclay, in view of what they i

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MR. Mf,RRC I'.: :

Well, it goes back quite a way, but we felt that after cur d'.ccucci.cn with thm. that th; accident was p)tentially nerious.

It tcc ccnceivable that an evacuaticn mi ht be decirable er c rdered and that te aht ulci take the steps J

to preparo for'that, if that thould be reallned.

We knew there war a chauce thac ' 3 ni;ht be.: pen lin time and energy for o

acc.:e th ' n; th:.t.m '.;ht no t ccmc tc paca.

We felt that v;e chould be prepared.

Te h '.d 1cnc prepar.2d fcr uct such an emergency.

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'<'e have thic canual prepar:c fcr man: yearc.ith recpect to ratpondinc to an e. riancy.

.!e felt that we chould go through the c topc n 2cc ccar;. to bc ready, chculd cn ovacuation be ordered.

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IlEPF2 C_'N'"ATIV" ITI'IN :

I can appruclate your i.m t a rpre t a t ic n.

What I m trying tc deccr'.be for you is the Erounja fcr that ir Mrpretatica and that's :ny I am preccing

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Ivan, why 10 it im?crtant for you tc. cet r t tail:1 anc'rer9 J-', are verL'_q cn badtering the eitnenc.

'That are you laadinL to" "FPRECENT/TIVE ITIN:

'.!u l l, I think it comac to the queetien cf ho., ceriarc the quartion,ar as far as Met Ed and why ;e 11ted until Fri. day to ccncider cny type of an evacuatior).

l Th? public here in th ic cc:.^.aun ity

- ' n ll, all we knew about it n-

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cn Wednesday is that it was an incident.

There was no conversation and then it went away.

Then, on Friday, poof, radiation exposure.

Everyone started to panic.

What I am trying to learn, Mr. Chairman, is whether the people and the public representatives ought tc have been aware of any i

y, uncertaintles-that were going.on,at the plant.mi ae>+

--m MR MARRCE:

I think I can respond by saying that

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it was something that we elected to do, based cn our own

• jud gment,

t.'e were aware, as we were doing it, that it might be absolutely unnecessary; but, again, we felt that if we were goint to err here, it had to be on tha side of caution.

We were determined to be ready.

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REPRESENTATIVF ITKIN:

Okay, see, you were ready on the side.cf caution, preparing that there may be an evacuation.

Yet, the ceneral-public didn't have the same oppcrtunity.

They were not told, to the best of my knowledge, that an evacuation might be> necessary, even in remote circumstances.

They were not tc1d anything.

Yet, you were aware of it.

That's all.

MR. MARRONE:

We were not told that, either.

We were not tc1d that an evacuation might be necessary or would be necessar'/.

'dc thought to be prepared, should it come about.

REPRESENTATIVE ITKIN:

Thank you.

BY CHAIRMAN WRIGHT:

4 I assume when you use the term property damage, you

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are essentially referring to damage to TMI, Metropolitan Edison h' ; TNev e4W k esern 2g% -Wg4, h b eew t a gg... fD,d'

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property in this particular instance.

Is that correct?

A Ye s, that is rirrht.

C And is it correct for me to assume that this unique typ2 cf cituatien ic re;: lated prim rtly by federal law and not by state Itu?

A*

I think in a sense that's true, that it primarily'is regulated ')y @ ral lau

't far 3r the third pcrty liability co foram la cc:ncarned, that'n the protection for the public, not the pr n a e r t:. el. r ;e to tho po*x r plant, itself.

The

!!uclear 2e ;ulatory Co:nminnlon establishes within the context of tM la":, the scope of th7 covera 7e that is required tc meet fin,ncial protection.

It ravious our policies, publishes them O

in t'!c ' vbral r 2. in tar and a7. mrove r Hr m.

It also establishes v

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eneral 37 t W th" cost of rur incurances are reasonable in t'r ' arms of re1cenab11.

Although, it did not relinquish ccT,1-tely thir authorit 7 It dces not taka this authority ccmpletely atay from the ntate.

The rates for our insurance'

.re i do throm h 11 ceased ratian burews, licensed by the state Tny are fl19d or fillne,re required and so forth.

So, there ic 1 ccr' 01' dun 1 re"u h tor ve spon e.ib ility here, I think.

CH AIE?^,N '!RIGHT:

Y' thank you - Mr. Bardes.

'n, STR P S:

Mr. Cha ir:ran, if I cculd just make one c1::r i fic a tion.

The cuent ton ons asked before whether we were knc :ledcouble of' ihan the contact with the Governor's office cr the cvernment bcd ica niere first inttlated.

I stand corrected.

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'..ie had cur annual tr.ce tinc, as Mr. Marrone indicated, on Thursday,.:hich uculd be the 29th.

At thnt time, there was cr.ntact i::ade :lth the Insurance Department :tskinr: uhat was our r 21at!cnahlp Mro.

"e lod ivt.ced the Inst.rance Department thct Je had cent rcprocentatives down to discucs with Metropolitan Edison what the situation wac.

I don't remember the detail: of 'hrt, but th't ac the cict of it.

I don't unnt tc yd:e an'; incorraet atotement tha t ue didn' t have any cont?ct.

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2, I think I had a merrage to call the Et:tte In. cura:'ce I's ; art :an t, uhtch I did not do.

I was Just tco bt:cy to do.

That had Nen relayed to me frcm our home r^

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cff'.ce.

Thn t r.l: ht hrte been Fri'ay or 'Nturd3'/.

I don't rur2mb2r.

'" DIE!F ?! 'OM '!T:

2ny othor ernnents nny of you

,ont]+1on 'ould 7 the to m ke?

(No renponae.)

C'f AIEI!.^.Il ' TtIGHT :

' 'c t'unk you fcer ba lni v:lth us

..!lrur tectinen't ir valueb2e.

Fer hhe next reveral months, if c

h::ve thoght cf av:- rt r, esticnr te make to us regarding the

'f. n r '. th' St:' t, ci' fenne:rlynn ia, u> appreciate Lt.

IT. SCIC" LTI:

':e thank you very much, 'Ir. Chairman.

He will rupp]; the 'nforrntien that var recuented and if we do have au metticnn or if we do prcorre :ny material bearing on

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this, we will be very happy to submit it.

Than!: you.

CHAI:i:i"H '.'RIGi T:

T:10 crating is adjourned until next Olttr C7 'ahen '.'a 11.11 Unik 1:ith the IIcalth Ccmaiccioner.

(The hearing terminated at 1:00 P.M.)

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.' hc rc b; ce rt ~ f' t hat tha ?rcceedin;c and evidcace trken by r.o htf'crr t?u ~:me C31ec t Cc r.ittc e - Three Mile T': land are fully anr' a c c : ' 017 '.nd i; :.t r '3 in ny notoc and that t"It t r.'. true trd cerr :c'c ';ranceri?t of car?.

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