The Nuclear Hazard Exclusion on a CEA Policy

The California Earthquake Authority has numerous exclusions on their property insurance policy form…

One of those many exclusions is a “Nuclear Hazard”s exclusion. Is your property covered by a nuclear issue on your CEA policy

What is Nuclear?

Cambridge defines “Nuclear” in one of two ways:

1. “being or using the power when the nucleus of an atom is divided or joined to another nucleus.”
2. “relating to weapons, or the use of weapons, which use the power produced when the nucleus of an atom is divided or joined to another nucleus.

Points one and two here can be viewed as Civilian with power generation usage and Military with destruction purposes. Although there is some cross over between these two, in this authors opinion. [For the record additionally there is also a full war exclusion from CEA policies as well.]

Dictionary also have multiple definitions, five in their case, with the second one perhaps being the most useful: “operated or powered by atomic energy.“

None of these definitions seem to bring up research of any kind, either civilian or military.

In the case of the Cambridge definition twice you are subjected to either “divided or joined ” wording which is signficant.

Divided or Joined – Fission vs Fusion:

There is essentially two types of nuclear reactions Fission and Fusion and they are different. It should be clear that both are considered nuclear and hence are part of the “exclusion.”

TWI Global states that “Both are nuclear reactions that produce energy, but fusion and fission are not the same. Fusion involves combining two light nuclei to form a larger nucleus and fission involves the splitting of a heavy nucleus into two lighter ones.”

Energy.gov explains further: “Fission occurs when a neutron slams into a larger atom, forcing it to excite and split into two smaller atoms—also known as fission products. Additional neutrons are also released that can initiate a chain reaction.” With Fission “Uranium and plutonium are most commonly used.” In power plants fission is “heats water into steam” and creates vast amounts of power.

Fusion on the other hand, “occurs when two atoms slam together to form a heavier atom, like when two hydrogen atoms fuse to form one helium atom.” Fusion is “the same process that powers the sun and creates huge amounts of energy—several times greater than fission.” Fusion reactions are not really commercially used at this time and “are difficult to sustain for long periods of time because of the tremendous amount of pressure and temperature needed to join the nuclei together.”

The military can use both fission and fusion in weapons.

Fission and Fusion are not the same process – but they both are under the umbrella of nuclear: Nuclear Power, Nuclear War, and Nuclear Resarch.

The CEA Earthquake Exclusion:

On the CEA policy, under Losses Excluded: “Controlled or uncontrolled nuclear hazard or any act or condition incident to any nuclear hazard.“

The Term Nuclear Hazard is defined within the CEA policy. Definition 17 states: ““Nuclear hazard” means any nuclear reaction, radiation, or radioactive contamination, or any consequence of any of these.”

In addition there is a War Exclusion, which we discussed in depth as well. That exclusion as well has an exclusion that includes Nuclear. On the same CEA policy, under Losses Excluded: “Declared or undeclared war, acts of terrorism, insurrection, rebellion, revolution, warlike act by a military force or military personnel or any person, destruction or seizure or use for a military purpose, and any consequence of any of these. Discharge of a nuclear weapon will be deemed a warlike act even if accidental.“

It seems excessively clear here that if anything earthquake related to Nuclear war, power generation, and even transportation that it is excluded on the CEA policy. A nuclear mishap involving research would be excluded as well it seems. Would the mere transportation of uranium that caused an earthquake be excluded? Probably, possibly, we do not know – its not completely clear.

What is an Exclusion?

An exclusion is a limitation on an insurance policy. IRMI defines exclusion as “a provision of an insurance policy or bond referring to hazards, perils, circumstances, or property not covered by the policy. Exclusions are usually contained in the coverage form or causes of loss form used to construct the insurance policy.”

Thimble, a small business insurer, has a good definition of exclusion too: “an event (peril, accident, incident, or accusation) that an insurance policy will not cover.”

In summary an exclusion limits or removes coverage. However just because something is NOT listed on the exclusions list does not mean that its covered.

Lastly the exclusions are not the only limiting factor on insurance policies – there are other terms and conditions that must be met.

Why is there a Nuclear Exclusion on CEA Policies?

A nuclear exclusion is not special to earthquake insurance policies. Other non earthquake property policies contain Nuclear Exclusions as well. The homeowner Policy ISO HO 00031010, Insurance Services Office, Inc 2019 edition, under Exclusions, Number 7 lists “Nuclear Hazard.” Therefore nuclear exclusions can be found on various forms of property insurance policies.

Without citing any outside sources, this author believes that nuclear exclusions are there mostly because they are so unknown and difficult to quantify. Can a Nuclear explosion cause an earthquake? Can a Nuclear power plant cause an earthquake? We do not know much. But it is certain that there is not enough information to work the risk model into the pricing model, hence they have wholesale excluded coverage for it.

Why Does the Nuclear Exclusion Matter if you are Purchasing a CEA Policy?

More than likely the creation of an Earthquake from a nuclear event is not the main consideration when purchasing quake coverage. However, when you consider the possiblity, it does limit your coverage. Therefore its simply important to understand that the CEA does not cover you from the peril of an earthquake that was created by nuclear event.