What Is a Nuclear Hazards Clause?
A nuclear hazards clause is property insurance policy language that excludes from coverage any damage caused by nuclear reactions, nuclear radiation, or radioactive contamination. The nuclear hazards clause is intentionally broad to protect insurers against paying the extraordinarily large claims that could otherwise result from such events, whether they are controlled or accidental, and whether the damage is direct or indirect. However, an insurance policy will still cover losses from certain otherwise covered events, such as fires or theft, even if those events are caused by a nuclear event.
- A nuclear hazards clause is policy language in property insurance that excludes coverage for any damage resulting from nuclear activity.
- The clause does not exclude normal events caused by nuclear activity, such as fires or theft.
- Insurance companies include nuclear hazard clauses because the potential loss from nuclear activity is so large that an insurance company would not be able to financially bear the burden.
- Conversely, if insurance companies did provide nuclear coverage, the premiums would be so high that the insured would most likely not be able to afford them.
Understanding a Nuclear Hazards Clause
Insurance companies began excluding nuclear events from coverage in the late 1950s. Standard homeowners' insurance policies now contain a nuclear hazards clause excluding from coverage losses from nuclear events. So do commercial and farm property policies, auto insurance policies, and inland marine policies, among others. The nuclear hazards clause means that if you discover that your property has radioactive contamination when you go to sell it, you can’t file a claim with your homeowner's insurance. You would have to sue the entity that caused the contamination to recover your losses.
Nuclear hazards are similar to other major hazards that insurance typically doesn’t cover, such as acts of war and terrorism, in that the potential losses are so large that insurers cannot afford to cover them. If such an event occurred and if it were covered by insurance, the claims would be so massive that the insurers would go out of business. On the other hand, insurers could attempt to provide coverage for such events, but the premiums would be so high that policyholders may not be able to afford the premium cost.
The nuclear hazards exclusion also applies to the legal liability coverage that comes with property insurance policies. In addition to not being covered for property damage related to nuclear acts, policyholders also aren’t covered for legal liability damages related to nuclear acts. Again, however, the fire exclusion applies, so if the legal liability claim results from a fire caused by a nuclear event, the policyholder would be covered, but only for the part of the claim related to the fire, not for the part related to the nuclear event.
This isn't to say a homeowner would have no recourse if, say, a nearby nuclear power plant should experience a meltdown. The plant itself would carry liability insurance that would cover homeowners in such an event. The same would hold true if say a train or truck carrying nuclear waste overturned. Both the carrier and the entity that shipped the material would have insurance to cover such losses.