Graph G has perfectly reliable nodes and edges that are subject to sto
chastic failure. The network reliability R is the probability that the
surviving edges induce a spanning connected subgraph of G. Analysis p
roblems concern determining efficient algorithms to calculate R, which
is known to be NP-hard for general graphs. Synthesis problems concern
determining graphs that are, according to some definition, the most r
eliable in the class of all graphs having a given number of edges & no
des. In applications where the edges are perfectly reliable and the no
des are subject to failure, another measure (residual node connectedne
ss reliability) is defined as the probability that the surviving nodes
induce a connected subgraph of G. Referring to such a subset as an op
erating state, the measure is not coherent because a superset of an op
erating state need not be an operating state. This paper proposes a ne
w definition of network reliability that handles the case of node fail
ures; it is coherent. We determine many of its properties, and present
several analysis & synthesis results.