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If a creature has an ability that is like a power. For example, an undead with fear ability. Are the character allowed to save using their Arcane Resistance Edge?

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No. Arcane Resistance only gives an armor bonus or Trait roll bonuses when "hit by damage-causing arcane powers, and […] when resisting opposed powers" (SWEX, p. 20).

Additionally, Arcane Resistance only works against the type of powers chosen when the Edge is bought. The choices available match the Arcane Backgrounds available in your game.

For Fear specifically, Arcane Resistance doesn't apply unless the fear is the effect of a Power. The Fear rules on page 100 of the Savage Worlds Explorer's Edition are independent of the Powers system and aren't affected by Arcane Resistance (although see the final paragraph below for a possible exception).

Even then, it's a judgement call on a case-by-case basis depending on the fiction. It can be easy to forget that Savage Worlds is a "fluff matters" system. If it's a "magic spell" (assuming that the PC with AR chose "magic" and not one of the other Resistances), then Arcane Resistance applies. If it's a natural effect merely being modelled as a Power, that doesn't qualify as a "magic spell" and Arcane Resistance doesn't apply.

Four cases to illuminate the difference:

  1. The PCs meet a dragon. The dragon has Fear –2 as a Special Ability as described in the Savage Worlds Explorer's Edition, page 100.
    • Arcane Resistance (magic) does not apply.
    • The fiction here is that dragons are just frightening to behold.
  2. The PCs meet a Night Terror, a wraith-like thing that's legendary for its fearful gaze. The creature has a Fear Power that models its naturally-terrifying gaze.
    • Arcane Resistance (magic) does not apply.
    • The fiction is that it's a natural ability that only works if the creature tries to use its fear-inducing gaze. Despite rolling the Power, it's not a "magic spell" that the creature is "casting".
  3. The PCs meet a Lich, which knows the spell Absalom's Word of Terror and casts it on the PCs. Absalom's Word of Terror is the Fear Power with the Trapping, "A single word in the nightmare language of the Elder Gods, at which the mortal mind quails in terror."
    • Arcane Resistance (magic) applies.
    • The fiction here is that a spell is being cast. In addition, the Trapping means the spell can be cast while the Lich is unable to move, as only a single word needs to be uttered.
  4. The PCs meet Gazaneth, an astral traveller from another world with the ability to psychically induce terror in puny human-things. Gazaneth has the Psionic Background and the Fear Power, with the Trapping, "A mental intrusion induces abject terror by directly activating the most basic flight reflexes of the brain."
    • Arcane Resistance (magic) does not apply.
    • Arcane Resistance (psionics) applies.
    • The fiction is that a psionic "spell" or "power" is being "cast", so people resistant to magic spells are out of luck, while people with a mind hardened against psychic intrusion are going to be prepared for the mental assault of the fear power. Additionally, the Trapping means that targets that don't have a brain-wired flight reflex (such as a sentient swarm-intelligence of bees, perhaps) will be immune. If the trapping were, "The psionic induces terror by forcing the target's greatest fear to the surface," then the bees might be affected just fine, but a character with amnesia might be immune.

However, it's worth emphasising again that Savage Worlds is a "fluff matters" system, so Arcane Resistance may also apply to non-Powers if the GM judges that the fluff warrants it. For example, if a character has Arcane Resistance (weird science) and is standing next to the Doom Engine when it explodes, the GM might rule that the explosion is partly arcane (weird science) and grant the Arcane Resistance benefits to avoid some of the explosive damage. Similarly, if the characters are travelling on the Plane of Magic, which causes periodic checks to see if the characters are altered by their exposure to raw Magic, then perhaps the character with Arcane Resistance (magic) gets the AR benefits on that check and/or suffers less significant alterations.

The key in all cases is the answer to the question, "Does the game fluff say this is a magic/pscionic/etc. effect?" If the answer is "Yes", then the matching Arcane Resistance will apply. If not, then it won't.

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+1 for "fluff matters system", that's an excellent turn of phrase. –  mxyzplk Nov 5 '10 at 2:50
@mxyzplk …You're right, and I hadn't realised it until you mentioned it. Much more plainly informative than "fiction first" that I once blogged about, or "colour first" that Big Model people use. –  SevenSidedDie Nov 5 '10 at 16:13
What's the antonym, just "rules first" or "crunch first"? In a 4e question I was trying to explain that that game in particular is "rules first," you can't try to figure out how much force a Tenser's Floating Disk generates, for example, it just is because the rules say it is. Some would call that "gamist" but your phrase makes it clear that some games specifically do say fluff matters, so it's not really gamist vs non gamist, it's more of a "how do you read this text" - as literature or as a law book? –  mxyzplk Nov 5 '10 at 18:17
@mxyzplk I don't know that there's a good antonym already. "Crunch uber alles"? "System first"? If you go by the Big Model, "system" and "color" aren't even antonyms, just two of five elements in a big box… –  SevenSidedDie Nov 5 '10 at 19:03
Perfect, thanks for clarifying it. –  David Allan Finch Nov 8 '10 at 13:43
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