Insurance and Drones: A Rising Risk

Summary by Karen Borg, Butler Rubin 

Here are some key takeaways from the presentation on “Insurance and Drones: A Rising Risk” by Frank Kehrwald, Senior Vice President at Swiss Re:

• FAA regulation governing the use of drones is in flux. Current FAA regulation prohibits commercial use of drones and limits recreational use to 55 pounds or less with minimal restrictions. Non-recreational use is limited to government or research use. Non-recreational government or research-related use of drones requires a Certificate of Waiver or Authorization (COA) and non-recreational commercial use of drones requires a Special Airworthiness Certificate (SAC). COAs and SACs both require the operator to have a pilot’s license. Operators generally do not comply with these regulations but the rules are expected to change by 2016-2017.

• The FAA proposed draft rules on February 16, 2015, allowing commercial drone flights. If implemented, these new rules may lead to increased use of unmanned aircraft systems (UAS). The final rules could be published as soon as 2016 or 2017. The FAA draft rules do not yet deal with privacy concerns and do not require private insurance for drone users.

• Potential legal issues raised by the use of drones include: violating FAA or Transport Canada Rules; physical damage and bodily injury; trespass; nuisance; invasion of privacy; and stalking and harassment.

• Although many ISO forms provide coverage for “personal and advertising injury” or “personal injury,” potential personal injury offenses that may be covered from the use of a drone are limited to the insured’s capacity as a landlord. • ISO drone endorsements CG 21 09 and CU 21 71, effective June 1, 2015, exclude all Unmanned Aircraft without exception.

• ISO drone endorsement CG 24 50, effective June 1, 2015, provides limited coverage for designated Unmanned Aircraft, but only with respect to operations or projects designated in the Schedule of the endorsement. CU 21 24 provides an exclusion for non-owned aircraft. ISO does not require compliance with FAA regulations.

• None of the drone liability policies have provided coverage for invasion of privacy/trespass, nuisance, wiretap laws, or fines by the FAA.

• The definition of “FAA guideline” remains open with respect to the wording of certain specimen policies covering drone liability.

• Drone claims may be excluded, pursuant to the exclusion for liability arising out of an aircraft that is found in many policies, depending upon the relevant policy’s definition of “aircraft.”

• Potential future uses of drones include search and rescue, monitoring, disaster management, crop management, inspection, use in the oil and gas industry, entertainment, and package delivery.