Risk and Safety Concerns

Insurance Requirements for UAS Operators

Commercial Insurance Considerations

Homeowners Insurance Considerations

Invasion of Privacy Claims

Conclusion

Background

Today most people are familiar with the use of UAS for recreational, business, law enforcement, and military purposes. These devices are widely referred to as “drones,” and in addition to being available from specialty manufacturers, can be found for sale in hardware stores, numerous retail and electronics outlets, hobby shops, convenience stores, and online. Tractica, a consumer marketing intelligence firm, believes consumer drone sales were about 6.4 million units in 2015 but expects that number to surge to nearly 70 million units by 2021. This surge in sales is driven in large part by technological advances in equipment miniaturization, software, and stability control. As the popularity of these devices has increased, prices have dropped rapidly with highly sophisticated models now selling for as little as a few hundred dollars.

Whether you refer to these devices as drones, unmanned aerial vehicles (UAV), or remotely piloted vehicles, the idea that a machine could be remotely controlled goes back to 1898 when scientist Nicolai Tesla designed, built, and introduced the first radio controlled boat at Madison Square Garden in New York City. But it wasn't until the late 1970s when General Dynamics developed the Tomahawk cruise missile for the U.S. Navy that the full capabilities of an unmanned aerial vehicle could be imagined.

Today UAS are used commercially in a variety of industries and government agencies, and the future is likely to see widespread deployment into areas only imagined today.

The term “drone” probably arises from the development of unmanned remotely controlled aerial vehicles, used in the training of anti-aircraft crews. One of the earliest such target drones was the British DH.82 Queen Bee, which was developed in 1935. It is believed the name “Queen Bee” led to the present term “drone” to generically describe a wide variety of UAS.

Regulations

Rules of operation of remotely piloted UAS are primarily promulgated by the Federal Aviation Administration (FAA). Such regulations dictate how high drones can fly; impose limitations with respect to airspace around airports, stadiums, and other heavily populated areas; mandate certain owners to operate drones within line of sight; and regulate the registration of UAS. Not all UASs require registration but most recreational flight is subject to the following FAA Safety Guidelines:

• Fly at or below 400 feet
• Be aware of airspace requirements and restrictions  www.faa.gov/uas/where_to_fly/airspace_restrictions) FAA website
• Stay away from surrounding obstacles
• Keep your UAS within sight
• Never fly near other aircraft
• Never fly over groups of people
• Never fly over stadiums or sports events
• Never fly near emergency response efforts such as fires
• Never fly under the influence of drugs or alcohol

Separate rules apply for flying Model Aircraft.

Many states have also passed laws aimed at protecting people from UAS use, with Vermont and Oregon even restricting the government's use of UAS. Generally, most states with UAS laws limit their use in private spaces, backyards, crowds, and government buildings.

California is at the forefront regarding privacy regulations, making an individual liable for invasion of privacy when a UAS operator records or attempts to record any type of image or sound of a person engaging in a personal or family activity where that person would have a reasonable expectation of privacy. Similarly, in Texas, The Texas Privacy Act addresses privacy concerns and the potential of drones to be used for spying. The Texas law prohibits the use of drones to take photos of people or private property with the intent to conduct surveillance. It also prohibits possession and distribution of illegally obtained photographs.

Other states have similar drone laws. In Kansas, it is illegal to stalk a person using a drone. In Arizona, Utah, and Louisiana, drones are prohibited from being flown near police and fire stations. In both Tennessee and Oklahoma, drone operators are prohibited from operating near critical infrastructure such as power generation, transmission, and water treatment facilities

Because regulations governing UAS operation are rapidly evolving, it is incumbent on UAS operators—whether commercial, private, or governmental—to identify and understand the laws that they are subject to.

Risks and Safety Concerns

UAV operation is also subject to many of the risks and hazards found in the operation of automobiles, boats, motorcycles, aircraft, and mobile machinery. Following is a sample listing of recent UAS-involved accidents and incidents. These incidents resulted in physical damage, property damage, personal injury, or criminal acts, but they illustrate the types of claims that undoubtedly will continue to occur and that we are sure insurance underwriters are closely following.

• In December 2018 and January 2019, drone incursions into Heathrow and Gatwick airports in the UK halted operations for several hours while officials investigated.
• On December 13, 2018, a Boing 737 passenger jet was damaged by a mid-air drone hit. In November 2018, a drone crashed through a car window injuring a child in Eau Claire WI.
• On October 1, 2018, a San Diego man was cited for operating a drone that interfered with a shark-bite victim rescue.
• In August 2018, Venezuela President Maduro survived a drone assassination attempt.
• In July 2018, a drone was recovered from near the tarmac runway at San Francisco International Airport, prompting an investigation.
• In February 2017, a drone struck the window of a 27th floor apartment at 20 Waterside Plaza in New York City. The resident was using her computer at the time the drone shattered her window.
• In February 2017, a man with a history of voyeurism and his girlfriend were arrested on suspicion of flying a drone used to videotape people in their bathroom and bedrooms in the city of Orem, Utah.
• On New Year's Eve 2016, after filming a view of downtown Seattle, a drone suddenly accelerated and slammed into the Seattle Space Needle roof. Space Needle officials reported that this was the third time a drone had been recovered from the Space Needle roof.
• On January 26, 2015, a drone crash landed on the White House lawn. Immediately after the incident, the White House went into lockdown. The U.S. Attorney decided not to charge the drone operator, Shawn Usman, after determining the drone was not under his control at the time of the crash.
• A drone crashed into the face of newspaper photographer, clipping the end of her nose and cutting her chin. The drone was a promotion by TGI Fridays called “Mobile Mistletoe.” The drone carried a cargo of mistletoe above diners encouraging them to kiss.
• The owner of an aerial photography business was sentenced to thirty days in jail and was given a $500 fine after a drone he was operating crashed into people during a 2015 parade and knocked one woman unconscious. Judge Willie Gregory of the Seattle Municipal Court acknowledged that the collision was accidental and not intentional but felt a punishment was in order.
• During a Christian Democratic Party campaign in September 2014, a drone crashed in front of German Chancellor Angela Merkel. The drone was piloted by a German Pirate Party member as a government surveillance protest. No one was harmed, but the situation raised concerns over similar experiences using weaponized drones.
• At a triathlon in Australia, a drone was being used to photograph competitors when it crashed into a triathlete, causing a minor head wound that required stitches to close. The drone operator, photographer Warren Abrams, claims that the drone crashed after someone in the audience stole control of it from him.
• In the fall of 2013, spectators gathered at the Virginia Motorsports Park for the Great Bull Run Festival. During the event, a drone being used to record video crashed into the stands, injuring several people.
• In Washington, a news helicopter was covering a fire when the pilot noticed a drone flying dangerously close. Nothing happened in this incident, but the FAA reports that it receives dozens of reports a month of drones flying too close to manned aircraft
• In July 2014, a drone narrowly missed colliding with an Airbus A320 as it was taking off from London's Heathrow airport. The Civil Aviation Authority (CAA) rated the incident as a “serious risk of collision,” the top rating it can give.
• On January 20, 2015, a drone carrying methamphetamine crashed into a parking lot in Mexico near the U.S. border. According to the DEA, drones are becoming a common means to transport drugs over the border.
• The Detroit Tigers were playing against the Baltimore Orioles in a Major League Baseball game when a drone flew overhead. Being that professional sporting events usually attract fans in the tens of thousands, a weaponized drone could cause serious injury. Drones are difficult to detect and make security harder to enforce at such events
• A Dutch man crashed his drone in the Grand Prismatic Spring, a famous hot spring in Yellowstone National Park. At the time, park rangers were concerned that the downed drone, as well as attempts to remove it, could hurt the spring.
• On September 12, 2015, a drone fell to the ground after its operator lost control, cutting and bruising an eleven-month-old baby girl.
• Latin pop singer Enrique Iglesias suffered a bloody injury in a freak accident involving a drone at one of his concerts.

Insurance Requirements for UAS Operators

Currently in the United States, UAS insurance is not required for either recreational or commercial use. In Canada, however, there is a requirement to carry at least $100,000 in liability protection if you're operating commercially. While no states currently require operators to carry specific insurance for their drones, a few states are considering such legislation. Florida considered but did not pass legislation in 2015 that would have required a report including information on the appropriate amount of liability insurance that should be carried by UAS operators. New Jersey also considered legislation in 2015 that ultimately failed but would have required registration and insurance for certain drones. In 2016, a few states—including California, Hawaii, and New Hampshire—have considered legislation to require insurance.

From an insurer's perspective, setting mandatory UAS coverage is difficult at this point as the industry continues to collect data to develop adequate insurance rates to cover the use of the technology. At this time, there is little data on the frequency, type, and severity of claims for UAS-related damage. One fundamental principle of underwriting and rating insurance is to be able to adequately match price to risk. As UAS rules and regulations continue to develop, so will the market for UAS insurance.

Commercial Insurance Considerations

Because of accidents and injuries like the examples previously cited, insurance underwriters continue to evaluate liability and coverage issues related to commercial and recreational UAS use. From a commercial liability insurance standpoint, the standard commercial general liability (GCL) policy covers bodily injury and property damage liability, but most claims related to the use of an aircraft are often excluded.

Where a business or commercial enterprise operates or contracts for the use of drones, care must be taken to carefully read both primary and excess and umbrella policies to determine the extent, if any, of coverage for a UAS exposure. We have seen a few endorsements used to address the issue of UAS on standard general liability and excess liability policies, but these are inconsistent and not always available. Where an insured already has an aviation exposure, always contact your current insurer an attempt to schedule the exposure, including any umbrella or excess liability policy you have in place. Where this is not possible, there are numerous markets available to write the UAS exposure on a stand-alone basis.

Homeowners Insurance Considerations

Most homeowners policies exclude liability for injuries or damages arising out of the ownership, maintenance, operation, use, loading, or unloading of “aircraft.” Liability arising from recreational UAS operation is covered under a typical homeowners policy depends on how the term “aircraft” is defined. Some homeowners policies define “aircraft” as “any device used or designed for flight, except model or hobby aircraft not used or designed to carry people or cargo.” Under such a definition, liability arising from the recreational use of a UAS would likely be covered.

Keep in mind, however, that most homeowners policies will exclude coverage for business activities, so any claim arising from a homeowner insured operating a UAS for business purposes (such as receiving money for taking pictures) would likely be the basis for a claim denial.

If the homeowners policy does not cover or is unclear about coverage for UAS operation there may be other sources for stand-alone insurance protection. Various hobby organizations such as the Academy of Model Aeronautics offer members a $2.5 million comprehensive general liability protection policy for model activities, which includes UAS operation. Homeowners may also be able to buy stand-alone policies from direct writing insurers or independent insurance agents and brokers.

Whether insurance protection for UAS operations are included in a homeowners policy or can be purchased as separate stand-alone coverage, such coverage should be scheduled as underlying insurance under any umbrella or excess policy that an insured may also buy.

Invasion of Privacy Claims

The federal government and many states have enacted numerous laws aimed at protecting the privacy of individuals. In California, for example, state lawmakers have advanced several bills that would make drone operators responsible for personal injuries they cause and require them to buy insurance.

Liability insurance policies may provide coverage for invasion of privacy claims resulting from UAS operations if the policy includes liability for “personal injury,” where such term includes invasion of privacy. In addition to any aircraft exclusion that might apply, a potential coverage issue that could arise in UAS-related invasion of privacy claims is whether the policy includes an intentional act exclusion, which most all liability insurance policies do have. The question then becomes whether such invasion of privacy injuries was expected or intended by the insured as opposed to being negligence. Whether intent is present to trigger the intentional act exclusion is a legal finding that relies on specific conduct, the wording and definition of the “personal injury” coverage grant, the intentional acts exclusion, and any potentially other factors.

Conclusion

UAS have an incredible potential for beneficial uses, but many aspects of the technology present significant risks for both commercial and recreational operators. As federal and state legislatures balance the need to regulate the risks associated with this new technology with promoting continued development, UAS operators need to be cautious to ensure compliance with applicable laws, take appropriate safety precautions, and understand and correct any limitations to current insurance programs.