Thinking About Drones and Insurance


An AZ real estate agent was recently approved by the FAA to use drones under certain terms and conditions.  

In a recent issue of MFD, I mentioned that some law firms already have established “Drone Practice Groups.”  There is little or nothing on the use of drones by a community association although I would guess this is happening.  Apart from insurance matters (the main subject of this post), a pivotal question would be whether an association’s use of drones was a commercial use or a hobbyist’s use.

Leaving that aside and returning to drone insurance and risk see the cites below.

Thinking About Drones and Insurance

General Introduction to Drones & Insurance  Quoting

The Federal Aviation Administration (FAA) estimates that by 2020, about 30,000 small, unmanned aircrafts will be used for all types of business purposes. Worldwide, total spending for these aircraft systems is expected to top $89 billion in the next decade, thanks to strong military and commercial demand, according to a 2012 market study by Teal Group, an aerospace industry analyst.

The FAA has allocated $63.4 billion to modernize the country’s air traffic control systems and expand airspace to accommodate the commercial use of these aircrafts. As regulatory constraints are modified to reflect the introduction of these new aircraft systems, commercial markets for their use will expand rapidly. The FAA estimates that roughly 7,500 commercial drones could be viable in five years.

The FAA must develop effective policies and standards to address the increasing number of drones taking to the skies, balancing efficiency and predictability while enhancing safety; operating globally; creating a viable system for airspace use and protecting both safety and the environment.

And legal issues will also arise: Can a property owner claim a drone is “trespassing” on his land? How will stalking, harassment and other laws regulating criminal behavior be applied to drone use? Does airspace ownership apply to unmanned aircraft systems? What about claims of invasion of privacy and spying?

And how will federal aviation law conflict with state law on some of these issues? The government has already made a foray into this quagmire with the Drone Aircraft Privacy & Transparency Act of 2013, introduced to create a regulatory structure for the private use of drones, including privacy protection, data collection and enforcement.  

In addition to many regulatory and legal challenges, a slew of complex liability and coverage issues related to insuring unmanned aircraft systems for commercial use is on the horizon too. New and serious problems are likely to arise over airspace procedures, types of accidents and inadvertent eavesdropping.

July 9, 2014 GenRe on Drones  This article deals with privacy issues and the CGL.  The author also cites drone crashes (418 known crashes).  The author of the AZ real estate article, however, says NAR sees no public safety issues:

In September, the National Association of Realtors sent a letter to the FAA requesting an exemption from the FAA’s drone usage rules because their motives would not affect public safety.

May/June How to Cover a Drone  Quoting

How would you insure a drone? We discussed this topic with risk management expert and RiskEpedia author Dick Rupp. He told us, “My instincts tell me that this is an aviation risk, which most standard commercial insurance policies exclude. I contacted several broker friends and, from some of the couched responses received, I suspect that there are already some reported claims involving drones that have either been denied or are being handled under a reservation of rights basis because of coverage questions.”

These questions concern the regulation and legality of flying drones for commercial purposes in the United States. Civil and public users can only fly drones if they have FAA approval. The FAA approval process includes certification of the aircraft and requires the use of a licensed pilot and approval of the purpose and location where the drone is to be operated. Hobbyists can only fly drones below 400 feet, away from airports and air traffic. In 2007, the FAA clarified the hobbyist rule to specifically exclude individuals or companies flying drones for business purposes.

April 2014 AIG on Unmanned Aircraft Insurance  Quoting

Introducing Unmanned Aircraft Insurance

Our Unmanned Aircraft Insurance policy provides broad physical damage and third party liability coverage, explicitly designed for the exposures of unmanned aircraft.

  • Policy language drafted specifically to respond to the exposures of unmanned aircraft.
  • Coverage encompasses “operators” and specifies other non-pilot, on-ground crew members among the insureds.
  • There is NO exclusion for loss arising from electronic malfunctions and failure of electronic components, accessories and power equipment (Such an exclusion is standard on manned aircraft policies.)
  • Optional coverage for hi-jacking or any unlawful seizure or wrongful exercise of control by means  of “spoofing”.

UAS UAV Insurance  Quoting

Transport Risk Management provides Unmanned Aerial Vehicle (UAV) Insurance and Unmanned Aircraft Systems (UAS) Insurance and Non-Owned Unmanned Aerial Vehicle and Unmanned Aircraft System Insurance for Manufacturers, Military, Law Enforcement, Film Production, Search and Rescue, Agricultural and other aerial work uses.

We understand the risks involved in manufacturing and operating UAS and we have spent considerable time understanding the mechanics and properties of UAV and UAS themselves. As such, we have a detailed insight into the insurance requirements of such aerial units and have developed innovative insurance products through several of the worlds leading Aviation and Aerospace Insurers.

All policies are written and covered by A to A++ Rated Aviation and Aerospace Insurance companies on Aviation and Aerospace Insurance Policy Forms.

These are NOT adapted commercial general liability policies (CGL) written by non-aviation property insurers who know nothing about aviation and aerospace risks and exposures.

Whether your intended use is for Aerial Photo, Aerial Filming Surveillance, Photographic or other purposes, we can help. If you are unsure about the Liability Insurance implications we’ll be happy to advise you and guide you towards the coverage that you need.

Transport Risk Management Can Provide Hull and Liability:

  • Multi-rotor UAS / UAV Insurance for all risks of ground and flight
  • Fixed Wing UAS / UAV Insurance for all risks of ground and flight
  • Single Rotor UAS /UAV Insurance for all risks of ground and flight
  • Civilian and Law Enforcement Drone Insurance for all risks of ground and flight
  • RPAS Insurance for all risks of ground and flight

July 2014 Emerging Risk of Drones in Construction Industry  Quoting

Unmanned aerial vehicles (UAV or “UAVs”) are changing the way construction companies do business. For the purposes of this article I will use the term UAV, as it has the broadest connotation. Contractors are increasingly using camera-mounted UAVs to monitor their construction activities. These devices provide a way to obtain real-time data on job progress, may identify potential hazards or quality issues, and help acquire other useful information in a very expeditious and cost-effective manner. The larger the construction site the more helpful they are in monitoring the project. Types of UAVs typically available for commercial application include packages with four, six, or eight rotary blades. More blades mean more lift, and that provides more power for attached payloads. Many of today’s drone systems are iPhone controlled, connected by Wi-Fi, and positioned using Global Positioning (GPS). Due to the rotary blade design, unmanned aerial UAVs can remain in one place for extended periods without the extravagant costs associated with helicopters and small planes.

Clifford J. Treese, CPCU, ARM, CIRMS

Association Data, Inc.

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  • Shawn R
Comments 1
  • Ollie

    If you are running a commercial drone operation getting appropriate insurance is a no-brainer, we have complied a list of companies offering insurance with a top level comparison:

    Hopefully someone finds it useful!

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