Attack of the Drones: Unmanned Aircraft Raise Coverage and Liability Questions
The commercial use of drones has increased exponentially over the past few years. Under federal law, anyone who intends to use drones for non- recreational purposes (e.g., commercially) must petition the Federal Aviation Administration (“FAA”) for a registration exemption. The number of petitions granted by the FAA has grown from a few hundred as of 2012 to a few thousand as of last month. At this rate, the FAA estimates that some 10,000 drones may be in commercial use by 2018.
This dramatic increase in drone usage has led insureds and insurers alike to evaluate insurance policies to determine whether coverage issues may exist. The standard commercial general liability (“CGL”) policy excludes coverage where bodily injury or property damage (but not personal or advertising injury, which is governed by a separate part of a CGL policy) arises out of the ownership, maintenance, or use of “aircraft.” The term aircraft, however, is not defined in standard CGL policies. While a drone is defined as an aircraft under federal law, this may not be dispositive to the interpretation and intent of the aircraft exclusion of a CGL policy. Indeed, arguments over whether drones fall within the aircraft exclusion have already begun. To date, however, courts have not spoken to the issue, and thus insurance coverage for bodily injury or property damage arising out of drone use remains unresolved.
With regard to drones, another insurance consideration is potential claims of nuisance, trespass or invasion of privacy. Insurers therefore need to examine such details as the function or intent of the drone usage, its takeoff and landing location, whether the drone will be operating over a populated area, and its flying altitude. In drafting or evaluating existing insurance policies, it is thus crucial for insurers to know where the drone will be operating and how any data obtained will be used. Brokers too should inquire about the drone operators’ data collection, storage and usage policies, as well as a drone’s particular purpose. This information will help assess the risk of privacy or personal injury (e.g., nuisance or trespass) related litigation.
Given the recent proliferation of commercial drone use, this will certainly be an issue courts will grapple with over the next few years. In the meantime, several insurers are getting ahead of the curve and offering both drone exclusion endorsements and limited drone coverage endorsements for standard CGL policies, and entirely new, stand-alone drone-specific insurance policies.
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