The sky is getting more crowded these days and it’s not due to the summer travel season. We are sharing our airspace with the now ubiquitous Unmanned Aircraft Systems, generally referred to as drones. These drones can be seen all across the United States flying, hovering, and circling in cities, parks, rural areas, and just about anywhere there is open sky.
The advantages of using drones for business are many and varied, including the delivery of packages to customers, scientific research applications, firefighting, film production, aerial surveying, exploration of high hazard areas, and law enforcement/security. The increased use of drones poses a unique challenge for risk managers as they evaluate their respective risk profiles. In addition, as drones are a dynamic and evolving phenomena, compliance exposures exist as rules and regulations continue to change or are clarified over time. Liabilities involved in the operation of drones for business or those companies which assemble, construct, design, or mass-produce drones, encompass a wide array of exposures some of which include:
Bodily Injury and/or Property Damage associated with any malfunction of the drone, operator error, or drone failure
Hacking into the drone’s computer guidance system or compromising non-guidance data stored in the drone’s memory (i.e., images, spatial coordinates, or other proprietary or sensitive information)
Drones being used for alleged terroristic or other illegal purposes
Privacy and related encroachment and intrusion issues which vary markedly by state and local governments
While specific exposures for each insured will vary, there are a number of ISO endorsements available that address and provide variant coverage extensions for Unmanned Aircraft Systems under Coverage A - Bodily Injury & Property Damage Liability and Coverage B - Personal and Advertising Injury Liability in the Commercial General Liability policy. These endorsements, in addition to conversations with the insured’s broker and market, will allow the risk manager to specifically tailor their policy and dovetail coverage to more precisely address the particular exposures involved.
Clearly, drones are here to stay and will continue to expand in complexity and use in a vast number of businesses. An update to International Data Corporation’s (IDC) Worldwide Semiannual Robotics and Drones Spending Guide forecasts worldwide spending on robotics and drones will total $103.1 billion in 2018, an increase of 22.1% over 2017. The challenge for risk managers and insurance professionals is to maintain focus on the changing technology, as well as local and federal regulations, so that proper thought and implementation of the insurance coverage needed is in place, as appropriate, year over year..
Jerry Payne is a Vice President, Account Executive with Old Republic Risk Management. He is responsible for leading the relationship with clients and brokers by marketing and underwriting casualty insurance programs for large corporations and group captives in the risk management marketplace. Jerry assists ORRM's efforts in the Northeast.