Breathtaking aerial photography. Lightning-quick delivery of packages. Increased military capabilities. The use of drones, which has skyrocketed in recent years, offers these and countless more benefits. New uses and applications for this technology are emerging daily. The sky, literally, is the limit as to how drones can be used for personal, commercial, and public benefit. But liability issues with drones raise many questions.
As with other developing technologies, dangers go hand-in-hand with benefits; the rate at which issues emerge almost always outstrips the pace at which law and policy can respond to them. Liability insurance policies written yesterday may not address a novel coverage issue that arises tomorrow.
What liability issues already exist, or are likely to arise, with the burgeoning use of drones, especially in the commercial sector? Obviously, there are risks associated with mechanical failure, including injury to people and property damage. Some drones weigh in excess of forty pounds, and can travel at speeds exceeding 75 miles per hour. At those speeds, even a ten pound drone could cause serious physical injury. Drones that carry cargo may injure people with dropped cargo, or may be liable for damage to the cargo itself when dropped.
But there are other concerns as well, including:
How do commercial general liability policies speak to these emerging risks, to the extent that they address them at all? The answer may lie in how drones are defined—specifically, whether they fall within the category of "aircraft" for liability purposes.
Most businesses with commercial general liability insurance policies are covered for liability for property damage and bodily harm (Coverage A), and other tort claims under Coverage B. This matters because Coverage A frequently has an exclusion for damages caused by the ownership or use of aircraft by the insured party or its agent.
Coverage B typically has no such exclusion, likely because the use of conventional aircraft is not usually associated with claims like theft of intellectual property or invasion of privacy. While Coverage B does typically contain coverage exclusions for knowing violations of the rights of another party, many of the violations caused by drone operation may be inadvertent. Cybersecurity issues may not be addressed at all, meaning companies could be left without coverage for claims involving hacking and data theft.
Regarding the issue of whether drones are properly considered "aircraft" for purposes of a Coverage A exclusion, case law and federal statutes have variously defined aircraft as "a vehicle (as an airplane or balloon) for traveling through the air" and "any contrivance invented, used, or designed to navigate, or fly in, the air." These definitions could support a finding that a drone is an aircraft; coverage under Coverage A would thus be excluded. Counsel have creatively attempted to thwart such an interpretation by arguing that the term is commonly understood to refer to manned vehicles that fly; under this definition, the aircraft exclusion would not apply to drones.
The Federal Aviation Administration estimates that 30,000 civil and commercial drones could be in regular use in this country by 2020. Furthermore, in less than ten years, it's likely that the drone industry will create in the neighborhood of 100,000 jobs, infusing tens of billions of dollars into the economy. Drones are big business and getting bigger; the Insurance Services Office (ISO) is aware of, and responding to, emerging drone liability issues.
The ISO is offering several new options to modify insurance coverage under their Commercial General Liability and Commercial Liability Umbrella/Excess programs. These include three limited-coverage endorsements and three optional exclusions, designed to address exposure to liability regarding property damage, personal injury, and other issues. The ISO endorsements do not offer coverage for certain issues, including invasion of privacy, trespass, or nuisance.
The take-away for insurers? The issue of liability for drone use isn't going away, and it is incumbent on insurers to consider and plan for the various forms that liability might take.