How Insurers are Responding to Drone Coverage Issues
In a recent blog post, we discussed the increasing use of drones and liability issues that accompany the developing ways in which drones are being employed by both businesses and recreational users. As noted before in this space, it often takes the law some time to catch up with technology (during which time technology usually sprints ahead again). Therefore, it is incumbent on insurers to respond to emerging legal issues so that they, and their insureds, are not burdened with unnecessary claims.
The issue boils down to what claims could arise from the use of drones, and what types of claims insurers are willing to cover. Most drone users want insurance coverage for property damage and personal injury caused by drones. An insurer may be willing to pay for repairs to a building damaged by a drone crash and a person injured by falling debris from the crash. But what happens if a drone strikes a passenger plane, causing millions of dollars in property damages and damages for loss of life?
Then there are other coverage issues. Insurers must consider whether they want to offer coverage for violations of FAA rules, damages for lost income when drone use is enjoined by law, damages for nuisance and trespass.
Newly Available Endorsements and Exclusions
The Insurance Services Office has responded to emerging drone liability issues by developing a number of endorsements and exclusions to coverage for drone-related liability issues. The exclusion is applicable to both Coverage A and B.
CG 21 09 and CU 21 71 serve to exclude from coverage, without exception, all unmanned aircraft (drones). The exclusion for manned aircraft is preserved. The exclusion applies to Coverage A and B. If CG 21 09 is attached along with either an exclusion for employee and volunteer workers or an exclusion for volunteer workers only, there are endorsements that allow CG 21 09 to be accommodated.
CG 24 50 (Limited Coverage For Designated Unmanned Aircraft) is similar in function to CG 21 09. However, it has limited exceptions to exclusions for designated unmanned aircraft. CU 21 24 is an exclusion for non-owned aircraft. If CU 21 71, referenced above, is attached, the exception to the exclusion for aircraft chartered, hired with a paid crew, or loaned to but not owned by the insured is eliminated.
ISO Drone Hull and Cargo Endorsements
Unmanned Aircraft Property and Cargo Coverage Forms IH 0061 and IH 9929 are now available to address issues raised by unmanned aircraft and the cargo such aircraft may carry. The forms create, in effect, a separate policy that can limit coverage for specific operations only. The coverage encompasses the equipment required to carry out specific described operations of the aircraft, along with data that these operations generate and whatever electronic media such data is recorded, stored, or processed on. There are also options for coverage for owned cargo and cargo owned by other parties.
Also available are Limited Coverage for Unmanned Aircraft (Scheduled and/or Blanket Coverage) (CP 04 14, AG 04 54, OP 04 54). These endorsements bear similarity to Forms IH 0061 and IH 9929 in many respects. In addition, if the policy to which these endorsements are attached covers business personal property of the insured, coverage extends to include that property while it is airborne during described drone operations. There is also optional Business Interruption coverage available.
Coverage under these endorsements is not applicable to damage to drones or related property if the loss takes place while the drone is being used to deliver goods or merchandise to other parties. Similarly, if the drone is loaned, leased, or rented to a party other than the insured, coverage will not apply.
There remain many unknown factors with regard to drone liability, issues that loom but that statutes and case laws have not yet addressed. How often will people sue for things like nuisance, trespass and invasion of privacy? How frequently will personal injuries resulting from drones arise? How far does a property owner's rights to airspace above his land extend? It's hard right now to anticipate the frequency of claims or the average cost to pay them. The law on drones is constantly evolving, requiring companies to stay abreast of all developments.