L O C K T O N C O M P A N I E S
Drones—What Could Possibly Go Wrong?
A Discussion of the Legal and Liability Aspects of Operating Drones by Commercial Entities
1
https://www.youtube.com/watch?annotation_id=annotation_863790077&feature=iv&src_vid=zuW7Fc2iN8E&v=HSBhAx3QMDA
https://www.youtube.com/watch?v=zuW7Fc2iN8Ev
https://www.kickstarter.com/projects/742279450/smartchutes-quadcopter-parachute-recovery-system
2
Why use a Drone (UAS)?
g\unit_shea\2015\drones.pptx\#7007
3 g\unit_shea\2015\drones.pptx\#7007
What is a “DRONE”
What’s in a Name:
Drone – indicates REMOTE pilot operation (operator away from aircraft)
UAV (Unmanned Aerial Vehicles)
UAS (Unmanned Aerial System)
4 g\unit_shea\2015\drones.pptx\#7007
What is a “DRONE”
Fixed Wing:
Longer Range
Aerial Mapping
More Expensive
Quad (Multi)-Copter:
Most Common
More Payload
Most Inexpensive
5
Practical Uses of a Drone
Three D’s—Work That is Dangerous, Dull or Dirty
Inspections of flare stacks at factories
Bridge inspections
Powerline/pipeline patrol
Security at large facilities
Wildlife conservation/fire patrol
Search and rescue
Cost Effective Aerial Mapping/ Photography
Commercial helicopter = $1,500 per hour
Drone = $1,500 one-time purchase
g\unit_shea\2015\drones.pptx\#7007
6
Top Industries Using Drones
Agriculture
Film Production
News Media
Real Estate
Construction
Mining
Utilities
Energy
g\unit_shea\2015\drones.pptx\#7007
7
Legal (FAA) Timeline
g\unit_shea\2015\drones.pptx\#7007
8
Legal Timeline of Drones
g\unit_shea\2015\drones.pptx\#7007
Oct 2011 The FAA fined a filmmaker $10,000 for “careless or reckless UAS operation” (Pirker) Univ of Virgina
March 2014 NTSB ALJ Dismisses FAA’s $10,000 Civil Penalty Against UAS Operator “No Enforceable FAR” (Pirker)
May 2014 Virtually All Major News Organizations File Brief in Pirker, Assert First Amendment Rights
Nov 2014 National Transportation Safety Board, determined that the FAA's existing "aircraft" regulations can apply to model aircraft, drones, and remote controlled aircraft.
Dec 2014 FAA announces “333 Exemption Process” for commercial drone operators.
9
Legal Timeline of Drones
g\unit_shea\2015\drones.pptx\#7007
Feb 2015 Applications for “333 Exemption” and “Certificate of Authority” (COA) flooding FAA. DOT and FAA Propose New Rules for Small Unmanned Aircraft Systems “UAS” (to become law in 2016)
March 2015 FAA Publishes “Blanket COA” to mirror proposed rules. This allows operators who have received 333 Exemption to operate under the proposed rules without notifying the FAA for EACH Flight
August 2015: FAA launches a “Know before you fly” campaign due to the UAS’s flying over wildfires in California, preventing Airborne firefighters from dousing the fires. “If you endanger manned aircraft or people on the ground with an unmanned aircraft, you could be liable for a fine ranging from $1,000 to a maximum of $25,000,” said FAA Administrator Michael Huerta. “Know the rules before you fly. If you don’t, serious penalties could be coming your way for jeopardizing these important missions.”
10
Legal Timeline of Drones
g\unit_shea\2015\drones.pptx\#7007
Oct 2015 FAA Fined SkyPan International Inc., $1.9 million penalty for reported 65 illegal flights between March 2012 and Dec. 2014 in Class B Airspace
Dec 2015 FAA announces new Registration process for recreational/hobby users for all drones between 0.55 lbs and 25 lbs at cost of $5 per registration
March 2016 U.S. Senate Committee approves FAA reauthorization bill that includes the FAA’s proposed new drone regulations. Awaiting approval from House of Representatives and final votes.
11
Legal drone operations
g\unit_shea\2015\drones.pptx\#7007
12
SECOND - With a 333 Exemption – Users may operate UAS under a “Blanket COA (Certificate of Authorization)” or apply for COA if needs fall outside the “Blanket COA” requirements:
The FAA has created a streamlined COA process for commercial operations “to respond to the current demands and to bridge existing UAS operations with the proposed small UAS rule,” according to an FAA memorandum.
This blanket COA will allow commercial operators to fly without receiving special authorization under certain operational parameters.
g\unit_shea\2015\drones.pptx\#7007
What do businesses do between NOW and when the new rules take effective (2016/2017)
FIRST - Apply for “333 Exemption” - this is the only LEGAL means to operate a drone commercially in US airspace
• Apply for Exemption thru FAA website. • Hire attorney to complete the application • Use available online tools (AVUSI) to help complete the application
yourself and file with the FAA. • Currently running SIX months from application to approval. • Current Exemption requires the operators maintain at minimum
a Sports Pilot License – this can cost $5,000 - $10,000 per pilot.
13
Do You Need the “333 Exemption” and “COA” to Operate a Drone?
Disclaimer . . . I am not an attorney and Lockton is not a law firm. We recommend you discuss the legality of drone use in your business with a qualified aviation attorney.
FAA.GOV “The FAA currently authorizes the use of unmanned aircraft systems (UAS) for commercial or business purposes on a case-by-case basis. You may not fly your UAS for commercial purposes without express permission from the FAA. You should check with the FAA for further determination as to what constitutes a commercial or business use of small UAS.”
Is it better to ask for permission or beg forgiveness?
g\unit_shea\2015\drones.pptx\#7007
October 6 2015 – FAA Fined SkyPan International Inc., $1.9 million penalty for reported 65 illegal flights between March 2012 and Dec. 2014 in Class B Airspace.
14
Legal Status
FAA Notice of Proposed Rulemaking (Part 107) – Feb 2015
Must weigh less than 55 lbs
Visual Line of Sight only
Daylight Only (sunrise to sunset)
Maximum Airspeed 100 mph
Maximum altitude 400 ft above ground level
Minimum weather—three miles visibility
Airspace Restrictions
No operations over people or in careless/reckless manner
Operators must be 17 years old, pass an aeronautical knowledge test (pilot’s license NOT required) and pass a TSA background check
Eliminates the “333 Exemption and COA Process” for most operators
When will this become law? 2016…..2017….????
g\unit_shea\2015\drones.pptx\#7007
15
State/Local Laws
g\unit_shea\2015\drones.pptx\#7007
More than THIRTY municipalities have passed their own ordinances/laws regarding the use of drones including: Miami/Chicago/Seattle/Pittsburgh/Los Angeles
• Pittsburgh banned the use of drones above, within or in the vicinity of a public park • Chatham Township, New Jersey prohibits the use of drones launched from, landing on, or
flying above government or public buildings, property, or parks • Los Angeles passed an ordinance that approximately mirrors FAA recreational drone
guidelines with a punishment for violators of up to $1,000 and six months in jail
Other municipalities have previously banned the uses of drones altogether from flying within the airspace of the city - St. Bonifacius, MN- Northampton, MA: Iowa City IA
FAA RESPONSE: “If municipalities enacted ordinances regulating UAS in the navigable airspace and a significant number of municipalities followed suit, fractionalized control of the navigable airspace could result. In turn, this ‘patchwork quilt’ of differing restrictions could severely limit the flexibility of FAA in controlling the airspace and flight patterns, and ensuring safety and an efficient air traffic flow. A navigable airspace free from inconsistent state and local restrictions is essential to the maintenance of a safe and sound air transportation system.”
16
Potential Legal Battle Brewing???
g\unit_shea\2015\drones.pptx\#7007
States control Privacy Issues
FAA Controls Airspace
17
Safety & Risk Management
g\unit_shea\2015\drones.pptx\#7007
18
Safety and Risk Management
Select aircraft right for your mission
Size
Flight Duration
Fixed Wing: 40-50 Minutes Per Flight
Rotor Wing: 20-25 Minutes Per Flight
Type of Images to be gathered
Camera
LIDAR
Heat
Operator training
Documented and recurrent
Manufacturer approved (if possible)
g\unit_shea\2015\drones.pptx\#7007
19
Safety and Risk Management
Development of Safety Management System (SMS)
Pre- and post-flight checklists
Logbooks
Weather minimums (wind and visibility)
Operational guidelines (spotter/safety line, etc.)
Flight Tracking Software
Understand FAA Airspace
Corporate policy for handling images captured
Maintenance
Documented
Scheduled
g\unit_shea\2015\drones.pptx\#7007
20
Safety and Risk Management
g\unit_shea\2015\drones.pptx\#7007
Lockton Training and Safety Manual – Phantom 3 Professional
21
Safety and Risk Management
g\unit_shea\2015\drones.pptx\#7007
Lockton Training and Safety Manual – Phantom 3 Professional
22
Safety and Risk Management
g\unit_shea\2015\drones.pptx\#7007
Lockton Training and Safety Manual – Phantom 3 Professional
23
Safety and Risk Management
g\unit_shea\2015\drones.pptx\#7007
Lockton Training and Safety Manual – Phantom 3 Professional
24
Safety and Risk Management
g\unit_shea\2015\drones.pptx\#7007
Lockton Training and Safety Manual – Phantom 3 Professional
25
Safety and Risk Management
g\unit_shea\2015\drones.pptx\#7007
Lockton Training and Safety Manual – Phantom 3 Professional
26
Drone insurance
g\unit_shea\2015\drones.pptx\#7007
27
Frequently Asked Questions Regarding Drone Insurance
Do I need to be approved by the FAA to obtain drone insurance?
Do I need insurance for my drone?
What would commercial drone insurance cover/not cover?
How much does drone insurance cost?
Does the FAA require we have insurance?
g\unit_shea\2015\drones.pptx\#7007
28
Do I Need to be Approved by the FAA To Obtain Aviation Specific Drone Insurance?
Standard underwriter data needed:
Do you have a “333 Exemption” from the FAA?
Make and model name of drone including size and weight?
Description of area of operation (urban/rural).
Use of operation: mapping; agriculture; law enforcement; aerial survey?
Operators experience level and pilot ratings (if any)
Description of training provided to operators:
Is a spotter in addition to the operator used in operations?
Description of corporate policy for handling of images captured. Are images kept in secured server/password protected laptop? Images reviewed prior to publishing to public (editing images you don’t have authority to make public).
g\unit_shea\2015\drones.pptx\#7007
29
Do I Need Insurance For My Drone?
Yes; aviation has been and always will be a litigious environment – and the first BIG claim is waiting to happen…
g\unit_shea\2015\drones.pptx\#7007
March 22 2014 – Drone nearly collides with U.S. Airways Flight landing in Tallahassee FL
Nov 11, 2014 – Three different airline crews report drone operating in approach pattern to JFK Airport.
May 28, 2015 – Shuttle America reports near drone hit landing at LaGuardia Airport
Sept 2015 - A New York district court in Queens sentenced a man who illegally flew a UAS recreationally over a stadium at the U.S. Open to five days of community service.
April 17, 2016 -Airbus A320 landing at Heathrow Airport strikes small drone operating new airport.
More than 406,000 people have registered their drones from December 2015
to April 2016. The FAA estimates small, hobbyist UAS purchases may grow
from 1.9 million in 2016 to over 4 million by 2020.
30
Do I Need Insurance For My Drone?
g\unit_shea\2015\drones.pptx\#7007
2014 (Feb – Dec) FAA Reported UAS
Encounters
2015 FAA Reported UAS
Encounters
238 1208
31
Where can I find Coverage?
Employee Owns the Drone and it is insured under their Personal Insurance Policy:
Homeowners’ Policies Policy typically excludes any business/commercial operations.
Very likely excludes drone liability.
“Hobby” policies (Academy for Model Aeronautics) Specifically Excludes coverage for “commercial/business” use
g\unit_shea\2015\drones.pptx\#7007
32
Where can I find Coverage?
General Liability Policy Standard coverage only applies while aircraft “is operated per the procedures and practices specified in
the FAA Small UAS Notice of Proposed Rulemaking, February 15, 2015”
Liberty Mutual: “When used in compliance with all FAA rules and regulations, unmanned aircraft usage”
AIG: Bodily injury or property damage arising out of the operation of an unmanned aircraft system which (i) is remotely controlled by an operator, (ii) is operated per the procedures and practices specified in the FAA Small UAS Notice of Proposed Rulemaking, February 15, 2015, (iii) has an airworthiness certificate or an exemption under Section 333 of the FAA Modernization and Reform Act of 2012, and (iv) does not weigh more than ten (10) pounds (hereinafter referred to as Unmanned Aircraft Systems).
g\unit_shea\2015\drones.pptx\#7007
FAA Notice of Proposed Rulemaking (Part 107) • Must weigh less than 55 lbs • Visual Line of Sight only • Daylight Only (sunrise to sunset) • Maximum Airspeed 100 mph • Maximum altitude 500 ft above ground level • Minimum weather—three miles visibility • No operations within Five Miles of Airport
33
Where can I find Coverage?
Hire a Professional Contractor to operate it for you.
Require the operator to maintain 333 Exemption/COA
Require they operate under the FAA regulations/proposed rules
Minimum Insurance Requirements ($1M) or higher
Require certificate of Insurance naming customer (you) as Additional Insured
Waive rights of subrogation as respects physical damage in your favor
Include 30 (Thirty) day notice of cancellation
Be Primary and without right of contribution of any insurance maintained
g\unit_shea\2015\drones.pptx\#7007
34
Where can I find Coverage?
Aviation Specific Policy Broadest coverage
Most Expensive
Tailored to fit the exposure
Ability to purchase physical damage coverage
Aviation adjustors to handle claims
g\unit_shea\2015\drones.pptx\#7007
35
What Would Commercial Drone Insurance Cover?
Physical Damage
Some insurers willing to provide physical damage on values as low as $1,000.
Standard Rates (10% Rate / 10% Deductible)
Explore adding to Corporate Property Insurance Program (flight coverage excluded)
Liability—Bodily Injury and Property Damage
Arising out of the use, ownership, or operation of a UAS for bodily injury and property damage
Coverage provided on “Occurrence Basis”
All major aviation insurers will consider providing coverage for UAS
Up to $2M readily available for any operator with or without 333 Exemption
$5M to $25M for available for operators with 333 Exemption with documented training procedures.
g\unit_shea\2015\drones.pptx\#7007
36
What Would Commercial Drone Insurance Cover?
Personal Injury Aviation Coverage (Limit follows Aircraft Liability)
(a) False arrest, detention or imprisonment;
(b) Malicious prosecution;
(c) The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room,
dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;
(d) Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services;
(e) Oral or written publication, in any manner, of material that violates a person’s right of privacy;
(f) The use of another’s advertising idea in your advertisement; or
(g) Infringing upon another’s copyright, trade dress or slogan in your advertisement. Most underwriters agree the greatest concern they have is personal injury suits brought against companies using a drone for aerial photography.
g\unit_shea\2015\drones.pptx\#7007
37
What Would Commercial Drone Insurance Cover?
Additional Coverages:
Medical Payments
Worldwide Territory
Coverage includes “All Operations of the Named Insured”
Premises Liability Coverage
Non-Owned Drone Liability Coverage
g\unit_shea\2015\drones.pptx\#7007
38
Standard Drone Liability Policy Exclusions
Expected or intended injury
Workers compensation (or similar laws) & Employers Liability
Damage to property owned by the insured
War, Hijacking and other perils – can be removed for additional premium
Discharge of any munitions
Dispensable Loads (releasing anything from the drone)
Noise and other pollution (unless caused by an aircraft crash, fire or explosion or collision)
Indoor Use – risks underwritten very carefully can have this exclusion deleted
Consequential Loss – some underwriters will delete this exclusion
Fines or Penalties from Government Agencies
October 6 2015 – FAA Fined SkyPan International Inc., $1.9 million penalty for reported 65 illegal flights between March 2012 and Dec. 2014 in Class B Airspace. FAA Penalties range from $100 for small entities or individuals to $25,000 per violation for large businesses.
g\unit_shea\2015\drones.pptx\#7007
39
How Much Does Drone Insurance Cost?
Recent Example of Aviation Specific Policy (Nov 2015)
DJI S1000 (13lbs /purchase price $20,000 / 20 Min Flight Time)
Engineering Firm (With FAA 333 Exemption)
Aerial survey
Liability $5MIL
Physical Damage—$20,000
Annual Premium
Liability $5M : $3,500
Hull $20K: $1,500.
Total Premium: $5,000
g\unit_shea\2015\drones.pptx\#7007
40
Does the FAA Require We Have Insurance?
No - FAA does not require Drone aircraft operators to maintain insurance.
No mention of insurance requirements in the “333 Exemption” & “COA” process nor in the Notice of Proposed Rulemaking released in February 2015.
Very likely that operators who are “operating UAS for hire” will need to secure some type of liability coverage (just a commercial aircraft operator is currently required to maintain).
g\unit_shea\2015\drones.pptx\#7007
41
Resources
g\unit_shea\2015\drones.pptx\#7007
Association for Unmanned Vehicle
Systems International
Questions?
43
Our Mission
To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management
Our Goal
To be the best place to do business and to work
www.lockton.com
© 2015 Lockton, Inc. All rights reserved.