Q A guy out for a jog gets brained by a delivery drone. Who pays?
There are already a handful of companies that offer commercial drone insurance. I got a chance to talk with Mike Kelly, the cautiously-titled Media Risk Control Manager at Prosight Specialty Insurance, which insures businesses that use commercial drones. It was an illuminating conversation.
Q What are some of the biggest issues faced by companies looking to implement drones?
A The biggest challenge is to ensure they are working with a drone operator who not only has his 333 exemption, but that the exemption specifically approves the intended operation. If your drone operator has an accident while conducting a non-approved operation, it’s a significant liability exposure where it would be easy to allege negligence.
One of the most important concepts in the world of liability and litigation is the concept of foreseeability. That is, was the incident (personal injury or property damage) foreseeable? It doesn’t matter whether the act that resulted in the incident was against recognized common sense or formal safety standards. If an action that could result in personal injury or property damage is foreseeable, then the company using the drone may be held accountable for preventing it.
Q For businesses looking to invest in drones, what are some of the most prominent insurance concerns to be wary of?
It’s all about understanding the regulatory environment – you’ve got to have a clear understanding of what’s legal and what’s not.
So – to properly control the liability exposure, you’ve got to ensure you’re operating legally – again – conforming to not only the FAA requirements, but also to any regional requirements as well. And it’s critical to be aware of all applicable requirements. Many states, counties, municipalities, federal lands and individual cities have laws and ordinances directed specifically at the use of UAVs, and these rules may be far more stringent than the requirements one had to implement to obtain a 333 exemption.
Q How do pilot education programs and credentials come into play? Does the experience/knowledge of the pilot play a part in liability?
One the front end, the amount of education and experience makes me more comfortable with a particular operator. In the event of an incident, the operator has a more substantial defense if he can show that he has a formal education, an excellent safety record and was operating within the applicable regulations. There are presently hundreds of institutions that offer courses and certificates (not FAA 333 exemptions) for drone operations. These all support the credibility and competence of the operator should there be a claim.
Q What are some things you should keep top-of-mind when it comes to drone maintenance? Does that play a part in liability?
Specific maintenance requirements are conspicuously absent from the current FAA regulations. 333 exemptions do not propose any requirements for airworthiness or for inspections by a certificated repairman, but the fact that they don’t tell you exactly what you have to do doesn’t mean you don’t have to do it.
In the world of liability, the mandatory standards should always be considered the minimum standard. Doing more than you have to is a better defense than doing only the minimum.
And since nobody can conduct this type of operation without insurance, it will be up to the drone operators to develop and implement FAA-approved protocols to minimize the potential for accidents, and it will be up to the guys that do what I do to determine whether these protocols are sufficient to minimize the potential for
I think that writer Greg Nichols did an excellent job prepping for this interview. He addressed some areas that are commonly glossed over – there is a lot more to the article then reproduced here. Notice Mike Kelly’s repeated emphasis on the 333, and the specifics of the individual exemption as being central to liability and one assumes cover.
Now consider how this will change for service providers that will only have a Part 107 – for which as far as we know will be issued without a specific use case. i.e. endorsement for a specific operation.
As Enrico Shaefer points out, there is a very significant difference:
The Section 333 exemption was essentially a company asset. The company maintained the responsibility to ensure that all operations conducted under its Section 333 were in compliance. Part 107 is a pilot-based approach… it will become the pilot’s responsibility to fly within the Part 107 regulations.
Finally consider that in many cases, customers will have a choice of DaaS providers with 333s and others with 107s. The exposure will be different with each – though being named additional insured will remain the foundation.