Commentary and analysis on the
law of insurance coverage

Drone Hazards and Insurance Coverage


Author: Carl A. Salisbury

I have a special reason to be afraid of drones.  I’m a private pilot.  I have what I consider a healthy apprehension of objects — birds, fireworks, recreational projectiles launched from the ground — flying into my airplane while I’m in flight.  As one of my General Aviation, or GA, pilot friends said to me two years ago, when we were on the cusp of the drone explosion, “I have enough on my mind when I’m flying that I shouldn’t have to worry about a small metal object being flown by someone on the ground who is talking to no one, possibly being regulated by no one, oblivious to my presence or my intentions, and that will likely be invisible to me right up until the instant when it collides with my airplane.”

I say, “Amen” to that.

This past Christmas alone, Americans bought 1.2 million drones (known in the aviation business as “Unmanned Aircraft Systems” or “UAS”), according to the Consumer Technology Association.  Drones that weigh more than 0.55 lbs. are supposed to be registered with the Federal Aviation Administration before they can be flown outside.  Only some 570,000 have been registered thus far.  That’s a compliance rate of about 18% when counting only the drones that were sold last year.  If people aren’t bothering to register these aircraft, how likely is it that they even know about, much less that they will comply with, the regulations that apply to drone operations?  My hunch is: not very likely.  Moreover, how tightly does the FAA regulate private (as opposed to commercial) drone operations in the first place?  The answer to that question is: not very.  Here’s some background on that.

It may come as a surprise to non-pilots, but it is perfectly legal — in fact, it is common — for pilots of general aviation aircraft to fly their planes in the airspace that blankets most of the United States without ever talking to an air traffic controller.

The FAA Modernization and Reform Act of 2012 required the FAA to establish a program to “integrate UAS into the National Airspace System by September 2015.”  Current regulation permits UAS operation only up to an altitude of 400 feet and only while maintaining constant visual contact with the aircraft.  Drones are not supposed to be operated within five miles of an airport.  Commercial use of drones is prohibited except where the FAA issues a special exemption under Sec. 333 of the Reform Act.  Operating a drone for commercial purposes requires an FAA-issued pilot’s license.  There are, of course, a great many exciting commercial applications for drones that could make currently risky endeavors much more safe without interfering with flight by manned aircraft.  Photographic inspection of high tension wires at the top of power line towers, inspections that currently require men and women to undergo the peril of climbing several hundred feet into the air, is one.  Any pilot who flies that close to power lines is either doing so illegally or because an emergency of some kind has given him no choice.  Use of drones in the motion picture industry, where coordination with the FAA and air traffic control could result in temporary flight restrictions, or TFRs, that prohibit manned aircraft from using airspace at the time of filming, is another.  (Violating a TFR can mean the suspension or even the revocation of a private pilot’s license.)

In a perfect world for private pilots, I would certainly prefer to reduce the number of objects that share “my” airspace rather than to increase them.  That said, I am personally not terribly worried about the commercial use of drones.  Where a person’s livelihood depends upon complying with regulations and operating expensive equipment safely and responsibly, it enhances the prospect that she will do so.  It is the hundreds and hundreds of thousands of unregistered, untrained, essentially unregulated private users out there who scare the Dickens out of me.

A huge number of the drones that were purchased as Christmas presents in 2016 were given as gifts to children.  FAA regulations prohibit anyone under the age of 13 from operating a drone outdoors unless supervised by someone 13 or over.  Why the FAA chose 13 as the cut-off age is a mystery.  Anyone who has ever had a 13-year-old son knows that the parts of their brains involved in making judgments are not yet fully developed and are swimming in hormones.  In any event, as mentioned above, it’s unlikely that everyone who buys a drone will know about these regulations, so there are bound to be a great many very young children out there trying to fly drones for fun.  And drones are not easy to fly competently.  In fact, they are devilishly difficult to operate and control.  (The New York Times ran an article today about such gifts where the maiden flights lasted only seconds before the drones were lost in trees, crashed into buildings, or were flown into the ground.  It was entitled, “Santa Delivered the Drone. But Not the Safety and Skill to Fly Them.”)

There are approximately 6,000 airports in the continental United States, the overwhelming majority of them small private or municipal fields that service recreational pilots, flight schools, and local charter operations.  Pilots who use most of these airports cannot talk to air traffic controllers in control towers because these airports, for the most part, don’t have control towers.  Instead, they have what are called common traffic frequencies that are printed in official FAA publications and on which pilots voluntarily communicate with one another over their radios.  UAS, of course, being unmanned, are inherently uncommunicative.  Also, GA aircraft often fly at low altitudes where drones are also going to be flying.  When planes are in the act of taking off and landing, they are, in aviation parlance, low and slow.  The traffic pattern altitude for GA aircraft landing at an airport is typically between 1,000 to 1,200 feet above ground level.  What is more, a great many small local airports, which service the GA population exclusively, are located in rural areas, often surrounded by farmland.

It may come as a surprise to non-pilots, but it is perfectly legal — in fact it is common — for pilots of general aviation aircraft to fly their planes in the airspace below 18,000 that blankets approximately 95% of the United States without ever talking to an air traffic controller.  Although it is far less common, it is still perfectly legal for GA pilots to fly without talking to each other on a common traffic frequency.  The most important Federal Aviation Regulation to all GA pilots in flight is the requirement to “see and avoid” other aircraft.  There are specific protocols and conventions that each pilot of accidentally converging aircraft are supposed to follow so that the pilots of each plane will not be surprised by another pilot’s maneuvers and so that aircraft can avoid colliding in mid-air. Except for the most expensive and sophisticated UAS sold primarily to commercial users, drones can neither see nor avoid and they certainly do not know or follow the conventions used by pilots to avoid mid-air collisions.

The risk of unhappy interaction between UAS and GA aircraft, therefore, certainly seems real and obvious. But is it?

There have, in fact, been an alarming number of near misses between drones and manned aircraft.  Some have involved commercial jets.  Way back in March 2014, before the explosion in sales of drones had yet taken place, there was a widely reported near collision between a UAS and a U.S. Airways flight that was landing at Tallahassee Regional Airport in Florida. The incident occurred at an altitude of 2300 feet.  In April of last year, a drone collided with an Airbus A320 carrying 132 passengers as it was landing at Heathrow Airport outside of London.  The flight landed safely.  (Heathrow seems to be a particularly popular place for UAS and commercial aircraft to encounter one another.  There were three near misses reported at Heathrow between August and October 2015.)  Last year, the Department of the Interior reported more than 50 encounters between its firefighting aircraft and drones.  The jet engines of commercial aircraft are designed to be able to withstand and survive a bird strike.  Nobody yet knows, however, what will happen when a drone gets sucked into a turbine engine.  Most drones are powered by lithium ion batteries, which have a tendency to catch fire when breached.  Fire on an aircraft is the one hazard that terrifies pilots more than any other.

When I think of risk, I think of insurance.

No matter how pilots currently feel about sharing airspace with drones, there are millions of them out there in private hands.  That genie is obviously out of the bottle and rogue operators are now a potentially tragic fact of life for pilots and passengers.  And the more drones there are in operation, the bigger the pool of potential rogues.  It’s a matter of simple math.  As more drones take to the air, the risks to pilots and passengers increases.  It is really only a matter of time before a collision ends in a plane crash.

When I think of risk, I think of insurance.

For the recreational drone owner, most homeowners liability insurance policies will cover property damage or bodily injury caused by a drone accident.  Expect that to change as the number of privately owned drones increases and the number of accidents grows.  (Liability from the use of a drone commercially will be excluded under most homeowners’ policies.)  The standard form commercial general liability policy, however, contains an exclusion for damage resulting from the use of an aircraft.  Commercial users, whether they operate the UAS themselves or contract the job out to specialized operators, are going to need specialized insurance against accidents involving UAS.  Risks include the obvious: product liability, bodily injury (including death) and property damage; as well as the not-so-obvious, such as invasion of privacy.  UAS have also become increasingly sophisticated in the collection, processing, and storage of vast amounts of data, a fact that makes them both enormously useful and subject to data breach and cyber-attack.

The kinds of coverage UAS manufacturers and operators need include first-party property, for damage to the UAS, itself; third-party liability, for injury or property damage to others; cyber insurance for data breach, invasion of privacy, and disclosure of private information; and possibly business interruption and contingent business interruption.  There are brokers that specialize in placing insurance for commercial UAS operators and manufacturers and essentially all of the major commercial liability carriers are either fully in the market or have at least dipped their figurative toes into it.

Insurance, however, is nothing more than protection in the event of a catastrophe.  It comes into play only after the fact.  It is the unknown — and possibly unknowable — risk of accidentally encountering UAS in the air that has pilots fretting about sharing airspace with remote-controlled metal objects.  And the existence of insurance to pay for the consequences of such an encounter afterwards is small comfort to us.

If you’d like us to notify you whenever there is a new post on The Insurance Recovery Journal, subscribing will make that happen. There’s no charge and we won’t use your email address for any purpose other than to send the notifications.