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Why Drone Insurance and Liability Coverage Is Becoming More Important For Businesses

March 5, 2019

Is your business using unmanned aerial vehicles (UAVs), unmanned aerial systems (UASs) or simply put drones? If you answered, yes you are not alone as the FAA estimates that by 2020 about 30,000 small unmanned aircraft will be used for all types of business purposes. Drones are being used in a variety of applications across many sectors…agricultural monitoring, disaster management, law enforcement, aerial imaging/mapping, road surveys and construction.

What does this mean for your business? The Federal Aviation Administration (FAA) has certain requirements for commercial use drones. Commercial use is defined as any usage connected with a business whether using an owned or non-owned drones, and specific rules apply. A summary of Part 107 FAA regulations will indicate that each drone intended to be operated must be registered, the pilot must obtain a remote pilot certificate with a small UAS rating or be under the direct supervision of a person who holds such a certificate and the operator must take responsibility to ensure the drone is safe before flying. (See FAA Part 107 for a full list of all rules and regulations)

Although not a requirement of the FAA Part 107, Drone Insurance is a good idea. Even when flown by conscientious pilots, drones are not foolproof and accidents do happen. There are numerous incidents of privacy claims, as well as people and property getting damaged as a result of drone usage. Liability insurance would take care of most of these issues however there is some confusion in the marketplace as to whether or not you need to purchase a specific drone insurance policy or if your general liability policy would provide protection. The standard general liability policy will not provide coverage for liability or property coverage of an unmanned aircraft. Insurance carriers are using the aircraft exclusion for their coverage position and some carriers are coming out with an unmanned aircraft exclusion to further state the intent of their policy is to not provide coverage for the use of drones.

What should you do if you are using a drone in your business? You need a specific policy to cover the drone. This policy can be issued to cover both physical damage (hull coverage) as well as liability exposures coming from 3rd party damages of bodily injury and property damage. In addition to these damages some policies go further by protecting you from other 3rd party claims such as invasion of privacy. Some insurance carriers are offering endorsements to their general liability policies that will provide liability coverage, whether coverage is offered by endorsement or a specific policy, liability insurance transfers the financial responsibility and risk of loss to your insurer.

What can you expect to pay? A majority of insurers issue policies with liability limits at $1,000,000 and estimated annual premiums around $800 however costs widely depend upon various factors including the experience and skill of the operator, usage, and the environment you are working in. Coverage for the drone itself (Hull Insurance) and the equipment onboard/cameras depend upon the value of the individual pieces of equipment.

The insurance marketplace is growing with more insurers entering the Unmanned Aircraft Systems Insurance (Drone Insurance) and others offering coverage under professional liability and general liability coverage forms. Because all of these factors vary from one situation to another, if you are using drones whether owned or non-owned it is best to contact your risk management professional for guidance.

Sources: AIG and Best Drones For The Job

For more information, contact:
Brian Baumgardner
Associate Client Executive

Further Reading:

Is your drone registered? View Register Your Drone with the FAA Before You Fly and learn how.

In recent news, the FAA now requires you to display registration numbers on the exterior of your small unmanned aircraft. Learn more here.


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