Unmanned Aircraft Systems: A Growing Risk

July 08, 2019

By Joey Freeman

The rapidly expanding use of unmanned aircraft systems – commonly referred to as UAS or drones – in commercial and industrial applications is producing significant changes on the risk management landscape, as insurers and insureds attempt to utilize and effectively manage emerging technologies and business innovation.

Currently, the Federal Aviation Administration (FAA) oversees and regulates the UAS industry to assure the safety and efficiency of the busiest and most complicated airspace in the world. UASs may not be operated for commercial (nonrecreational) purpose without express permission from the FAA. Regulation of UAS continues to evolve incrementally as the FAA grasps a better understanding of operational issues such as operator/pilot training requirements, operational specifications, and technology considerations.

Companies seeking to utilize UAS to enhance and expand the delivery of products and services to customers will look to engage commercial entities specializing in UAS technology and operations. Risk management organizations should implement specific due diligence strategies to evaluate and qualify UAS operators.

Suggested areas for due diligence for UAS operators specializing in aerial photography/videography or other UAS applications are as follows:

  1. Verify FAA Authorization – Section 333 Exception of the 2018 FAA Reauthorization Act.
    • Request the operator’s Section 333 Exemption Number and Regulatory Docket Number. Note and verify the company name on the exemption. Search the FAA website (www.faa.gov) to authenticate that the exemption has been granted to the company you are considering for hire.
    • Request the granted exemption document provided to the operator by the FAA. The exemption document will specify the following:
      • Approved UAS equipment
      • Operating conditions and limitations
      • Exemption termination date
  2. Review Operating and Maintenance Manuals, which the vendor will be using for each flight.
    • These safety manuals – required by the FAA – should address the following:
      • Qualifications of the Pilot-In Command (PIC) for each flight
      • Valid FAA Airman’s certificate
      • UAS Experience (outdoor flight and/or indoor operations)
      • Provisions for a Visual Observer to support the PIC
      • Pre-flight safety inspection of UAV (unmanned aerial vehicle) and related equipment
      • Pre-flight inspection of flight area (hazard identification)
      • Flight Safety Plan
      • Collaboration with UAS operator and property owner(s) to minimize risk related to structures, other property (power lines, signage, lighting, landscaping, etc.), vehicles, flight and support crew, and other bystanders
      • Equipment failure procedures/flight termination procedures
  3. Check contractual provision requiring that all flights occur under the exemption limitations, operation manuals, maintenance manuals, and all applicable FAA regulations. Obtain indemnification and hold harmless language in the contract to fully protect your organization.
  4. Determine responsibility for FAA Flight Standards District Office (FSDO) notification requirements and process of notification (if applicable) for operations in proximity to restricted airspace.
  5. Retain the right to request and review documentation from the UAS operator of all log books, operations checklists, and other operational documents on 24 hours notice.
  6. Authenticate certificates of insurance with endorsements specifically for UAS/drone operators including the following:
    • Liability to third parties (property damage/bodily injury – limits of not less than $ 1 million)
    • Workers’ compensation
    • Personal injury/invasion of privacy require that your company is a Named Additional Insured for all flights
  7. Review the vendor’s procedures/measures for protection of privacy and prevention of unlawful use of likeness.
  8. Contractually specify provisions for storage and distribution of images and data.
  9. Retain legal counsel with expertise in UAS/drone law and operations to review contracts, operating procedures, insurance, and other requirement to minimize risk and assure safe flights.

Rulemaking, interpretation, and enforcement continues to evolve for emerging commercial innovation and application. Strict and disciplined due diligence of prospective UAS vendors is essential to minimizing potential regulatory and other liabilities from unsafe, unlawful or negligent actions of the operator.

Download Unmanned Aircraft Systems: A Growing Risk here.

This article is intended for informational purposes only. It is not a guarantee of coverage and should not be used as a substitute for an individualized assessment of one’s need for insurance or alternative risk services, nor should it be relied upon as legal advice, which should only be rendered by a competent attorney familiar with the facts and circumstances of a particular matter. Copyright Beecher Carlson Insurance Services, LLC. All Rights Reserved.