Trust a curious incident involving a dropped pizza pie to underline how nebulous and far behind insurance companies are when it comes to drones. The case stems from New Hampshire where a drone delivering pizza fell on a man and his car. When the pizzeria was sued for more than $300,000, the restaurant’s insurance company refused to back the claim because its policies exclude liability for all incidents involving “aircraft.” Unfortunately for the company, its policy didn’t include “drones” in its definition of aircraft. After a lengthy legal battle, the highest court of New Hampshire forced the insurance company to pay the claim.
The company in question is not alone my research suggests. Insurance companies have shown little signs of adapting rapidly enough to the rise of drones, which are fast growing as both commercial tools and recreational devices, with liability issues increasing in step with their popularity.
As drone flying continues to grow, and the number of incidents likely to follow suit, this ambiguity from insurance companies can make for an unpleasant and potentially costly experience for the insurers and their customers. There’s a pressing need for the insurance industry to better define what is a ‘drone’ in policies, as well as more clearly stipulate what is and isn’t covered with the respect to these aircraft .
The Definition of A Drone Isn’t Always Clear
None of the homeowners or renters policies I have analyzed explicitly mention “drones,” or even their more technical names, “unmanned aerial vehicles (UAV)” or “unmanned aircraft systems (UAS).” By contrast, other forms of transportation, like boats and golf cars, receive explicit mention in the policies. Policyholders will unequivocally know what happens in a case involving, say, a “boat with an inboard motor greater than 50 hp” because it is explicitly written into the policy. We aren’t told what happens if a drone over a certain weight, or one that flies a certain speed hits a person.
The closest thing to drones in most policies is a provision excluding all injury and damage from the operation of an “aircraft.” The definition of “aircraft” in these policies is not inclusive however. To the insurers, an “aircraft” is “any device used or designed for flight, except model or hobby aircraft not used or designed to carry people or cargo.”
Thus in the eyes of an insurance company, a drone is not an aircraft. But, as that court in New Hampshire underlined, if policies are not explicit about that exclusion, they could still be on the hook for claims made by policyholders–though not without a lengthy and costly legal battle first.
Why Treating Drones Like Any Other Liability Issue Is Problematic
If drones are not technically aircraft, insurance companies will be forced to treat claims that involve them like any other liability issue. That is, when a suit is brought, the insurers will be inclined to cover the claim, so long as the use of the drone was legal and any resulting damage was not intentional.
Unfortunately, the federal laws administered by the Federal Aviation Administration(FAA) aren’t always applicable to the situations surrounding drone liability. Some are specific to particular situations, while most do not address the more nuanced issues that can come up in everyday flying situations like privacy breaches.
One federal law relevant to drones is one that bans flying above stadiums from one hour before or after an NFL, MLB or NCAA event. A case in point is an incident at a University of Wisconsin football game where a drone was spotted hovering above the student section late in the game . If the drone owner in that situation injured someone and they were sued, the insurance company likely would not defend them since they were breaking laws set by the FAA. Other laws include those that call for not flying near airports or military bases, or near events like wildfires.
State laws are more explicit in what they will and will not permit for drones. Texas for example has defined explicitly lawful and unlawful uses for drones. Overall, 43 states have enacted or pending legislation involving drones. Still, that leaves a few states with no laws at all the govern drones, and only 13 of those 43 states have laws that govern intrusions into privacy involving the craft.
Relying on the laws to sort out the issue could work if drone flying was an obscure form of transport. However, with the prospect of 7.1 million drone flyers by 2025 by one estimate, conducting a legal battle each time a drone hurts someone or spies on them will create undue legal chaos and ambiguity.
What Needs to Be Done
To reduce the ambiguity surrounding drone liability, insurance companies need to either include clearer language within their policies, or offer additional insurance products for drone owners.
As boats and golf carts have clear provisions, drones should be given comparable treatment. Insurers can either choose not to not cover drones larger than a certain size–similarly to how they won’t insure homeowners with certain breeds of dogs. Certain drones can be as heavy as 55 pounds, while others as small a couple pounds–the former having a much greater potential to cause serious injury. They can also explicitly say they won’t take any case involving a drone with a camera, to avoid the ambiguity surrounding privacy laws.
Another route may be to introduce an “endorsement” for drones, which are add-ons to your main policy that gives you more coverage for a certain properties or events . Just as companies offer endorsements for sewage backup and jewelry, customers could purchase the endorsement the gives them broader liability coverage when it comes to their drones.
Of course, changing insurance policies and adding new products cannot be done at the wave of a hand. It can take years to actually fully implement changes across all fifty states. The important thing is the insurers recognize the growing threat, and are prepared when even more drones buzz America’s skies in the years to come.
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