Liability Insurance for Drone Operations – Are You Adequately Protected?
Drone (sUAS) operators and companies that use drones in their day-to-day operations have more options for insurance coverage than ever before. In the past, drone operators were required to obtain a dedicated policy from an aviation insurance company. More recently, the general insurance marketplace has begun to incorporate policy endorsements to address liability and property coverage for drones and drone operators. For example, a photography business that uses drone for aerial photography may be able to add an endorsement to provide some liability extension for drone operations and property coverage for the drones themselves.
Drones are a new industry for insurers and little claims data is available to provide insurers with a comprehensive understanding of the risk involved. Especially outside of the aviation insurance marketplace, insurance policies may be limited in scope and insurance provided. Drone operators may select a policy with lower premiums to save costs, but these policies may not provide adequate coverage for the operator and will limit coverage for any business the operator contracts with. Bear in mind, an operator may present a traditional CGL (commercial general liability) policy covering their other operations (eg photography or videography) which specifically excludes aviation operations and would not provide coverage in the event of a claim involving drones!
Because of the variety of coverage options available in the marketplace, businesses that contract with outside drone operators need to closely scrutinize coverage. By contracting with an outside drone operator, a business can ideally transfer regulatory, liability and property risks to the operator, the drone operator needs to have ample insurance with adequate coverage. While businesses can avoid legal requirements and potential liability exposures by contracting with outside drone operators, the liability exposure may not be fully addressed. Any business that contracts with a drone operator should consult with their insurance advisor to carefully review the operator’s policies for adequate coverage.
Whether a company operates its own drones or contracts with an outside drone operator, several coverage aspects should be addressed:
- Coverage for invasion of privacy and trespass – if the drone is operating in the vicinity of other residences and businesses, there may be a presumption of privacy invasion
- Third-party claims for bodily injury and property damage caused by the drone operations
- Loss of business income resulting from damage or injury caused by drone operations
- Operational limitations of the drone operator’s policy – does the policy exclude any anticipated operations?
- Limits of liability adequate to indemnify the operator and the business contracting with the operator
If your business is operating drones or contemplating contracting with an established drone operator, make sure to review insurance coverage thoroughly.