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Drone Risks - Are you Covered?

Unmanned aerial drones, also called unmanned aircraft systems (UAS), are a new type of aircraft that has broad commercial and personal uses. UAS can be used to inspect buildings, deliver materials or fly around as simple, recreational products. However, as UAS become more advanced and widespread, they can represent a significant new threat to you or your business.

The exposures caused by UAS have been widely covered by the media. Drones have crashed at the U.S. Open, the White House and other prominent locations, and they have led to instances of property damage, severe injuries and death. Additionally, as UAS technology advances, new risks such as cyber security and privacy need to be considered.

These threats, along with the lack of comprehensive UAS regulations, make drones a new and substantial risk exposure. You need to be aware of how UAS can impact your business, and what you can do to protect it.

New Drone Regulations
Drones are usually thought of as toys or hobbyist aircraft. However, they also constitute a substantial risk to your family, home and privacy. Whether or not you own a drone, it’s important that you’re aware of regulations and safety tips.

Use these tips to safely operate drones:

  • Check your local laws and ordinances to ensure that drones can be operated in your area.
  • Make sure that the drone’s operator is comfortable with the controls.
  • Don’t fly the drone above 400 feet, and always remain below any surrounding obstacles.
  • Keep the drone in sight at all times, and have an observer assist the operator if needed.
  • Don’t operate the drone when it’s windy, or in other inclement weather.

The FAA believes that drones are currently the most dynamic growth sector within the aviation industry, and it estimates that 7,500 drones will be operating commercially by 2018.

While drones may feel like fun and games, the FAA legally considers them aircraft, and they now have to be registered online. Here are the basic guidelines for registering recreational drones:

  • Drones that weigh between 0.55 pounds and 55 pounds must be registered online.
  • Once registered, the drone’s operator will receive a registration number that must be placed on all applicable drones.
  • The registration is valid for three years. Failing to register a drone may result in regulatory and criminal penalties.

Since the FAA considers drones to be the equivalent of manned aircraft, any attempt to damage or destroy one can result in federal penalties. Even incidental damage could expose you and your family to severe expenses for any resulting damage.

The FAA also has regulations that apply to both commercial and recreational UAS:

  • Drones must fly below a height of 400 feet above ground level and weigh 55 pounds or less.
  • An operator must maintain a visual line of sight with his or her drone.
  • Drones cannot fly within 5 miles of an airport, and must remain clear of all manned aircraft and obstacles.
  • Drones cannot be flown near people or open-air stadiums.
  • The FAA currently considers UAS to be in the same category as manned aircraft. As a result, any attempt to damage or destroy a drone can result in federal penalties—up to 20 years in prison and $25,000 in fines.
  • Operators should look up state and local laws concerning the use of UAS before operation.

Additionally, the FAA has released more specific rules on the commercial use of drones that weigh less than 55 pounds:

  • An operator may use a camera system to control a drone, but must also be close enough to see it if something unexpected occurs. Additionally, the operator must have a visual observer who remains in constant line of sight with the drone.
  • Operators cannot fly the drone over anyone who is not directly participating in the drone’s operation.
  • Drones may carry an external load if it’s securely attached and doesn’t adversely affect the controllability of the aircraft.
  • Operators may transport property for compensation within state boundaries.
  • Commercial drone operators need a remote pilot airman certificate with a small UAS rating, or be under the direct supervision of a person who holds such a certificate.
  • Drones used for commercial purposes must be registered with the FAA.

For more details on the FAA rules regarding the commercial use of drones, visit the FAA’s website.

Consider the Technological Risks
Since most drones are small and widely viewed as advanced hobbyist aircraft or toys, you may not consider them substantial threats. However, many small UAS are already equipped with advanced cameras and listening devices, and they also present other risks to your business’s privacy.

Researchers have demonstrated that drones equipped with smartphones can access data from a business’s insecure networks and devices. Additionally, these drones can access areas that a normal person could not, such as the top floor of a building or outside the window of a secured room.

Any of your business’s Wi-Fi networks, computers or wireless printers could also be targeted by a properly equipped drone. Employees’ personal devices could be vulnerable to this same type of attack, and any business information on these devices could be compromised.

The cyber security risks of drones will only be compounded by additional features that make UAS easier to use and even autonomous. As GPS and sensor technology improves, the owner of a UAS could instruct a drone to automatically monitor your business, disrupt its operations or steal its data. Even if a drone isn’t used for nefarious activities, if one is unmonitored or forgotten, it could still crash and cause significant damage.

Make sure that your home’s networks and devices are safe from intrusion, even if they seem to be in an inaccessible location.

Your Homeowners’ Policy and Recreational Drone Use
Does your homeowners coverage protect you from harm caused by drone usage? In an article for Claims Journal, Tom Schrimpf and Russ Klingaman determined that "the short answer to whether harm caused by the recreational use of a UAS is covered by a standard homeowners’ insurance policy is, “probably yes.” However, as with every insurance coverage issue, the availability of coverage depends on the specific policy’s language – including the grant of coverage, the definitions, the exclusions, the exceptions to the exclusions and other conditions." This is because most homeowners’ policies exclude liability for injuries or damages arising out of the ownership, maintenance, operation, use, loading, or unloading of “aircraft" - however drones don't technically qualify as aircraft because they are intended for model or hobby aircraft use and not used or designed to carry people or cargo.

One concern mentioned in this article was the importance of recognizing the difference between business usage and recreational usage of your drone, however. Most homeowners’ insurance policies will not provide coverage for harm associated with commercial use of a drone. "The line between recreational and business uses may not always be crystal clear, but insureds who receive compensation for their UAS use will probably jeopardize their homeowners’ coverage. For example, taking photographs with a UAS for personal use is likely considered recreational. Conversely, taking photos for a realty listing for a fee or as a part of a part time real estate brokerage business is not likely considered recreational," said Schrimpf and Klingaman.

Any damage that a drone causes to your property, equipment or employees will likely be covered under existing policies. However, you should speak with Marshall & Sterling, Inc. to ensure that your policies include coverage for aircraft-related damage. To read the full Claims Journal article referenced above, visit: