Drones – or Unmanned Aerial Vehicles to give them their proper title – continue to be a hot topic in technology circles. If the commercial drone industry fulfils even a fraction of analysts’ growth predictions it will become a multi-billion dollar industry in the next 5 to 10 years.
Public Liability, Professional Liability and Commercial Combined policies will only cover drone- related risks to the extent that they fall within wording of existing policies which, at risk of stating the obvious, were not developed with drones in mind. This gives rise to interesting questions (from a lawyer’s perspective at least) about the extent to which resulting liabilities will be covered.
Use of drones is being championed in a multitude of industries such as agriculture, infrastructure maintenance, surveying, transport, oil & gas, journalism, and film-making or simply as a “must have” toy. The scalable nature of drone technology means that it can be utilised across a spectrum of businesses, from small “disruptive” technology start-ups to large corporations (such as Amazon’s much-heralded plans for drone deliveries).
Whilst dedicated drone insurance policies remain in their infancy, the question arises how traditional liability policies respond to the issues raised by drones. Commercial drones are typically small inexpensive devices under 20kg so do not give rise to significant first party exposures. The main exposures arising from drones are:
- Liability for personal injury and damage to third party property: The most obvious area of liability is plainly the risk that the operation (or sudden failure to operate) of a drone will injure people or damage property. Whilst the majority of reported incidents have been minor ones resulting in property damage, instances of unauthorised use near airports and in commercial airspace show that drones can potentially give rise to very significant liabilities. Typically, claims will be brought in negligence and involve the establishment of liability in a similar way to any other tort claim. However, the burden of care on a drone operator will be high so, unless there are unusual circumstances or the injured party is at fault, liability is likely following an incident. Primary liability will typically be on the part of the drone operator (both the individual operator and his employer). However, depending on the nature of the incident, other parties are potentially at risk of liability, such as a third party who has hired the drone
- Product liability: Incidents arising from defective drones clearly also give rise to potential liabilities on the part of various entities in the supply chain such as the manufacturers of the platform itself and of components of the system such as the autopilot manufacturer, payload systems and the software/firmware developer
- Trespass: Overflight of property will not in itself give rise to a liability in trespass (although it might give rise to a liability in the tort of nuisance or privacy issues). However, the take- off and the landing (particularly where unplanned) do potentially give rise to liability issues arising from access to property
- Privacy: The use of drones by journalists leads to obvious privacy concerns but the use of drones in mundane applications, such as surveying can also lead to potential issues. Gathering images in public places or on third party private property potentially constitutes the processing of personal data for regulatory purposes. Unless policies contain specific exclusions of these exposures, this is increasingly an issue for casualty insurers following the recent Google v Vidal Hall decision (see below) which indicated both that breach of privacy is a tort in itself and that the requirement of “damage” for liability claims under Section 13 of the Data Protection Act, does not require the claimant to show physical harm or financial loss
- Regulatory/criminal investigations: To the extent that coverage is available for the costs of responding to regulatory investigations, operating drones gives rise to a number of potential exposures:
- Health and Safety Executive (HSE): an incident involving a drone may well give rise to a HSE investigation
- Information Commissioner’s Office (ISO): as indicated above, gathering images may involve processing personal data for the purpose of the Data Protection Act and bring the activities within the regulatory ambit of the ICO, which has issued guidance regarding the operation of drones
- Civil Aviation Authority (CAA): drones larger than 7kg are subject to regulation by the CAA. The regulations limit the extent to which commercial drones can fly in congested areas, close to people or property or beyond the line of sight of the operator. Tighter restrictions apply to unmanned aircraft used for surveillance purposes imposing minimum distances from which the drone can approach properties. These regulations will impose liability on the operator of the drone together with additional liability on the “remote pilot” of the drone to satisfy himself that the flight can be conducted safely. To date, at least two drone pilots have been prosecuted by the CAA (for flying a quad-copter drone over busy rides at Alton Towers and loss of control of a drone near an MOD facility, narrowly missing a public bridge)
- Police: misuse of drones can also lead to criminal prosecution under the Air Navigation Order 2009. A recent case involved prosecution of an individual for filming a number of public buildings in London and premiership football matches in breach of the regulatory requirements not to fly over congested areas and/or without line of sight to the drone.
What is clear however is that there are gaps in many of the existing coverages, particularly for the significant liabilities which may arise from the considerable regulation imposed on drone operators (which is likely to increase with the introduction of further EU regulation in 2016). If the market for drones grows as predicted we therefore expect to see an increase in bespoke wordings specifically covering risks such as operator’s regulatory exposures, costs of the loss or disappearance of the drone itself and third party contractual liabilities arising from the loss of or defect in a drone.