Drone use is on the rise. Private individuals and commercial companies are finding new and varied applications for the technology, from Amazon's `flying warehouse' to Lady Gaga's drone-propelled American flag at the Superbowl.
Analysts have estimated that, by 2022, there will be a global market of $90bn for drone related business. The affordability and lack of regulation regarding drone use gives rise to new and untested issues for insurers.
Potential Legal Liabilities
Drone users have broadly the same types of legal liabilities as the operators of conventional aircraft: the risk of first party property damage to the drone or its equipment, third party property damage and personal injury to the drone operator or a third party.
Commercial operators also risk incurring liabilities in respect of employees or independent contractors working in the vicinity of the drone. In our forthcoming Breakfast Briefing we will consider the extent to which those liabilities may be covered by existing household and commercial policies.
The liability sections of household polices commonly exclude cover for liability arising from the use of "motorised vehicles" or "aircraft". However, in many policies, these terms are undefined. They are potentially ambiguous when considered in the context of a drone.
One standard wording excludes liability arising from "owning or using any Motorised Vehicle (or) aircraft...intended for the carriage of people". The wording does not define the term `aircraft' and its definition of Motorised Vehicle excludes "any mechanically propelled vehicle...other than: electrically powered toys (and) model planes...not intended for the carriage of people".
Might a drone qualify as an `aircraft' or a `Motorised Vehicle', or is it best described as an `electrically powered toy'? Might the outcome depend upon the size and type of drone in question, or the purpose of its use?
Commercial polices also tend to exclude cover for losses arising from the use of "motorised vehicles" or "aircraft". This has prompted an influx of niche insurance companies dedicated to providing drone specific-policies, onto the market.
Established liability insurers may need to consider their existing wordings and their risk appetite for insuring drones. The government has begun a consultation on insurance requirements for drones, which will likely have a major impact in this area.