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The use of unmanned aerial vehicles (UAVs or “drones”) is taking off among real estate brokers, developers and design and construction firms.

The potential application of drone technology is nearly endless. For example, Wisconsin ice fisherman use them to deliver beer, and both Amazon and UPS are evaluating their use for deliveries. Besides being fun, drones offer real advantages. Among these are significant savings in time and money, as well as increased safety over traditional tools used to provide aerial photography, such as manned helicopters and small planes. With a small, lightweight and relatively inexpensive drone armed with a digital camera, Wi-Fi and a GPS, a firm can photograph and map out a large jobsite or completed project in great detail within an hour. A real estate broker can provide a unique birds-eye view of a specific listing at significantly less cost than it would take using an airplane or helicopter.

Drones give virtually all firms the opportunity to create and capture an aerial view of undeveloped land, hazardous conditions, active building sites, finished projects (inside and out) and all steps in between. This allows businesses to quickly and cost-effectively provide their clients and others with extremely accurate visual representations of a project. Those representations can include photos, videos, thermal readings, infrared scans, 3-D topography models and other data.

Drones are amazing tools that promise increased efficiency and effectiveness in serving client needs. Indeed they will likely raise the bar for the types of services and data clients will soon expect. So why aren’t drones used more often than they are? While drones are currently legal if they are used personally (anyone can fly a drone within his or her field of vision and at a height of no more than 400 feet above ground provided they are not in restricted areas like airports or government installations), they are illegal, absent a waiver, for commercial use. This has been complicated by federal red tape as the Federal Aviation Administration (FAA) struggles to come up with rules and regulations governing the commercial use of unmanned aerial vehicles. A secondary factor is the ability to buy insurance for liability arising out of drone use.

The FAA and Drone Registration

Architects, engineers, surveyors, contractors and developers are now allowed to use drones for commercial purposes. As UAVs are considered aircraft, it took some time for the Federal Aviation Administration (FAA) to determine how to regulate this technology explosion. Starting Dec. 21, 2015, the FAA has implemented a system for drone owners to register their aircraft for recreational and commercial purposes. Today, all drones must be registered with the FAA after purchase.

Registration is fairly easy for drones under the 55-pound weight restriction, which includes cameras or any other payload attached to the drone. Owners can go to the FAA website, provide their name, address and email address, and obtain a Certificate of Aircraft Registration that includes a unique identification number that must be marked on the aircraft. At this time, the cost is only $5 and registration is good for three years. Aircraft over 55 pounds must be registered via a paper process and obtain specific approval from the FAA.

With regard to drone usage, the FAA offers a set of simple guidelines that include:

  • don't fly the drone more than 400 feet in altitude;
  • always keep the drone within visual sight;
  • keep at least 5 miles away from airports and remain clear of any manned aircraft;
  • keep away from large crowds and stadiums; and
  • don't fly carelessly or recklessly.
If drone usage goes outside of these guidelines, owners need to work with the FAA directly to obtain exceptions. Also, be aware that some states and municipalities have their own laws regarding the commercial and recreational use of drones.

Insuring Drones

If using a drone for personal reasons, damage to the drone may extend from the personal lines policy. While the policy will likely have an aircraft exclusion, many policies make exceptions for “model or hobby aircraft not designed to fly people or cargo.” Liability is the bigger challenge. Personal lines policies have an aircraft exclusion that would include drones. In other words, if someone flies the drone into oncoming traffic and causes an accident, it is not covered. Commercial drones have a similar challenge. While coverage for physical damage to the drone is possible by scheduling it on an equipment policy, absent specific liability coverage, it probably would be uninsured. The standard general liability policy (ISO’s CG 0001) also has an aviation exclusion and this extends to drones.

While drone exposure is on the major insurance companies’ radar, no one is currently offering coverage under their standard insurance programs. One of the main reasons is that, absent a waiver, it is currently illegal to use a drone for commercial purposes. When the FAA does legalize drones, it is anticipated that most major insurance companies will shortly thereafter file specific endorsements to cover this exposure. In the meantime, there are sources online that are willing to specifically cover liability arising out of drone use.

The premiums to cover this exposure remains a moving target. Insurers will want to know what the drone is being used for, takeoff and landing locations, where they will be operated (populated areas would pose more of an exposure) and how high they will fly. An additional challenge is that there is no statistically relevant data on which to base rates.

To Drone or Not to Drone?

Drones are undoubtedly going to become more popular. During the next decade, they likely will become an indispensable part of many businesses. For now, it seems those who wish to use drones for commercial purposes can take one of four courses:

  1. file for an exemption under Section 333;
  2. subcontract the use of drones to a firm that has already obtained a Section 333 exemption for the type of work being executed;
  3. break the law and fly drones without the exemption; or
  4. wait until the final Small UAS Rule is issued, supposedly in 2017.
If a decision is made to move forward with the use of drones, now or in the future, be aware of the legality and liability issues. If a waiver is required, get one. Make certain proper insurance covering legal liability from the use of a drone is in place. A wayward drone can cause physical injury and property damage and there are potential privacy issues as well. Check the commercial general liability policy to see whether the use of a drone would be covered (it probably isn’t) and, if necessary, seek specific coverage from a specialist aviation insurer.

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