Limited Coverage for Designated Unmanned Aircraft
April 27, 2015
Summary: In December 2014 ISO filed a number of forms that apply specifically to drones, also known and unmanned aircraft. These forms become effective June 1, 2015. This article discusses the limited coverage endorsements CG 24 50 06 15 and CG 24 51 06 15. For a thorough discussions on drones and related issues, See Drones.
Introduction
Drones are the latest technological product to become an insurance concern. They can be incredibly useful to police, firefighters, and others, but they can also be a large liability issue. The Federal Aviation Administration is working to establish regulations as to how and when they can be used. The CG 24 50 is designed to provide limited coverage for drones when added to the CGL form. The CG 24 51 form is identical other than that it does not modify section B, exclusions for personal and advertising injury liability.
A. Exclusion 2.g. Aircraft, Auto Or Watercraft under Section I – Coverage A – Bodily Injury And Property Damage Liability is replaced by the following:
2. Exclusions
This insurance does not apply to:
g. Aircraft, Auto Or Watercraft
(1) Unmanned Aircraft
“Bodily injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft that is an “unmanned aircraft”. Use includes operation and “loading or unloading”.
This Paragraph g.(1) applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the “occurrence” which caused the “bodily injury” or “property damage” involved the ownership, maintenance, use or entrustment to others of any aircraft that is an “unmanned aircraft”.
This Paragraph g.(1) does not apply to “unmanned aircraft” described in the
Schedule, but only with respect to the operation(s) or project(s) described in
the Schedule.
Analysis
This endorsement removes the aircraft, auto, or watercraft exclusion from the CGL form and makes significant changes. The changes are identical to the language found in the CG 21 10, the exclusion for unmanned aircraft. What is different is the fact that this exclusionary language does not apply to unmanned aircraft that are listed in the schedule as long as they are used for the specified project that is listed as well. The form requires the insured to schedule both the aircraft and the operation or project, and well as a limit of insurance. If the aircraft is not scheduled, there is no coverage, and the exclusionary language applies.
First, it excludes injury or damage from the use, maintenance, or entrustment to others of an unmanned aircraft. “Unmanned aircraft” is a defined term now, and is defined later in the policy as any aircraft that is not designed, manufactured, or modified after manufacture to be controlled from a person within or on the aircraft. This is an aircraft that is controlled by a person on the ground, using handheld controls in order to maneuver the vehicle to wherever the operator wants the craft to go. Drones can also fly autonomously, something that separates them distinctly from hobby radio controlled aircraft. Any use is excluded, including loading and unloading. Loading and unloading become a concern if the drone is used to carry cargo or load or unload vehicles; certain drones can carry a significant amount of weight and could be used for such activities. Drones, or unmanned aircraft, are different than commercial airliners and radio controlled hobby aircraft.
The exclusion applies even if the claims arise from any alleged negligence or other wrongdoing by the insured of any supervision, hiring, employment, training or monitoring of others by the insured which cause injury or property damage involving the drone. For example, a university hires someone to fly its drone over the homecoming game and videograph the event. While making the video, the operator diverts from the event and flies low enough over the audience to cause alarm in the crowd and buzzes pedestrians. Should a spectator file an injury claim against the operator and the university, the university would have no coverage for such actions once the endorsement has been added. This form would allow the university to schedule the drone and the project, videotaping the homecoming game, for example, so that coverage would apply.
(2) Aircraft (Other Than Unmanned Aircraft), Auto Or Watercraft “Bodily injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft (other than “unmanned aircraft”), “auto” or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and “loading or unloading”.
This Paragraph g.(2) applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the “occurrence” which caused the “bodily injury” or “property damage” involved the ownership, maintenance, use or entrustment to others of any aircraft (other than “unmanned aircraft”), “auto” or watercraft that is owned or operated by or rented or loaned to any insured.
This Paragraph g.(2) does not apply to:
(a) A watercraft while ashore on premises you own or rent;
(b) A watercraft you do not own that is:
(i) Less than 26 feet long; and
(ii) Not being used to carry persons or property for a charge;
(c) Parking an “auto” on, or on the ways next to, premises you own or rent,
provided the “auto” is not owned by or rented or loaned to you or the insured;
(d) Liability assumed under any “insured contract” for the ownership, maintenance or use of aircraft or watercraft; or
(e) “Bodily injury” or “property damage” arising out of:
(i) The operation of machinery or equipment that is attached to, or part of, a land vehicle that would qualify under the definition of “mobile equipment” if it were not subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged; or
(ii) The operation of any of the machinery or equipment listed in Paragraph f.(2) or f.(3) of the definition of “mobile equipment”.
Analysis
This section is identical to the exclusion in the CGL form. It maintains the exclusion for aircraft other than unmanned aircraft, watercraft, and automobiles. There are exceptions to the exclusion for various types of watercraft depending on ownership, length, and activity. Exceptions for auto exist for the parking of vehicles on or next to premises the insured owns or rents, or the operation of machinery or equipment that is attached to a vehicle. The operation of the vehicle itself is not covered, but if the insured is operating equipment attached to the vehicle that would qualify as mobile equipment, then coverage applies. “Mobile equipment” is a defined term found in the CGL policy. “Mobile equipment” includes such items as bulldozers, forklifts, vehicles on crawler treads, vehicles with permanently mounted cranes, shovels, loaders, diggers, and other types of equipment. See Commercial General Liability Definitions.
B. The following exclusion is added to Paragraph 2. Exclusions of Coverage B – Personal And Advertising Injury Liability:
2. Exclusions
This insurance does not apply to:
Unmanned Aircraft
“Personal and advertising injury” arising out of the ownership, maintenance, use or entrustment to others of any aircraft that is an “unmanned aircraft”. Use includes operation and “loading or unloading”.
This exclusion applies even if the claims against any insured allege negligence or other
wrongdoing in the supervision, hiring, employment, training or monitoring of others by
that insured, if the offense which caused the “personal and advertising injury” involved the ownership, maintenance, use or entrustment to others of any aircraft that is an “unmanned aircraft”.
This exclusion does not apply to:
a. The use of another's advertising idea in your “advertisement”; or
b. Infringing upon another's copyright, trade dress or slogan in your “advertisement”.
c. “Unmanned aircraft” described in the Schedule, but only with respect to the
operation(s) or project(s) described in the Schedule.
Analysis
This section excludes coverage for personal and advertising injury caused by the ownership, maintenance, use, or entrustment to others of any unmanned aircraft. Again, the language is the same as that in the CG 21 10, exclusion for unmanned aircraft, with an exception for unmanned aircraft and operations listed in the schedule. Again, use includes loading and unloading. Personal and advertising injury includes false arrest; detention; malicious prosecution; invasion of the right of private occupancy of a room, dwelling, or premises that a person occupies; libel and slander; oral or written publications that violate a person's right to privacy; copyright infringement; or use of another's idea in your advertisement. While some of these may be hard to imagine as being caused by a drone, the invasion of the right of privacy is a huge concern. With the ability to mount cameras on drones, it is very easy for a landlord of a property to spy on his tenants. Any claimed injury from such actions is not covered. This section does not appear in the CG 24 51 form; that form applies only to section A exclusions, and does not apply to the personal and advertising injury part of the policy.
C. If an Unmanned Aircraft Liability Aggregate Limit is shown in the Schedule, the following provisions are added to Section III – Limits Of Insurance:
1. Subject to Paragraph 2. or 3. of Section III – Limits Of Insurance, whichever applies, the Unmanned Aircraft Liability Aggregate Limit shown in the Schedule is the most we will pay for the sum of:
a. Damages under Coverage A;
b. Damages under Coverage B; and
c. Medical expenses under Coverage C;
because of all “bodily injury”, “property damage” and “personal and advertising injury” arising out of the ownership, maintenance, use or entrustment to others of any aircraft that is an “unmanned aircraft”.
2. Paragraph 4., the Personal And Advertising Injury Limit, Paragraph 5., the Each
Occurrence Limit, Paragraph 6., the Damage To Premises Rented To You Limit, and
Paragraph 7., the Medical Expense Limit, of Section III – Limits Of Insurance continue to apply to “bodily injury”, “property damage” and “personal and advertising injury”, as applicable, arising out of the ownership, maintenance, use or entrustment to others of any aircraft that is an “unmanned aircraft” but only if, and to the extent that, a limit of insurance is available under the Unmanned Aircraft Liability Aggregate Limit.
Analysis
This section allows the insured to set an aggregate limit for coverage. This works like any other aggregate limit and puts all damages under one limit of coverage.
C. The following definition is added to the Definitions section:
“Unmanned aircraft” means an aircraft that is not:
1. Designed;
2. Manufactured; or
3. Modified after manufacture;
to be controlled directly by a person from within or on the aircraft.
Analysis
This section defines “unmanned aircraft” as a vehicle that flies without having a person in the vehicle, such as a commercial airplane, or a vehicle that has a person on the aircraft, like an ultralight or other craft where the person is as much on, as in, the vehicle. Unmanned aircraft are controlled by operators using handheld controls or can fly using an autonomous system. While this may sound like a radio controlled hobby craft, the two are different. Unmanned aircraft, or drones, are often quad copters, having four rotors that allow the craft to fly vertically and hover.