This chart highlights the differences and similarities between drones and hobby aircraft, as well as commercial aircraft. What then becomes important is the insurance policy language; how does this fit with the aircraft industry definitions?

 Regulations

 Numerous issues with drones have led the FAA and various states to create legislation surrounding the use of drones. In December 2015 the FAA developed requirements that owners of small UAV's register their craft with the FAA. Registration provides a way to identify the aircraft in event of an incident and provides an opportunity for training for those new to dealing with airspace regulations.

 Drones weighing more than .55 pounds (8.8 ounces) and less than fifty-five pounds on takeoff must be registered. The weight includes attached cameras, batteries, or other equipment. Tethered, untethered, and remote control aircraft all must be registered as well as drones. Owners age thirteen and older must register; if the owner is younger than thirteen, someone thirteen or older must register the aircraft. The owner must be a U.S. citizen or permanent legal resident. Those craft under fifty-five pounds may be registered using the online registration process. Aircraft over fifty-five pounds must use the Aircraft Registry process, which is a paper registration process. The paper registration process must be used if the aircraft is over fifty-five pounds, the owner intends to use it outside of the United States, the aircraft is owned by a trustee, or the owner uses a voting trust to meet U.S. Citizenship requirements. The fee for either registration is $5. A special N-number may be required for aircraft over fifty-five pounds; a separate $10 fee is required.

 All aircraft must be registered before being used outdoors. Failure to register may result in civil penalties up to $27,500 and criminal fines up to $250,000 and three years' imprisonment. Proof of registration must be with the operator when the aircraft is in use. If the aircraft is sold, the owner should remove his registration number from the aircraft before the transfer of the aircraft to the new owner. Those with multiple aircraft who fly them only as model aircraft can use one registration number on all aircraft. Otherwise, if the aircraft are flown for purposes other than model aircraft, each aircraft needs a separate registration number. Renewal of registration is required every three years and is $5. If the aircraft is no longer operational, destroyed, lost, sold, or is otherwise no longer in the original owner's possession, the owner needs to notify the FAA of the changes.

 As of June 21, 2016 the FAA has issued regulations for non-hobby and non-recreational operation of UAS. Typical operations may include crop monitoring/inspection, research and development, educational/academic uses, power-line inspections in hilly or mountainous terrain, antenna inspections, bridge inspections, rescue operations, aerial photography, wildlife nesting and other such uses. This will allow UAS operations in National Airspace without the requirement of airworthiness certification, exemption, or a COA.

 The rule applies to UAS weighing less than fifty-five pounds. They are limited to daylight and civil twilight operations with appropriate collision lighting, confined areas of operation, and visual-line-of-sight operations. Civil twilight begins at sunset when the sun dips below the horizon and ends when the geometric center of the sun reaches six degrees below the horizon, roughly thirty minutes. During civil twilight there is sufficient light for terrestrial objects to be clearly distinguished; artificial sources of light are not needed to carry on most outdoor activities. For example, on June 21, 2016, in Maineville Ohio civil twilight begins at 5:348 a.m. and ends with sunrise at 6:11 a.m.; sunset is at 9:07 p.m. and civil twilight ends at 9:39 p.m. Sunrise and sunset are when the upper edge of the sun is on the horizon, so this is not a lengthy period. The regulation specifies thirty minutes before official sunrise or after official sunset, local time.

 There must be a remote pilot in command and a person manipulating the controls or a visual observer. A remote pilot in command must have a remote pilot airman certificate with a small UAS rating or be under the direct supervision of a person who does have such a rating. To obtain a certificate, the person must demonstrate aeronautical knowledge by either passing an initial aeronautical knowledge test at an FAA-approved knowledge testing center, or hold a part 61 pilot certificate other than student pilot, complete a flight review within the past twenty-four months, and complete a small UAS training course provided by the FAA. The person must also be vetted by the Transportation Security Administration and be at least sixteen years old.

 The UAS must have a maximum groundspeed of 100 miles per hour with a maximum altitude of 400 feet above ground level, or within 400 feet of a structure. Weather visibility of three miles from the control station is required, and operations in airspace classes B, C, D, and E are allowed with air traffic control permission. The vehicle may not be operated from a moving vehicle or aircraft, no reckless or careless operations, no carriage of hazardous materials, and a preflight inspection must be made by the remote pilot in command. The UAS may carry an external load if the object is securely attached and does not adversely affect the flight characteristics or controllability of the aircraft. The entire regulation with its background can be found here: A chart of current state regulations is also available. Drone Laws by State.

Insurance Definitions

 Aircraft are generally excluded in most insurance policies, although some policies have exceptions, particularly the homeowners policy. "Aircraft liability" is a defined term in the Homeowners 3 Special Form, HO 00 03, and means liability for injury or damage arising out of the ownership, maintenance, occupancy, use, loading, unloading, entrustment to others, failure to supervise others, or vicarious liability for a child or minor involved in the aircraft. "Aircraft" is defined as "any contrivance used or designed for flight except model or hobby aircraft not used or designed to carry people or cargo."

 Drones are not designed to carry people, so in that capacity they do not fit the definition of "aircraft." Cargo is another matter; the policy does not define "cargo," and courts generally refer to a standard dictionary when a term is not defined. Merriam Webster Online defines "cargo" as "the goods or merchandise conveyed in a ship, airplane, or vehicle" or "freight." This implies product to be delivered, not equipment such as cameras and sensors to take photographs or detect chemicals. Therefore, unless a drone was carrying packages to be delivered, again they do not fit the policy definition of "aircraft" and would not be excluded. However, the exception applies to hobby aircraft; if an individual is using a drone to view his crops that would become business use.

 Commercial policies are less specific. The Business and Personal Property form, CP 00 10, does not define "aircraft" and excludes aircraft along with vehicles and self-propelled machines operated away from the described premises. However, an exception exists for aircraft that the insured manufactures, processes, warehouses, or holds for sale. So, if the insured is manufacturing, storing, or selling drones, those would be covered, as well as drones the insured uses on the insured premises.

 The Commercial General Liability form, CG 00 01, does not define "aircraft." In case of a claim that goes to court, a dictionary definition of aircraft may be used. Merriam Webster Online defines "aircraft" as "a vehicle (as an airplane or balloon) for traveling through the air." This is a broad definition with no differentiation between hobby and commercial aircraft.

 The Businessowners Coverage form, BP 00 03, is similar to the CGL in that aircraft are not defined and a standard dictionary definition could be used. Aircraft and any computers to be used in aircraft are excluded in the property coverage section. Liability is of course excluded.

 Coverages

 In the homeowners policy, aircraft are excluded from physical damage except for model or hobby aircraft not used or designed to carry people or cargo. As was seen in the definitions, drones can easily be seen as hobby aircraft depending on their use and what, if anything, they are carrying. Therefore, they would be covered as personal property and covered for damage from named perils.

 Aircraft liability is excluded completely with one exception: injury to a residence employee arising out of and in the course of that employee's employment by an insured. However, since not all drones will fit the definition of "aircraft," there is some coverage. An insured flying the drone around the neighborhood, or at a park taking photos of his family and friends, is covered.

 Liability coverage under the homeowners policy is excluded as defined under the aircraft liability definition. As mentioned previously, not everything is included in the definition of "aircraft liability," so injury or damage from hobby aircraft or drones would be covered.

 As mentioned previously, the Building and Personal Property Coverage Form excludes aircraft operated away from the premises, but craft the insured manufactures, sells, stores, processes, or uses on premises are covered. Drones used to monitor the property for security would be covered.

 The Commercial General Liability policy excludes injury or damage arising out of the ownership, maintenance, or use or entrustment to others of any aircraft that is owned, operated, loaned, or rented to any insured. This broadly excludes aircraft of any type. An exception exists for liability assumed under an insured contract for the ownership, maintenance, or use of an aircraft. The policy states that coverage is excess over any other insurance for any aircraft that are not excluded.

 The Businessowners policy excludes aircraft and computers that are permanently installed or designed to be permanently installed into aircraft. Similar to the CGL, injury or damage arising out of the ownership, maintenance, use, or entrustment to others of aircraft owned, operated, rented, or loaned to the insured is excluded. The same exception for liability assumed under an insured contract applies.

 In December 2014, Insurance Services Office (ISO) filed Unmanned Aircraft Endorsements for commercial umbrella and general liability policies. There are exclusions and limited coverage for designated drones. Form CG 21 09, Exclusion for Unmanned Aircraft, defines "unmanned aircraft" as "an aircraft that is not designed, manufactured, or modified after manufacture to be controlled directly by a person form within or on the aircraft." Therefore, any drone or radio-controlled aircraft is considered unmanned. The form specifically excludes coverage for injury or damage arising out of the ownership, maintenance, use, or entrustment to others of unmanned aircraft. This exclusion includes negligence or other wrongdoing in hiring, training, supervising, or monitoring others by the insured if an unmanned aircraft was involved. Personal and advertising injury arising out of the ownership, use, maintenance, or entrustment to others of an unmanned aircraft is also excluded.

 An exclusion is available for coverage A only, form CG 21 10, Exclusion-Unmanned Aircraft (Coverage A Only). The definition of "unmanned aircraft" and the exclusion have the same wording as the CG 00 09 except that this form applies only to coverage A. CG 21 11, Exclusion Unmanned Aircraft (Coverage B Only) contains the same wording, just applicable to coverage B only.

 Another new form provides limited coverage for drones: CG 24 50, Limited Coverage for Designated Unmanned Aircraft, which allows the insured to schedule a particular drone, used for a specific operation or project, with a selected limit onto the CGL policy. The definition of "unmanned aircraft" is the same as that in the exclusions. The exclusionary language appears and applies to all drones except those scheduled. Coverage is for coverage A and B. If an aggregate limit is listed on the schedule, the aggregate is the most paid for damages under coverage A, B, and C. If a limit is listed for coverage under personal and advertising injury, an each occurrence limit, damage to premises rented to you limit and medical expense limit, there is coverage. There are separate forms for coverage A only, CG 24 51, and coverage B only, CG 24 52, with the same language, just coverage for only coverage A or coverage B.

 There are exclusions and a limited coverage form for the Commercial Umbrella Policy. They have the same wording as do the exclusions and coverage form for commercial liability coverage; the definition of "unmanned aircraft" is the same, as is the exclusion and coverage wording. These forms are CU 21 71, Exclusion Unmanned Aircraft; CU 21 72, Exclusion Unmanned Aircraft Coverage A only; CU 21 73, Exclusion Unmanned Aircraft Coverage B only; and CU 24 50, Limited Coverage for Designated Unmanned Aircraft.

 Specialty lines and other carriers have created policies specific to drone exposures. Included is coverage for police and law enforcement, emergency responders and firefighters, homeland security, traffic patrol, prison, agricultural, construction, railroad, pipeline, archaeological, film, and wildlife conservation use, and film and news gathering among other types of operations. Each of these areas have particular liability and property exposures. Different types of drones are needed for certain tasks; an agricultural drone may be outfitted with sprayers to spray crops, while a police drone may have multiple cameras to record video and photographs of an ongoing incident, or may be outfitted to collect evidence. Other drones may deliver medical supplies, determine the path of wildfires, use thermal imaging for search and rescue, inspect thousands of miles of pipelines, track wildlife and many other uses. Liability is an issue as well, especially when drones are taking photographs for any purpose; those inadvertently or deliberately photographed may claim their privacy has been violated. Drones that malfunction or an operator that loses control can injure bystanders. There are many coverages specific to drone use that are being addressed by specialty policies.

 Industry Use

 Aside from coverage issues, drones impact the industry another way, and that is the ability of the industry to use them itself. Drones have many advantages for the industry. First, the resolution of pictures is excellent and better than satellites and manned aircraft. In event of a claim, the pictures are clear and data retrieval is faster than before. With the ability of autonomous flight, a carrier can map out parameters for the drone to survey and accumulate data safely without exposing employees to danger; think the aftermath of any hurricane or natural disaster with debris and rubble strewn around. Numerous sites can be visited much faster than an adjuster or inspector on the road dealing with traffic or the aftermath of a serious weather event can. Munich Re used drones in the aftermath of the earthquake in Ecuador in April. The ability to use drones sped up the ability to survey and adjust losses. IAG used drones to inspect brushfires in Australia in order to fast-track assessments for claims. The drones allowed adjusters and insureds to review damage from safety, without being exposed to risks from physically visiting the site such as asbestos, fallen power lines, and other hazards.

 Underwriters want photos of homes they are insuring in order to see that the property is well maintained, determine if there are any attractive nuisances or safety issues, and determine the square feet of the property. The use of drones allows the carrier to quickly obtain the information during the underwriting period instead of waiting for the insured to give the agent a two-year old photo of the home with snow on the roof. The carrier can also easily underwrite sections of the book of business to reassess coverage A values and see that the properties are insured correctly.

 Loss control can also make use of drones to inspect properties with several locations or outside operations. They can quickly survey multiple sites where digging, trenching, construction, or other operations are being conducted. Safety measures can be verified as well as condition, type, and quantity of equipment or stock for sale.

 Issues

 Safety and privacy are two large concerns involving drones. Many people are concerned about neighbors spying on neighbors since cameras are readily available on drones. This would make stalking someone incredibly easy, and sex offenders could watch children while still being at a proper distance from the school or playground. In September 2014 a New Jersey man shot down a neighbor's drone that was flying over his property; the neighbor was taking photos of the shooter's home, which was under construction. While the shooter was arrested and charged with possession of a weapon for an unlawful purpose and criminal mischief, the shooter's right to privacy is still an issue. What if instead of flying over the house the drone flyer was using the drone and camera to look inside the window? While the FAA stated that it is legal to fly drones over private houses unless the drone is operated in an unsafe manner, at what point does a drone with a camera become a peeping Tom? This is a huge privacy issue that has yet to be resolved.

 Safety is an issue depending on the responsibility and carefulness of the pilot. The FAA levied a $10,000 fine against Raphael Pirker, who was hired to obtain aerial photos and videos of the University of Virginia. Claims were made that the pilot flew recklessly, very low to the ground, through tunnels with moving vehicles, and close to railway tracks and individuals. Pirker fought the penalty, and a National Transportation Safety Board (NTSB) administrative law judge agreed that the FAA at that time did not have the authority to levy the fine under existing authorization. The FAA's appeal of the ruling is still pending.

 Others have also filed suits regarding FAA authority, and many claim the FAA policies are too restrictive and harm business and that the FAA does not have the authority to impose such regulations. A group of universities filed suit stating that the new FAA rules are a threat to research, science, education, and innovation. A group of business owners and the AMA have filed challenges in the District of Columbia court of appeals over FAA regulations that they say severely limit who can fly camera-equipped drones. These are just the start of suits, and more are bound to occur as more and more drones are out in public.

 However in September 2015 a drone crashed at the University of Kentucky's Commonwealth Stadium before a home football opener. The pilot was in the parking lot with the controls flying the craft before it crashed near the suite level. Later that week a U.S. Open match was buzzed by a drone that then crashed near some empty seats. The operator was arrested and charged with reckless endangerment and reckless operation of a drone along with other charges. The safety of the public is a concern as there are other incidents of drones being flown near the public and crashing.

 There have been instances of commercial airliners encountering drones in flight, and the FAA has serious concerns about such activities. Airspace control is crucial to the safely of pilots, crew, passengers, and cargo, and reckless drone flyers could cause havoc. The Center for the Study of the Drone at Bard College conducted an analysis of airline and drone instances and has recorded 921 incidents between December 2013 and September 2015. Thirty-six percent of these incidents qualified as what the FAA considers "near midair collisions" which is when the drone is close enough to an airliner that there is the possible danger of collision, even if an exact distance between the plane and the drone is not reported. A majority of the incidents were above 400 feet and within five miles of an airport, both restricted areas for drones. Drones are too small to show up on radar and by the time they become visible to pilots, there is no time to change course.

 Drones have also come close to colliding with airliners over New York City, and earlier in the summer a runaway two-pound drone struck a woman at a gay pride parade in Seattle and knocked her unconscious. A crowd in Albuquerque was buzzed at an outside festival and a bystander was injured, and a woman in Tampa was stalked outside a bar before the drone crashed into her car. Near misses with aircraft have caused the FAA to issue guidelines requiring drones to stay at least five miles away from airports and below 400 feet.

 Military aircraft have also experienced near misses with drones. In 2015 there have been at least thirty-five incidents of drones being too close to military airfields or interfering with military aircraft. The Air Force is not only training pilots, flight crews and air traffic controllers about the hazard, they are also soliciting contracts for portable equipment that would interfere with the drones' navigational signals and force them to return to where they started from. While many drones are no larger than birds that could be sucked into a jet engine, they are constructed of plastic and metal, as well as batteries, capable of causing more damage than bones and feathers.

 The issue of rogue drones has grown; lately a drone was flown over a prison in Ohio in an attempt to smuggle in drugs, a drone smashed into a Cincinnati skyscraper, and in California drones have hampered firefighting efforts. In June of 2015 the presence of drones caused firefighting aircraft to divert and caused the grounding of four responding aircraft for over two and one half hours before firefighting efforts could resume. Some planes had to drop their fire retardant, and the failed mission cost between $10,000 and$15,000. In July 2015 a fire near a California interstate was interfered with and caused a twenty minute delay of responding aircraft, allowing the fire to grow substantially. Some counties are offering rewards for information on drone flyers, up to $75,000, and proposed legislation would let firefighters knock drones out of the air if they are impeding firefighting efforts without having to pay for damage caused to the drone. Owner/operators could also be jailed up to five years for operators impeding firefighters on federal property. It is already a misdemeanor to impede firefighting, the problem is in catching the perpetrator.

 The department of Homeland Security has recorded more than 500 drone incidents between 2012 and 2015 where drones were hovering over sensitive sites and critical installations such as nuclear plants and military bases. There are also concerns that terrorists could down a plane by flying a drone into the engine or carry a bomb onto a plane still on the ground. The spread of propaganda is another possibility; a football match between Serbia and Albania was disrupted and prematurely ended because s drone flew a "Greater Albania" flag over the match. Propaganda instead of fan support could be used or even dispersed onto a crowd. A Connecticut man went so far as to arm a drone with a handgun, and firing shots via remote control while hovering the drone in the air; local police determined that no laws had been broken, so nothing could be done.

 Summary

 Drones are fascinating aircraft and can be outfitted with a vast array of equipment that can perform a wide variety of tasks. This being said, there are many concerns over drone operation, who is allowed to fly, where drones are allowed to fly, who has regulatory authority, and what drones can be used for. Many states are already trying to legislate the use of drones. Legislation often defines "drone," lists prohibited uses and exceptions, states how long information can be retained, and provides other restrictions and permissions. How legislation and actions by the FAA ultimately impacts the insurance industry is yet to be seen; more endorsements and policy changes may appear in the future.