Yes, you need specific drone insurance

Posted by Lydia M. Hilton on

A guest at a California wedding in April 2016, alleges that she went in with vision in both eyes but left with vision in only one. She claims a drone being used by Hollycal Productions, Inc. to photograph the event hit her in the head, necessitating surgery and resulting in the loss of vision in one eye. She sued Hollycal in state court.

Hollycal filed a claim with its insurer, Philadelphia Indemnity Insurance Company, asking it to defend the lawsuit and to pay any resulting damages.  Philadelphia Indemnity, however, recently filed suit in federal district[1] court asking the court to declare that it has no duty to do either.

Philadelphia Indemnity alleges that the defendant’s insurance policy specifically does not cover injury caused by drones because it does not cover injury “arising out of the ownership, operation, maintenance, use, loading or unloading of any flying craft or vehicle, including…aircraft…” or from any “propelled objects.”

The insured now finds itself defending two lawsuits in two different courts. If the federal judge finds no coverage, the defendants presumably would have to defend plaintiff’s lawsuit on their own.  Should plaintiff win her case, defendants would have to pay the judgement—which given the alleged injuries could be significant.

How did this company get in this situation? Since the defendant company had an insurance policy, presumably it recognized the need for lability coverage, but we can only speculate why it omitted to obtain specific coverage for drones.  Perhaps the company simply did not understand the exclusions, or did not think to update its policy when it started using drones, aka unmanned aircraft systems.

Even if the incident were covered by insurance, questions arise about regulatory compliance and safe flying.  If the facts are as alleged, was the photographer improperly flying over people or flying too close to people so as to be operating the drone in a dangerous and reckless manner?  Did the drone operator report the incident to the FAA and to the NTSB? Did the company have appropriate checklists and manuals to ensure the drone was operating properly? Was the operator properly licensed and experienced? Will this incident make coverage more difficult or expensive to obtain in the future? After an incident occurs is not the time to be asking these questions for the first time.

If you or your company are considering drones, you want to lay a solid and defensible foundation of safety so that you can in fact be safe and also prove that you were if called upon to do so in a legal setting. You want to understand the exclusions in your insurance policies and the necessary endorsements for drones. If you are the person engaging an outside drone vendor, you want to know what to look for and require in insurance.  The highest limits in the world will be worth nothing if drones are excluded from coverage.

Let us know if we can help you understand what to consider in using drones in your business and how to mitigate the regulatory and insurance risks.

[1] Case No. 5:18-cv-00768 (SPx), Central District of California.