Drone liability cases aren’t likely to be the next big litigation trend for plaintiffs’ attorneys, but there may be more risks on the horizon when drones start taking off without pilots at the controls, according to an aviation attorney.

Speaking at the Advisen Casualty Insights conference in late March, Justin Green, a partner and aviation attorney for Kreindler & Kreindler LLP, revealed that while drones are in fact a hot topic on agenda of every plaintiffs’ lawyers conference, he views them as being somewhat safer than other aircraft in the current environment—even as regulators play catch-up with emerging technology.

Green and fellow panelist, insurance broker Thomas Klaus, a vice president with Willis Aerospace-Americas, repeatedly referred to drones as UAVs—an acronym for “unmanned aerial vehicles”—during the session. But Green noted that UAVs in operation today are actually not entirely “unmanned.”

One thing to watch for in the future is “when drones start flying themselves,” he said in a response to a question from panel moderator Rebecca Bole, senior vice president of Advisen’s editorial division, who asked the lawyer to predict what risks will emerge within five years.

“Right now you need a pilot.” When the Federal Aviation Administration gives permission to fly a drone for commercial use, the agency usually requires a private pilot or someone with commercial pilot’s license to fly it, said Green, who has represented families in major aviation cases including airline disasters, and corporate and civil airplane and helicopter accidents.

He offered two likely reasons for the requirement. “A pilot will know all the airspace restrictions, [and] if the pilot messes around, the FAA can pull that license,” he said.

“But going forward, if Amazon is going to deliver its packages, it’s not going to have 100,000 pilots, each flying the individual UAVs….They’re going to eventually have drones that are true drones—meaning that nobody is flying them. They are basically flying a program.

“That’s really science fiction almost,” Green said, characterizing the prospect at “kind of scary.”

A broker in the audience suggested another frightening scenario—one in which a terrorist uses a drone to take down a passenger plane.

Green, who served in U.S. Marine Corps as an aviation safety officer for his squadron and an accident investigator, said that only a heavy drone would pose a threat. “A really small drone, if it goes [into] an engine will probably just go right through, just like a bird. These engines are designed to handle four pounds that actually go right through the engine” without harming the plane, he said.

Still, “it is a danger and a known risk” to watch for, he added.

The audience participant seemed to take his cue from listening to earlier comments from Klaus, who said that inadvertent “near misses” with helicopters and commercial aircraft are reported every week. “Imagine if an UAV got sucked up into a jet engine just like a bird does, or hit a blade of a helicopter—you can imagine the damage to property and people that would cause,” the Willis representative said.

Klaus noted that UAVs are getting more and more sophisticated, and that some can be programmed so that they cannot fly in certain areas, like into the airspace immediately surrounding airports or near the White House. (See, for example, USA Today article, “Drone maker offers to block flights around Washington,” Jan. 28, 2015.) “But you’re never going to stop the robotics guy who can actually make his own UAV. Whether that’s risky or not, he can do what he wants with that.”

Both Klaus and Green noted that the Secret Service has some anti-UAV measures to prevent incidents like a recently reported unintentional flight onto the White House lawn, and that the FAA has been formulating rules about flying within near airports and crowds.

The FAA announced rules restricting flight paths of recreational drones last year. (See FAA press release “FAA Offers Guidance to Model Aircraft Operators, dated June 23, 2014 and related Federal Register notice http://www.faa.gov/uas/publications/media/model_aircraft_spec_rule.pdf.)

On the commercial side, “it’s up to the FAA to stiffen fines and criminal penalties for operating an UAV” to prevent a nightmare scenario, Klaus said at the Advisen session.

“The other issue is policing,” said Green. Even when aviation regulators get restrictions sorted out, how are they going to police UAV flyers, he asked. The rules aren’t going to stop anyone with “real intent” from flying within five miles of the airport, he said.

Risks, Regulations and Insurance Coverage

Still, for the most part, Green weighed in on the side of drone safety, downplaying the risks in the world today.

“We have probably five conferences like this every year, and for the last two years, every single one of them had a drones panel,” he reported. “And every single one had plaintiffs’ lawyers, and sometimes defense lawyers, talking about what’s coming down the pike.”

But “drones are probably going to be way safer than helicopters. They’re going to replace a lot of missions that helicopters traditionally have done,” he said, referring to search and rescue operations in disasters, as an example.

“If a drone goes out and does a search in a forest fire, you don’t really care if the drone crashes. Depending on the price of the drone, you might lose thousands of dollars. It’s not hundreds of thousands.

“You’re not going to lose a pilot. You’re not going to lose an observer.”

As a plaintiffs’ lawyer, Green said he’s not thinking, “Hey, 10 years from now, I’m going to be a drone contingency lawyer.” Instead, “having represented families of people who have died doing those types of missions, I’m happy that in the future some of those missions won’t put people at risk.”

Green made those remarks after Klaus listed some of the commercial uses of drones today—a list that included everything from aerial photography for movie production to disaster recovery.

“There are many industries. We’re just getting to the tip of the iceberg right now,” Klaus said. Among those using drones today or exploring their use, he said, are:

• The oil and gas industry.

Drones are used to check pipelines for maintenance issues. And when oil spills happen, they can measure far spread the oil is in the sea

• Sports and entertainment businesses.

Football and baseball teams, as well as stadiums use UAVs to capture action shots

• Law enforcement

Police, fire, and the military use UAVs for reconnaissance and surveillance activities. Klaus said such activities can include: the Coast Guard using drones to go out and check for drug runners coming in from South American countries; fire fighters, to track the spread of forest fires; immigration departments for border control.

• Real estate firms.

Drones are used to get photographs of buildings and undeveloped lands.

• Journalism.

UAVs are going into war zones, which previously would be very dangerous to capture.

• The insurance industry

Companies can use UAVs to examine flood situations, or to see the tops of roofs when structures are not stable for adjusters to view the damage themselves.

Similarly, for disaster recovery, Klaus imagined how UAVs in the sky might have been used instead of helicopters after Hurricane Katrina to search for people who were trapped; or when there are airplane crashes, looking for where survivors are or looking to the flight data recorder.

Retailers are also exploring the use of UAVs, Klaus said, and Bole noted that Amazon has just recently gotten the green light from the FAA to test its delivery drone outdoors.

“It took Amazon a long time to get that special permission,” noted Green. “You know what that special permission is for? They’re going to be testing it in a very safe manner.”

“That’s something that the FAA could have probably approved in 24 hours but it took months and months,” Green said, underscoring a point he made when Bole asked him how well commercial drone users understand their regulatory obligations today.

The regulations “are pretty well understood because there aren’t any yet,” he said. “This is an industry that’s five years ahead of the FAA. The FAA is trying to catch up. But at the same time, the FAA is trying to keep control over it. So what they’ve basically said is don’t do any commercial operation unless we give you special permission.”

Insurance Coverage Issues

Even though regulations are lagging, at least one broker in the audience reported that when his entertainment clients seek insurance coverage for drone-related risks, they face questions about regulatory approvals on applications. Insurance carriers ask whether the clients sought clearance and permits from the FAA. “We didn’t even know that was necessary. We just bought this thing off of Amazon,” the potential insureds tell him, he reported.

Giving a rundown of risks that might need to be insured as businesses use UAVs more and more, Klaus said the first exposures to think about relate to aircraft liability—exposures to property damage and bodily injury of third parties.

There are also privacy and cyber liability issues to consider—”UAVs looking at information they should not have or spying on people, like paparazzi do on the celebrities.”

Green noted related regulatory issues. “A couple of weeks ago, the FAA contacted a hobbyist who took video with a UAV and posted it on YouTube. The FAA said that’s a commercial use, and that violates the current regulations,” he reported.

As to the question of obtaining adequate UAV coverage, Klaus described two options. “I have seen insurance companies in the property/casualty market endorse the general liability policy to cover UAVs or model aircraft [and] I have also seen the aviation insurance industry write specialized standalone UAV…liability policies which address the issues.”

But there is a stark difference in limits available, he suggested, noting that the aviation insurance community is not willing to offer the limits that some GL programs have. The common limit for a UAV policy from the aviation market is $1 or $2 million, he said, adding that he has seen policies written up to $10 million. “But GL programs can be a lot more than that,” he said.

Asked whether there have been losses, Klaus could only cite one bodily injury claim for certain—involving a UAV that hit a triathlete in Australia, when the UAV crashed during the filming of the event. “I think there are a number of incidents around the world like that [but] most of the incidents that I have heard involve damage to the UAV itself” rather than injury to a person, he said.

Bole wondered aloud whether privacy would pose the greatest threat of mushrooming litigation in the future, and Green was quick to point out that recreational users—especially children—could easily get into trouble.

“Any town is going to have kids who play around. If you go to the Apple store right now, you can get a high-definition camera on a UAV and you could probably learn to fly in a half-hour. And you could fly it around your neighborhood using your iPad and you could take great video of anything you want—see what the neighbors are doing out at the pool.”

“That’s a real concern,” he said. “People are going to be sued for it, for sure. People are going to get criminally in trouble for it, for sure.”

“The recreational users are the ones that don’t understand that you’re not supposed to fly over an airport, or near the George Washington bridge,” he added.

“If my kids have a drone, where would I get that insured,” asked an audience participant, wondering if his homeowners or umbrella policy would provide coverage for privacy claims.

While Klaus responded that this is among the issues with which the insurance community is still struggling, the question of exactly what a homeowners policy will cover—and whether an aircraft exclusion in the standard ISO standard homeowners policy would apply to drones—has been raised elsewhere in recent insurance industry reports.

In a July 2014 item on Gen Re’s blog titled “Drones: Peek-A-Boo,” Charlie Kingdollar, an emerging issues specialist for the reinsurer, notes that a standard ISO homeowners policy defines aircraft as “any contrivance used or designed for flight except model or hobby aircraft not used or designed to carry people or cargo.”

While the words of the definition might suggest that coverage for third-party bodily injury or property damage would therefore not be eliminated by the aircraft exclusion, Swiss Re in a more recent report explains that the language of the policy leaves this unsettled.

“Whether a drone designed to carry only a video camera qualifies as ‘designed to carry cargo’ could be a source of future coverage disputes if it hasn’t been already,” says the report titled, “Insurance and the rise of the drones,” published in December 2014.

According to the Swiss Re report, the absence of coverage for personal and advertising injury is clearer. “Unendorsed, ISO’s homeowners policies don’t provide coverage for either personal injury or personal and advertising injury as defined in ISO’s umbrella policies. As such, non-bodily injury or non-property damage liability claims arising out of use of a drone wouldn’t be covered….”

“In order for liability coverage to be triggered under most homeowners insurance policies there is a bodily injury or property damage requirement. As a result, there may not be coverage for liability that arises from personal use of a drone that involves trespassing, stalking, harassment and other criminal laws that don’t implicate bodily injury or property damage,” the report also notes.

ISO Task Force Scoping Out Options

In an email responding to an inquiry from Carrier Management about whether the worried parent of drone-flyer could find coverage under an ISO homeowners policy, ISO reported that it has “put together an internal task force to examine more closely potential coverage and exclusion issues with respect to property, liability and personal injury exposures regarding the use of drones in relation to the ISO Homeowners program.”

As to the specific scenarios of a son spying on a neighbor or crashing his airborne vehicle on a neighbor’s property (resulting in damage or injury), ISO said, “it will ultimately depend on the provisions of the specific insurance policies, if any, involved and all the related facts and circumstances of a given situation.

“Speaking more broadly, we are looking at the subject on a broader scale and plan to identify the need, if any, for the introduction of new options with respect to such exposures,” ISO said.

In December last year, ISO, which is a unit of Verisk Analytics, noted that it had taken steps to help insurers clarify coverage for commercial drone use, introducing “exclusion and coverage options to give insurers maximum flexibility when writing risks that use drones in their operations.”

“The options modify coverage under ISO’s Commercial General Liability and Commercial Liability Umbrella/Excess programs and were…developed and filed on a multistate basis for a June 2015 implementation,” ISO said in a media statement, which also referred insurers to drones white paper for more information (www.iso.com/drones).