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The Drones are Coming

Published onJul 22, 2015
The Drones are Coming

Henry Ford pictured a car in every driveway.  Bill Gates a computer in every home.  The next stage may become a drone above every house.

While the popular conversation about drones focuses on how businesses like Amazon will profit from their commercial usage, there is a growing trend of hobbyist buying drones for recreational purposes.  Despite this excitement, residential drone operators that crash their crafts must figure out how to pay for the expensive damages they cause.  The Boston Globe published one such story recently where a recreational drone user crashed a drone at a parade, hitting a man and almost injuring a child.  Therefore, this blog will focus on how a typical homeowner’s policy covers liability incurred from a wayward residential drone and predict how insurance companies may change policy language in listed liability exclusions to avoid disputes involving drones.

How a Standard Homeowners’ Policy Covers Liability From Residential Drone Usage

A standard homeowner’s insurance policy has a liability section which covers an insured for negligent actions on or off the property, except for listed exclusions.  Well-known exclusions are acts during the course of business, damages by an automobile, or damages done intentionally or illegally.

Among these listed exclusions is an “aircraft exclusion” which states negligent acts caused by aircrafts are excluded from liability coverage. However, it does not include “hobby aircrafts.”  A standard HO-3 policy covers liability for “hobby” aircraft as stated in the policy as follows:

1)    States the policy does not cover “aircraft liability.”

2)    Defines an aircraft as “any contrivance used or designed for flight except model or hobby aircraft not used or designed to carry people or cargo.”

Considering the language of the policy, a drone is a “hobby” aircraft so long as it is not used to carry people or cargo.  Therefore, the liability section of a typical homeowner policy will likely cover the liability from a wayward drone with no additional policies or add-ons.

Thus, if an insured is recreationally flying his or her drone around on the weekend and crashes it into a pedestrian watching a parade, an insurance coverage dispute may arise between a carrier and the insured if the carrier attempts to deny coverage.

How Courts would View the “Aircraft Exclusion”

In most states, including North Carolina, the burden is on the insurer to prove an exclusion is not a covered event.  This makes sense, because insurance companies draft the policies.  In All State Ins. Co. v. Lahoud, the court determined it was the insurer’s burden to prove that an insured’s actions were “intentional” in order to apply an exclusion in coverage and avoid enforcement of the policy.  The specific language of the aircraft exclusion in the liability section of an insurance policy came up in the Illinois case, Hanover Ins. Co. v. Showalter.  In that case, the court used the dictionary definition of “flight” and “aircraft” to determine if a policy covered liability of an insured that was incurred in a parachute incident.

In the case of the parade drone, the insurer would bear the burden of proving the aircraft exclusion applies in order for the insured to avoid covering the recreational drone accident.  One possible way the insured could exclude covering the drone is if it carried “cargo.”  When the aircraft exclusion was originally crafted, insurers had in mind lightweight remote control airplanes that could not fly far out of sight.  Today, drones operate increasingly via camera.  Attachments like cameras such as “go pros,” popular on drones, could constitute “cargo.”

However, taking the plain meaning approach of Hanover,the meaning of “cargo” is “something that is carried from one place to another by boat, plane, etc.”  A camera attachment could fall into that category, but the burden would be on the insurer to prove that a camera constitutes cargo.  Overall, considering the contracts construction of ejusdem generis, “people or cargo” tend to bring to mind large objects that a regular plane would carry, like a suitcase, rather than lightweight cameras.  Therefore, even if a drone carried a small camera, it would likely not fall under “cargo” and would be covered by an insurance policy.  However, as drones become more popular and the possibility to transport items from neighbor to neighbor becomes more common, the “cargo” exclusion may come into play if drones start transporting larger items.

Illegal Usage?

Though the FAA mandates that businesses be granted a waiver to use drones legally, it permits most residential drone usage.  While there are growing complaints about recreational drone usage, arrests from residential drone usage typically only come from flying in heavily populated areas.

The only controlling policy on residential drones is Advisory Circular 91-57, which directs hobbyists to avoid flying their model airplanes above 400 feet; within three miles of airports; and near non-hobbyist aircrafts, populated areas, or noise-sensitive areas such as parks, schools, hospitals, and churches.  However, 91-57, was never promulgated as a formal FAA rule and instead called for hobbyist’s voluntary compliance as a means to ensure public safety.

Mysterious Drone at Running of the Bulls  (Image via WTVR video screenshot)

Thus, the exclusion of liability for “illegal activities” present in a standard homeowner’s policy would not exclude coverage for when an insured incurs drone liability.  Still, insureds should check to make sure their usage complies with state laws.

Going forward

Despite possible ambiguities about “cargo” and “illegal activity,” recreational drone users will likely be covered for negligent acts in the event of an incident involving a drone under the “hobby” aircraft section of the aircraft exclusion.  Additionally, as licensing and drone laws are promulgated, the exclusion for illegal acts may exclude coverage for liability from drone usage.

With drone usage growing in popularity, it is possible that insurance companies in the future will start to consider naming drones as an exclusion in policies and creating separate residential drone policies, much like boats or cars.  While at this time the aircraft exclusion allowing liability coverage for “hobby aircrafts” likely covers drones, expect insurance companies to make changes in the future if incidents involving recreational drone usage increase.

*James Lathrop is a second year law student at Wake Forest University School of Law.  After graduation, he hopes to practice insurance law.  He’d like to thank David Anderson for his contribution of insurance resources for this article. 

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