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Drone risks an urgent priority for companies

Posted On: Apr. 27, 2015 12:00 AM CST

The growing use of drones is creating numerous and still-unanswered liability, privacy and insurance coverage issues, experts say.

For example, if a drone somehow causes medicine to mistakenly be delivered to the wrong house and it leads to someone having an adverse reaction, “who’s responsible for that, where are the risks going to lie, who’s going to pay for that and how much are they going to pay? There are a lot of unknowns,” said Timothy D. Crawley, a member of law firm Anderson, Crawley & Burke P.L.L.C. in Ridgeland, Mississippi.

Mr. Crawley was among the speakers at a session on drone readiness Monday at the Risk & Insurance Management Society Inc.’s annual conference in New Orleans.

Privacy concerns are an issue as well. “When you think about what can go wrong with drones, and consider all the different places they can get to, I think we’re in for an evolving state of interesting claims in the future,” said Bruce H. Raymond, principal at the Raymond Law Group L.L.C. in Boston.

Drones also create insurance questions, Mr. Crawley said. Right now, under Federal Aviation Administration rules, businesses that want to use drones for commercial purposes must obtain a waiver in order to legally operate drones, and most insurance policies would have exclusions in their policies if they are operated in violation of the law.

Policy language covering drones is still in the development stage, “so it remains to be seen how broadly or narrowly” insurers will write these policies, Mr. Crawley said, adding that firms should consult with their brokers on this issue.

Also discussed at the session was the current regulatory outlook insofar as drones are concerned. Under the FAA Modernization and Reform Act of 2012, the agency is in the process of developing regulations in this area.

For now, however, drones can be operated only by a licensed pilot, there must be a second observer, and they can only fly within line-of-sight.

“Drones are new to the commercial environment,” Mr. Raymond said. “They’re out there and the law and regulations are definitely running a long way behind.”

Scott Fazio, director of risk and operations at the St. Charles Parish School Board in Luling, Louisiana, said his school district has beta-tested drones.

He said one way to get rid of risk is to transfer it. For instance, when drones are used as part of a fire drill, the district hires a third party who is insured through a rider on its commercial general liability policy.

Mr. Crawley also discussed the wider use of drones.

“Drones aren’t only coming, they’re here,” he said. Within the past week, for instance, he said, the Swiss postal service has arranged with a company to deliver small packages by drones, with plans to mainly focus on medical supplies.