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Safety questions remain as drones spread their wings

Insurers race to keep up with high-flying innovations

Safety questions remain as drones spread their wings

The commercial drone industry has won a doubling of the space in which the unmanned aircraft systems can fly, while proposed rules for flight directly over people are currently under review, but insurance is not among the risk management requirements under federal rules, at least so far.

Little historical data to gauge the nature of the risks that drones pose is challenging the industry as well as insurers.

The Federal Aviation Administration in March doubled the ceiling for commercial drone flights, allowing them to fly as high as 400 feet in the air.

In March, a micro UAS aviation rulemaking committee discussed rules to safely fly drones above people. The group of manufacturers, aviation industry associations and other stakeholders gave their recommendations earlier this month to the FAA, which has projected the current 600,000 drones in the United States will grow to 2.7 million by 2020.

While safety experts before the committee provided several days of testimony on risk of serious injury and death that drones pose, Doug Marshall, Chicago-based aviation consultant at Antonelli Law Ltd., said the group was challenged to find hard data on the risk of being hit or the severity of the impact.

“This technology is the most disruptive and innovative that the commercial aviation industry has seen since the jet engine, and there are no existing standards on the components of the technology,” said Mr. Marshall, who also is a member of the rulemaking committee.

“They don’t fly like regular airplanes. They can take airspace that other aircraft can’t get into. The entire parameter of manned aviation has been turned upside down,” he said.

Chris Proudlove, chairman of the UAS Insurance Association, said insurers can assess the risks that drones pose the same way they did as standard aviation — changing them as the industry evolves.

“When the FAA originally wrote rules and regulations for air travel, it didn’t contemplate multideck passenger aircraft, supersonic travel or helicopters landing on hospitals,” said Mr. Proudlove, who also is the Mountain Lakes, New Jersey-based senior vice president and manager of the Northeast regional office and unmanned aircraft systems risk at Global Aerospace Inc. “The aviation industry has continued to evolve, and the regulations have continued to evolve with it, and it will be exactly the same for drones.”

Among the committee’s recommendations are using an operation-based method to define four categories of risk rather than weight, as countries such as Canada and Australia do. According to their levels of potential hazard, each category would have greater restrictions.

Category 1 drones would be allowed to fly in congested areas and over crowds. Such drones would be small, weigh less than 8.8 ounces including cargo or cameras and have a low risk of hurting people.

Category 2 drones over 8.8 ounces could fly over people no closer than 20 feet vertically or 10 fee horizontally, but the FAA wants manufacturers to prove they have a 1% or less chance of hurting someone.

Category 3 drones would not be allowed to fly over densely populated areas, and flights would be limited to restricted sites. Such drones are used for tasks like inspecting transmission lines or flare stacks. The manufacturer also would have to certify there is a 30% chance or less that impact would cause a serious injury.

Category 4 drones, used primarily by news media, could fly over people, but they also would have greater operational restrictions. Operators would be required to have a risk mitigation plan that coordinates with event planners and local government, and a higher level of pilot training than the other categories will be required.

William Walsh, a Seattle-based member of Cozen O’Connor who focuses on aviation law, is alarmed by the recommendations and lack of insurance requirement.

“Normally, you assess a known risk calculated with previous data and losses, but here we are saying we can subject the public to a 30% risk at the convenience of commercial use of drones,” he said.

If losses are possible, insurance should be required to mitigate those risks, Mr. Walsh said.

John Geisen, Minneapolis-based senior vice president of Aon Risk Solutions’ aviation practice, doubts there ultimately will be an insurance mandate, but also says he’s confident that those who need insurance will seek it out.

“I do believe we will continue to see those in the commercial space secure cover out of competitive necessity — either due to their own risk retention philosophies or, more so where relevant, because their customers are likely going to demand that they have cover, grant additional insured status, etc., much like they would demand of any contract service provider,” Mr. Geisen said.

Mark Dombroff, a McLean, Virginia-based partner at Dentons U.S. L.L.C. as well as a member of the UAS Insurance Association and the Aviation Insurance Association, agrees that market demand will drive insurance purchases.

“There are a lot of drone-for-hire services out there that will fly over facilities and inspect transmission lines or flair stacks, etc. but businesses are not going to allow this operation on their property unless they have insurance,” said Mr. Dombroff, who also made a presentation to the micro UAS aviation rulemaking committee.