Since publication of our June 2016 blog article about the imminent Department of Transportation (“DOT”) and Federal Aviation Administration (“FAA”) rules for the use of small unmanned aircraft, the final rule has been issued and the use of these unmanned aircraft systems (“UAS”, or “drones”) is officially regulated by the Federal government for commercial purposes. In accordance with the new rules, unmanned aircraft weighing less than 55 pounds can be legally flown in commercial operations within the parameters established by the FAA in Title 14 of the Code of Federal Regulations (14 CFR) part 107, Small Unmanned Aircraft Systems.

Now that using drones for commercial applications will no longer require a cumbersome application seeking specific exemptions from federal aviation regulations, we predict use of this technology will increase rapidly across all commercial sectors. Construction, agriculture, real estate, energy, film, insur­ance, photography, and retail delivery are just some of the industries that are poised to capitalize on drone capabilities. The allure of UAS is their ability to perform tasks and achieve results safer, faster, and cheaper than traditional methods.

Camera-mounted UAS provide a unique visual perspective and the ability to inspect and document physical conditions over wide areas and in hard to reach places. For instance, external components of a high-rise building or bridge can be inspected without put­ting a person in danger, and without incurring more traditional, but cost-prohibitive operational and ancillary costs.

Despite their many uses and advantages, drones present risks of their own, and as such, must be used responsibly and carefully by experienced drone pilots familiar with the equipment, local airspace and, of course, the Federal rules and regulations. Contractors choosing to take advantage of this exciting technology should establish and enforce safety protocols and best practices for drone use to maximize the capabilities that drones afford, while minimizing exposure from potential risks.

Types Of Drones For Commercial Use

Drones, like any other type of vehicle, or craft, come in many different shapes and sizes. Generally speaking, as drones increase in size, stability of the platform, battery life, and weight-bearing capacity also increase. While the largest drones that are utilized by the military for battlefield surveillance and reconnaissance, or even direct combat operations, can approach the size of a small airplane, the vast majority of commercial drone applications can be accomplished with smaller, easily portable craft weighing between 10-20 pounds, well within the FAA’s parameters for small unmanned drone systems.

In commercial applications, rotary-based drones (ie. quad-copters) are much more common than traditional fixed-wing craft. Quad-copters function similar to helicopters, having vertical take-off and landing (VTOL) capabilities, as well as the ability to hover in place. Advances with GPS systems, satellite connectivity and telemetry, and autonomous systems, such as terrain and obstacle avoidance features have dramatically improved the control and safety of UAS, making them much more practical for everyday commercial use.

These smaller, rotary-based drones are very useful for monitoring and documenting progress and site conditions on construction projects, inspecting structures, such as buildings, roofs, cranes, bridges, scaffolds, and other out-of-reach places, documenting and/or investigating work site accidents and, of course, marketing and PR, by capturing inspiring photographs of completed projects for potential clients and customers.

Specific Limitations Relevant To Contractors

The rules pertaining to small drones primarily regulate three key areas: (i) the UAS device; (ii) Operator qualifications; and (iii) in-flight operations.

The Federal rules require a remote pilot in command, which stipulates that the person operating the UAS must either hold a remote pilot airman certificate or be under the direct supervision of a person who holds a certificate.

Significantly, FAA rules prohibit drone flight over people not “directly participating” in the flight operation unless they are under shelter or in a stationary vehicle. The purpose of this requirement is to protect people on the ground who are likely unaware of the drone flying over­head and could be injured if control of the aircraft was lost.

For example, suppose a contractor is adding a new building to a university campus. Clearly, students, faculty and visitors entering and leaving the campus are not participating in the operation, so drones may not be flown over public locations where non-participating individuals are likely to be present.

The FAA has made clear in the final rule that only the remote pilot in command, the person operating the controls (if different), the visual observer, and any other person who is necessary for the safety of the operation are considered to be “directly participating” in the operation.

Therefore, flying an unmanned aircraft over an active, open construction site would most likely require the contractor to obtain a waiver from the FAA.

As discussed in our June 2016 blog article, other key limitations on small UAS operations include no nighttime operations, visual line of sight requirements, maximum speed of 100 miles per hour, and maximum altitude of 400 feet above ground (unless within 400 feet of a structure). Operators must also comply with restrictions on flight in controlled airspace and yield to other aircraft at all times.

Primary Risk And Exposure For Contractor Drone Operations

Unmanned aircraft present most of the same risks as other forms of aircraft, but thankfully on a smaller scale. For most commercial UAS users, the most likely losses include: (i) injury or damage due to collision or interference with another aircraft; (ii) injury or damage to people or property on the ground; (iii) damage to the unmanned aircraft; (iv) violation of another’s rights when flying over private property; and (v) unauthorized collection, use, or storage of data.

Obviously, the most catastrophic exposure, and the one that regulators are most concerned with preventing, is interfer­ence with a manned aircraft, such as a commercial passenger jet. The number of near misses reported by airline pilots as they approach or take off from urban air­ports is growing. In most cases, these drones appear to have been operated by hobbyists and recreational users, who were operating their drones either knowingly or unknowingly, in flagrant violation of the Federal rules.

In addition, while a UAS crash landing can cause serious injury or damage to persons and property on the ground, actual damage to the hull of the aircraft and its components (ie. rotors, cameras and gimbals, etc.) is perhaps the least worrisome of all UAS risks because it is easily quantifiable and the cost of the devices is relatively low.

Finally, unmanned aircraft also have the potential to create personal injury claims, including interference with one’s personal rights (the right to privacy and the right to refuse entry onto one’s property).

Liability Insurance Covering Drone Usage

The insurance industry largely treats drones as “aircraft.” As such, UAS are treated just like manned aircraft when determining coverage for the exposures associated with owning and using drones. Standard commercial property and liability policies do not cover most aircraft exposures unless such coverage has been added to the policy. Therefore, companies that own, lease, or rent UAS to conduct operations have an uninsured liability unless they have taken specific steps to cover this risk.

Standard endorsements are available for adding coverage for damage to unmanned aircraft (the hull exposure) to prop­erty policies and for adding liability insurance to the CGL and umbrella policies. Alternatively, hull and liability coverage can be obtained on an aviation policy or on one of the many new unmanned aircraft forms that have been introduced specifi­cally for this industry in the past 18 months.

The market for aviation insurance for unmanned aircraft is fairly robust, as UAS present a tremendous growth opportu­nity for a mature industry that already has the expertise in place to write the coverage. Some CGL insurers will agree to cover the unmanned aircraft exposure for little or no additional premium for companies that use small UAS to perform tasks that are incidental to the company’s revenue-generating operations, with restrictions on the type, size, or usage of the device in some cases.

As CGL underwriters collect data on types of UAS (size, safety features, etc.) that have higher incidence rates, expect more conscientious underwriting of this exposure to occur.

Avoid Claims By Implementing A Best Practices Policy

The FAA regulations provide only minimum stan­dards, and provide little to no guidance on flight planning, record keeping, and maintenance. As such, contractors interested in minimizing their expose to loss may do so by implementing best practice guidelines.

First, contractors should perform routine maintenance and a pre-flight inspection before each flight. The FAA small drone regulations do not mention any specific maintenance requirements, nor do drone manufacturers typically provide recommended maintenance guidelines. Thus the obligation is on owners and operators of the UAS to decide when maintenance should be performed.

As a general rule, a conservative maintenance plan (i.e., shave 15-20% off the expected life expectancy of the part in ques­tion), particularly focusing on moving parts and batteries, will substantially reduce the risk of a failed component during flight. The operating software and firmware should also be updated regularly to ensure optimal performance of the aircraft, and calibration of the drone’s compass should be performed prior to each flight.

In addition, pilots should always conduct a routine pre-flight inspection before any flight. During the pre-flight inspection, pilots should confirm that all control links between the control station and the UAS are functioning properly and check for signs of excessive wear and tear, loose con­nections, and any other abnormalities with the aircraft and controller. Obviously, any worn or damaged parts should be replaced prior to takeoff.

Second, while unmanned aircraft operators are not required by law to file a formal flight plan, preparing a flight or mission plan has a number of benefits. It will help the pilot to think about: (i) the most ideal spot to launch; (ii) the optimal flight path that will avoid pedes­trians, and obstacles; and (iii) estimating the time required to complete the flight from takeoff to landing to ensure it is well within the battery capacity (typically 20 to 30 minutes of flight time).

Third, weather conditions, particularly wind, and any condition that may reduce visibility, such as, fog, rain, and snow, should be assessed before any flight. If weather presents any concern at all, postpone the operation, review the forecast and wait until conditions improve.

Fourth, some experts suggest assigning a spotter, or visual observer to assist with drone operations. A spotter may be helpful in observing speed, altitude, and location of the unmanned aircraft, as well as keeping a look out for unexpected hazards (i.e. manned aircraft, birds, power lines). A spotter may also keep an eye on the drone operator, who could be exposed to dangers due to his or her attention being focused on the flight and aircraft. With a visual observer, the risk of dangerous conditions, tripping hazards, and oncoming vehicles may be minimized.

Fifth and finally, maintaining a flight log and record of all UAS operations, including the date, time, purpose, and location of the flight, is useful for not only determining when scheduled maintenance should be performed on the UAS, but to also provide a defense against third-party claims. The ability to produce a record showing when and where unmanned aircrafts were in the air could be persuasive evidence in refuting a claim for third-party injury or damages.

Conclusion

Remarkable advances in technology, together with the increased availability and affordability of UAS nearly guarantees that these devices will be utilized in ever increasing numbers for commercial operations. Contractors wishing to take advantage of drones are encouraged to do so, but just as any piece of equipment, or tool utilized on the job, precautions must be taken in order to minimize risk and exposure.

For more information:  http://www.faa.gov/uas

ABOUT THE AUTHOR

Craig H. Handler, Esq. is an experienced litigator focusing his practice primarily on complex commercial, construction, real estate and insurance litigation. Mr. Handler is also an experienced drone pilot, and enjoys using his DJI Phantom 4 Pro and DJI Mavic to capture photos and video on the east end of Long Island.