Virtually every businessperson knows that he or she needs insurance to protect their enterprise. Most are even aware that insurance is not “one policy fits all.” They have auto insurance to cover their vehicles and drivers, workers compensation insurance to cover workplace injuries, and comprehensive general liability or professional liability insurance to cover the work that is done. However, it appears that many do not realize that if they use unmanned aircraft, there is likely a hole in their insurance protections.
A lawsuit recently filed in the United States District Court for the Central District of California highlights the consequences of this insurance knowledge gap. According to court filings, Holly Cal Production, a company that provides photography services, had purchased a liability insurance policy with a $1 million per occurrence coverage limit. Holly Cal was using the drone to take pictures and video at a wedding when an accident occurred. According to conflicting reports, either the drone was flown into a bystander or the bystander walked into the drone when it was flying at eye level. The bystander suffered a serious eye injury that required surgery, and ultimately resulted in the loss of vision in one of her eyes.
Regardless of these factual disputes over how the accident happened, the insurance company declined the claim. As it turns out, the policy contains an exclusion expressly stating that it does not cover bodily injury arising out of the ownership, operation or use of an aircraft. In addition, the policy also excluded coverage for bodily injury arising out of any “object propelled, whether intentionally or unintentionally into a crowd by or at the direction of a participant or insured.” Counsel for Holly Cal has disputed this interpretation, claiming that the exclusion is only intended to apply to manned aircraft, and does not apply to a drone equipped with a camera.
In response, the insurer has correctly pointed out in its motion papers that, pursuant to 49 U.S.C. § 40102, 14 C.F.R. § 1.1, 49 U.S.C. § 40101, and the NTSB’s decision in Huerta v. Pirker, it is now indisputable that an unmanned aircraft is an “aircraft” under the law. As a result, we fully expect the insurer’s position to be vindicated in court, and a ruling that there is no coverage for the accident.
This court filing is yet another reminder that businesses must consider aviation-specific issues before investing in drone technology, and certainly before operating drones commercially. Virtually all general liability insurance policies contain a standard exclusion exempting aircraft operations from coverage. While accidents such as this do not happen often, they do happen, and the blinding of a young woman in one eye is a very costly injury. As a result, if you use drones in your business, it is imperative that you work with an aviation insurance broker to ensure that your aircraft, and the way you actually use them, are covered.
Of course, this incident should also serve as a reminder that, if you operate unmanned aircraft in your business, you are entering a heavily regulated field. You should make sure that you have the guidance of a regulatory expert to avoid government investigations and costly civil penalties.