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Unmanned Aerial Systems

Unmanned Aerial Systems

Lately there has been a lot of discussion on Unmanned Aerial Systems. 60 Minutes showed Amazon’s delivery plans; new companies are popping up with delivery services for anything from prescription medication to beer deliveries on frozen lakes. In a recent ruling we saw the courts strike down the FAA’s oversight of commercial operations (for the time being). This has elevated the status of UAS to the next big thing -– and for once I think they’re right!

UAV Aerial ViewThese flying systems are not futuristic fantasies; they’re flying today in almost every city in the country. The flight controllers are as sophisticated as many systems in manned aircraft. The technologies being developed everyday in universities around the world are revolutionary in the most exciting of ways. The impact that these UAS will have on our lives over the next 20 years will be significant. These systems are in the same state that our aircraft industry was in the 1920s. At that time, there were many manufactures with different ideas and models. Commercial service was really getting more traction, but uses seemed limited to wealthy and the military. Then came consolidation and technological advances and today we have vehicles getting ready to deliver us into space. It won’t take 100 years to get as advanced in the UAS industry rather I think we will track the same trajectory that the internet did. Development of better systems is being done in garages and workshops around the world. Ideas that will help improve our lives will become more evident as we progress with the expansion of these vehicles.

The insurance market is trying to help, but in the rush to supply coverage for these systems most companies have not applied enough thought to the coverage they offer. We are seeing coverage applied to aircraft hull and liability policies and some “Frankenstein” forms to insure the unmanned vehicles. The problem with this is many of the coverages, wordings and exclusions do not accurately apply to UAV and related systems. For example, on manned aircraft premises, coverage is provided where you store or base your aircraft - typically an airport. However where do you store your UAV, in your car, your house, your office? It is hard to imagine that underwriters and actuaries have been able to evaluate and price the exposures associated with covering this expanded premises, dog bites, slip and falls, or other non-aviation related issues. Another question, are underwriters planning to cover mental anguish when a UAV crashes during a sporting event and claims are made for fear of things dropping from the sky? It’s an embarrassment to our industry that we can so quickly jump into something, but decide not to evaluate it properly to make sure we are actually helping. It is concerning, to say the least, that our industry would quickly jump into something without proper evaluation. It seems there are many issues that need to be addressed in order to make sure we are actually helping.

One issue that needs to be addressed is Physical damage coverage. What is a total loss, what is considered a partial? Who can repair and what makes them qualified? How are vehicles identified - do you know which vehicle is your insured’s as many don’t have serial numbers (keep in mind many owners buy parts and components and build these systems at home). Are insurers going to send adjusters out to the loss site? Are all occurrences advised?

So what are we doing at Berkley Aviation? As is true for most all companies we employ pilots, mechanics, and aviation engineers to better understand the issues around our typical manned aviation products. So in an effort to better understand the nuances of this category, we bought our own UAS – a DJI Phantom II Vision – a small, simple quad copter that is almost ready out of the box. We have been flying it and learning what it’s like to fly, crash, test the limits and maintain them. We have flown it in different situations and have become proficient in its operations. This has enabled us to see the issues around learning to fly and why some basic training is needed. We can see the need to have a multi-person crew for filming. We know what minimum number of satellites it operates best at. We also learned what happens when a rotor blade comes into contact with a person. Through firsthand experience, we know how often they crash and how many people get drawn to watching them fly. One of the main points we have gathered from our experience is that these vehicles are not aircraft and shouldn’t be insured like one.

We have written a policy form specifically for these vehicles with definitions, exclusions and coverage components that apply to the exposures that we intended. We aren’t willing, in most cases, to provide hull coverage at this time, there are too many issues that need to be resolved in order to provide our legally required services. We have a form that reflects the coverages that we intend to provide.

It’s important in this industry to be a leader, but being first doesn’t mean you can lead. All too often speed to market is rewarded, but I fear the lack of detail will provide years of legal suits. Some people will think that ambiguity always goes in the favor of the client, but when your insurer sues you to reform a policy who is really going to pay?

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