If your company uses drones or plans to use them as part of your operations, you are faced with a unique set of risks that can leave you exposed to a variety of possible liabilities.
That’s why it’s important that you are properly insured to cover any legal liability in the event of property damage, bodily injury or other claims by third parties. Your commercial property policy won’t cover the claims and you’ll need a policy that specifically covers commercial drones.
With the number and types of businesses using drones expanding, it’s important you understand the potential risks your firm can face:
Liability risks: If your drone crashes, you can face claims for property damage, bodily injuries and financial damages that occur in day-to-day drone operations.
And as drone operators face heavier regulation, they also face the potential of expensive liability claims.
Cyber security: If hackers access your drone, they could take control of it and crash it into a ground object or aircraft. Typically, they will take control of the drone by taking over Wi-Fi or radio signals controlling the device. Any data the drone is collecting can also be compromised.
They can also intercept sensitive data that’s being transmitted from the drone to the control station.
Invasion of privacy: One of the biggest concerns about drones is the right to privacy. A number of states have passed laws that make using a drone to fly over someone’s property with the intent to capture video, pictures or sound an invasion of privacy.
Drones are also explicitly barred from flying over certain areas, like correctional facilities and government buildings. As a result, invasion-of-privacy lawsuits always loom.
Coverage and costs
Liability coverage: This coverage is standard in drone insurance policies. It protects your business against legal liability for property damage or bodily injury caused by your company’s drone. It also includes coverage for invasion-of-privacy lawsuits.
Coverage includes medical costs for injured parties as well as legal costs, including lawyer fees, settlements and judgments.
Commercial drone liability insurance is typically offered starting at $500,000 per occurrence, but you can opt for higher coverage as well. Some policies may cover up to $25 million per claim.
The cost of coverage will depend on a number of factors, like the type of work the drone is employed for, the experience of your drone pilot(s), the policy deductible, accident history and the location where you’ll be operating the drone.
Your coverage should be commensurate with your risks, and the higher your limits the higher the premium. Typically, a drone policy with a $1 million limit will cost less than $1,000 per year.
Physical damage coverage: Depending on your policy, it may also cover damage to the drone itself if it’s damaged. This coverage, which sometimes is a policy option, typically covers the full replacement cost of the drone itself, plus any attached equipment like cameras and other technology.
Hull coverage typically ranges from 8-12% of the replacement cost of your drone and its equipment. If you are looking for $10,000 in hull coverage, you’d be looking at additional premium of $800 to $1,200 per year.
Examples illustrating the need for coverage
- The company SkyPan was sued by the Federal Aviation Administration for taking and publishing aerial drone photos over restricted areas. The company agreed to pay a $200,000 fine.
- A California-based drone photography company was sued by a wedding guest who lost the use of her eye when a drone made contact with her face. A court upheld the right of the company’s commercial liability insurer to refuse to defend the case, since the policy excluded coverage of aircraft.
The takeaway
If your organization is starting to use drones for its operations, it’s crucial that you secure drone liability insurance at a minimum. The ramifications for your business if your drone injures a third party can be devastating.