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to pay claims, which could leave design firms operating drones underinsured. Finally, under this approach, there may not be any “property” coverage for damage to the drone itself or its payload (such as expensive video or electronic equipment). This protection will require purchase of separate “hull” coverage. ASSESSING STAND-ALONE DRONE INSURANCE. The market for stand- alone drone insurance is currently competitive and evolv- ing rapidly. Coverage can be obtained for: physical damage (hull), including the drone, cameras, sensors, and ground station equipment; as well as for liability, including non- owned aviation liability. Many insurers now offer limits of up to $1 million for hull/ physical damage and as much as $100 million or more for liability. Nonetheless, be sure to evaluate any stand- alone drone policies carefully and assess any coverage restrictions, such as exclusions or sublimits. MANAGING OUTSOURCED DRONE EXPOSURES. A/E firms choosing to use outsourced drone vendors should make sure the ven- dor has related experience or can demonstrate the capabili- ties required to effectively and safely undertake your work. A key issue in using outsourced drone operators involves contractual risk transfer. The contract should define obligations and describe services provided. It should also contain an indemnity clause in favor of the A/E firm. The contract should spell out insurance requirements and name the A/E firm as an additional insured on the drone operator’s liability policy. “By assessing how they plan to use drones, carefully evaluating related risks and taking appropriate measures to manage them, design firms will be in position to get the most from this exciting new capability.” Because drone insurance coverage can vary, it may be prudent to contractually require the subcontracted drone operator to provide you with a copy of the actual insurance policy and all endorsements. That way, you can review any exclusions or other coverage terms to ensure you are truly protected. As the use of commercial drones by A/E firms expands, the insurance market is evolving as well. By assessing how they plan to use drones, carefully evaluating related risks and taking appropriate measures to manage them, design firms will be in position to get the most from this exciting new capability. ROSE HAAS, senior account manager in the Boston office, and ALLISON BAREFOOT, vice president and senior broker in the Washington, D.C. office, work with Ames & Gough. Haas can be reached at rhaas@amesgough.com; Barefoot can be reached at abarefoot@amesgough.com.

pounds), as well as drone registration, operation, pilot certification, and certain restrictions. For instance, drones must be controlled or directly supervised by an individual with “Remote Pilot in Command” certification from the FAA. The agency also stipulates that drones can be flown at a maximum altitude of 400 feet and only during daylight hours. They must be flown within the operator’s visual line of sight and cannot fly above any persons not directly participating in the operation or under a covered structure or inside a covered stationery vehicle. “As the use of commercial drones by A/E firms expands, the insurance market is evolving as well.” Meanwhile, insurers have established their own rules for businesses, such as design firms, seeking to obtain coverage for drones. Above all, insurers have stated they will not provide coverage for any firm not in compliance with the FAA Rule 107 requirements. Thus, any drone utilized must be registered with the FAA and operated according to the agency’s rules. In addition, applicants for drone insurance will need to provide the following information: ❚ ❚ Intended use of the drone (operations/services provided) ❚ ❚ Size of the drone ❚ ❚ Number of drones operated ❚ ❚ Expected number of flights per year ❚ ❚ Controls to address privacy implications (management of video or captured images) ❚ ❚ Intended use of the video and images captured ❚ ❚ Name and remote pilot certification information of any op- erators Once they qualify for drone insurance, design firms can opt to add drone coverage to an existing commercial general liability policy or obtain a quote for a mono-line drone policy. The former may be the most cost-effective option, with many insurers charging either no premium for this additional exposure or minimal additional premiums ($250-$500). Note, however, that some insurers currently are not offering “Personal and Advertising Injury” coverage for drones. In these cases, drone operators would have no coverage for lawsuits claiming invasion of privacy or similar offenses. Further, under these endorsements there is no “non- owned coverage” for utilizing subcontracted drone services. These arrangements may call for purchasing a separate insurance policy. Additionally, at present, most insurers will not extend drone coverage to umbrella/excess policies. As a result, only the CGL policy limit (typically $1 million) is available

THE ZWEIG LETTER November 7, 2016, ISSUE 1175

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