Droning On

By Frederick Ferrand and Kori Eskridge

  

Craving a Slurpee but unable to break away from the office? Have no fear, the 7-Eleven drone is here! Indeed, earlier this year 7-Eleven partnered with a start-up company to begin testing residential deliveries by drone of popular convenience store staples, such as coffee, donuts, candy, and yes, even Slurpees. See 7-Eleven Just Made the First Commercial Delivery by Drone (2016) http://www.theverge.com/2016/7/23/12262468/ 7-11-first-retailer-deliver-food-drone. 7-Eleven is not the first company to consider delivery by drone - Amazon and Wal-Mart have been developing infrastructure and processes to make drone deliveries an everyday reality. Drone use has also become invaluable to various industries, such as real estate, where sellers can showcase their properties by providing an aerial view of the home, location, and surrounding area. Additionally, drones have been used to deliver medical supplies to rural areas surrounded by rough terrain. See Watch the First FAA-approved Delivery Drone Drop Medicine Down to Rural Virginians (2015), http://www.theverge.com/2015/7/20/9002639/first-legal-faa-approved-drone-delivery. As the technology advances, more uses for drones will inevitably be created.

  

Most drones are classified as "unmanned aircraft systems" ("UAS"), which the FAA defines as an "unmanned aircraft and the equipment necessary for the safe and efficient operation of that aircraft. " See Unmanned Aircraft Systems (UAS) Frequently Asked Questions (2016), https://www.faa.gov/uas/faqs/. The FAA further defines "unmanned aircraft" as "an aircraft that is operated without the possibility of direct human intervention from within or on the aircraft." Id. Many question whether a drone is the same as a model aircraft. To attempt to answer this question, Congress has defined "model aircraft" as a UAS that is 1) capable of sustained flight in the atmosphere; 2) flown within visual line-of-sight of the operator; and 3) flown for hobby or recreational purposes. Id.

 

Recently, numerous rules and proposals have been considered regarding drone use. Since December 21, 2015, all owners of UAS which weigh between 0.55 and 55 pounds are required to register online to receive a Certificate of Aircraft Registration/Proof of Ownership for their drone or model aircraft. See 14 C.F.R. § 48 (2015). As part of the registration, each UAS used exclusively for recreation will be assigned a unique identification number that must be affixed to the drone prior to flying. Id. Failure to register a UAS can result in stiff penalties and fines. Furthermore, on August 29, 2016, new rules became effective regarding the use of UAS for both commercial and recreational use. See 14 C.F.R. § 107 (2016). At the state level, at least 38 states considered legislation related to UAS in the 2016 legislative season. See Current Unmanned Aircraft State Law Landscape (2016), http://www.ncsl.org/research/transportation/current-unmanned-aircraft-state-law-landscape.aspx. In Georgia, H.B. 779 passed in both the House and the Senate, only to be vetoed by Governor Deal. See H.B. 779, 153rd Cong. (2016) (vetoed). The bill sought to ban weaponized drones and create a drone commission to focus on economic benefits and development along with privacy and safety concerns. Deal stated that the FAA should finalize federal rules and regulations regarding the use of drones before the state instituted regulations that could ultimately turn out to be contradictory to the federal rules. See Deal Issues 2016 Veto Statements (May 3, 2016), https://gov.georgia.gov/press-releases/2016-05-03/deal-issues-2016-veto-statements.

           

Drone use creates uncertainty in the insurance arena as well, in regard to property damage claims. A large part of this uncertainty revolves around the classification of a drone and the specific language included in the policy. The remainder of this article will focus on the unique risks posed by these uses in the context of potential insurance claims.

  

Homeowners Insurance

  

A typical homeowner's policy provides coverage for a claim or suit brought against an insured under the policy for "damages because of bodily injury or property damage" that is "caused by an occurrence." It is easy to imagine potential claims involving an accidental crash landing of a drone causing property damage or an overzealous pilot causing a drone to strike an unsuspecting friend resulting in bodily injury. Claims for property damage and bodily injury resulting from drone use would likely be covered under the general provisions of a homeowner's policy.

 

However, it is less clear whether policies will provide coverage for an invasion of privacy claim. What qualifies as an "occurrence" will vary from policy to policy, but most homeowners policies exclude losses that arise out of the "ownership, maintenance, operation, use, loading or unloading" of any "aircraft." As such, the definition of "aircraft" becomes the focus of any coverage opinion. In a recent declaratory judgment action, Tucker v. Allstate Texas Lloyds Ins. Co. , 180 S.W.3d 880 (2005), the policy defined "aircraft" as: a " device used or designed for flight, except model or hobby aircraft not used or designed to carry people or cargo." Based on this specific definition, there is some ambiguity as to whether a drone would qualify as an "aircraft." While all drones are designed and used for flight, not all are large enough or used in a capacity to carry cargo.

 

Courts often accept evidence of common usage or even dictionary definitions to determine the meaning of a word, especially in cases of ambiguity. Merriam-Webster's dictionary defines "aircraft" as "a machine (such as an airplane or helicopter) that flies through the air." http://www.merriam-webster.com/dictionary/aircraft. "Aircraft" may also be defined as "any machine supported by flight in the air by buoyancy or by the dynamic action of air on its surfaces, especially powered airplanes, gliders, and helicopters." Recently, the National Transportation Safety Board ("NTSB") determined that a drone is an "aircraft" for purposes of FAA enforcement of reckless operations. See Huerta v. Pirker, Order No. EA-5730, (NTSB Nov. 18, 2014). Therefore, the specific language defining "aircraft" in the policy is extremely important because, if properly worded, the definition can potentially limit claims for property damage and bodily injury resulting from drone use. Absent such definitions, there may be ambiguities regarding whether damage by drone is a covered cause of loss under the policy, and ambiguities in an insurance policy are almost always construed against the insurer. Of course, this would not include any claims related to a drone used for commercial use, since any business-related activities are typically excluded under a homeowner's policy.

 

For more information about this topic, please contact Frederick Ferrand or Kori Eskridge with Swift, Currie, McGhee $ Hiers, LLP at 404-874-8800.