What Risk Managers Need to Know Game of Drones: What Risk Managers Need to Know to Keep Their Heads When Dealing with UAVs Brendan C. Holt C. Lily Schurra Saxe, Doernberger & Vita, P.C. Saxe, Doernberger & Vita, P.C.

FAA Can Investigate THIS

An Industry Poised to Take Off: FAA Sales Growth Estimates: Hobbyist drone sales could expand from 1.9 million in 2016 to 4.3 million in 2020 Commercial drone sales could increase from 600,000 in 2016 to 2.7 million by 2020. Drone Services Industry: Revenue could increase from $170 million in 2015 to $8.7 billion by 2025 Comparison to Auto Industry: From 1910 -1914 increase of 1.2 million cars on the road.

Uses: The Sky’s The Limit Aerial imaging 3-D modeling and surveying Security of property and job site Scanning and detecting damages Real-time monitoring of project progress Emergency management / monitoring First Responders Municipalities Insurance companies

FAA Regulatory Framework Aircraft Requirements FAA airworthiness certification not required Aircraft registration required Aircraft markings required Part 107 – remote pilot certificate Requires passing of Initial Aeronautical Knowledge Test TSA background check Application process can take 4-6 weeks Carriage of Cargo Now allowed Maximum weight – 55 lbs. Required preflight check of security of load Must meet all other operating limitations or have a waiver Visual Line of Sight (VLOS) Operator must be able to see aircraft at all times Night time operations prohibited Operational Limited Continued: Maximum altitude of 400ft above ground level No operations above 18,000ft Waivers Can waive some 107 limitations Must prove safety of operations and justification for waiver

Potential Liabilities Third-party Bodily Injury Third-party Property Damage Privacy Violations Data Breach Contractual Liability

CGL and Data Liability Coverage Issues CGL Coverage Part A – Aircraft, Auto or Watercraft Exclusion 2. Exclusions This insurance does not apply to: g. Aircraft, Auto or Watercraft ‘Bodily injury’ or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to others of any aircraft… Exception to Exclusion g. This exclusion does not apply to: (4) Liability assumed under any ‘insured contract’ for the ownership, maintenance or use of aircraft… CGL Coverage Part B – Relevant Exclusions 2. Exclusions This insurance does not apply to: a. Knowing Violation Of Rights Of Another ‘Personal and advertising injury’ caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury’. d. Criminal Acts ‘Personal and advertising injury’ arising out of a criminal act committed by or at the direction of the insured. p. Recording And Distribution Of Material Or Information in Violation of Law …(4) Any federal, state or local statute, ordinance or regulation…that addresses, prohibits or limits…collecting, recording, sending, transmitting, communicating or distribution of material or information. Data PII/Data

Other Policies & ISO Endorsements Drone Specific Policies Aviation/Aircraft Specific Policies New ISO CGL Unmanned Aircraft Endorsements: CG 21 09 06 15 Exclusion - Unmanned Aircraft CG 21 10 06 15 Exclusion- Unmanned Aircraft (Coverage A Only) CG 21 11 06 15 Exclusion - Unmanned Aircraft (Coverage B Only) CG 24 50 06 15 - Limited Coverage for Designated Unmanned Aircraft (Coverage Parts A and B) CG 24 51 06 15 - Limited Coverage for Designated Unmanned Aircraft (Coverage A Only) CG 24 52 06 15 - Limited Coverage for Designated Unmanned Aircraft (Coverage B Only)

Take Aways Know what is (or isn’t!) in your insurance program Make sure discrete lines of insurance align Tailor contractual risk transfer Insurance requirements Indemnity

Thank You! Brendan C. Holt 203.287.2124 bch@sdvlaw.com C. Lily Schurra 203.287.2138 cls@sdvlaw.com