Double-check coverage in three key risk areas
This summer, attorneys Steven Ritt and Eric Barber emailed a memo to their clients on the heels of newly released Federal Aviation Administration (FAA) final rules for small drones. It began: “The floodgates are open.”
That’s because the rules will enable more farmers, other business owners and hobbyists to fly the friendly skies. The technology, while a time-saver for many producers who need fields scouted, is adding layers of complexity for insurers whose policies protect farm operations.
“Insurers now engage in a qualitative case-by-case evaluation of insurance applicants,” noted Ritt and Barber, both with the Milwaukee, Wis.-based law firm Michael Best & Friedrich, LLP, at the time. “While the process of securing insurance can still be quick, it is slowing.”
Coverage Criteria. The meticulous review process represents a shift from the past, when insurance companies relied on FAA’s Section 333 exemptions as a general guidepost for evaluating the potential for risk.
Today, producers who want to secure lower premiums and higher insurance limits need to take care with packaging and presenting their application and accompanying materials, Ritt and Barber say.
You should provide specifics about how a drone will be used, they say, because if you make promises that you can’t keep during the underwriting process, written documentation can “come back to haunt” you. More worrisome, plenty of farmers who fly drones wrongly assume the equipment is automatically covered in their farm operation’s general liability policy, which can be risky.
“Unfortunately, it’s simply not the case,” explains Shawn Ram, head of technology practice at New York-based insurance broker Crystal & Company. “It requires some unique policy that’s not usually covered in your general liability policy, which usually exclude aerial or technology liabilities.”
Three Big Risks. There are three categories of risk to consider when purchasing drone insurance, Ram says. The first surrounds property loss and damage.
“It can happen because of pilot error, technology failure such as a software error or just the circumstances of high wind or other local conditions,” he says.
That category presents perhaps the most obvious need for insurance. The second category is the drone itself, Ram says. Simply put, it provides protection in the event the technology fails or a product recall is issued for your drone model.
The third category, privacy liability, is sometimes less obvious, Ram says. Yet if a drone takes photos or captures video with “unintended info,” it could compromise privacy laws. Not to worry—there are options to add this to a policy.
Ram says producers looking for a step-by-step process to secure proper drone insurance coverage should:
1. Identify potential risks.
2. Ask their insurance provider if their farm is properly covered for property damage, technology failure and privacy liability.
3. Be aware of any other warranty and product-related issues.
He notes some farmers hire a retailer or other third party to collect farm data with drones. If you do this, Ram says, be sure to read the limitations of liability in the contract. “Push back if it looks too aggressive,” he advises.