New coverage options from ISO in light of rise in use of commercial drones

ISO, a Verisk Analytics business, has announced the availability of new coverage options to prepare insurers for the rise of commercial drones around the world.

Recently filed on a multi-state basis for a June 2015 implementation, the options modify coverage under ISO’s Commercial General Liability and Commercial Liability Umbrella/Excess programs, notes a statement from the company.

“The new endorsements address the growing liability exposures of commercial drones, which have already developed a wide range of potential and reported uses, including package delivery, crop protection and aerial photography,” reports ISO, which, among other things, provides statistical, actuarial, underwriting and claims information and analytics.

“The applications of drone technology are growing every day, both in the United States and abroad,” says Beth Fitzgerald, president of ISO Insurance Programs and Analytic Services, adding the idea is to develop solutions for “drones being used now and those that will be used in the future.”

Comments Ron Beiderman, vice president of Commercial Lines Coverage Products at ISO Insurance Programs and Analytic Services, “Providing a range of options can help an insurer better align its product offerings both with its underwriting tolerance and the needs of its clients.”

ISO recently published a white paper that explores drone technology, ongoing efforts to regulate drones, and potential risks that drones could present to the insurance industry and global markets.

“As with most technological advancements, the widespread use of drones has the potential for benefits to business, individuals and society,” the white paper states. “But along with the benefits, come challenges and exposures that insurers must face. As drones become more prevalent, their use could raise questions about the safety and privacy of individuals. At the same time, they could create the potential for a range of personal and commercial liability exposures across multiple lines of insurance.”

The potential for commercial liability exposures may be far-reaching, the paper suggests, including safety of the public (loss and damages could include bodily injury to humans and animals, as well as property damage to buildings and personal property).

With home delivery of goods a front-runner for the anticipated commercial usage of drone technology, some challenges in rolling out the technology include determining how to avoid power lines, deciphering satellite maps for optimal landing, and ensuring a drone responds to unpredictable events.

From a personal liability standpoint, the paper notes that homeowners who operate drones as a hobby could face bodily injury and property damage exposures similar to those of a commercial user.

There is also the issue of drone mechanics, including malfunctions related to a design flaw or improper manufacturing. “Such defects could potentially result in products and completed operations exposures,” notes the white paper.

“Determining the potential exposures relating to the functionality of a drone in any specific venture and its attendant risks would be one consideration in insuring this new equipment,” the paper points out.

With regard to property exposures, “in general, first-party commercial and personal property policies covering buildings and their contents, where applicable, address impact to such property from aircraft, vehicles, and falling objects,” the paper states. “From a different perspective, the owner of the drone will need coverage for the drone, including its various assembled parts.”

As for Professional Liability (E&O) exposures, the drone operator and perhaps the drone software developer may seek coverage for their respective operations.

And with regard to Management Liability (D&O) exposures, the paper notes that new technology involves new risks sometimes overlooked or not known. “Therefore, it is plausible to anticipate there might be increased exposure for directors and officers of enterprises that manufacture, support or make use of drones.”