The ABCs of UAVsUnderstanding the Evolving Landscape of Drone Regulations and Risk Management

Gallagher AviationPractice

FALL/SEPTEMBER 2014

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The ABCs of UAVsUnderstanding the Evolving Landscape of Drone Regulations and Risk Management The use of unmanned aerial vehicles (UAVs, or drones) has increased dramatically in recent years. Drones — small, unmanned aircraft that are operated remotely — are in the news daily. The strong marketing of the devices to the public combined with decreasing costs has proliferated these devices, yet the regulation of them remains lenient. The current and potential uses for drones are varied; they are widely used in the military, for disaster and emergency situations, and there has been much talk about extending their use for commercial purposes. Martha Stewart even has one to take aerial photos of her home in New York. However, unless you are a member of the manufacturing team of such a device, or an organization leveraging the innovative opportunities of UAVs, there is limited information currently available for companies interested in pursuing UAV usage for business purposes.

U.S. Government regulation of drones has moved slower than the business community. Currently, the Federal Aviation Administration (FAA) prohibits the commercial use of drones but does allow the use of drones for hobby or recreational use, subject to some limitations. And United States Senator Charles Schumer recently called for stricter guidelines in regulating the operation of drones. While Congress has given the FAA until September, 2015 to propose regulations, Schumer, citing safety and privacy issues, has called for swifter action.

Senator Schumer may have been thinking about a recent news story wherein a Connecticut beachgoer took justice into her own hands when a privately-operated drone

passed overhead. She assumed the young drone enthusiast was taking inappropriate pictures of her enjoying the hot summer day. While she was pursuing this “pilot” who said his drone was flying too high to capture intimate photos, another beachgoer was filming the incident on their mobile device. It appears the “pilot” survived the attack, but the drone’s condition is not certain. Keep in mind, one doesn’t have to be a licensed pilot to order or operate a drone. We will address this point later.

Beyond the HypeIn all the excitement, it is important to remember that drones are aerial devices, and can present risks for aircraft (within the commercial or private sector), and the FAA apparently shares Congressional concerns on the topic. The FAA recently published their roadmap for the integration of unmanned aircraft systems in the National Airspace System (NAS).

The FAA’s first big step following introduction of their roadmap was the naming of six sites for the testing of drones. Six states were chosen from a pool of about twenty-five applicants. While no doubt a proud moment for these states, the specific proposals and studies are more defined, as the states are merely the sponsor for the organization engaged in the actual research. For example, the State of Alaska is in reality is the University of Alaska. Nevada is actually the Reno-Stead Airport, and Texas is represented by Texas A&M University.

A “Drone” by any other name:• UAV — Unmanned Aerial Vehicle

• UAS — Unmanned Aircraft System

• RPA — Remotely Piloted Aircraft

• ROA — Remotely Operated Aircraft

• RPAS — Remotely Piloted Aircraft System

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The FAA plan is to form teams across the nation that will host the development and testing of drones, with the goal being the harmonious sharing of the sky with commercial airlines. This plan includes gaining a better understanding of the impact the rapid introduction of these systems will have on U.S. airspace — the most unique and complex air system in the world. U.S. airspace includes commercial airlines, corporate and commercial business jets, helicopters, blimps, balloons, and thousands of general aviation pleasure aircraft flying together every day.

However, the FAA’s plate contains much more than these obvious items. We all see the cute remote control mini-drones, but in reality we are talking about the integration of UAVs with wingspans as large as commercial jetliners. For instance, the Department of Homeland Security currently employs un-armed General Atomic Predators to perform border and port surveillance. We also have military training & and evaluation, law enforcement, firefighting, search & rescue and state university research operations employing large-scale drones. These devices are (and will be in greater frequency) flying amongst us, and need to be effectively and safely integrated into our NAS.

Currently, the FAA does not allow UAVs to operate in the NAS. They do however make exceptions through what is called a Certificate of Waiver or Authorization (COA). Federal, state and local governments and universities for example, apply for the waiver which is then carefully considered by the FAA. The operations may be restricted to daytime-only or in a defined area, for example, and require special equipment such as a transponder to communicate with airspace authorities.

The Blurred Lines Between a Hobby and a Business The FAA recognizes the need to establish policies for small UAVs (the cute ones). As drones become smaller, more capable and easier to operate, this category continues to experience very rapid growth. And the impact of this growth is demonstrated most clearly by what we see in the news every day. This includes not only a typical consumer — making potential hobby shop orders — but also public and commercial entities operating smaller but very capable units. In fact, this very subject is addressed in the FAA’s roadmap.

For all intents and purposes, the drones generating most of the media excitement are addressed by the FAA under “special rules for model aircraft.” Sorry Buck Rogers, this is what they are. Very cool, but model aircraft nonetheless — less than 55 pounds, flown strictly for hobby or recreational use, in a manner that does not interfere with (and gets out of the way of) manned aircraft, and if within five miles of an airport — giving the airport operator and airport traffic control tower prior notice of your intended operation. If however, a permanently established model aircraft facility is within five miles of the aircraft — you’re all set, because they already know you are there.

The recreational use of model aircraft is addressed by FAA Advisory 91-57. Interestingly, it was drafted back in 1981. However, in 2007 the FAA further defined the advisory as applying to modelers only and specifically excludes companies flying model aircraft for business purposes. The FAA is considering relaxing such restrictions — starting with some TV and film companies under very defined circumstances — but any such proposed rules are not expected until 2015.

Resource: FAA Advisory 91-57 http://www.faa.gov/documentlibrary/media/advisory_circular/91-57.pdf

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As mentioned earlier, an individual doesn’t have to be a licensed pilot to operate a drone under the model aircraft heading. However, these drones available on Amazon.com and other hobby websites are ready to fly out of the box, and if you tell them to go to 2,000 feet, they will promptly do so — right into the path of manned aircraft. Clearly there are third party liability issues, and there have been a number of near collisions with passenger aircraft already this year.

Model aircraft enthusiasts have operated sophisticated aircraft responsibly for decades. With the rapid advance in drone technology, small acquisition costs, and exceptional out of the box flying capability, the potential exists for unfortunate consequences from inexperienced users. Whether you’re a hobbyist or an emerging commercial enterprise — understanding these risks and the ever-changing regulatory landscape is the first step in creating a safer airspace for all.

Drone operators should consider the following risks and coverages when evaluating their exposure:• Aircraft Liability

• Aircraft Liability (War)

• Aircraft Hull

• Aircraft Hull War

• Manufacturer’s Product Liability

• Manufacturer’s Affinity Groups

• Aviation General Liability

• Airport Liability

• Non-Owned Aircraft Liability

• Invasion of Privacy Liability

• Aviation Architects & Engineers E&O

• Workers Compensation

Gallagher AviationPractice

Two Pierce Place Itasca, IL 60143-3141

About the Gallagher Aviation PracticeGallagher’s Aviation Practice is a global leader in aviation risk management, including UAVs. We view this growing sector with great excitement, and we are prepared to assist in arranging comprehensive insurance solutions for any related exposures — from manufacturers and distributors to the end user.

For more information, contact:

Brad Meinhardt Managing Director — Aviation www.ajg.com/aviation

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