Drones: The next big risk

In the aftermath of Nepal's earthquakes, there was a buzzing above the rubble. Squadrons of drones were at work on a humanitarian mission. In this role, drones equipped with cameras were flown over mountain roadways blocked by landslides to locate the injured and record potential damage to far-flung bridges and buildings. The goal was to provide real-time images and data for emergency crews on the scene and to map the effects for disaster relief groups across the globe.

With uses emerging in search and rescue, surveying, crop dusting and even deliveries, some businesses are beginning to look at opportunities to revolutionize how basic services and dangerous tasks might be performed in the future. Plans for deployment are so widespread that Federal Aviation Administration (FAA) estimates there could be 7,500 small commercial drones in flight over the United States in just the next three years.

A multirotor quadcopter drone used for aerial photography flies near a wind turbine.
Getty Images
A multirotor quadcopter drone used for aerial photography flies near a wind turbine.

As the number of drones entering the skies increases, accidents, injuries and the potential for lawsuits are bound to follow. In the commercial marketplace, successful companies may not be the ones that simply use drones, but those that deploy drones most safely and effectively.

For airspace already crowded with commercial and military craft, regulators from the FAA have been working to develop a framework to integrate drones safely into the national airspace. The FAA currently permits businesses to use drones for commercial purposes on a case-by-case basis. To date, the agency has allowed companies to shoot films and television episodes, survey land and test package deliveries. It has also proposed new rules for small drones and approved six test sites across the country to conduct research.

Whatever form the final FAA rules take, federal regulation will provide only one measure of control. Businesses also need to consider how potential liabilities from injuries and property damage can be minimized. In a sphere without a long record of data, there have been some strong suggestions of risk. Last year, The Washington Post reported that more than 400 drones operated by the U.S. military have crashed in accidents around the world since 2001, with some hitting homes, farms, and highways and causing millions of dollars in damages.

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And exposures are not limited to blue skies; drones carry the potential to cause injuries indoors. Consider the woman who was hit by a drone in a restaurant last year, leaving her with facial abrasions. It's not hard to imagine how relatively minor incidents could soon lead to major lawsuits. Whether an event occurs indoors or outdoors, such incidents might also spark public relations nightmares that could prove costly for any business.

The good news is that businesses can take steps to prepare for the rise of commercial drone flights. Sound planning begins with an understanding of the capabilities and limits of drones, as well as the experience and level of control exercised by their operators.

Capabilities: What are the make, model and year of the drone? How high can it fly? How long can it remain in the air? If pressed to exceed its limits, a drone might malfunction and come crashing to earth, possibly colliding with a car, building, power line or person. How much weight can the drone safely carry? Has the drone been modified after manufacture? If overloaded, both the drone and the cargo could be lost and potentially damage property or harm bystanders below. It's also important to investigate whether a drone has been serviced and maintained according to manufacturer guidelines. That includes the drone's software and operating systems, which should be kept up to date to reduce the risk of malfunction.

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The U.S. military uses three major categories of drones, according to a report issued by the federal government, and commercial operators will likely be flying aircraft with similar range and capabilities. The mini-drone flies at low altitude over short distances for periods lasting up to one hour. The tactical drone can remain airborne for several hours with a range of about 180 miles. The largest, known as the strategic drone, can remain aloft over long distances for hours or even days and is often operated remotely and far removed from a pilot's line of sight.

Uses: Each industry and function presents its own risks in using drones, distinct both in type and potential severity. Filming a battle scene, for example, with hundreds of extras on a windy field might pose different perils than a drone surveying thousands of acres of open farmland. Another risk involves potential exposures for those who misuse drones to capture and exploit images without consent of persons on private property.

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Control: How will the drone be piloted? Will the operator use a remote-control device with a joystick or a mobile app? Preparation of the pilot will likely be a critical factor: How will the operator be trained, and what standards will have to be met? The FAA's currently proposed rules would require that a candidate be at least 17 years old and pass an aeronautical exam to obtain an operator's certificate. To maintain certification, an operator would have to pass additional FAA tests about every two years. Of course, businesses may want their commercial operators to undergo more extensive training. A number of universities already offer drone pilot courses, and before long there may be national standards to measure the quality of the related flight education each school provides.

Drones used in a commercial context present risks and rewards that may soon become much clearer to everyone at ground level. For businesses that seek to reap the potential benefits, it might be prudent to pause on the launch pad and conduct a due diligence review of drone risks.

Ron Beiderman is vice president of commercial lines coverage products at ISO Insurance Programs and Analytic Services, a Verisk Analytics business.