Drone Use & Local Government: Underwriting & Risk Management Implications Claire Lee Reiss Program Director, NLC-RISC

Ann Gergen Executive Director, AGRiP

Why Should You Care? • Your insureds are (or will be) using drones • Use will increase risk exposure for pools • There could be risk exposure even if local government or school members do not operate drones

What coverage will your members need and how will your pool manage drone risk?

Advantages • Low cost • Enhanced perspective • Reduced likelihood of injury to personnel

Public Sector Uses • • • • • •

Public safety Border patrol Monitoring & inspecting infrastructure Property management Aerial photography Parks, school and sporting events

Private Uses • • • • •

Infrastructure inspection Commercial aerial photography Private surveillance & investigation Agricultural surveys, inspection, maintenance Recreational

Pool Uses • Evaluating property damages • Collecting information for underwriting • Routine inspections and appraisals

On the Horizon • • • • • •

Recreation and education event centers Operation out of the operator’s line of sight Air traffic management Delivery drones Drone detection systems Geo-fencing

What other uses have you identified?

What are Drones? NAMES

CHARACTERISTICS

• Unmanned Aircraft Systems (UAS) • Unmanned Aerial Vehicle (UAV) • Remotely Piloted Aircraft Systems (RPAS) • Model aircraft

• Remotely piloted • Wide variety of size and sophistication • On everyone’s holiday wish list

Baseline Considerations • Define the risk • Understand the environment, regulation, and existing controls • Blanket or optional coverage • Application process

• Occurrence or claims made • Limits and sublimits • Exclusions • Reinsurance • Loss control • Claims handling

Everything you need to know but wish you didn’t about

REGULATION OF DRONES

Regulation? Rule Number 1: There is no public entity use of a drone, or use of a drone in or around public space, that does not need to be or is not regulated in some way. Rule Number 2: The FAA makes the rules.

Rule Number 3: See rule number 1. If that seems implausible, see rule number 2.* *Yes, really.

FAA Exemptions (n=49 States) • California • Florida • Texas • Illinois • Arizona

• Pennsylvania • Colorado • Washington • New York • Virginia

The First 1,000 Commercial UAS Exemptions, Association for Unmanned Vehicle Systems International, September 2015, http://bit.ly/1gxWtFd

Some Uses Mentioned in Applications • Aerial photography • Real estate • Aerial survey/inspection • Infrastructure/utility inspection • Search & rescue/emergency management • Insurance • Education

512 350 542 180 90 25 9

The First 1,000 Commercial UAS Exemptions, Association for Unmanned Vehicle Systems International, September 2015, http://bit.ly/1gxWtFd

A horrifying list of all the possible

THINGS THAT COULD GO WRONG

Accidents

Nightmare scenario: Collision with a commercial airliner

• Human Failure • Inadequate pilot training & oversight • Rogue operator • Hijacking

• Technical failure • Mechanical/hardware • Software • Inadequate maintenance

• Problems on public property

Privacy & Civil Rights • Law enforcement (and other uses) • Intentional or unintentional • Potential issues • Privacy • Search, seizure, surveillance • Freedom of association

Nightmare scenario: Widespread illegal surveillance

Property Rights • Trespass • Nuisance • Land use regulation

Managing Information • Compliance with public records laws • Response to open records requests • Ensuring data integrity • Finding sufficient data storage capacity • Securing images & data during storage & transfer Nightmare scenario: Massive public records request in a state with a very broad open records law

Cyber Overlap • Theft or misuse of data, images • Taking control of the drone Nightmare scenario: Hacker entry into a drone’s control system and use of the drone to attack another aircraft

Public Property • Failure to adequately control or supervise use • Municipal airport liability • Direct liability • Contract with managers & FBOs

Regulatory Violations • Federal (FAA) • State • Local • Non-drone specific

Nightmare scenario: Trying to determine what the FAA regulations really mean

Public Officials • Direct conflict between local ordinance, state or federal law • Permitting use in conflict with state or federal law (knowing or unknowing)

FAA – Focus on Safety • Drones are “aircraft” regulated by FAA • FAA is responsible for aircraft safety at all altitudes • FAA currently prohibits drones in national airspace except under certain conditions • FAA has proposed regulations that will establish requirements for routine drone operation, once finalized

FAA – Recreational Use - Current • FAA does not “regulate” recreational use below 400 feet and within VLOS, except when it does… • Special rules for model aircraft • Strictly hobby or recreational use • Operate in accordance with safety guidelines • Stay below 400 ft. • Keep in VLOS

• Can’t generally weigh more than 55 pounds • Don’t interfere with manned aircraft • Don’t fly near airports

FAA – Public Aircraft - Current • Government drones are subject to public aircraft requirements • Certificate of Authorization (COA) • • • •

Particular aircraft Particular purpose (not commercial) Particular airspace Required safety precautions • Operate outside populated/restricted area • Operation within VLOS

FAA – Notice of Proposed Rulemaking • Small Unmanned Aircraft Systems • • • • • • • • •

Weigh less than 55 lbs Less than 100 MPH & 500 feet Within VLOS, including a visual observer Not operated over uninvolved people Daylight and 3 miles visibility Prohibited in some classes of airspace Operator inspection of drone before flight Operator passed test, TSA vetted, & certified Be registered & have required markings

Privacy, Civil Rights & Civil Liberties • Presidential executive order – February 2015 • Requires compliance with Privacy Act, civil rights & civil liberties • State/local government grantees must adopt policies and procedures to respect these same rights

Legal Environment: State • Privacy & landowner rights • Civil remedies • Use of drones to commit crimes • Prohibited airspace/properties • State oversight mechanisms • Lethal/non-lethal weapons

• Hunting & fishing use • Law enforcement use • Record retention & disclosure of images • Preemption of municipal & county authority

Current Unmanned Aircraft State Law Landscape, National Conference of State Legislatures, 9/14/2015, http://bit.ly/1EHKJLy

Legal Environment: Local • Complete prohibition of drones • Limit use by agencies (especially law enforcement) • Use of evidence gathered in legal proceedings • Sharing of information with other agencies • Outfitting with weapons

• Control use over public property • Control use through land use and zoning power • Minimum elevations/trespass

Question to Consider

Should legislation be drafted specific to drones, or on a technology-neutral basis?

Ownership & Operation Issues • Own and operate a drone • Contract with 3rd party • Commercial • Another public sector entity • Accept services from a volunteer • Special considerations for mutual aid

Baseline Considerations • Define the risk • Understand the environment, regulation, and existing controls • Blanket or optional coverage • Application process

• Occurrence or claims made • Limits and sublimits • Exclusions • Reinsurance • Loss control • Claims handling

Pool Coverage • General liability • Physical damage • Privacy (Law Enforcement & in general) • Work comp • Cyber • War / terrorism • Business interruption • War / terrorism • Airport liability

Commercial Approaches • ISO endorsements • Specialty markets for targeted uses

Reinsurance • Coverage • Questions • How pool expects to provide coverage • Current & expected member use of drones • Special sublimits or aggregates on coverage • Underwriting procedures & expertise • Plans for loss control & claims handling • Contributions for coverage

Member Conversations • Awareness • Compliance • Coverage • Policies and Practices • • • •

Neutral to drone technology (mostly) Information storage Employment consequences Regulation of drones

Questions? Claire Lee Reiss Program Director NLC-RISC [email protected] 202-626-3165

Ann Gergen Executive Director AGRiP [email protected] 518-220-0336