Tom Montgomery, NGU Risk Management

September, 2015

Drones, or more technically, unmanned aerial vehicles (UAV's), are regulated by Federal Government Agencies including the FAA & FCC. In addition, at least 5 states and numerous local governments have their own regulations in place as of this writing. Earlier this year the White House released a Presidential Memorandum that outlines key requirements for drone use. At this time, Tennessee has not passed any formal regulations, other than to address their use in law enforcement (T.C.A. 39-13-609). While this law authorizes their use for certain law enforcement functions, it also creates a cause of action for their alleged misuse.

These regulations are by no means consistent and the FAA's final rules aren't expected to be issued until 2016 or 2017. It is anticipated that operators will be required to pass a test and meet other criteria, but little is now certain. We do know that drones operated in the public sector, such as for use by schools or law enforcement, must apply to the FAA for a Certificate of Airworthiness. Only 2,000 or so of these COA's have been issued to date.

It is no wonder that the commercial insurance marketplace is still coming to grips with the issue of drones. Without question, drones present issues of potential violation of privacy rights, trespass and low-altitude airspace rights. Drones accidents or malfunctions can lead to significant bodily injury and property damage.

TNRMT does not currently provide any coverage for the ownership or use of a drone or any aircraft. We strongly recommend that our members do not use or condone their use in any fashion. We have heard reports of drones being flown to film football games and to film scenic views for tourism interests. These practices present significant, uninsured exposures to our member entities.

While there is some limited coverage now available for these drones, it is quite expensive, with low and insufficient liability limits and high deductibles. These policies vary from carrier to carrier and are full of exclusions that significantly limit the scope of coverage. NGU Risk Management does have a long history of insuring airports and airplanes to accommodate various TNRMT members, as aircraft coverage is a specialty line and has always been outside the scope of standard property and general liability insurance. If your organization decides the use of a drone is necessary, please contact us, and we will obtain the best coverage available for you from these aviation markets.

TNRMT of course would respond to provide coverage should any of our members property be damaged by a drone. At this time, TNRMT does not cover the damage to a drone, or liability arising from it, regardless of who owns or operates.

Those of us at TNRMT and NGU Risk Management will continue to work to secure adequate coverage to address the use of drones, but it will likely be many months before these regulations become finalized and adequate and uniform insurance solutions are available.

Please contact Tom Montgomery or John Evans should you have any questions about this.