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WHAT IS A “DRONE” What’s in a Name: Drone – indicates REMOTE pilot operation (operator away from aircraft) UAV (Unmanned Aerial Vehicles) UAS (Unmanned Aerial System)

WHAT IS A “DRONE” Fixed Wing: Longer Range Aerial Mapping Quad (Multi)-Copter: Most Common Most Inexpensive

PRACTICAL USES OF A DRONE Three D’s—Work That is Dangerous, Dull or Dirty • Inspections of flare stacks at factories • Bridge inspections • Powerline/pipeline patrol • Security at large facilities • Wildlife conservation/fire patrol • Search and rescue Cost Effective Aerial Mapping/ Photography • Commercial helicopter = $1, 500 per hour • Drone = $1, 500 one-time purchase

TOP INDUSTRIES USING DRONES Agriculture Film Production News Media Real Estate Construction Mining Utilities Energy

LEGAL TIMELINE OF DRONES October 2011 The FAA fined a filmmaker $10, 000 for “careless or reckless UAS operation” (Pirker) March 2014 NTSB ALJ Dismisses FAA’s $10, 000 Civil Penalty Against UAS Operator “No Enforceable FAR” (Pirker) May 2014 Virtually All Major News Organizations File Brief in Pirker, Assert First Amendment Rights November 2014 National Transportation Safety Board, determined that the FAA's existing "aircraft" regulations can apply to model aircraft, drones, and remote controlled aircraft. December 2014 Applications for “ 333 Exemption” and “Certificate of Authority” (COA) begin flooding FAA recognizes it must establish specific UAS regulations.

LEGAL TIMELINE OF DRONES February 2015 DOT and FAA Propose New Rules for Small Unmanned Aircraft Systems “UAS” (to become law in 2017) March 2015 FAA Publishes “Blanket COA” to mirror proposed rules. This allows operators who have received 333 Exemption to operate under the proposed rules without notifying the FAA for EACH Flight August 2015 FAA launches a “Know before you fly” campaign due to the UAS’s flying over wildfires in California, preventing Airborne firefighters from dousing the fires. “If you endanger manned aircraft or people on the ground with an unmanned aircraft, you could be liable for a fine ranging from $1, 000 to a maximum of $25, 000, ” said FAA Administrator Michael Huerta. “Know the rules before you fly. If you don’t, serious penalties could be coming your way for jeopardizing these important missions. ” October 2015 FAA Fined Sky. Pan International Inc. , $1. 9 million penalty for reported 65 illegal flights between March 2012 and Dec. 2014 in Class B Airspace December 2015 FAA announces new Registration process for recreational/hobby users for all drones between 0. 55 lbs and 25 lbs at cost of $5. per registration

LEGAL STATUS FAA Notice of Proposed Rulemaking (Part 107) – Feb 2015 • Must weigh less than 55 lbs • Visual Line of Sight only • Daylight Only (sunrise to sunset) • Maximum Airspeed 100 mph • Maximum altitude 500 ft above ground level • Minimum weather—three miles visibility • Airspace Restrictions • Possible new “UAS Operators License” in lieu of Pilot license Will not be fully enforceable until 2017

WHAT DO BUSINESSES DO BETWEEN NOW AND WHEN THE NEW RULES TAKE EFFECT? (2017) FIRST - Apply for “ 333 Exemption” - this is the only LEGAL means to operate a drone commercially in US airspace • • • Apply for Exemption thru FAA website. Hire attorney to complete the application Use available online tools (AVUSI) to help complete the application yourself and file with the FAA. Currently running 4 -6 months from application to approval. Current Exemption requires the operators maintain at minimum a Sports Pilot License – this can cost $5, 000 - $10, 000 to obtain. SECOND – With a 333 Exemption – Users may operate UAS under a “Blanket COA (Certificate of Authorization)” or apply for COA if needs fall outside the “Blanket COA” requirements. • The FAA has created a streamlined COA process for commercial operations “to respond to the current demands and to bridge existing UAS operations with the proposed small UAS rule, ” according to an FAA memorandum. • This blanket COA will allow commercial operators to fly without receiving special authorization under certain operational parameters.

DO YOU NEED THE “ 333 EXEMPTION” AND “COA” TO OPERATE A DRONE? Disclaimer. . . I am not an attorney and Aldridge is not a law firm. We recommend you discuss the legality of drone use in your business with a qualified aviation attorney. • FAA. GOV “The FAA currently authorizes the use of unmanned aircraft systems (UAS) for commercial or business purposes on a case-by-case basis. You may not fly your UAS for commercial purposes without express permission from the FAA. You should check with the FAA for further determination as to what constitutes a commercial or business use of small UAS. ” • Is it better to ask for permission or beg forgiveness? October 6 2015 – FAA Fined Sky. Pan International Inc. , $1. 9 million penalty for reported 65 illegal flights between March 2012 and Dec. 2014 in Class B Airspace.

FREQUENTLY ASKED QUESTIONS REGARDING DRONE INSURANCE • Do I need to be approved by the FAA to obtain drone insurance? • Do I need insurance for my drone? • What would commercial drone insurance cover/not cover? • How much does drone insurance cost? • Does the FAA require we have insurance?

DO I NEED TO BE APPROVED BY THE FAA TO OBTAIN AVIATION SPECIFIC DRONE INSURANCE? Standard underwriter data needed: • Do you have a “ 333 Exemption” from the FAA? • Make and model name of drone including size and weight? • Description of area of operation (urban/rural). • Use of operation: mapping; agriculture; law enforcement; aerial survey? • Operators experience level and pilot ratings (if any). • Description of training provided to operators: • Is a spotter in addition to the operator used in operations? • Description of corporate policy for handling of images captured. Are images kept in secured server/password protected laptop? Images reviewed prior to publishing to public (editing images you don’t have authority to make public).

SAFETY AND RISK MANAGEMENT • Select aircraft right for your mission • Size/Flight Duration/Camera • Operator training • Documented and recurrent • Manufacturer approved (if possible) • Development of Safety Management System (SMS) • • Pre- and post-flight checklists Logbooks Weather minimums (wind and visibility) Operational guidelines (spotter/safety line, etc. ) Flight Tracking Software FAA Airspace Corporate policy for handling/review images • Maintenance • Documented • Scheduled

DO I NEED INSURANCE FOR MY DRONE? Yes; aviation has been and always will be a litigious environment – and the first BIG claim is waiting to happen… March 22, 2014 – Drone nearly collides with U. S. Airways Flight landing in Tallahassee, FL. Nov 11, 2014 – Three different airline crews report drone operating in approach pattern to JFK Airport. May 28, 2015 – Shuttle America reports near drone hit landing at La. Guardia Airport. Sept. 2015 - A New York district court in Queens sentenced a man who illegally flew a UAS recreationally over a stadium at the U. S. Open to five days of community service. 2014 FAA Reported UAS Encounters Jan-Aug 2015 FAA Reported UAS Encounters 238 650 (273% Increase in 8 Months)

WHERE CAN I FIND COVERAGE? • Let a Contractor own/operate it for you. • • Require the operator to maintain 333 Exemption/COA Require they operate under the FAA regulations/proposed rules Minimum Insurance Requirements ($1 M) or higher Require certificate of Insurance naming customer (you) as Additional Insured • Waive rights of subrogation as respects physical damage in your favor • Include 30 (Thirty) day notice of cancellation • Be Primary and without right of contribution of any insurance maintained • Insurance Policies: • Homeowners’ or “Hobby” policies • Excludes coverage for “commercial/business” use

WHERE CAN I FIND COVERAGE? • General Liability Policy • Standard coverage only applies while aircraft “is operated per the procedures and practices specified in the FAA Small UAS Notice of Proposed Rulemaking, February 15, 2015” • Liberty Mutual: “When used in compliance with all FAA rules and regulations, unmanned aircraft usage” • AIG: Bodily injury or property damage arising out of the operation of an unmanned aircraft system which (i) is remotely controlled by an operator, (ii) is operated per the procedures and practices specified in the FAA Small UAS Notice of Proposed Rulemaking, February 15, 2015, (iii) has an airworthiness certificate or an exemption under Section 333 of the FAA Modernization and Reform Act of 2012, and (iv) does not weigh more than ten (10) pounds (hereinafter referred to as Unmanned Aircraft Systems). • • FAA Notice of Proposed Rulemaking (Part 107) Must weigh less than 55 lbs Visual Line of Sight only Daylight Only (sunrise to sunset) Maximum Airspeed 100 mph Maximum altitude 500 ft above ground level Minimum weather—three miles visibility No operations within Five Miles of Airport

WHERE CAN I FIND COVERAGE? • Aviation Specific Policy • • • Broadest coverage Most expensive Tailored to fit the exposure Ability to purchase physical damage coverage Aviation adjustors to handle claims

WHAT WOULD COMMERCIAL DRONE INSURANCE COVER? Physical Damage • Some insurers willing to provide physical damage on values as low as $1, 000. • Standard Rates (10% Rate / 10% Deductible) • Explore adding to Corporate Property Insurance Program (flight coverage excluded) Liability—Bodily Injury and Property Damage • Arising out of the use, ownership, or operation of a UAS for bodily injury and property damage • Coverage provided on “Occurrence Basis” • All major aviation insurers will consider providing coverage for UAS • Up to $2 M readily available for any operator without 333 Exemption • $5 M to $25 M for available for operators with 333 Exemption with documented training procedures.

WHAT WOULD COMMERCIAL DRONE INSURANCE COVER? Personal Injury Aviation Coverage (Limit follows Aircraft Liability) • (a) False arrest, detention or imprisonment; • (b) Malicious prosecution; • (c) The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor; • (d) Oral or written publication, in any manner, of material that slanders or libels a person or organization or • disparages a person’s or organization’s goods, products or services; • (e) Oral or written publication, in any manner, of material that violates a person’s right of privacy; • (f) The use of another’s advertising idea in your advertisement; or • (g) Infringing upon another’s copyright, trade dress or slogan in your advertisement. Most underwriters agree the greatest concern they have is personal injury suits brought against companies using a drone for aerial photography. Additional Coverages: • • • Medical Payments Worldwide Territory Coverage includes “All Operations of the Named Insured” Premises Liability Coverage Non-Owned Drone Liability Coverage

STANDARD DRONE LIABILITY POLICY EXCLUSIONS • • Expected or intended injury Workers compensation (or similar laws) & Employers Liability Damage to property owned by the insured War, Hijacking and other perils – can be removed for additional premium Discharge of any munitions Dispensable Loads (releasing anything from the drone) Noise and other pollution (unless caused by an aircraft crash, fire or explosion or collision) • Indoor Use – risks underwritten very carefully can have this exclusion deleted • Consequential Loss – some underwriters will delete this exclusion • Fines or Penalties from Government Agencies • October 6, 2015 – FAA Fined Sky. Pan International Inc. , $1. 9 million penalty for reported 65 illegal flights between March 2012 and December 2014 in Class B Airspace. FAA Penalties range from $100 for small entities or individuals to $25, 000 per violation for large businesses.

HOW MUCH DOES DRONE INSURANCE COST? Recent Example of Aviation Specific Policy • DJI S 1000 (13 lbs/purchase price $20, 000/20 min Flight Time) • Engineering Firm • Aerial survey • Liability $5 MIL • Physical Damage—$20, 000 • Annual Premium - Liability $5 M : $3, 500 - Hull $20 K: $1, 500 - Total Premium: $5, 000

DOES THE FAA REQUIRE WE HAVE INSURANCE? • No - FAA does not require Drone aircraft operators to maintain insurance. • No mention of insurance requirements in the “ 333 Exemption” & “COA” process nor in the Notice of Proposed Rulemaking released in February 2015. • Very likely that operators who are “operating UAS for hire” will need to secure some type of liability coverage (just a commercial aircraft operator is currently required to maintain).

RESOURCES Association for Unmanned Vehicle Systems International

QUESTIONS ? L O C K T O N C O M P A N I E S