Legal compliance is generally cited by
insurance company leaders as their number one concern with integrating drones
into their business practice. Unlawful
use exposes companies and employees to
civil and criminal liability, including fines
and adverse court awards or high settlements. The rapidly changing legal environment and the patchwork of state and
federal laws can overwhelm all but the
most sophisticated in-house legal departments. Nevertheless, insurance companies are moving forward with drone use
if for no other reason than to avoid being
left behind by their competitors.
One of the most common ways for in-
surance companies to address legal risk
is to outsource their drone operations in
whole or in part. This approach may dis-
tance the company from legal compliance
issues while offering the advantage of re-
duced start-up costs for training pilots
and purchasing aircraft.
Companies should use caution, how-
ever, when relying on contractors to
provide drone services. The use of a con-
tractor does not relieve the insurer of the
requirement to take reasonable measures
to ensure that its agent is operating with-
in the law. In the event of an accident, any
potential claimant will surely seek relief
from both the insurance company and
the contracted pilot. If the contractor was
operating unlawfully, its insurance carrier
is unlikely to defend the claim. If the con-
tracting insurance company was willfully
blind to this violation, it may find itself
in the position of the only “deep-pocket”
defendant trying to explain its actions.
Before relying on another organization
to fly on behalf of the insurance company,
the insurance company must develop and
implement a vetting and oversight pro-
gram. This involves more than checking
to see whether a pilot is licensed. The
FAA does not require license holders to
demonstrate any practical flying skill.
Prior to contracting with a pilot, insur-
ance companies should insist on some
verification of experience, knowledge of
applicable laws and regulations, and a
plan for complying with those require-
ments. The insurance company will likely
want to draft a services contract that in-
corporates these elements and, perhaps,
adds additional elements such as proce-
dures to ensure that the pilot is being a
“good-neighbor” by coordinating with
adjacent property owners or providing
advanced notice of flights.
Whether using in-house pilots or contracted pilots, every insurance company
should have a working knowledge of
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