Chuck Hembree rejoins the program to discuss the use of drones and the insurance considerations for both the personal and commercial lines.



Below is a transcript of the episode, modified for your reading pleasure. For more information on the topics discussed in the episode, see the links at the bottom of this post. 

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Grant FINLEY: Welcome to Your Insurance Connection Podcast. I'm your host, Grant Finley, joined once again by President of CLH Insurance, Chuck Hembree.  Chuck, glad to have you back.  How are you?

Chuck HEMBREE:  Good today, thank you. 

FINLEY:  Good.  Today I thought we could talk about something that - we try to be topical around here and you could make the case for this being topical, but it's drones and I say could be topical because I remember a couple of years ago, Amazon, the big online retailer and it's almost Christmas time, they're delivering presents - they said they wanted to start delivering items with drones and that made a big fuss in the news and in general drones have kind of been a - are they good?  Are they bad?  What does it mean?  So obviously there's some insurance aspects involved with drones as well so I thought we could dive into that.  So if you wouldn't, first let's talk about the positives about drones because I feel like they're probably outweigh the negatives, but I want to hear it from you.

HEMBREE:  You and I both we're looking at Insurance and the impact here but my dad was always - my dad is passed away now but he always worked with the airlines that I've always been fascinated with flight and aircraft and anything like that.  It's just a fascinating subject and we're starting to see the amazing ways that they can be used.  You know insurance is looking at them for claims adjusting and so forth.  We've seen filmmakers in the last few years use them.  We've seen them used recreationally. They've kind of taken the place almost of the old model aircraft that we would used to see youth and adults too because that got to be big, big business too, as a great hobby, flying them.  They're just a fascinating subject and add a new dimension like the Amazon that we're talking about so they're new enough that we're trying to just now explore how they can be used and we can already see some very positive results. So, I don't think we want to think of them as negatives.  We see some of the negative and serious impacts when we see drone strikes  within Wars and so forth.

FINLEY:  Well sure, and there's certainly a difference between a predator drone and a drone that you know you can fly around the neighborhood with a camera so let's focus on the one that you can go to the store and buy and affix it with a camera or a basket if you're Amazon, and delivering a package.  How has the insurance industry been using drone footage? I assume you can fly a drone up on a roof or maybe in some other areas that aren't as accessible that you can use for claims information et cetera but I want to hear it from the horse's mouth.

HEMBREE:  Well, that's true.  It's up to date.  Yes, we have great satellites in the sky and Google Earth is an amazing tool but it's dated because maybe the the photos that we're looking at are a year or two years old and when we're talking about claims or something that is a specific, recent time we have to be able to respond in an appropriate and quick way.  So drones give us the ability to fly above and see in areas and look more circumspect with safety then we could perhaps in the past.  So great ramifications to insurance where we can look at crash sites, we can look at roofs, errors that might not be quite as accessible for damage or possible damage, and so that's how insurance is looking at them.  Now I don't know that they're going to start delivering policies by drones tomorrow, but that's some of the areas that we're starting to explore.  The other area that insurance has to look at is how do we protect other people's interests?  Because as businesses and persons use drones we have to figure out, okay, how do we protect them if liability claims come against them because they accidentally cause property damage or bodily injury?  And it's even going into personal injury, so what's the appropriate way for insurance to respond to the use of drones by the public?  

FINLEY:  You brought a personal injury and it makes me think of - I don't know that this is negative, we don't want to go there, but certainly some concerns with using drones, and I imagine invasion of privacy is a popular topic.  How can the insurance industry protect against invasion of privacy whether your privacy been invaded or, you know, if I have a son or daughter and they have a drone and they invade somebody else's privacy and then I'm at fault? What are the ramifications there on each side? 

HEMBREE:  That's where we're still exploring and already there's been good movement.  We've already seen endorsements that have been produced that can be added onto policies to address some of these.  Markets are still trying to figure out how much do they want to cover and under what circumstances.  And the reason they're still trying to do this really this is in its infancy because all those drones have been used a while. It's taken the FAA a while to get out their reports and under what criteria they're going to allow appropriate use of drones.  So let's think about it in a personal way and let's think about it in a commercial way.  You brought up the idea of personal injury and so that's that's liability.  Either someone thinking that you've invaded their privacy or whether you really actually did.  I know when we've talked about this previously, you brought up the idea of, "what are we going to have here, peeping Toms or something?", and that's a real concern to insurance but it can also be industrial spying, it could be an invasion of privacy because someone feels like they shouldn't have to be on camera.  We've had that question come up all the time even now with street cameras and so forth.  So this is just taking it to a new level.  So if someone accuses us of personal injury, invasion of privacy, how will a policy respond?  Well there may be some coverages underneath the commercial policy because most commercial policies do include personal injury but personal lines many times never respond to personal injury unless you added that endorsement on and almost comes automatically commercial insurance but not with personal insurance.  Then even if they do have addresses personal injury or invasion of privacy on their policy, we have another hurdle to overcome in definitions of what's covered.  Generally, aircraft aren't covered.  You need an aircraft policy for that.  Drones really aren't aircraft, yet they are so the definitions within policies are having to be re-crafted to either give some limited coverage to drones and not to blanketly exclude them as aircraft as they are now.  So since they're excluded even if we have invasion of privacy as a coverage they wouldn't be an excluded peril.  We have no coverage underneath the personal policy or the commercial.  Also, we cover legal liability.  We don't cover it illegal liability.  So if someone is using it for illegal purposes or against FAA regulations, that's not going to be covered and they're going to be fined for that.  So that's why people wanted to know, "what does the FAA think?"  And the FAA has come out with categories of drones that are 55 pounds and over and obviously those are going to be huge, industrial type things.  And for the more private type of drones that we're used to seeing around with the little cameras and so forth that are less than 55 pounds, what kind of instruction must someone had before they can operate either sector of those drones?  How do we delineate from a kid who wants to use it as a little model aircraft versus someone who wants to use it for business purpose?  So those are still being developed.  The oversight has come out, but even with the oversight it's very incomplete.  It's ambiguous in a lot of areas and there's really no risk management oversight by the federal government.  They put out laws but no way to follow up on it, so it's a skeleton that's got to be filled in and I think we're going to play with it for quite a while.  So what do we take away from an insurance viewpoint?  If you're a business and want to operate a drone we need to make sure, first of all, as a business, that if we are going to operate a drone in a professional manner that it complies with the FAA oversight and the FAA has come out with some recommendations of their own from the Inspector General that says we've got to give specific milestones and update our guidelines on drones.  We need to develop training if we say the training is recommended or required, then the FAA has to provide that on a regular basis so people can take advantage of it.  There needs to be a way to process and perform inspections, which there really isn't in place right now so even though there's laws out there's nothing to enforce them.  We need to design and implement an oversight plan for these drones so that it's ongoing and grows with the industry.  We need to tie together databases so that the FAA can talk with local, state, and federal government resources.  There's no way to tie those together right now.  And we have to have a process within the FAA and field oversight where operations are coordinated.  None of that is there.  So a business owner needs to check with the FAA and local authorities to see that the use that they're going to use for his been applied for.  There has to be an application that's applied for, that can be found online.  And gives you some general requirements, so you can't just go out there and use a drone for your business without registering with the federal government.  And it'll tell you some things like, you can't fly it in fly zones, you can't go above certain amount of footage because we're concerned about aircraft and interaction.  We've already had some drones strike aircraft accidentally because they weren't paying attention of those and that's a big danger.  And then you need to register the use and purpose of the drone business-wise.  Then check with your insurance agent to make sure that underneath your policy it still doesn't have a definition that excludes coverage for aircraft including rules.  And ask and inquire about what endorsements can be added on so that you are protected when you do perform business with a drone.  We've had several there and we've had to work around those and it's been a learning experience for us as well with businesses and Ministries that are using drones and it's amazing the number that are there.  So now let's shift personal lines and for the hobby enthusiast, the person wants to use it for personal use and enjoyment, maybe with or without a camera.  Again, not as many guidelines that are there, but if you're going to fly them, you do need to ask for an exception and for permission so you need to put that on unless you're using them only inside your home or only in your yard and on your premises.  Which, quite honestly, is probably very unlikely with drones that they're going to be confined there.  So that's one place where you need to take some precautions.  You need to realize that your homeowners does not give adequate coverage to the operation of drones for liability, or property damage that you might cause.  Most definitions in the homeowners do exclude drones and there's a more limited amount of endorsements that can be added on.  And the best way, again, is check with your agent.  See if we can't help you.  We know that they're not a great physical harm, you know if they run into something these aren't huge drones.  There is not a big cost is going to be involved in these.  There's a low exposure but you need to make sure that exposure is covered in case you do go through the window of a homeowners and cause some damage there or someone does accuse you of invasion of privacy because we don't know what that would cost and those are things that the homeowner doesn't want a bear without having insurance coverage in place.

FINLEY:  So there you go, good information.  If you own a drone or are thinking about getting drone - commercially or personally, and we would be more than happy to answer any questions that you might have on the topic, so certainly feel free to give us a call or shoot us an email anytime.  Chuck, unless you have any other closing thoughts, I think that will probably wrap it up for today. 

HEMBREE:  No, I know Christmas is coming here fairly soon and drones might be in you're underneath the tree.  So think about it, have fun with it, don't be scared of it, but just be smart about it.

FINLEY:  Well said.  All right, thanks for listening and we'll catch you next time.


Your Insurance Connection podcast can be heard on iTunes and Stitcher or by visiting clhins.com/content/podcast. If you like what you’ve heard you can support this podcast by rating and/or sharing it on your social platforms. CLH Insurance is a “Trusted Choice”, independent agency servicing Missouri, Kansas and Illinois. For more information on CLH Insurance, visit clhins.com or call 636.391.0700 to speak with an agent. Until we connect again, thanks for listening. 



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Show Notes - Where you can learn more about the people and ideas discussed in this episode. 

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