The rise of Unmanned Aerial Vehicles (“UAV”), also known as drones, is well-documented. In fact, the global market for non-military drones has recently been estimated as a $2.5 billion industry that is growing at approximately 15 to 20 percent annually. See Clay Dillow, Get Ready for ‘Drone Nation,’ Fortune, Oct. 27, 2014. Companies large and small are heavily investing in drone technology and generating business capabilities based on their potential.
While some of the most highly publicized forays into drone usage include Fortune 500 shipping companies – such as Amazon investigating the potential use of drones for their delivery service – less publicized industries are ripe for drone operation. These industries include agriculture, construction, energy, and mining. Id. All of which are industries in which it is easy to imagine the benefits of aerial data.
In fact, the Association for Unmanned Vehicle Systems International predicts that eventually 80 percent of the commercial drone market will relate to agriculture. See Christopher Doering, Growing Use of Drones Poised to Transform Agriculture, USA Today, Mar. 23, 2014. This is because a drone’s ability to assist farmers in identifying and analyzing insect problems, watering issues, crop yield, missing cattle, and fertilizing make for a natural union with the industry.
While some farmers may purchase and operate their own drones, it is expected that specialized companies will fill this demand. One such company is goFarm LLC (“goFarm”), a Michigan-based agri-data business – one of the few companies authorized by the Federal Aviation Administration to legally operate commercial drones in this arena. GoFarm performs field surveys by drones operating at low altitudes that collect imagery in visible and non-visible bands to determine health of crops. By analyzing hundreds or thousands of images, goFarm performs detailed assessments of the condition of entire fields and individual plants.
Whether such data is collected by end-user farmers or by specialized third-party companies such as goFarm, all individuals and companies involved need to be cognizant that with great opportunity also comes risk.
Beyond, the obvious risks of property damage that could result from wayward drones, many jurisdictions have, or are in the process of, passing legislation aimed at addressing privacy concerns. The most recent example of such legislation comes out of Florida. On May 14, 2015, Florida Governor Rick Scott signed a drone privacy bill into law. This bill establishes a private right of action for people photographed in their homes by drones without their consent. Some speculate that this legislation will trigger a wave of litigation. See Carolina Bolado, New Fla. Drone Privacy Law Could Trigger Litigation Wave, Law360, May 15, 2015.
Legislation similar to that passed in Florida creates substantial risk to drone based companies, even those operating in rural locations typically associated with industries such as agriculture and mining. GoFarm’s Chief Technology Officer, Eric Silberg, explains that “when conducting their assessments, in order to ensure adequate coverage, inevitably pictures are taken of the areas directly surrounding the field goFarm operators are contracted to assess. These pictures may include property that does not belong to goFarm’s customer, even if the drone never flies over land not belonging to the customer. This extraneous data is removed during the analysis process, and is not available in any product.” While companies utilizing drones for photographic purposes will need to alter their operations to comply with any local rules and regulations, inadvertent photographs could result in litigation exposure.
In order to protect themselves from privacy related claims, as well as other liability exposures, companies utilizing drones need to assess their insurance portfolios to ensure adequate coverage. In particular, companies need to analyze the breadth of their liability policies, including the language of any potentially applicable exclusion contained therein – such as exclusions associated with aviation risk. This analysis should be conducted with the help of an experienced insurance broker and/or insurance coverage counsel.
In the event that the company’s liability policies are deemed not broad enough to cover its contemplated operations, the company should investigate purchasing UAV coverage. Given the relative infancy of the drone market, insurance companies are developing and releasing new products associated with drone activity at a breakneck speed. Consequently, coverages and pricing will likely vary across carriers. Risk managers should speak with their insurance experts to ensure that an appropriate and cost-effective insurance solution is identified and implemented.
Jason Rubinstein is a partner at Gilbert LLP. Click here to read his full biography.