Here Come The Drones — And The Legal Headaches
| February 23, 2017

Law360, New York (February 23, 2017, 11:09 AM EST) —

There is arguably no bigger stage in America than that of the Super Bowl halftime show. More than 117 million people watched recently as Lady Gaga appeared to jump from the roof of NRG Stadium and down to the sea of adoring fans below. But before showing off her acrobatic abilities, she offered a subdued rendition of “God Bless America” in front of a series of red, white and blue lights seemingly suspended in mid-air.

The audience was completely unaware that this light show, which first formed a series of stars and then a fluttering American flag, were actually a swarm of 300 drones flying in perfect formation, all controlled by a single computer. Intel’s Shooting Stars, quadcopters that feature built-in LED lights that can create more than 4 billion color combinations, danced and dazzled the brave new world of drones even further into the mainstream of American culture.

Drone Development

Whether you refer to them as unmanned aerial vehicles, remotely piloted aircraft or unmanned aircraft systems, we know them familiarly as “drones,” and they are rapidly expanding beyond the settings in which we’ve grown accustomed to seeing them. What began as military weapons are being adapted for a myriad of commercial purposes.

Farmers are employing drones to monitor crop growth. Real estate agents are showing homes from the sky. Mark Zuckerberg’s “” initiative seeks to utilize solar-powered drones — able to stay airborne for five years at a time — to provide remote areas of the world with reliable wireless internet access.

Amazon famously introduced the world to the concept of drone armies dropping off boxed merchandise to your home, but now even food deliveries, like California’s “Burrito Bomber,” are embracing the idea. And, lest we forget, the eagerly-anticipated 2017 Drone Racing League season is set to kick off in the very near future.

The Association for Unmanned Vehicle Systems International estimates that the drone industry will create 100,000 jobs and contribute $82 billion to the U.S. economy in the next decade. But this excitement isn’t limited to multinational corporations, social media entrepreneurs and professional drone racers. Recently, drones have become accessible for the average consumer for personal use.

Drones currently on the market are controlled by your iPad, smart phone or VR headset, are enabled with a GPS-tracking system and 14-megapixel camera, and can fly up to 3,000 feet in the air or 100 feet under water. All this technology is at your fingertips for less than $1,500. Americans are purchasing drones at an ever-increasing rate — drone sales have expanded at least fourfold each year since 2009.

The Federal Aviation Administration (FAA) claims that about 2.5 million drones were sold in calendar year 2016, and the Consumer Technology Association reports that sales during this past Christmas likely doubled those of last year. Analysts expect this trend to continue, as the personal drone market is estimated to top $100 billion in the next decade.

A Growing List of Close Calls

Pretty amazing stuff, right? Unfortunately, as attorneys are all too aware, technological advancement necessarily creates additional liability. The Super Bowl was an anomaly; not all drone use occurs in protected airspace, at the hands of one of the world’s foremost global technology companies, and as part of a coordinated performance.

In fact, most drones are operated by either corporations seeking to expand or break into a new business segment, or individual hobbyists flying for purely recreational purposes. And the sheer size and speed of drones currently on the market adds up to the potential for inflicting significant damage upon both persons and property.

The FAA considers any drone up to 55 lbs. “small,” and drones can ascend to 6,000 feet and fly up to 50 MPH. Imagine a full-grown golden retriever soaring around at the speed of a car on the interstate. While there are not yet any reported incidents of true catastrophes caused by drones, there have been some near misses.

In 2015, a drone came within a few feet of a news helicopter in Washington state. In 2016, a drone almost collided with an Airbus A320 descending into Heathrow Airport in London. Drones have landed on the White House lawn and at the feet of German Chancellor Angela Merkel, and one crashed into the Empire State Building.

The numbers are mounting: the FAA claims that 583 “near misses” between drones and planes were reported in just a five-month period in late 2015. Regrettably, it appears to only be a matter of time before drones begin causing substantial damage and loss of life. As a result, both drone manufacturers and distributors should be prepared to defend against inevitable products liability lawsuits which are sure to follow.

Avoiding Product Liability Lawsuits

Manufacturers and distributors need to be cognizant of the myriad of ways in which they can incur product liability lawsuits for drones they place in the stream of commerce. With respect to claims of design defects, manufacturers should both continue to augment safety features through research and development, as well as stay abreast of the latest technologies employed by competitors in the market.

For example, many drone manufacturers already employ features which prevent takeoff from, or flight into, restricted areas, sensing and avoiding obstacles, and automatically returning to the location of the operator when the signal is lost or the battery is low. And in order to mitigate potential failure-to-warn claims, drone manufacturers should place conspicuous warnings in the owner’s manual, as well as on the packaging and drone itself.

The warnings should alert operators to all potential pitfalls, including flying: at unsafe speeds; with impaired sight from the on-board camera; too close to hazards such as buildings, trees or power lines; in airspace dedicated to other purposes (such as an airport); in inclement weather; in violation of regulations; if impaired in any way; and without reading the owner’s manual and practicing drone operation in a secure area.

Attorneys representing drone manufacturers and distributors should alert their clients that the careful implementation of these additional safety features and warnings can save those in the stream of commerce during litigation.

Insurance Carriers Take Notice

Unsurprisingly, given the rapid increase in drone ownership and use, the impact of drones on the insurance industry is estimated to be $6.8 billion. Insurance companies, quick to recognize this potential impact, have taken their first steps toward writing policies to include drone coverage.

Specialty insurers, like Unmanned Risk Management and Avion Insurance, offer insurance to drone owners and operators for the drone itself, as well as general commercial liability policies for drone manufacturers and sellers in the event of personal injury or property damage claims. But it is not just aviation-specific insurance carriers who have recognized the potential for additional business.

The larger insurance companies, like AIG, are getting in on the act as well. AIG now offers drone insurance to its commercial customers, protecting them from damage caused by their drones. AIG’s policy covers “broad physical damage,” including losses caused by any electronic malfunctions and component failure. AIG is planning on rolling out specific policies for organizations using drones for construction, farming, oil and gas exploration and several other industries.

The insurance industry is expected to continue to trend in this direction. In a recent survey, 76 percent of risk managers said they would invest in drone-specific insurance coverage. Insurance carriers are marketing their new drone policies to manufacturers and distributors on a variety of bases.

Most current commercial general liability policies contain exclusions specifically for aviation exposures. Businesses are expected to begin contractually requiring drone insurance; such insurance protects against impending drone-based product liability litigation, and carrying drone insurance may enhance the reputation of a business.

Insurance defense counsel should work hand-in-hand with carriers to develop policy language, as well as closely monitor the implementation and interpretation of same.

The world of drones is relatively new, ever-expanding and full of potential pitfalls. A product liability attorney’s ability to preempt potential lawsuits and navigate the amorphous insurance environment will be critical to delivering positive results for clients.

—By Nathan Bohlander, Morgan & Akins PLLC

Nate Bohlander is an associate in the Philadelphia office of Morgan & Akins PLLC, where his practice focuses on product liability.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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