Author: Attorney John C. Mitby & Law Clerk Elizabeth L. Spencer
Phone: 608-575-4077
Email: jmitby@hbslawfirm.com

According to the Federal Aviation Administration for 2016, the potential sales of commercial small unmanned aircraft systems requiring registration was forecast to reach 600,000, growing to 2.7 million by 2020.[1] With increased accessibility, the desire to use drones, formally known as unmanned aircraft systems, to assist with construction and real estate projects is rapidly growing. The industry is ripe for both those interested in providing drone services and those desiring services. Drones can be used for a wide variety of activities not easily performed from the ground including photographing construction projects, monitoring work process, performing safety inspections, inspecting difficult to access locations, and real-time aerial surveying. However, there are numerous regulations and new laws evolving, along with insurance issues that must be considered before seeking the services of a commercially operated drone

Commercial Use Regulation

Drone use is regulated based on a party’s intended use of the drone. There are

1. public operations which are drones used for governmental purposes;
2. hobby or recreational use of drones which is governed by the model aircraft operations in Section 336 of Public Law 112-95; and
3. civil operation of drones, which includes the non-governmental usage of drones for business and commercial purposes.

Although there are no significant technical differences between recreational and commercial drones, the FAA has drawn a legal distinction based on the use of the drone for financial gain.

The regulatory scheme for drones is rapidly changing to handle the increased demand and numerous new uses. Starting in late August 2016, there will be two ways to gain FAA approval to operate commercial drones. If the drone weighs less than 55 lbs. it will need to comply with Part 107 of Title 14 Code of Federal Regulations. If the done weighs more than 55 lbs. it will need to secure four things:

1. a Section 333 grant of exemption;
2. a Certificate of Waiver of Authorization (COA);
3. registration with the FAA; and
4. a pilot with an FAA airman certificate.

On June 21, 2016, the FAA released a framework to allow small drones, weighing less than 55 lbs. to become registered for commercial use under Part 107 of Title 14 Code of Federal Regulations. This rule requires the operator to be at least 16 years old, pass an initial aeronautical knowledge test at an FAA-approved knowledge testing center, and be vetted by the Transportation Safety Administration (TSA). The rule includes certain operating restrictions including limiting flights to daylight hours, requiring the drone to stay within the pilot’s line of sight, height limits, speed limits, and limitations on flying it overhead. However, the restrictions are subject to waiver if the operator proves that the proposed flight will be conducted safely under the waiver. This rule does not require the drone owner to receive a FAA airworthiness certification for the aircraft.

Drones over 55 lbs. must be approved on an individual basis and endure a lengthy process lasting up to 7 months. A Section 333 exemption is granted to applicants if the FAA determines that based on a drone’s physical and operational characteristics it can operate safely in the national airspace system and not interfere with the public, or pose a threat to national security. In order to receive an exemption, owners must file a public petition with the FAA detailing the operator’s name and address, the specific applicable regulations from which relief is required, how the operator will maintain safety or have no adverse impact to safety, public interest of the exemption, the proposed operations, and the make and model of the aircraft for proposed operations. All grants of exemption are automatically issued with a “blanket” 400-foot nationwide COA with certain restrictions around airports, restricted airspace, and other densely populated areas. If an owner wants to operate outside of these limits they must apply for a separate COA.

The Section 333 exemption also requires that there be a pilot in command who holds either:

1. an airline transport, commercial, private, recreational, or sport pilot certificate;
2. a current FAA airman medical certificate or a valid U.S. driver’s license issued by a state, the District of Columbia, Puerto Rico, a territory, a possession, or the Federal government; or
3. meet the flight review requirements specified in 14 CFR § 61.56 in an aircraft in which the pilot is rated on his or her pilot certificate. The drone must also be registered using the Aircraft Registration Application, AC Form 8050-1 with the FAA.

Even after securing either the Part 107 registration or the Section 333 exemption, an operator is still not able to use the drone for whatever purpose they desire. Part 107 has requirements for when the drone can be operated and the Section 333 exemptions are individualized for the applicant with specific operating conditions and limitations associated with each within the exemption document.

Commercial Use Concerns

The use of drones in business while providing many advantages raises multiple concerns relating to liability for the business owner renting the services of a drone operate. In order to best minimize the potential liability, the business should construct its own agreement that includes clauses limiting both criminal and civil liability, an indemnification clause, and ensure that the operator has the proper insurance.

The use of drones creates potential for personal injury, property damage, and criminal liability. Drone usage may result in civil torts such as trespass, privacy invasion, and battery. Additionally, if the drone is used in way that violates local, state, or federal law, depending on the offense, civil or criminal suits may result. Contracts should include a clear indemnification clause indicating that the drone owner will agree to indemnify and hold the business owner harmless from all liability claims and related expenses arising from the drone operation.

For further protection, the business should ensure that the drone owner has proper insurance to cover potential claims that may not be protected by contract. Common commercial general liability polices often have exclusions for “bodily injury” or “property damage” arising out of the ownership, maintenance, or use of aircraft. Fortunately, due to the increasing popularity of drones, some larger insurance companies are beginning to provide coverage specifically for unmanned aircraft systems. For example, AIG has introduced a policy for drones that covers the pilot, non-pilot “crew”, property damage, and optional “war, hijacking, and terrorism coverage”, and loss of drone components. The rental of any drone service should include an inquiry into the owner’s current insurance policies or seek additional insurance. However, due to the developing nature of drone law it is unknown to what extent insurance companies will apply these policies or what exceptions may exist now or in the future.

Conclusion

Business owners interested in taking advantage of the variety of services of drones have many concerns to address. In order to protect themselves to the fullest degree, business owners should draft their own agreement with a drone operation to ensure that complies with all regulations and diminish liability concerns.

This example document is not intended to be used in its current form without adaptation to a specific project and circumstances. Consultation with an attorney is encouraged with respect to its use or modification.

[1] http://www.faa.gov/data_research/aviation/aerospace_forecasts/media/FY2016-36_FAA_Aerospace_Forecast.pdf