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Drone Technology, Utilization and Risks

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1 Drone Technology, Utilization and Risks
2015 FALL CONFERENCE & TRAINING SEMINAR

2 Proprietary Notice and Disclosure
The material contained in this presentation has been prepared solely for informational purposes by Genesis Management and Insurance Services Corporation. The material is based on sources believed to be reliable and/or from proprietary data developed by Genesis, but Genesis does not represent as to its accuracy or its completeness. The content of this presentation is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Disclosure Genesis Insurance Company is licensed in the District of Columbia, Puerto Rico and all states. Genesis Insurance Company has its principal place of business in Stamford, CT and operates under NAIC Number

3 Legal Framework for UASs
Overview Drone/UAS Basics Legal Framework for UASs Feel free to ask questions or share any experiences you may have had with Drones Utilization & Risks

4 UAS Basics What are Drones? Unmanned Aerial Vehicles (UAV)
Unmanned Aerial Systems (UAS) Remote Piloted Aircraft Systems (RPAS) Student Unmanned Aerial Systems (SUAS) Model Aircraft Unmanned Surface Vehicles It is a system, including the vehicle and associated hardware and software components Model Aircraft Less than 55 pounds Recreational use only No Regulations

5 The ABCs of UAS UAS Basics Sliding Scale of Sophistication and Cost
Military Commercial/Public Entity Hobbyist The ABCs of UAS All Fly, but can be very different equipment and price Can buy on Amazon or at a Mall Kiosk

6 Different Kinds of UASs
UAS Basics Different Kinds of UASs Military Large, Expensive Highly Sophisticated Weaponized Start with military usage of UAS because that often is the first thing that comes to mind. Military actively using drones for nearly 20 years First used by the U.S. military in 1995 as part of the NATO intervention in Bosnia After 9/11, the U.S. military used a Predator UAS equipped with a Hellfire missile in the war in Afghanistan In 2007, the next generation of UAS – the Reaper – which is a more advanced, deadlier UAS with a higher payload and more sophisticated systems. Typically are deployed in the Middle East and North Africa Leading research efforts in the area: UAS’s are getting smaller after getting bigger. Military is developing UAS’s that mimic the mechanics of flight by hawks, dragonflies and other creatures known for their precision movements for use in crowded areas – even indoors

7 Different Kinds of UASs
UAS Basics Different Kinds of UASs Public Entity Sophisticated Wide Range of Cost and Utility Public/commercial use of a UAS is very different from hobbyist use, but may seem similar, e.g. you can take personal photographs with a small UAS BUT, the same activity done by a public entity or business treated differently by the law. WHO is operating the vehicle and the PURPOSE of the activity is the crux of the issue flight of a drone is managed by a trained human and computing component, generally known as an autopilot. Systems include several cameras and/or kinds of sensors that make frequent measurements Range in price from a few thousand to upwards of a million. Costs include physical vehicle, but also all of the systems that go along with it, as well as training and maintenance costs

8 Different Kinds of UASs
UAS Basics Different Kinds of UASs Hobbyist Small, Inexpensive Relatively Simple Limited Utility In recent years, consumer grade UAS’s have proliferated. Recreations use is widespread Biometrics look like Birds, insects + other animals – Even Blimps and Balloons Very popular gift in the 2014 holiday season  So common that FAA and trade groups started a website (knowbeforeyoufly.org) to help make sure that people don’t injure themselves or others when flying drones Common advice: (a) keep vehicle in sight, (b) don’t fly near others, (c) don’t take photos without people’s knowledge

9 Legal Framework for UAS
Three Spheres of Regulation Federal Major Caveat: this is a rapidly changing area of law at every level. What you hear about today or read in the paper may not hold true a year from now. Just as the technology in this area is still developing, governments still are trying to fashion the fundamental rules to regulate the use of UAS And as new uses and new technologies emerge, those rules are almost certain to be adapted. State Local

10 Legal Framework for UAS Federal Regulation
Federal Aviation Administration (FAA) is Responsible for Setting and Enforcing Safety Standards in National Airspace (NAS) Since 2008, FAA has been trying to Fashion Comprehensive Regulations to Govern the Use of UASs (FAR) FAA U.S. Department of Transportation In 2008, the FAA first provided guidance on the use of UAS in civilian airspace These interim regulations – still in place today – govern public and civil use of UAS.  These rules not intended to govern hobbyist FAA Modernization and Reform Act of The act directed that the FAA must integrate unmanned aircraft systems into the national airspace by September of 2015. DIDN’T HAPPEN

11 Legal Framework for UAS Federal Regulation
The FAA Still No Final Set of Rules: Technology Outpacing Governmental Rule Making Deadline was Set for September 2015, but Final Rules not Expected Until 2016 or 2017 Testing and Researching the Use of Drones at Six Test Sites Nationwide Been a bureaucratic struggle of blown deadlines and an inability to develop comprehensive regulations. Part of the blame is on stakeholders – lots of different interests; part of blame is on technology In December 2013, FAA established 6 testing areas around the country to research UAS technology to inform the process of developing regulations. [Alaska, Nevada, New York, North Dakota, Texas, Virginia] In February 2015, the beginning of the end of gridlock began to change. FAA released a notice of proposed rulemaking for small UAS in the national airspace WILEY REIN SUMMARY

12 Legal Framework for UAS Federal Regulation
FAA Does Not Regulate Recreational Use of Airspace Below 400 feet and Within Sight of the Operator FAA Regulates All Other Operations Beyond Those Limits Non-Recreational Use Regulated at All Levels Scope of FAA Authority aircraft operation in the national airspace requires a certificated and registered aircraft, a licensed pilot, and operational approval. Not intended to govern recreational use below 400 ft and within sight of the recreational operator EVERYTHING else: regulated by FAA NAS National Air Space above 400 feet

13 Legal Framework for UAS Federal Regulation
Operational Limitations Operator Certification & Responsibilities Aircraft Requirements Prohibition of Model Aircraft in NAS Scope of FAA Authority Operational limitations: Weight Line of sight Daytime Max speed = 100 mph Max altitude = 400ft  Operator Certification & Responsibilities Testing, initially & every 2 years Vetting by FAA Obtain an operator certificate Aircraft Requirements Airworthiness certification not required Aircraft registration & markings required  Model Aircraft – codifying existing limitations

14 Legal Framework for UAS Federal Regulation
General rule: the FAA Does Not Want UASs to Operate in the National Airspace Governmental Agencies Must Apply for a Certificate of Authorization (COA) or an Exemption (Section 333) If it Does Not Have a COA, a Public Entity Should Not be Operating a UAS Scope of FAA Authority The full considerations when making this determination are aircraft ownership (leasing), the operator, the purpose of the flight, and the persons on involved with the aircraft. FAR – Federal Aviation Regulations - Section 333 a request for exemption from some of the FAR No fee required to do so by FAA The drone still has to be registered, if it is going to be used for commercial reasons

15 Legal Framework for UAS Federal Certification
Application for a COA Online Application Complicated, Technical and Comprehensive Review Process May Take Several Months Public Entity Must Identify Specific Purpose of the UAS and Area Use Basic Process: The FAA working to ensure Drones do not jeopardize the safety of other aviation operations. Basic Goal: The objective is to issue a COA with parameters that ensure a level of safety equivalent to manned aircraft. Make sure no operation in a populated area and that the UAS is observed, either by someone in a manned aircraft or someone on the ground to ensure separation from other aircraft in accordance with right-of-way rules.

16 Legal Framework for UAS Federal Certification
Application for a COA Operation of UAV Pilot Certification Crew Certification Training Medical Certification Airworthiness of UAV Application is detailed and extensive Condition, design and construction of aircraft Pilot in Command (PIC) and Observer (maintain direct communications) Pilot in Command Person in control of and responsible for the aircraft Expected to operate aircraft safely Observer Expected to observe the UA activity either through line of sight on the ground, or in the air by means of chase aircraft Certain requirements to coordinate with Air Traffic Control depending upon height of flight and instrument flight plans to be used GOOD TO USE FOR UNDERWRITING GUIDELINE REQUIREMENTS

17 Legal Framework for UAS Federal Certification
Additional FAA Requirements UAS Must Be Registered and Marked within 45 Days of Approval Trained Pilot; Sometimes an FAA Pilot Certificate Specific Purposes of Use Specific Geographic Area Specific Time Periods Coordination with Air Traffic Control Facilities Line of Sight Operator of the UAS must have specific training Other restrictions: The application and resulting approval define the use. If you get COA for fire safety, it can’t be put to a different use Daylight Two Years Most COAs require coordination with an appropriate air traffic control facility May require specified equipment (transponder) on the UAS to operate in certain types of airspace

18 Legal Framework for UAS Federal Certification
COAs Permitted 24 COAs for Commercial Use out of more than 300 Applications Over 1000 COAs for Public Entities Section 333 Over 1,400 Submitted in 2015 1,111 Granted 310 rejected

19 Legal Framework for UAS Federal Certification
10% Colleges & Universities 45% Military & Federal Government 45% State & Local Government COAs Colleges/Universities: Mostly developing for research purposes Military: Even the DoD needs to get permission for use in NAS; border patrol; Department of Interior (agriculture), NASA State/Local: state agencies, first responders But lots of room for growth. Fewer of 3% of police departments COAs are important – A drone being used without a COA could lead to coverage issue NOT STRONGLY ENFORCED – HOW CAN THEY? A 400 foot Ruler?

20 Legal Framework for UAVs State Regulation
State Regulation Varies 20 States have Enacted Laws Addressing UAVs Some Allow UAVs, Some Do Not In 2015, 45 States have considered 154 bills related to Drones

21 Legal Framework for UAVs State Regulation
State Regulation Varies Most Deal with How Law Enforcement can Use UAVs Other Issues include: Hunting, Traffic Enforcement, Data Retention, Privacy and Disclosure of Information to 3rd Parties Likely to Find Conflicts with FAA Regulations States considering the following: procedures and standards for law enforcement’s use of unmanned aircraft, regulations for the retention of information a record of all flights are kept and there is an opportunity for community involvement in the development of the agencies’ procedures. use UAS pursuant to a search warrant, pursuant to a judicially recognized exception to the warrant requirement and in situations not involving a criminal investigation. Images captured with UAS may be retained by police under the law for training purposes or if it is required as part of an investigation or prosecution.

22 Legal Framework for UAVs State Regulation
In 2013, First State to Enact UAS Legislation Established a Moratorium on all UAS by any State or Local Law Enforcement Agency Exceptions include Amber Alerts or Specified Search/Rescue Operations Does not Prohibit UAS Use Solely for Research and Development Purposes by Higher Education Institutions Requires Development of Protocols for Community Engagement, System Requirements and Operation Procedures Example: Virginia

23 Legal Framework for UAVs State Regulation
Tennessee Tennessee HB 153 prohibits using a drone to capture an image over certain open-air events and fireworks displays. It also prohibits the use of UAS over the grounds of a correctional facility. Presentation for [client/prospect], [date] | Proprietary and Confidential. © 2009 Genesis Underwriting Management Company

24 Legal Framework for UAVs State Regulation
Tennessee Tennessee SB 796 (2013) allows law enforcement to to use drones only with a proper search warrant with the exception of countering “high – risk terrorist attacks” or if “swift action is needed to prevent imminent danger to life” Tennessee SB 1777 (2014) Using a drone-captured video footage of a hunter or angler without their consent, is a Class C misdemeanor . Class c misdemeanor -  Class C misdemeanors can carry up to 30 days in jail and / or no more than $50.00 in fines. 24 Presentation for [client/prospect], [date] | Proprietary and Confidential. © 2009 Genesis Underwriting Management Company Presentation for [client/prospect], [date] | Proprietary and Confidential. © 2009 Genesis Underwriting Management Company

25 Legal Framework for UAVs State Regulation
Tennessee Tennessee SB 1892 (2014) also brands as a Class C misdemeanor the use of a drone to “intentionally conduct surveillance of an individual or their property” and the possession or distribution of images captured in such a manner.  Presentation for [client/prospect], [date] | Proprietary and Confidential. © 2009 Genesis Underwriting Management Company

26 Legal Framework for UAVs Local Regulation
Local Regulation Also Varies Multiple Municipalities have Passed Resolutions Banning Use of Drones Charlottesville, Va.; Evanston, Ill.; Northampton, Mass.; and Syracuse, NY It is not entirely clear whether the FAA has exclusive authority to regulate low-altitude drone flight.   The U.S. Supreme Court has held that, although high-altitude aircraft do not interfere with a landowner’s property rights, low-altitude flights by aircraft above their property can interfere with property rights; However, the Supreme Court did not clearly define the maximum altitude to which these property rights extend.  Local government still retain the power to regulate the use of drones in their jurisdiction in at least two ways: Local governments clearly retain the authority to regulate their own use of drones. Local governments may prosecute drone operators if their use of drones violates a law of general applicability (e.g. laws protecting privacy, nuisance laws, etc.)  Not tested in courts. Lots of room for conflict Chicago Permits

27 UAS Utilization & Risks
Some Key UAS Features Live-Feed Camera Infrared Camera Radar Weaponization?

28 UAS Utilization & Risks
UAS Usage Department of Homeland Security – Patrolling Borders NASA/U.S. Forest Service – Real-Time Imaging and Mapping of Forest Fires U.S. Customs and Border Protection (CBP) guards nearly 7,000 miles of U.S. land border and 2,000 miles of coastal waters surrounding Florida, Texas, and southern California. Not cheap: in fiscal year 2013, it cost at least $62.5 million to operate the program, or about $12,255 per hour. Efficacy is debatable. NASA/US Forest service areas focus Forest Management – map and monitor the general condition of forest stands and to assess damage from extreme weather events, such as wildfires, landslides, hurricanes, floods, ice storms, and high winds.  Watershed, Soil, and Air Management – map and monitor the general condition of watersheds Fish, Wildlife, and Plants – to map fish and wildlife habitat; to survey fish and wildlife populations; to monitor populations of threatened and endangered fish, wildlife, and plant species; and to monitor the effectiveness of habitat restoration efforts.

29 UAS Utilization & Risks
UAS Usage Police – Photographing Accident Sites; Assists in Reconstructing Accident Sites; Bird's Eye View of Emergency Situations Michigan State Police – Seeking State-Wide COA

30 UAS Utilization & Risks
UAS Usage Police – Tracking Criminals + Missing People North Dakota – Tracked Down Three Fugitives in a Cornfield, at Night Medina, Ohio – Tracked Down a Missing Alzheimer's Patient In a cornfield in North Dakota, four underage men were pulled over under suspicion of drunk driving. The four men hopped out of their car and bolted into the cornfield. Grand Forks police didn't follow them: Instead, they put a drone in the sky. Found the first in 3 minutes, second in 25 minutes "One of them was walking through the cornfield. It took about three minutes to find him," Alan Frazier, Deputy Sheriff in charge of the Grand Forks Police Department's unmanned aerial vehicle system unit told me. "The other was found on a second flight, after maybe 25 minutes." Also, a cattle rancher near there was arrested with the help of a Department of Homeland Security P Ohio police officials flew the UAS over the area around a care center to help locate a missing Alzheimer’s patient who had escaped out a window.

31 UAS Utilization & Risks
UAS Usage Fire – Eye in the Sky Connecticut – Saw How Close a Fire had Come to a Cache of Explosives

32 UAS Utilization & Risks
UAS Usage Search and Rescue Barricaded Suspects Fugitive Apprehension Detection of Drug Growth Operations on Public Lands

33 UAS Utilization & Risks
UAS Usage Sports Utility Inspection Infrastructure Inspection Environmental Scanning Weather Review Disaster Analysis

34 UAS Utilization & Risks Safety
Collisions with People Collisions with Objects/Buildings Collision with Other Aircraft Drones Impeded Firefighting Efforts in California Issues of Concern WH lawn: no damage, but highlights that risks of losing control are real Bronx Restaurant – University of Kentucky football game + US Tennis Open + Ohio Prison California Fires – delaying fire suppressors Nearly 200 crashes worldwide; 50 in the U.S. Many more near misses Risks Include: Collisions with: People Buildings Other Aircraft Human Error is behind many incidents. Crashes can have high exposure: millions of dollars

35 UAS Utilization & Risks Privacy
Public Backlash ACLU Worried About Invasion of Privacy Cameras Tracking Individuals Without a Warrant Entrepreneurial Litigation Issues of Concern USAGE LIMITS: Drones should be deployed by law enforcement only with a warrant, in an emergency, or when there are specific and articulable grounds to believe that the drone will collect evidence relating to a specific criminal act. DATA RETENTION: Images should be retained only when there is reasonable suspicion that they contain evidence of a crime or are relevant to an ongoing investigation or trial. POLICY: Usage policy on domestic drones should be decided by the public’s representatives, not by police departments, and the policies should be clear, written, and open to the public. WEAPONS: Domestic drones should not be equipped with lethal or non-lethal weapons. But Recent story Attorneys Seeking a Deeper Pocket

36 UAS Utilization & Risks Insurance
Possible Types of Exposure Property Damage Bodily Injury Invasion of Privacy Cyber-Attack Operators & Public Officials Potential impact of regulations Physical damage: UAV product, parts, and Third-party liability Personal injury – UAS hits someone Invasion of privacy – UAS gathers private information data collection – UAS doesn’t protect information Property damage – UAS hits something Premises liability – injury at UAS piloting location Nuisance Cyber risks Public Official

37 UAS Utilization & Risks Insurance
Underwriting Considerations Aircraft Owners Liability Non-Owners Liability There are a limited number of insurers. The commercial UAV industry is still young and growing fast, many risks and potential liabilities are still unknown. Insurers will likely request details of proposed operators, proposed uses, permissions and certification; representations in application will be critical  Owner's insurance encompasses bodily injury and property damage. This category also covers damage to the aircraft and components known as ‘hull damage.’ Third-party insurance is also covered under owner's insurance and may cover pilots who fly the aircraft, other than the owner, depending on the policy.  Non-owner insurance is similar to renter's insurance. This type of coverage applies to a pilot who is an employee of a public entity, rents aircraft, or regularly borrows aircraft. Non-owner ISO Endorsements

38 Contact Information Regina B. Pettus Richard A. Spiers, CPCU, ARM, ARe 15 Piedmont Center – Suite N. Wacker Dr. Suite Piedmont Road, NE Chicago, Illinois Atlanta, Georgia Direct (312) Direct: (404)


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