There are many potential uses for drones in the construction industry, such as for site selection, surveying, and real-time work inspections. If you are thinking about using a drone in your construction operations, there are several important issues to consider.

FAA Proposed Regulations and Current Exemption Requirement

The Federal Aviation Administration (FAA) regulates the commercial use of drones and does not permit their use unless you have an exemption to fly from the agency. This exemption is required under Section 333 of the FAA Modernization and Reform Act of 2012. Interestingly, FAA approval is not required if you are flying a drone for recreational purposes. Thus, while you can fly a drone legally at a neighborhood park for fun, you cannot currently fly the same piece of equipment at a project site for work without an exemption from the FAA.

The FAA, however, recently released proposed regulations for the commercial use of drones. The regulations, if finalized, will apply to drones that weigh less than 55 pounds. This weight limit includes anything carried on a drone, like video or imaging equipment. Drones will not be allowed to fly more than 500 feet above ground level. Additionally, drones will not be allowed to fly over any person who is not directly participating in the drone flight, unless that person is underneath a covered structure that can provide reasonable protection in the event of a crash. Operators will be required to see their drones at all times without the aid of any devices like binoculars.

The proposed regulations also require drones to be registered with the FAA, and any operator (pilot) must obtain an unmanned aircraft operator certificate. To get this certificate, the operator must pass an initial aeronautical knowledge test. Operators then must pass a recurrent aeronautical knowledge test every 24 months to continue flying drones. The FAA also is considering separate, more flexible regulations for "micro" drones that weigh less than 4.4 pounds.

It could take up to two years, though, for the FAA's proposed regulations to be finalized. In the meantime, the FAA has authority under existing aviation regulations to ban commercial drone operations that do not have exemptions. The FAA has used this authority to impose fines for unapproved drone use. As an example, see the National Transportation Safety Board's recent decision in Huerta v. Parker, NTSB Docket CP-217 (Nov. 17, 2014). The FAA also has issued subpoenas in other cases involving commercial drones – most notably to realtors who have used drones to take aerial photographs of property.

Insurance Coverage

Do not assume that your commercial general liability (CGL) policy covers commercial drone operations. Most CGL policies exclude coverage for bodily injury or property damage caused by an insured's use of an aircraft, automobile, or watercraft. The FAA defines a drone as an unmanned aircraft system, and insurers are applying the standard CGL aircraft exclusion broadly to exclude coverage for an insured's use of a drone.

Many insurers, however, are starting to offer coverage options for commercial drone flights. The coverage is offered through separate unmanned aircraft policies or endorsements to existing CGL policies. David Galbraith of RCM&D, one of the top privately-held insurance advisory firms in the country, recognizes this emerging market. "For our carrier partners," says Galbraith, "the risks associated with the rapidly increasing use of drones are still relatively new, which is why we have yet to see a solution built into standard CGL policy language. As carriers become more comfortable with drone risks in the coming years, we expect to see formalized policy enhancements designed to protect against this exposure."

Galbraith adds, "From our perspective today, the best way to handle the risk continues to be the purchase of an aircraft policy that provides separate liability and property coverage, versus a CGL endorsement. Also, drones can be expensive, so an additional benefit to buying a separate aircraft policy is that it allows for property (hull) protection in the event that the drone gets damaged or destroyed."

Regardless of whether you purchase a CGL endorsement or separate aircraft policy, make sure all individuals in your company who are participating in the drone flights are covered as additional insureds. Also make sure there is no exclusion for an electronic malfunction or equipment failure that may cause your drone to crash.

Minimizing Liability

Commercial drone flights could expose your company and employees to a variety of liabilities and risks. A crash on your job site could cause property damage to your work, property damage to the work of other contractors, or personal injury to anyone on the site. A crash off the job site could cause property damage and personal injury to third-parties. Even if there is not a crash, you could face a claim for trespassing on someone else's property if your flight goes off course. And there are always privacy concerns because drones can carry video and audio recording equipment.

Having an exemption from the FAA and adequate insurance coverage are two ways to minimize risk. In addition, you should develop specific guidelines for how your company will use drones. The guidelines should address issues such as:

• Defining the intent or purpose of the drone flights (to survey a proposed site, to inspect real-time work, to inspect completed work, etc.);
• Identifying the individuals participating (pilot, spotters, etc.), defining what their roles are, and providing the qualifications that a person must possess to fill each role;
• Identifying where take-offs and landings will occur; and
• Identifying the flight path (exactly where the drone will go, whether it will go over any populated areas, etc.).

These are just some of the issues that you need to consider before using a drone on a construction project. Stay tuned to see how the FAA, insurers, and the law adjust and respond as commercial drone use increases.