The FAA issued the much awaited Notice of Proposed Rulemaking on Operation and Certification of Small Unmanned Aircraft Systems on February 15, 2015. The proposed rules are described by the trade associations and other industry commentators as “flexible”, “a good first step”, and “lenient”. This is mostly good news for those seeking to use drones in a commercial setting – keeping in mind the rules are just proposed at this time and are not currently in force. Today you still cannot fly a drone for commercial use without an FAA exemption. So far the FAA has granted only 24 Section 333 exemptions from a total of 342 application requests.
A quick internet search will yield dozens of reviews describing the content of the proposed rules. (Such a review is not repeated herein below.) Most observers are quick to point out the differences between the proposed UAS rules and the existing regulations for general aviation aircraft and pilots. The proposed UAS rules are in many ways a “subset” of the general aviation rules and regulations. Being a subset sounds great from the standpoint of those who seek less regulation but it also highlights a potential lost opportunity for the FAA and those who seek to promote the safe use of drones in the national airspace. Like the existing regulations for general aviation, the proposed UAS rules contain no requirement for any minimum coverage or limits of insurance in association with UAS use. The fact that the FAA sets no insurance minimum for general aviation is simply carried over to the UAS world in this subset regulatory approach. Given the lack of an insurance minimum in general aviation, and resistance to recent efforts to implement a consistent national approach to health insurance coverage, it is no wonder that insurance is nowhere to be found in the proposed UAS rules. However, just like the debate over the benefits of some minimum national standards for health insurance coverage, we should consider whether the “no mandate”, “free market”, approach to insurance for UAS use is actually in the best interest of the public as well as those who seek to benefit from commercial drone operations.
To be clear the FAA does maintain an insurance requirement for certain manned commercial aircraft. The requirements are set as specific limits for liability and property damage coverage based on the aircraft’s capability and capacity (passenger count and cargo weight). (See 14 CFR 205.5(a).) It is a fairly straight forward task to calculate the exact minimum insurance for a specific aircraft and its intended use. For various reasons, most commercial aircraft maintain coverage and limits above the mandated minimums. Despite the insurance minimums for commercial aircraft the FAA has never seen fit to mandate any minimum insurance coverage or limits for general aviation aircraft. While many general aviation operators carry some insurance for themselves and their aircraft, any good plaintiff’s lawyer will tell you that many general aviation operators are either significantly underinsured or carry no coverage at all. The apparent basis for this no minimum insurance decision is the FAA’s focus on stringent aircraft pilot certification and aircraft airworthiness regulations, along with oversight from air traffic controllers, as a primary means to manage the risks in general aviation. Pilots are required to complete extensive training and aircraft are carefully regulated from FAA approved type certification to detailed maintenance requirements performed by certified mechanics. Historically, this model has provided a relatively safe environment within both commercial and general aviation. Many decades worth of incident records show that the FAA has noted a steady and significant decline in commercial aviation losses. However, in a growing cause for concern, no such decline has been observed for general aviation. The basis for this performance gap is now the subject of review within the FAA – and beyond the scope of this article.
So why is the missing insurance ingredient for UAS use a possible lost opportunity? The answer lies in the parts of the general aviation regulations that are missing from the “subset” of proposed UAS rules. There is no requirement for type certification of drone hardware. There is no requirement for airworthiness assessments by certified manufacturers and maintenance mechanics. There is no oversight of operators by air traffic controllers. These are some of the key elements of the general aviation regulations that serve to reduce risks for pilots, passengers, and the general public. Removing these regulations for UAS operators may seem like a “good first step”, but how will the actual risks of UAS flight be mitigated in the real world? What will take the place of these key elements of the current general aviation model? The answer may be some minimum insurance requirements for commercial UAS operations. Perhaps some minimum insurance coverage and limits for UAS commercial operations would serve to transfer some of the risks to private, third party insurers (with a financial stake in the final outcomes of actual UAS operations), who can then implement state of the industry underwriting criteria for operators, manufacturers, and maintenance providers. Just because you pass the driver’s test and have the money to buy a car doesn’t mean you can register the vehicle without evidence of some minimum insurance. Nothing good happens when we get hit by an uninsured motorist – or drone as the case may be.