UP IN THE AIR: APPLICATIONS, RISKS AND INSURANCE FOR DRONES IN CONSTRUCTION

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WORKSHOP M9

Monday, November 9

1:30 p.m.–2:45 p.m.

3:15 p.m.–4:30 p.m.

UP IN THE AIR: APPLICATIONS, RISKS AND INSURANCE

FOR DRONES IN CONSTRUCTION

Presented by

John L. Babel

Assistant Vice President, Senior Risk Engineering Consultant

North America Construction XL Catlin

Ernest C. Brown

Partner

Smith Currie & Hancock LLP

The use of unmanned aerial vehicles (UAVs), also referred to as drones, is rapidly changing the construction business. UAVs can be equipped with various tools that can enable contractors to quickly and economically identify potential hazards and constructability issues, monitor project conditions, inspect work quality, etc. The larger the construction site, the more helpful a UAV system can be. However, UAVs pose important operational, regulatory, safety, and risk management challenges that need to be carefully considered. We will examine types and features of UAVs, applications, regulatory issues, safety risk, liability, and insurance options.

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North America Construction

XL Catlin

As assistant vice president, senior risk engineering consultant for North America Construction at XL Catlin, Mr. Babel brings a wealth of experience to the XL Catlin Construction team, including comprehensive knowledge of the construction and environmental industries, safety and risk con-trol concepts, and program development and training, as well as primary casualty and construc-tion property lines and controlled insurance programs. Prior to joining XL in 2013, Mr. Babel held the position of senior risk engineering consultant at Zurich Services Corporation.

Mr. Babel holds a bachelor of science degree in environmental management from the University of Rhode Island and has earned the Construction Risk and Insurance Specialist (CRIS) certification. He recently achieved the U.S. Army Corps of Engineers Construction Quality Management for Con-struction certification. Mr. Babel is a retired U.S. Navy deep sea diver with 21 years of experience in diving and salvage operations.

Ernest C. Brown, Esq., PE

Partner

Smith Currie & Hancock LLP

Mr. Brown, a partner at Smith Currie & Hancock LLP, is an accomplished trial lawyer and project counsel. His practice emphasizes engineering and construction megaprojects (more than $500 million) and related complex disputes. He has resolved major contract disputes, construction disasters, and related litigation on airports, bridges, highways, high-rise office buildings, refiner-ies, pipelines, storage tanks, water and wastewater treatment plants, and a myriad of other proj-ects.

Mr. Brown is a graduate of MIT in civil and environmental engineering. While working as a project engineer and superintendent, he earned an MSCE in project management and JD (law) from the University of California, Berkeley. Mr. Brown is a registered Professional Engineer and member of the State Bar of California. He also serves the construction industry and public sector as a media-tor, arbitramedia-tor, and special master for the American Arbitration Association. He has mediated more than 600 construction cases and serves as AAA panel chairman on cases ranging up to $100 mil-lion.

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Presented By: John Babel, CRIS, STSC

XL Catlin North America Construction Risk Engineering

Ernest C. Brown, Esq., P.E.

Smith Currie & Hancock LLP

© 2015, XL Catlin companies. All rights reserved. I MAKE YOUR WORLD GO 1

Up in the Air: Applications, Risk and Regulation of Unmanned Aerial Vehicles (UAVs) in the Construction Industry

• UAV/UAS types, terms, applications, limitations • Review proposed FAA FMRA rules and how to

fly before the final rules are issued • Potential legal liability issues to consider • Insurance & risk management strategies • UAV hazard analysis & flight safety

considerations

Definitions

• Drone, UAS, UAV, sUAS

• National Airspace System

• LOS, VLOS (same) • FPV, camera view (same) • Hobbyist • Commercial use • ATC • AGL • RPAS/ICAO • Fly-away • Geo-fence 3

UAS Categories

Fixed Wing

• Fixed-wing UAS’s can stay aloft longer (1-35 hours) • Specialized payloads onboard for mapping and survey

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UAS Categories

Vertical Take-off and Landing (VTOL)

• Hover - Great for shorter missions where it is helpful to get close to the target.

• 20-30 minutes battery life (currently)

• Most Construction Applications use VTOL

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UAS Applications

• Digital Photogrammetry & documentation • LiDAR and DTM mapping & survey, • Integrate imaging to BIM

• Document existing & as-built conditions

• Inspect hard to reach places e.g. bridges & high vertical structures

• Route mapping for linear utilities

UAS Applications

• QC inspections, e.g. window & roof systems • Safety & workflow surveys

• Emergency response in remote areas (AED) • Pre and post-blasting condition surveys • Developer and contractor marketing videos • Traffic control plan inspections

• Mining spoils & dredging take-offs • Disaster “Real Time” Investigations

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UAS Benefits

• Photo-document/survey 160-acre site in 40 minutes on one battery charge (traditional aerial photography can cost $1K/month)

• Potential 50% reduction vs. traditional aerial surveys • VTOL UAS hover & go places other aircraft cannot

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Hobbyist vs.

Commercial Use

• Hobbyist = Hobby = no commercial use!

• Commercial = Offering a professional service in connection with a business

• Some contractors are operating drones by claiming their operators are hobbyists

• Several legal cases have been brought by the FAA

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FAA Categories of

National Airspace

• Controlled Airspace: • Class A 18,000 Ft + • Class B 0 to 10,000 • Class C 0 to 4,000 • Class D 0 to 2,500 • Class E Other

Regulatory Environment

• FMRA (2012) Congress mandated FAA to determine if UAS can operate safely in NAS • FAA currently bans commercial use of UAS’s

without Section 333 FMRA approval • FAA NPRM issued February 2015

• FAA may change rules and curtail hobbyist use • “No fly” zones (e.g. 15 miles of Reagan Airport)

-State/local law TBD

• Public Use – Police, fire, EMT – Easy to permit

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NPRM for Commercial

Use of UAV’s

• UAV must weigh less than 55 lbs.

• VLOS only – operator and/or observer(s) • May not operate over “persons”

• Daylight only operations

• Max airspeed 100mph - max altitude of 500 ft. AGL • Minimum visibility required = 3NM ( 3.5 statute miles) • No operation in Class A airspace

• ATC permission needed for Class B,C,D and E airspace • Micro UAS category < 4.4 lbs. for class G airspace

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FAA 333 Petition for

Exemption

Contractor Must Describe:

• Intended UAS operations and procedures • Equivalent level of safety, e.g. flight plans • Purpose for exemption (Need)

• Qualification of operator(s) for COA • Statutory authority for exemptions • Public benefit, if any

• Check out applications on FAA website

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Proposed Operator

Requirements

UAS operators would be required to:

• Pass an FAA-approved knowledge test • Be vetted by TSA

• Obtain unmanned aircraft operator certificate • Pass an aeronautical knowledge test

• Be at least 17 years old

• Make UAS available for FAA inspection and/or testing

FAA vs. State & Local

Regulations:

• FAA is mostly silent on state & local regulation of UAS. Senator Feinstein: Proposed

Consumer Drone Safety Act (2015). AGC suggests FAA rule that state & local

governments can not adopt operational rules outside traditional areas of state concern. • Contractors should determine what the laws

are in the states where they operate. 17 states have already enacted legislation governing the commercial use of UAS in their state

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If it is sub-55lbs, you can fly it:

• Recreationally 1. Buy a drone 2. Fly the drone 3. Repeat Step 2

• Commercially

1. Get a lawyer

2. Secure a Special Airworthiness Certificate (SAC)-Experimental Category, but you can’t carry property or persons

-or-2. Secure a SAC-Restricted Category to test your UAS

-or-2. Get an exemption under Section 333 of the FAA Modernization and Reform Act of 2012, AND a Certificate of Authorization (COA) to operate your drone in certain areas and with certain restrictions 3. Avail yourself of capitalism

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UAV Flight Risks

• Limited commercial airspace available in the U.S., especially >500’ AGL = near misses

• “Fly-aways” and loss of UAS power - technology is currently limited for many inexpensive UAV’s

• Must avoid 3rd_{party structures & people}

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UAV Flight Risks

• Illegal surveillance & trespass • Homeland security issues, e.g.

“weaponizing”

• Bird strikes or attacks • High winds

• Cellular tower/electromagnetic interference

• Lost wireless connection, problems with onboard GPS or compass

UAV Flight Risks

• American military drones crash 3-10 times the rate of manned fighters per 100,000 flight hours, usually causing major damage or destruction of the drone, plus third party exposure risk

• The FAA Reports about 60 Pilot Encounters with Drones a Month! • Commercial drones lack features of military drones designed to

improve reliability – redundant systems, durable communication links, long battery life, return home feature, “geo-fence”, etc. • There are several ways to down or hijack a drone. Defenses are

very expensive – most commercial drones don’t have them. • These and other factors pose a challenge to the P&C Industry

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Legal Issue: Privacy

Violation

• In places where an individual has a “reasonable expectation of privacy,” photography is considered a violation of the right to privacy • Moreover, police use of drones may threaten Fourth Amendment

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The homeowners in this photograph could (theoretically) sue the operator of this drone.

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Legal Issue:

Trespass & Nuisance

How to insure the risk?

Options include:

 Embrace the risk – apply for FAA Section 333 waiver, get Certificate of Authorization to operate in-house, get insurance (or self-insure), train operators, buy UAS

How to insure the risk?

Options:

CGL Policy Endorsement - 7 new ISO forms Available

• BI and 3rd_{party PD}

• Include/Exclude UAS • Provision for OPPI/CPPI

Aviation Policy - Coverage for:

• PD and legal liability (AKA “Hull” coverage) • Product liability for manufacturers

• May provide expanded coverage

Consult your broker and carrier

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New CGL ISO Forms

A - 3

rd

Party BI/PD

B - Personal/Advertising

Injury

Policy # Form Cover A Cover B

CG 21 09 Exclusion – UAS Excluded Excluded

CG 21 10 Exclusion – UAS Coverage A Only Excluded NA CG 21 11 Exclusion – UAS Coverage B Only NA Excluded

CG 24 50 Limited Coverage for Designated UAS Excluded Except Designated UAS Excluded Except Designated UAS

CG 25 51 Limited Coverage for Designated UAS – Coverage A only Excluded Except Designated UAS NA

CG 24 52 Limited Coverage for Designated UAS –

NA Excluded Except Designated UAS

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Info needed to insure the UAS risk

Underwriters may consider the following:

• Does customer have required FAA Approval/333 Waiver and COA? • Operator(s) training and experience

• Specifications of craft, e.g. make, model, size, weight, ceiling, speed, degree of drone autonomy, failsafe systems (geo-fence, return home features)

• Available accident history?

• Launch, propulsion, recovery mechanisms

• Operating parameters and mission-specific dangers: Near power lines, cranes, high density development, heavy or bulky payload? • Use of drones is incidental to the insured’s overall business

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Flight Safety - Pilot

Training

• First - Obtain FAA 333 Certificate of Approval (COA)

• Require & document UAS pilot training & certification from manufacturer, distributor, or school

• Good understanding of FAA regulations and NAS • Operator UAS experience/flying hours (experience) • Must conduct risk assessments & develop flight plans • Spotter(s) if using beyond LOS

Pre-Flight Safety - Ops

Do NOT fly if:

• Inadequate daylight or low light (e.g., fog) • Rain or lightning

• Wind gusts exceed 15 mph • Temperatures below 38\ F

• Altitude over 400’ AGL (build in safety factor, e.g., 250’ AGL)

• Distance exceeds ¼ mile away from operator

• Visual line-of-site (LOS) cannot be maintained with UAS • No spotter (co-pilot) backup available

• No stunt flying allowed!

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Pre-Flight Risk

Assessment/JHA

• UAS flight plan reviewed and approved

• Batteries Charged (UAV, controller, Camera, etc.) • Compass/GPS properly calibrated

• Propellers Clean and Tight

• Electronics clean/free of debris, wire connections tight • Takeoff site clear

• Emergency landing area clear • Wind gusts below 15 mph • Camera on

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Flight Safety - Site Map

Add Details: • Flight location • Property Lines • Fencing • Overhead Power Lines • Potential Hazards 42

Summary

• Great technology with many applications

• Significant cost savings possible over traditional aircraft • Companies must balance the benefits & risks of buying

UAS and FAA approval vs. subcontracting

• FAA currently bans commercial use without FRMA 333

waiver & COA

Q&A

PRESENTER:

John Babel, AVP

XL Catlin N.A. Construction [email protected]

(303) 513-2773

PRESENTER:

Ernest C. Brown, Esq., P.E

.

Smith Currie & Hancock LLP [email protected]

(415)655-2804

https://www.faa.gov/uas/legislative_programs/section_333/333 _authorizations/

M9. Up in the Air: Applications, Risks, and Insurance for Drones in Construction

Rating scale for all questions:

4 = Excellent 3 = Very Good 2 = Average 1 = Somewhat Disappointing 0 = Very Disappointing

Overall rating for this workshop?

4

3

2

1

0

John L. Babel

Preparation and quality of information 4 3 2 1 0

Energy and enthusiasm of delivery 4 3 2 1 0

Educational focus (not a sales pitch) 4 3 2 1 0

Ernest C. Brown

Preparation and quality of information 4 3 2 1 0

Energy and enthusiasm of delivery 4 3 2 1 0

Educational focus (not a sales pitch) 4 3 2 1 0

Comments:

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