Drones: Misuse them, and you might lose them

Published 30 September 2021

Drones or UAVs (Unmanned Aerial Vehicles), which were once used exclusively by the military when it was deemed too dangerous to send a manned aircraft, are fast becoming a feature of our modern day world. 

Advances in drone technology have led to their many positive uses: during the height of the COV-19 pandemic, we saw drones being used for lab sample pick-ups and for the delivery of essential medical supplies (including blood and organs) to rural areas, as well as for aerial spraying to disinfect potentially contaminated public areas.  

More generally, we now see drones featuring in a wide array of activities from monitoring crops and construction sites, to fighting fires, search and rescues, deterring poachers and war reporting and film making.

In our work at DAC Beachcroft, we have also seen drones being used widely, from investigating dam failures in Brazil, to surveying the damage caused by oil spills in the dense and inaccessible Peruvian jungle.  In one of our cases, a drone was used to assist a judge in court proceedings in Colombia when visiting the scene of a fatal accident.

Drones tend to have a greater range of movement than manned aircraft, which allows them to access harder to reach/dangerous areas.  This, combined with the use of GPS (Global Positioning System), means they can now be used to take high-quality aerial photographs and video footage with great precision. 

Just this month, the winners of the “Drone Photo Awards 2021” were announced, following submissions of some incredible images by photographers in over 102 countries worldwide, demonstrating just how widely and commonly drones are now being used.

However, as they become more widely available, and at relatively low cost, the incidents of drones being used for less positive purposes are also becoming more regular and more widespread.

Misuse of drones

In the UK, we are seeing reports of drones being used by thieves to scope out rural properties for goods to target, for smuggling drugs, phones and other contraband into prisons, and for surveillance, drug trafficking and terrorism operations.

In Mexico (widely considered to be the “drone capital” of South America, having opened the region’s first drone pilot academy in 2015), the Defence Ministry is now having to find ways to combat the misuse of drones, in particular by drug cartels.  In November 2024, it plans to introduce an “anti-drone system” (being developed at a cost of USD$9.6 million), which aims to monitor and disable drones being used for organised crime.  This follows increasing reports of infamous drug cartels using drones to drop explosives and shrapnel on rivals, and the police, as well as more broadly in their drug trafficking operations.   

The UK has also found itself having to introduce measures to tackle the misuse of drones:

• On 29 April 2021, the Air Traffic Management and Unmanned Aircraft Act 2021 (the “ATMUA Act”) came into force, modernising airspace management and tackling drone misuse. Part 3 of the Act, which deals with UAVs, was prompted by the increasing number of incidents of unmanned aircraft coming into unsafe proximity of manned aircraft (increasing from six incidents in 2014 to 125 in 2018) and gives the Police new powers to land, search and seize drones it believes are being used to commission an offence, to issue fixed penalty notices, and to use stop and search powers around airports and prisons.
  
  The Explanatory Notes to the Bill highlighted the significant disruption to operations at Gatwick Airport in December 2018 (after a drone was sighted in close proximity to the runway), and the large economic and operational impacts drones can have when used with malicious intent.  (Gatwick Airport was forced to shut down for 30 hours, impacting approximately 140,000 passengers over 1,000 flights and the military was deployed, along with officers from six Police forces.)    

• Misuse of drones can lead to criminal prosecution under the Air Navigation Order 2016 (as amended), which replaced the 2009 Order and is the UK’s principal legislation governing civil aviation operations. Chapter 4 covers unmanned aircraft and sets out the key principles for flying drones lawfully, including maximum heights (400 ft), and distances to be maintained from aerodrome boundaries (1 km), vehicles, structures and persons, and the need to maintain direct, unaided visual contact with the drone.  It also requires drones weighing over 250g to be registered with the CAA (some 200,000 drone owners in the UK have now registered).  Breaching these restrictions is against the law and may result in a fixed penalty notice or fine.  Under Article 265, endangering the safety of an aircraft is a criminal offence which could lead to a five year prison sentence on conviction.
  
  The UK’s first drone conviction (under the earlier Air Navigation Order (2009)) was in 2014, after a Nottingham resident was caught flying a drone over Manchester City football stadium, as well as a number of London landmarks, including Buckingham Palace and Parliament.  In 2018, the CAA successfully prosecuted a drone user in the Magistrates Court, who had failed to maintain direct, unaided visual contact with his drone, and flew it dangerously close to a Police helicopter that was being used to search for a missing person.   More recently, in June 2021, a drone user was fined £5,000 for flying over MI6’s premises in central London.

• In March 2021, after reports of 336 drone-related incidents in the previous 5 months, the UK Civil Aviation Authority (“CAA”) announced “Operation Foreverwing”, a new campaign which sees the Home Office, Police and the CAA working in partnership to tackle drone crime, using the new powers under the ATMUA Act 2021. It remains illegal to fly a drone or model aircraft in the UK that weighs over 250g and/or one fitted with a camera, without being registered with the CAA.  Registration requires passing a theory test and obtaining an operator ID. 

Drone-Aircraft collisions remain a real threat to aircraft crews and passenger: in its 2021 paper, the Royal Aeronautical Society reported on the recent aircraft windshield and wing 'drone strike' tests conducted by the National Research Council in Canada. The Council found that the impact of drones on an aircraft can be devastating, to include impaired vision through shattered windshields and glass fragments being released into the cockpit or passenger cabin.

It is hoped that, together, the above three measures will operate to reduce instances of dangerous and irresponsible flying, or flying for illegal purposes. 

The drone insurance market

 From an insurance perspective, drone technology is being put to excellent use in both risk assessment and claims handling, in particular by surveying properties, building sites and their surrounding landscapes, especially in hard to reach areas. 

In addition, the drone insurance market is growing and is expected to reach $1.41 billion in 2025 (up from $1.06 billion in 2020).[¹]  Public liability insurance is mandatory for commercial drones operators in the UK and Europe and dedicated drone policies are now widely available on the market, including “Pay-as-you-fly” policies.  Demand for first-party and third-party drone insurance is anticipated to increase, as is demand for both commercial and personal policies.  However questions do still arise as to how liability policies might respond to incidents involving drones, where the risks are broad: claims arising from drone misuse could include damage to third-party property, personal injury, privacy infringements, trespass, nuisance and regulatory and criminal investigations.

In 2017, Lloyd’s reported that in its developing experience of the drone insurance market, it was seeing first-party claims (loss or damage to the drones) occur more frequently (85%)[²] than third-party liability claims (15%).  At that time, Lloyd’s also considered drone insurance to be volatile: when reviewing the values of the claims, it found that the average claim amount was six times higher than the median, i.e. indicating that the majority of claims were modest, with a few very large claims pulling up the average dramatically. 

The Gatwick Airport incident in December 2018 would have been a stark demonstration to underwriters of how far-reaching the effects of drone misuse can be[^3], and therefore the potential for substantial claims.  Fortunately, for the airlines, the CAA promptly announced that it considered the related flight delays and cancellations to arise from “extraordinary circumstances” such that no financial compensation was due to passengers under Regulation EU261.  However, this did not stop one passenger from taking his claim against his credit card company (which provided holiday insurance) and insurers for his associated lost holiday costs, when cover was refused.  At trial (Rae v AXA Travel Insurance Ltd [2019] 9 WLUK 522), the judge found in favour of the insurers, agreeing that the specific incidents attracting cover under the policy did not include criminal activity and therefore claimed losses arising from the drone attack were not covered. 

There is still little in the way of claims data on which drone risks can be assessed, and with the regulatory framework around the use of drones subject to change and developments (for example the December 2020 easing of restrictions (by way the Air Navigation (Amendment) Order 2020) on lighter sub-250g UAVs and the removal of the requirement for CAA permission to fly commercial drones), underwriters continue to be presented with new challenges.

For now, underwriting in the global market requires a common-sense approach, with the risks being controlled by a flexible and evolving approach to the setting of indemnity and deductible limits.  The focus on conditions (for example, the requirement to comply with CAA’s regulations and guidelines (including registration of drones and completion of the DEMARES Theory Test)) and exclusions (for example, by weight or for drone incidents over land where permission by landowners has not been granted) will continue to remain important as the drone industry, and the claims landscape, adapts and develops.

[1] Source: https://www.businesswire.com/news/home/20210806005177/en/Drone-Insurance-Global-Market-Report-2021---ResearchAndMarkets.com 

[2] First Party claims typically relate to drones lost by owners due to flight malfunctions including battery loss, poor signal, technology failure or pilot error.  In 2019, the CAA  CAA reported that over a quarter (26%) of drone owners had lost a drone and set up a service, Drones Reunited, to help owners reconnect with their lost devices.

[3] For aviation insurers, the potential for accidents involving a drone-aircraft impact, whether on take-off, landing or on the ground, became clear, as well as the impact of such incidents on the travelling public and airlines if flight operations are suspended.  The airlines were faced with Regulation EU261 claims, which do not fall to aviation cover under standard terms.