The unmanned aerial vehicle (drone) industry is continuing to boom. More than 7,000 of them are operated by the military in the Middle East, and many U.S. companies are considering their use for package delivery, surveillance, search and rescue and other uses. In the September, 2014, issue of Claims Management, Kevin Quinley suggests that even insurers could use drones for surveillance on bodily injury claimants who assert disability. Insurers might also someday have the means of monitoring their insureds’ driving habits from the air, using some type of radio signal from an insured auto that would register to a drone flying or hovering above a freeway as to speed or erratic lane changes. With infrared detection, drones could help fine lost children or criminals.

Drone operation is not without its perils, however. In her August 2014 article “Commercial Use of Drones in a Holding Pattern,” published in For the Defenses, (Defense Research Institute, Chicago), Texas attorney Jennifer Henry recalls how the head of the Federal Aviation Administration Unmanned Aircraft Systems Integration Office “reported a near mid-air collision over Tallahassee, Florida between an unmanned aircraft flying 2,300 feet above the ground and a commercial airliner in March, 2014. The airline pilot said that the unmanned aircraft was so close to his jet that he was sure that he had collided with it. If the [drone] had crashed into the jet or been ingested by one of the turbine engines, the result could have been catastrophic.”

By law, those operating an unmanned aircraft, either a remote controlled hobby model aircraft or a helicopter-type drone, must not exceed 400 feet in altitude. That drones can reach the height at which airliners fly indicates that not all drone owners are obeying the regulations. Henry says, “In 1981 the FAA issued an advisory circular ‘outlining [and encouraging] voluntary compliance with safety standards for model aircraft operators.’ [FFA Model Aircraft Operating Standards AC 91-57] However, she adds, this is an interpretation by the FAA, not a regulation. “The FAA made clear that someone need not obtain FAA approval to fly model aircraft if these safety standards are followed: Operation occurs away from populated and noise-sensitive areas; The aircraft is not operated in the presence of spectators until it is successfully flight tested and proven airworthy; The model aircraft is not flown higher than 400 feet above the surface; It is not operated within three miles of an airport without notifying the entity responsible for air traffic control in the area; and the operator gives the right of way to and avoids flying in the proximity of full scale aircraft.”

Today, the commercial arena holds the most promise for the use of drone—with associated liabilities. CBS Sixty Minutes featured a plan by Amazon deliver packages by drone; currently at least two railroads are seeking FAA permission to utilize drones in bridge and track inspection. By using a drone that can hover near a tall rail viaduct with telephoto lenses, bridge inspections could be made safer than by visual inspection from the narrow crawl spaces beneath the bridge. Several railroads also approached their unions regarding use of drones by a “master conductor” flying with visual capabilities over sections of the rail lines, which would allow the reduction of the crew in the cab to one person, according to the November, 2014, issue of Trains. If a train stalled, for example, the drone could quickly arrive and make a visual inspection without the conductor needing to dismount the engine and physically search for the problem; the unions voted against the idea.

Nevertheless, commercial and governmental use of drones remains a certainty in the coming decades, and with it one can anticipate litigation of various sorts, from invasion of privacy to damage and injury claims when the unmanned aircraft crashes into something. First party claims are also likely; drones are not cheap to buy or operate. Additionally, drones may present an environmental impact when used in large numbers.

The use of drones by police for traffic control, following a criminal or monitoring large gatherings that might turn hostile has many advantages, as it allows remote access without endangering personnel on the scene. Henry notes, “Ultimately, the pace of integration will be determined by the ability of industry, the user community and the FAA to overcome technical, regulatory and operational challenges.” She continues, “Legislation to curtail the use of data collected by domestic drones operated by local law enforcement agencies has been proposed in 43 states, and nine states … have so far enacted such measures.”

The concern for insureds is that personal and commercial liability forms exclude “aircraft”, which by definition might include a very low altitude drone. The Homeowners policy excludes loss resulting from ownership, maintenance, operation, use, entrustment of any aircraft, failure to supervise, and vicarious liability. “Aircraft means any contrivance used or designed for flight except model or hobby aircraft not used or designed to carry people or cargo.” The Commercial General Liability policy does not define aircraft, but simply excludes any loss related to aircraft.

As policy continues to define the parameters of drone usage, adjusters must adapt to new and emerging issues that can impact coverage. Educational programs, like those taught in Crawford Educational Services and KMC On Demand courses, can prepare adjusters for the types of issues that may arise when investigating and analyzing such new and complex claims. By staying abreast of the latest developments, those in the risk management industry can firmly keep one step ahead of the future.


2017-04 | What Constitutes ‘Physical Injury’ To Property Under General Liability Policies?
Products liability claims, handled by Crawford & Company Casualty Claims Management specialists are among the most confusing general liability issues that adjusters of commercial losses encounter, which is why handling products claims is a key part of what is taught in Crawford Educational Services classes and KMC on Demand courses.
Featured Article: Understanding the Particulars of Riot or Civil Commotion
We’ve all seen protests in the news over the last few years. While most are peaceful assemblies, sometimes they can take a turn for the worst and get out of control quickly, creating a confrontation with police and damage throughout the area. After the crowds have dissipated, what happens next? How does the mess get cleaned up?
Featured Article: Pipeline and Railway Transportation of Oil, Gas and Hazardous Materials
Pipeline construction and transport accidents are frequently reported in the news. Many accidents that result in a spill of oil or some other hazardous material can create expansive legal and political issues, regardless of how minor the spill.
Feature article: Investigating an Unmanned Aerial Vehicle Aviation Accident
Unmanned Aerial Vehicle (UAV) or “drone” issues have become national news as airline pilots report thousands of near encounters with drones being flown higher than the allowed 400 feet and in the vicinity of airports, both a violation of Federal Aviation Administration (FAA) rules.
Featured Article: Personal Property, Home Services Not Always Covered
Going back to a basic insurance principle, insurance is intended to be a “last resort” method of risk management, including personal risk management. Each year, millions of Americans discover their homeowners or businessowners policy fails to cover certain losses that may arise. However, you can find specific coverage once you know what your policy excludes. Here are some more prevalent coverages available, depending on your needs.
Featured Article: Requirements for Fire Investigation Experts
Fire claim adjustment often requires retaining the services of a fire expert or engineer to determine causation. In the October 2015 Claims Management feature article, Supressing the Burn, Attorney John W. Reis suggests that the National Fire Protection Association (NFPA) replacement of NFPA 921 fire investigation for NFPA 1033 would be “the next big avenue for expert challenges, especially with its recent revision in 2014.” Suggested minimum qualification are for each fire investigator to know 16 topics. However, this is neither code nor statute unless adopted by a state.
Feature article: Preservation of Evidence: Avoiding Allegations of Spoliation of Evidence
The tort of ‘spoliation’ is created when vital evidence is accidentally or intentionally lost or disposed of before a party wanting the evidence examined by an expert has the opportunity to do so. Not all states, including Louisiana, recognize the tort of spoliation.
Featured Article: Who Is Insured? The ‘Named Driver’ Condition
The plaintiff’s allegation was that he was injured in an auto accident when he was a passenger in a vehicle owned by Walker and driven by Gilmore. At the time of the accident, Walker’s vehicle was insured under a personal auto policy issued by the Titan Indemnity Co. and underwritten by Victoria Fire & Casualty Company. The policy stated that it did not provide liability insurance for any person who was not listed as a “named driver” on the policy. Walker was the sole listed driver. The insurer thus denied the plaintiff’s claim, and the plaintiff, Byoung Suk An, brought suit against Gilmore and Victoria F&C Co., seeking declaratory judgment that Victoria had a duty to defend and indemnify Walker and Gilmore. The trial court reviewed the policy and found in favor of the insurer, as the driver was not listed on the policy.
Featured Article: Policy Archaeology and Lost Policies
Accurate records of what policies were in force, what they covered or did not cover, when they applied, and who they insured is a matter of sound risk management of information. In the case of Cardigan Mountain School*, a private school in New Hampshire was sued for events that had occurred during the 1967-1968 school year. The school could not find the insurance policies going back that far, but did find an accounting report that referenced a $1 million liability policy in 1970 with New Hampshire Insurance Co. A statement by one of the accountants revealed he believed had the school changed carriers between 1968 and 1970, it would have been noted on the audit report.
Trends in Workers Compensation
“The state of the Workers Compensation market is calm for now, but increasing medical costs, changing regulations and cyber attacks could threaten the line,” suggested Nancy Grover in the October 2015 issue of National Underwriter. She quotes Mark Walls, vice president of communications and strategic analysis at Safety National and founder of WorkCompAnalysis, who said, “Medical costs continue to be the number-one cost driver, in spite of all the efforts to contain them.”
Featured Article: Weather-Related Perils and Exclusions
Lightning Damage: A major cause of fire and structural damage is lightning. Scott Lacourse of Enservio reported in the August 2015 issue of Claims Magazine that lightning strikes the ground an estimated 25 million times a year. Each strike brings about one billion volts and billions of watts of energy, with temperatures between 18,000 ºF and 60,000 ºF, causing an estimated $674 million in homeowners claims in 2013 and killing 26 people in 2014. Lightning can destroy or damage structures; often adversely affects HVAC and electronic equipment in homes and businesses; and can cause power outages resulting in business-income losses.
Featured Article: Use of Forensic Accountants in Claim Calculation
Both first- and third-party claims require accurate evaluation of both causation and the resulting loss. Webster’s New World Dictionary defines “forensic” as being: of, characteristic of, or suitable for a law court, public debate, or formal argumentation; specializing in or having to do with the application of scientific, especially medical knowledge in legal matters, as in the investigation of crime.
Featured Article: Recalls, Electronics and Computers
About once a week, the media reports that between 1,000 to 100,000 autos are being recalled for a defect that might cause the owner a problem. These issues range from Volkswagen (VW) diesels with software that allow the vehicles to “cheat” and pass an emissions test when they shouldn’t; to General Motors (GM) cars with faulty ignition switches that suddenly disable vehicles in heavy traffic; to faulty exploding air bags. Many of the recalls involve computerized systems in newer model automobiles.
Featured Article: Investigating Medical Billing Fraud
Many states, perhaps through lobbying efforts of doctors and hospitals, have legislated rules for the quick payment of medical claims. Such laws may potentially be a factor in the growing amount of fraud loss in medical billing.
Take Note: Technological Advances in Three-Dimensional Printing
Today, three-dimensional (3-D) printing can produce a plastic gun or just about any other item one might need, but according to the U.S. Department and Health and Human Services and as reported in Popular Science magazine, NBC and elsewhere, 3-D printing of human organs may soon be possible.
Featured Article: The Dilemma of the ‘Driverless’ Automobile
Two driverless cars collide in an intersection. The computer in one talks to the computer in the other and says, “Hey, I had the green light!” “No you did not!” says the other. “I did.” It sounds like a joke, but the reality is that “driverless” vehicles are already taking their place on our highways. The vehicle would drive itself, using computerized components to detect other traffic, traffic signals and other barriers, so that the vehicle is entirely autonomous.
Featured Article: Social Media Useful in Discovery and Trial Preparation
When a defense counsel monitors the social media such as Facebook or the tweets and twitters of prospective jurors in the voir dire [jury selection] procedures, there can be surprises. Atlanta attorneys Colin K. Kelly and Allyya Z. Hague of Alston & Bird cite one case in which a prospective juror tweeted “Jury duty 2morrow. I may get 2 hang someone… can’t wait….” Yes, such an opinion could “hang” a jury, and defense counsel need to be aware of the social media as discoverable evidence in a trial. Kelly and Hague are authors of “A Trial Lawyer’s Guide To Using Social Media Information During Trial,” published in the October, 2013 issue of For the Defense, (Defense Research Institute, Chicago, Ill.)
Featured Article: Injuries to the Brain
Media attention to sports injuries, particularly concussions sustained in football, have led to some potential changes in how such sports are conducted. Studies have found that advanced chronic traumatic encephalopathy (CTE), a form of brain disease and dementia far different from Alzheimer’s, arterial sclerosis or other brain disorders, is caused by repeated trauma to the brain due to concussions received by football players. Since 2013, a number of new such cases, even involving fatalities to teens playing high school football, have been reported.
Featured Article: The Need for Surety Bonds
As the U.S. economy continues to improve in the wake of the 2008 financial recession, an increase in commercial and residential construction and infrastructure repair has also increased the market for various types of surety bonds (e.g. bid bonds, performance bonds, payment bonds, etc.). In the May 2014 issue of Best’s Review, Senior Associate Editor Kate Smith described how one 75-year-old Texas firm with over 550 employees, Ballenger Construction, was working on over twenty different highway construction projects in 2012. On one where it had bid for work on an underpass, it had been hit with a number of problems ranging from rapidly rising fuel costs to finding a nest of endangered spiders at the worksite that brought construction to a halt.
Featured Article: Claim Expectations Across Generations
What defines a generation? While music, fashion and social commonalities have long linked members of the same age group (as well as separated them from past and future generations), beneath the outer trappings is a shared, cultural mindset that affects everything from career and financial expectations to how individuals react to personal misfortune, including how they handle claims.
Featured Article: Are Drones the Wave of the Future?
The unmanned aerial vehicle (drone) industry is continuing to boom. More than 7,000 of them are operated by the military in the Middle East, and many U.S. companies are considering their use for package delivery, surveillance, search and rescue and other uses. In the September, 2014, issue of Claims Management, Kevin Quinley suggests that even insurers could use drones for surveillance on bodily injury claimants who assert disability. Insurers might also someday have the means of monitoring their insureds’ driving habits from the air, using some type of radio signal from an insured auto that would register to a drone flying or hovering above a freeway as to speed or erratic lane changes. With infrared detection, drones could help fine lost children or criminals.
Featured Article: Catastrophe Bonds: A Closer Look
Hurricane season began this month with a below-normal activity forecast from the National Oceanic and Atmospheric Administration (NOAA). NOAA’s 2015 report estimates a 70 percent likelihood of 6-11 named storms (including May’s Tropical Storm Ana), 3-6 hurricanes and 0-2 major hurricanes. However, a “below-normal seasons can still produce catastrophic impacts to communities,” says NOAA Administrator Kathryn Sullivan, PhD., recalling how the 1992 season began with Hurricane Andrew despite a relatively mild forecast.
Featured Article: The Effects of Fire on Homes on Businesses
Each year thousands of homes and businesses are destroyed by fire. Fires can destroy thousands of acres of property and hundreds of homes before being brought under control. “After a structural fire, engineers often are called upon to determine which portions of the structure can be reused and what needs to be replaced,” writes David P. Amori, P.E., R.R.C., a structural engineer with EFI Global, in his article, “How Hot Is Too Hot?” in the October, 2013 issue of Claims Management. “The ability to reuse components or systems, like the foundation, greatly impacts the time required to rebuild. The answer to the question of what can be reused requires an assessment of the mechanics of the structure and a review of the prevailing building codes,” he says.
Featured Article: Same-Sex Marriage and the Impact on Claims
Over the past decade, a growing number of states have legalized same-sex marriage. While recent headlines have zeroed in on state politics and policy issues, the shift in legislation also affects claims and how adjusters respond to them. While the U.S. Supreme Court decision in U.S. v. Windsor allows a filing of federal income tax either jointly or separately, some states with state income tax rules may not yet have reached that point. In a December 2013 Best’s Review article, Robert A. Fishbein, a vice president and corporate counsel for Prudential Financial, noted that other court cases have covered the issues of whether employer-provided health care benefits could apply to a same-sex spouse, whether such couples could adopt children or claim them as dependents, whether Social Security benefits could apply (the Social Security Administration “is currently using a ‘state of domicile’ rule, which could mean a disconnect between the federal tax and Social Security rules in the same situations) and how financial institutions might consider such a couple under lending rules.
Featured Article: Insurance Protection for Cyber Attack Loss
In the previous Take Note, we discussed the rising threat of cyber attacks (hacking). In this segment we explore coverages for both first and third party claims. Once the computer owner recognizes that data has been compromised, the next step is to find out when and how the breach occurred and install software to prevent future breaches. Another consideration is that while data may be “stolen”, it remains inside the system; however, it may have been altered, requiring a byte by byte check for accuracy. While potentially expensive, this necessary action is similar to non-insurable “maintenance costs.”
Featured Article: A 21st Century Plague: Cyber Attacks
Hardly a week passes without a news report of another major corporation or governmental agency being “hacked”; their data stolen and their customers, or those on their accounts, subject to identity theft and the “cleaning out” of their debt card or bank accounts. Cyber attacks have the potential to be one of the 21st century’s most expensive causes of personal and commercial loss. The problem, similar to many combination property and liability casualties, involves both first party expenses related to the computers that have been hacked and third party exposures to those who have had their personal data stolen. The U.S. Secret Service suggests that no less than 75 percent of American businesses have been targeted for at least one cyber attack in recent years.
Featured Article: The Polar Vortex
In the movie The Day After Tomorrow, a fictional unprecedented freeze suddenly hit the Northern Hemisphere, killing millions and destroying everything. The reality isn’t quite that severe, but in early autumn of 2014, snow was already falling in parts of the North and West, and Calgary, Alberta was blanketed with snow. The blizzard that accompanied Superstorm Sandy and the harsh winters of 2013 and 2014 set records for low temperatures and heavy snow across the northern half of the U.S. What caused these deep freeze winters? Despite protests from skeptics, many scientists place the blame squarely on global warming.
Plumb Foolishness: When You Have a Claim You Must Notify Your Insurer
An auto or general liability policy is a contractual agreement in which there are certain requirements on the part of both the insured and the insurance company whenever a claim is made. One is notice to the insurer of a claim or lawsuit, generally “as soon as practicable.” Further, the policy may state, “No insured will, except at that insured’s own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.”
Featured Article: When Travelling for Work Who Really Covers Your Car?
In most commercial liability insurance situations the employer, as the principal under the master/servant law of agency, is responsible for the acts or omissions of the employee, as long as the employee is acting within the course and scope of employment. One common exception to this rule is automobile insurance where the insurance usually follows the automobile, not the purpose of the trip, on a primary/excess basis. Thus, as in one California case, all personal coverage on an employee’s automobile, while operating in the course of his or her employment with the employer’s knowledge and permission, is primary over the employer’s excess auto coverage for the employer’s vicarious liability.
Featured Article: Insurance as Applicable to the Terrorism Peril
Could paying bribes to terrorists to protect commercial interests constitute an insurable risk? The Ohio Court of Appeals determined that the term “accident” in a general liability policy did not apply to the illegal financing of terrorism. Simultaneously, it found that any injuries to or death of claimants that occurred during torture, kidnap and murder by terrorists fell outside of the policy’s territorial limits.
Featured Article: Responding to Major Storms – Autos and Property Claims
In 2012 Superstorm Sandy devastated New Jersey and New York City causing ramifications that will continue for years to come, especially in underwriting and rating of property insurance policies where properties are near the shore. While much of the extensive damage was to government-owned facilities such as subway lines or to major corporations such as utilities, millions of homeowners also suffered direct wind and water damage and indirect losses due to power outages, and in at least one case, from uncontrollable fire. Few beyond the coastline had federal flood insurance for the water damage, hence many will have to take that need into consideration for future storm losses.
Featured Article: Contact Sports and Head Injuries
What began in the early 21st century following the death of a famous Pittsburgh Steelers lineman, Mike Webster, turned into bad publicity for the National Football League. Webster’s death became a warning for the entire nation of the dangers of contact sports such as football, hockey, boxing and wrestling and the dangers of head injuries and brain concussions, even for those as young as seven years old.
Featured Article: Technology Malpractice
As commercial entities turn ever increasingly to technology for practically every aspect of management, from robotic creations and use in manufacturing to artificial intelligence in the selection of new personnel, the design of new software becomes increasingly complex. This was a key problem in the roll-out in October, 2013, of the new Patient Protection and Affordable Care Act by the U.S. Department of Health & Human Services. New software applications are constantly being promoted, but even tiny software errors can create nightmare situations for the entity that designs it or uses it.
Featured Article: Gun Violence at Schools and Colleges
Learning how to examine a policy of insurance in light of a disastrous claim situation requires the same skills as any major loss or catastrophe. “Schools are locations where children and young adults should be exposed to positive learning experiences and relationships that last a lifetime. It is a place where they should feel completely safe and where good things happen,” writes James P. Smith, a retired deputy fire chief of the Philadelphia Fire Department, in the June, 2013, issue of Firehouse, a Cygnus publication for first responders. As claim adjusters are also among the “first responders” to any major incident, including school shootings, what Smith has to say applies to the insurance industry as well as firemen.
Featured Article: Adjuster Safety
It takes more than a sign reading, “BE CAREFUL!” to conduct a safety program. It may or may not be sufficient to simply preach “safety,” or warn of dangers. “Many firefighters use the term ‘Stay safe!’ with fellow fire-fighters,” says Battalion Chief John J. Salka, Jr. of the New York Fire Department in the October 2013 issue of Firehouse, a Cygnus publication for firemen and emergency first responders. “It is a common phrase that many of us use casually, and sometimes I think we say it without actually knowing what it means.” To a great extent adjusters are a part of that industry, and are often on the scene of fires, wrecks, hazardous material spills and other disasters at the same time as emergency responders.
Featured Article: Robotics in Our Future
Robotics are taking over an ever-increasing number of jobs formerly done by humans, according to a 2013 CBS 60 Minutes report. This is an advantage for the corporations that use them, but it may leave too many humans on the unemployment line at a time of high unemployment. Robots cost only an average cost of $3.20 an hour to build and operate, and many can be reprogrammed to do tasks other than what they were originally designed to do. Hence they are cheaper than Asian labor, and jobs are coming back to America, just not to American workers. Robots don’t take lunch breaks, vacations or sick leave, nor do they require insurance or a pension. When they’re worn out, they’re recycled for their parts. They currently run warehouses, hospitals, food preparation and just about everything else, and even robotic surgery is now quite common, although with a trained surgeon at the robot’s controls.
Featured Article: Cyber Security and Privacy Issues
The security leaks and information provided by Edward Snowden brought the entire subject of cyber security and privacy to the public’s attention. Who is listening to us or monitoring our communications? Unfortunately, it is not just the National Security Agency. Cyber thieves and hackers are doing more than listening, as we have recently seen with the data breaches of at least two major retailers and the possibility of others still looming. Hackers are stealing data, and that theft threatens both personal finances and the national economy. A recent study by the Ponemon Institute of nearly 5000 Information Technology and IT security professionals from the U.S., U.K., France, Germany, Japan, China, India, Australia and Brazil revealed that 60% of companies had a network security breach in 2012 and that 34% of those companies had experienced more than one breach.
Featured Article: Exploring Explosion Claims
At least annually an explosion somewhere in the United States or Canada temporarily becomes a media event. Explosions devastate entire cities, as occurred in 1946 in Texas City, Texas in the Grandcamp ship explosion, the 1917 collision of two war ships carrying explosives in the Halifax harbor, and almost in the 2008 Savannah, Georgia, sugar plant explosion. Many such explosions have involved materials such as grain dust, sugar, and fertilizer, the primary ingredient in the bomb that destroyed the Federal Building in Oklahoma City in the 1990s.