ISO UNMANNED AIRCRAFT PROPERTY AND CARGO COVERAGE FORM ANALYSIS

The Insurance Services Office (ISO) introduced IH 00 61–Unmanned Aircraft Property and Cargo Coverage Form in 2016 to cover the rapidly expanding market for drones and other unmanned aircraft. These aircraft are increasing in popularity, and new uses for them continue to be found. This coverage form covers the aircraft itself and supporting equipment. An option is available to cover owned cargo being carried by the aircraft, and another option covers cargo of others being transported by the aircraft.

This is the introductory edition of the coverage form, so many changes should be anticipated.

POLICY CONSTRUCTION

Unmanned Aircraft and Cargo Coverage requires at least the following six forms:

IL DS 00–Common Policy Declarations
IL 00 17–Common Policy Conditions

CM DS 02–Commercial Inland Marine Declarations
CM 00 01–Commercial Inland Marine Conditions

IH DS 61– Unmanned Aircraft Property and Cargo Declarations
IH 00 61– Unmanned Aircraft Property and Cargo Coverage Form

IH DS 61– UNMANNED AIRCRAFT PROPERTY AND CARGO DECLARATIONS

The advisory Unmanned Aircraft and Cargo Declarations does not have spaces for the named insured, its mailing address, other named insured information, the policy period, or the description of the insured business. That information is on the Common Policy Declarations. IH DS 61 contains the following information:

Insurance Company and Producer Name

The name of the insurance company that provides the coverage and the name of the agent or broker that produces the business are entered in the spaces provided.

Description of Unmanned Aircraft Operations:

This area is used to describe what the plan is for using the unmanned aircraft. An accurate and broad description should be provided because the aircraft is covered only while performing these operations.

Unmanned Aircraft Property and Limits of Insurance

This section has spaces to describe the aircraft to be covered and the limit of insurance for each:

Scheduled Equipment

Up to five aircraft can be listed. If there are more than five, a separate endorsement needs to be attached with a description of the property and a corresponding limit.

Blanket Property Consisting Of

A description of the aircraft that are to be blanketed must be provided. One limit of insurance is entered for all aircraft. There is no per aircraft or per item limit.

All Covered Property in Any One Occurrence

This is the catastrophe type limit that must be carefully reviewed because it limits the coverage provided in a single occurrence, regardless of where that property is.

Deductible

This section has a space to enter the aircraft deductible.

Coinsurance

This section has a space to enter the coinsurance percentage that triggers the coinsurance additional condition if coinsurance applies.

Rental Reimbursement

A limit must be entered in this section if rental reimbursement coverage is to be provided.

Replacement Cost

When aircraft are scheduled, a decision must be made as to which aircraft, if any, are to be valued on a replacement cost basis rather than standard actual cash value. The items numbers must be entered for the selected aircraft.

When aircraft are blanketed, one selection is made for all.

Removal of Exclusion B.2.j.

Exclusion B.2.j. excludes loss or damage to aircraft when rented, leased, or loaned to others. A selection of yes or no must be entered.

THE FOLLOWING CARGO ITEMS ARE COMPLETED ONLY IF CARGO COVERAGE IS TO BE PROVIDED.

Cargo Owned by You

A description of the cargo that is to be covered must be described. An unusual feature of this description is that if items are to be covered that are considered Property Not Covered under the coverage form, if they are entered in this area, they become covered property.

Limits of Insurance

A cargo limit per aircraft and a separate limit for all covered property in any one occurrence must be entered.

Deductible

This section has a space to enter the deductible for damage to cargo that you own.

Replacement Cost

Cargo is valued on a replacement cost basis if a yes is selected but at actual cash value if a no is selected.

Cargo in Your Care, Custody or Control As a Carrier-for-Hire

Limits of Insurance

A cargo limit per aircraft and a separate limit for all covered property in any one occurrence must be entered.

Deductible

This section has a space to enter the cargo owned by you deductible.

THE FOLLOWING APPLY TO ALL COVERAGES

Optional Cause of Loss

Exclusion B.2.f. the artificially generated electrical current exclusion is removed when a Yes selection is made in this section.

Rates and Premiums

This section allows for rates and premium to be entered on a nonreporting basis or a reporting basis. The information may be provided per aircraft.

Special Provisions

Any special provisions are entered in the space provided.

IH 00 61–UNMANNED AIRCRAFT AND CARGO COVERAGE FORM ANALYSIS

This analysis is of the 01 16 edition. Changes from the previous edition are in bold print.

Introduction

This section encourages carefully reading the entire coverage form to determine what is covered, what is not covered, rights, and duties. It defines we, us, and our as the insurance company that provides this insurance coverage. It also defines you and your as the named insured on the declarations. The reader is also pointed to the Definitions section because certain words or terms used in the form have a broader or restricted meaning.

A. Coverage

1. Covered Property – Unmanned Aircraft

The insurance company pays for direct physical loss or damage to the following covered property but only when that loss is from a covered cause of loss.

Unmanned aircraft that are owned by the named insured is covered property. Unmanned aircraft rented or leased to the named insured are also covered property but only the named insured is under a contractual obligation to insure them.

Loss or damage to owned or nonowned aircraft while in flight, being prepared for flight or being transported to the launch or landing site is covered only when the operations for which it is to be used are those that are described on the declarations.

Example: The description of unmanned aircraft operations is real estate surveillance.

Scenario 1: The drone is taking pictures of a wildfire to provide pictures for the local newspaper and YouTube. Not covered if damaged.

Scenario 2: The drone that had been taking pictures of a wildfire is returned to its base location and is destroyed by that same wildfire. Covered because it was not in flight, being prepared for flight, or being transported for launch at the time of the loss.

Equipment that is essential to the operation of the unmanned aircraft or for executing its operation is covered. Data and media generated and used with the operation of the unmanned aircraft are covered along with the aircraft. There is no separate limit for these items, so their value must be included in the limit of the unmanned aircraft.

2. Covered Property – Cargo Owned by You

The insurance company pays for direct physical loss or damage to covered property but only when that loss is from a covered cause of loss.

Only cargo owned by the named insured and described in the Declarations is covered. Coverage applies only when a scheduled unmanned aircraft is performing a described operation. The coverage of the cargo begins when the unmanned aircraft leaves the premises where the transit is to begin and ends when the unmanned aircraft arrives at its destination.

Example: The description of operation is delivery of medical supplies to rural hospitals and clinics.

Scenario 1: Drone #1 is taking a supply of drugs and medical devices to the Really Out There clinic when it is damaged by a covered cause of loss. The damage to the drugs and medical devices is covered.

Scenario 2: Drone #2 is taking a supply of meat, vegetables, and some kitchen staples to Mary’s Restaurant. There is no coverage when that drone is damaged because the cargo is not part of the described operations.

3. Covered Property – Cargo in Your Care, Custody or Control

The legal liability the named insured has for direct physical damage to the following covered property is covered but only when that loss is due to a covered cause of loss.

The covered cargo must meet all the following criteria:

Property of others
The type of property described in the Declarations
Being transported by an unmanned aircraft covered by this coverage
The transport of this cargo is part of the described operations of that unmanned aircraft

Coverage applies only while the cargo is in the named insured’s custody until either it arrives at its destination or it is undeliverable and is returned to its owner.

Imported shipments are not covered until the property is no longer on whatever mode of transport was used to import it or until the Ocean Marine Coverage for it ends, whichever occurs last.

Exported shipments are not covered after they have been given to the mode of transport is being used for the export or until the Ocean Marine coverage that applies begins, whichever occurs first.

Example: Mallard, Inc. is a transport carrier that has purchased two unmanned aircraft to transport cargo to locations it cannot access by a motor vehicle. The driver of the vehicle attaches the cargo to the aircraft, and the licensed operator at home base pilots the aircraft to the destination before releasing it.

Scenario 1: The cargo is supplies to be used for Mallard’s upcoming mountain team-building exercises. This is not covered property because Mallard owns the cargo. It should be covered under Cargo Owned by You.

Scenario 2: The cargo is a cooler of frozen meat ordered by a camper group. The described operations are transport of supplies needed for wilderness activities. This cargo is covered.

4. Property Not Covered

a. Contraband. Any property that is illegal for the named insured to own or in illegal trade or transportation is not covered.

b. The following are not covered, but there is an exception. If any of these items are specially listed in one or both cargo sections of the Declarations as Covered Property, it is no longer considered property not covered:

Money, notes, securities, currency, coins, stamps.
Accounts, bills, records, documents, evidence of debts
Precious metals including bullion and gold
Jewelry and watches along with other stones that are precious or semi-precious
Furs including garments that are trimmed with fur
Live animals
Works of art

Note: There is no explanation provided as to what is to be considered a work of art. This is a very ambiguous way to not cover the property.

5. Covered Causes of Loss

The covered causes of loss for aircraft and cargo owned by the named insured are direct physical loss or damage to covered property, except as excluded.

The covered causes of loss for cargo in the care, custody or control of the named insured are direct physical loss or damage to covered property, but only if the named insured is liable for the loss or damage. In addition, there is no coverage if the cause of loss is excluded.

Example: The frozen meat is delivered to the camper group at exactly the time requested and at the location specified. The group shows up 12 hours later to collect it only to find it destroyed by the animals who found it first. There is no coverage because Mallard is not legally liable for the damage.

6. Coverage Extension – Earned Freight Charges

The only extension of coverage in this coverage form is the payment to the named insured for freight charges it has earned but that are considered uncollectible because of a covered loss. The most paid in any one occurrence is $2,500.

This limit is an additional amount of insurance.

Example: The camper group refuses to pay the freight charges for the delivered meat, so Mallard turns in a claim for earned freight charges. The claim is denied because the loss was not from a covered cause of loss.

7. Additional Coverages

a. Additionally Acquired Unmanned Aircraft

The named insured may acquire additional unmanned aircraft during the policy period. If it does, the acquired unmanned aircraft is covered, but only if it is of the same type and is used for the same operation of the unmanned aircraft on the Declarations. This coverage is provided for up to 30 days but not past the expiration date. The most the insurance company pays for loss or damage is 25% of the sum of the limit of insurance for all unmanned aircraft on the declarations or $50,000, whichever is less. The named insured must report the value of the newly acquired unmanned aircraft to the insurance company within 30 days after it takes possession of it and pays premium for it from the acquisition date. If this is not done, coverage ends after 30 days or at the expiration date, whichever occurs first.

This additional coverage is subject to the following conditions:

The Coinsurance Additional Condition does not apply.
The limit of insurance is not increased.
It does not apply to unmanned aircraft written on a blanket basis.

Note: Coverage for additionally acquired unmanned aircraft is covered in the same manner as the other unmanned aircraft on the coverage form, so the equipment and data used with the additionally acquired unmanned aircraft are also covered.

b. Debris Removal

Coverage applies to the costs to remove the debris of covered property from a covered loss at described premises. The expenses must be reported to the insurance company in writing within 180 days of the date of loss. The most paid is 25% of the amount paid for direct physical loss or damage to the covered property. The deductible that applies to that loss or damage must be added to this amount.

An additional $5,000 is available to pay for debris removal if either of the following applies:

The sum of the debris removal expense and the actual physical loss exceeds the applicable limit of insurance.
The debris removal expenses exceed the computed available amount to pay for those expenses.

Costs to extract pollutants from land or water or to remove, restore, or replace polluted land or water is not covered under this Additional Coverage.

c. Pollutant Clean Up and Removal

The insurance company pays to clean up pollutants caused by or that result from a covered cause of loss that occurs during the policy period. The most paid is $10,000 as an aggregate amount during each separate 12-month policy period. The expenses are paid only if they are reported to the insurance company in writing within 180 days of the date of loss.

This coverage does not apply to costs to evaluate the presence or effects of pollutants. However, it does pay for testing that is part of the process of extracting pollutants from either land or water.

d. Rental Reimbursement

This Additional Coverage is an optional coverage because it applies only when a limit of insurance is entered on the declarations.

When a covered loss to covered property occurs, the insurance company will reimburse the rental expenses the named insured incurs but only if the property being rented is needed for the named insured to continue its unmanned aircraft operations. However, if the named insured has idle equipment that could be used instead of renting, this coverage does not pay. No payment is made after the damaged property has been replaced, put back into service, or is deemed not needed, whichever comes first.

This time period is not impacted by the policy expiration date.

Example: Mallard rents an additional unmanned aircraft from a friend.

Scenario 1: Mallard’s services are so popular he is contemplating adding an additional aircraft; however, he wants to test the market before investing. There is no coverage for the cost of this rental.

Scenario 2: A group of hunters mistook Mallard’s aircraft for a duck and shot it out of the sky. He rented the aircraft because he needed it to keep his customers happy. The aircraft was damaged by a covered cause of loss and the rental was needed to continue operations, so the rental reimbursement coverage is provided up to the limit of insurance on the declarations.

B. Exclusions

1. Primary Exclusions

The first group of exclusions applies whether the loss event results in widespread damage or affects a significant geographical area and is essentially absolute. Subject to specific exceptions, each is totally excluded, regardless of any other cause or event that contributes to a loss, either concurrently or in any other sequence. The insurance company does not pay for any direct or indirect loss or damage caused by or that results from any of these events.

a. Governmental Action

This exclusion applies to the legal and authorized seizure or destruction of property by a government entity’s order. There is one exception. Loss or damage that is caused when the governmental entity orders property to be destroyed is covered if used as a method to prevent a fire from spreading is covered. However, this exception applies only if the fire being contained would have been a covered fire under this coverage form.

b. Nuclear Hazard

Nuclear reaction, radiation, or radioactive contamination is not covered. There is an exception. If a fire results from the nuclear reaction, radiation, or radioactive contamination, there is coverage for the direct loss or damage caused by that fire.

c. War and Military Action

This exclusion lists three specific warlike activities.

War. This can be a declared war, an undeclared war, or a civil war.
Military force of a warlike nature. These activities must utilize military personnel or agents of a government or other type of authority. Actions taken to prevent any of these activities are also considered war.
Insurrection, rebellion, revolution, and attempts to usurp power. Any government action to respond to such actions is also considered war.

2. Secondary Exclusions

The second group of exclusions applies to loss or damage caused by or resulting from any of the following loss events. Some of these exclusions have exceptions, conditions, or limitations that should be noted and reviewed carefully. The insurance company does not pay for any loss or damage caused by or resulting from any of these events.

a. Delay, loss of use, and loss of market

These are consequential or indirect losses that develop because of a direct loss or damage.

b. Dishonest or criminal acts

These are any dishonest or criminal acts the named insured, its partners, employees, temporary employees, leased workers, officers, directors, trustees, authorized representatives, or members and managers of a limited liability company commit. This also includes theft.

Such acts committed by anyone with an interest in the property, their employees, temporary employees, leased workers, or authorized representatives who act alone or who act in collusion with other parties or with each other are also excluded. This exclusion also applies whether or not the acts take place during regular working hours.

This exclusion does not apply to acts of destruction by the named insured’s employees, temporary employees, leased workers, or authorized representatives. However, there is no coverage for theft by the named insured’s employees, temporary employees, leased workers, or authorized representatives.

c. Theft

Theft by any person the named insured entrusts covered property to for any reason, whether they act alone or in collusion with any other party. This exclusion applies 24 hours a day/7 days a week. There is one exception. Covered property that is in a carrier for hire’s care, custody, or control is not subject to this exclusion.

d. Work upon the property

Any work done on property that results in loss or damage. However, if the work done on the property results in a fire, explosion or collision and this insurance covers that fire, explosion, or collision, the resulting loss or damage is covered.

e. Unexplained disappearance

When covered property is gone and there is no obvious cause or explanation of what happened to it.

f. Artificially generated electrical, magnetic, or electromagnetic energy

Loss or damage that is caused by or that results from artificially generated electrical, magnetic, or electromagnetic energy damaging, disturbing, disrupting, or interfering with any of the following:

Networks, devices, systems, wires, or appliances of an electrical or electronic nature
Cellular or satellite devices, appliances, systems, or networks

Examples of this excluded energy are electrical current, charges a magnetic or electromagnetic field produces, and microwaves, but are not limited to just these. There are three exceptions:

If the energy described in this exclusion results in a fire, explosion or collision coverage applies to the direct loss or damage that any of those three causes but only if they are considered covered causes of loss under this coverage form.
This exclusion does not apply to all property. It applies to only loss or damage to the unmanned aircraft or property related to it in which the disturbance occurs.
This exclusion does not apply if Yes is selected next to Exception to Exclusion B.2.f under the Optional Cause of Loss for Unmanned Aircraft and Cargo section on the Declarations but only when the short circuit or electrical disturbance starts in and is limited to only the damaged unmanned aircraft and/or property related to it.

g. Voluntary parting

The named insured or anyone else entrusted with the property being tricked or deceived into giving that property away.

h. Unauthorized instructions

When covered property is transferred to another person or place because unauthorized instructions were received to do so.

i. Neglect

Neglect on an insured’s part to do take reasonable measures to preserve and protect covered property from subsequent damage during and after the time of loss.

j. Rented, leased or loaned to others

Damage occurring while an unmanned aircraft is being rented, leased, or loaned to others. This applies to both the aircraft and its related property. The only exception is when the yes box is checked for Removal of Exclusion 2.j. on the Declarations.

k. Improper packing, stowage, or rough handling of cargo

Note: This could be considered a type of intentional acts exclusion. The named insured’s employees decide how to handle or stow property or help pack it in many cases. The named insured controls these situations. As a result, losses caused when any of these activities is done improperly would mean paying for a cost of doing business.

l. Professional or organized racing

When an unmanned aircraft is participating or preparing to participate in a professional or organized racing event there is no coverage for any damage to the aircraft or its related property. This exclusion also applies to stunts or demolition events.

Note: Damage that incurs during impromptu racing contests and other events would continue to be covered but only if the damage is not excluded elsewhere.

Example: Both of Mallard’s aircraft are damaged when they collide 100 feet above the ground.

Scenario 1: Mallard entered both of his aircraft in a competition to gain additional publicity for the company’s new drone adventure. His operators have been working together to prepare for the event. The crash happened as they were practicing. The damage is not covered because they were damaged during preparation for a racing/stunting event.

Scenario 2: Both of Mallard’s aircraft happen to be making drops within one mile of each other. The two operators are excited, so after their cargo is dropped they have an impromptu race through the trees. Unfortunately, one tree did not get out of the way. The damage to the aircraft is covered because the racing was not professional or organized.

3. Other Exclusions

This group of exclusions applies to loss or damage caused by or that result from any of the following loss events. In every case, if loss or damage by a covered cause of loss occurs because of one of these excluded events, coverage applies to the loss or damage the resulting covered cause of loss causes. The insurance company does not pay for any loss or damage caused by or that results from any of these events.

a. Wear and tear, depreciation

This is loss or damage due to wear, tear, and depreciation.

Notes:

Wear and tear is damage that occurs naturally because of aging or normal wear.

Depreciation is loss of value due to wear.

b. Any quality in the property

These are any qualities in the property that cause it to destroy or damage itself.

Note: An example is a loss or damage caused by hidden or latent defects in the property.

c. Insects, vermin, or rodents

This is loss or damage to covered property caused by or that results from insects, vermin, or rodents.

Note: Some examples are damage from mice, rats, cockroaches, squirrels, beavers, spiders, ants, centipedes, and ticks. Each is characterized by destructive habits that cause damage, such as gnawing and nibbling.

d. Corrosion or rust

This is corrosion or rust that causes loss or damage to covered property.

Note: Rust and corrosion are low-temperature oxidation processes that deteriorate over time due to inactivity or neglect.

e. Mechanical breakdown

This is loss or damage caused by or that results from machines, tools, or mechanisms failing to operate or function properly.

C. Limits of Insurance

The most the insurance company pays for loss or damage in a single occurrence is the limit of insurance on the declarations for the applicable coverage.

D. Deductible

The insurance company does not pay for loss or damage until the amount of the adjusted loss or damage (before capping with the limit of insurance) exceeds the deductible on the declarations. It then pays the amount of the adjusted loss or damage that exceeds the deductible up to the applicable limit of insurance.

E. Valuation of Cargo Owned by You

This condition is added to the Valuation condition in the Commercial Inland Marine Conditions.

Property is valued at its net invoice value plus its prepaid or advance freight but only when the property is sold under invoice.

Note: If the property is not sold on invoice, the CM 00 01 Valuation condition applies.

F. Valuation of Cargo in Your Care, Custody or Control

This condition replaces the Valuation condition in the Commercial Inland Marine Conditions.

The value of the covered property is determined at the time of loss or damage and is the least of the following amounts:

a. The reasonable costs to restore the property to the condition it was in just before the loss

b. The cost to replace that property with property that is virtually identical to the damaged property

c. The declared value on the bill of lading or the shipping receipt (if any)

d. The tariff’s declared limitation

G. Valuation of Data and Electronic Media

This condition replaces the Valuation condition in the Commercial Inland Marine Conditions.

Data is valued at the cost of reproducing it. If the decision is not to reproduce it, the most paid is the value of electronic media with no data stored on it. Electronic media is valued at the amount it would cost to repair or replace it with property that is the same as or very close to the damaged media.

H. Option for Valuation at Replacement Cost (Unmanned Aircraft and/or Cargo Owned by You.)

This applies only if Replacement Cost is selected on the Declarations for Unmanned Aircraft and/or Cargo Owned by You. It is not an option for Cargo of Others.

This condition replaces the Valuation condition in the Commercial Inland Marine Conditions.

This valuation applies only if the property is replaced and is the cost to replace that covered property with property that is similar. No depreciation is taken into consideration, but the amount paid will not exceed the limit of insurance on the declarations.

Property that is not replaced is valued at its actual cash value, the cost of to restore the damaged property to its condition prior to the loss or the cost to replace the item with an equivalent item that will function in the same manner, whichever is the least expensive.

Value is always established at the time of loss.

This paragraph does not apply to any of the following:

Property that is sold under invoice.
Cargo that is not owned but it is in the named insured’s care, custody, or control
Electronic media on which data is stored or being processed or recorded.
Data

I. Additional Conditions

These conditions are in addition to the Commercial Inland Marine Conditions and the Common Policy Conditions.

IL 00 17–Common Policy Conditions Analysis

CM 00 01–Commercial Inland Marine Conditions

1. Coverage Territory

The coverage territory is the United States of America, its territories and possessions, Puerto Rico, and Canada. Property shipped by air within and between these points is within the coverage territory.

2. Coinsurance – Unmanned Aircraft

This condition applies if there is a coinsurance percentage on the declarations.

The insurance company does not pay the full amount of any loss or damage if the value of the covered property at the time of loss or damage multiplied by the coinsurance percentage is more than the limit of insurance for all covered property at that location. In such cases, the amount the company pays is determined as follows:

Step 1. Multiply the value of the covered property at the time and location of the loss or damage by the coinsurance percentage on the declarations.

Step 2. Divide the limit of insurance for the covered property at the location where the loss or damage occurred by Step 1.

Step 3. Multiply the total amount of loss or damage at the loss location by Step 2. before applying the deductible (if any).

Step 4. Subtract the amount of deductible from Step 3.

The insurance company pays the lesser of Step 4. or the limit of insurance. Any amount that remains must be paid by other insurance, or the named insured must pay it from its own funds.

This condition does not apply to any property covered under a blanket basis.

3. Coinsurance – Cargo Owned by You

This condition applies if there is a coinsurance percentage on the declarations.

The insurance company does not pay the full amount of any loss or damage if the value of the covered property at the time of loss or damage is more than the limit of insurance for all covered property at that location. In such cases, the amount the company pays is determined as follows:

Step 1. Divide the limit of insurance for covered property in the shipment by the value of that shipment.

Step 2. Multiply the total amount of loss or damage by Step 1. before applying the deductible (if any).

Step 3. Subtract the amount of deductible from Step 2.

The insurance company pays the lesser of Step 3. or the limit of insurance. Any amount that remains must be paid by other insurance or the named insured must pay it from its own funds.

This condition does not apply any property covered under a blanket basis or that is the property of others in the named insured’s care, custody, or control.

J. Definitions

There are three definitions.

Pollutants

These are any solid, liquid, gaseous, or thermal irritants or contaminants. Pollutants also include smoke, vapor, soot, fumes, acids, alkalis, chemicals, or waste. Waste is any material intended to be recycled, reconditioned, or reclaimed.

Unmanned aircraft

An unmanned aircraft is one that is not controlled by a person who is in or on that aircraft. It must not have been designed, manufactured, or modified to have such internal person-centric control.

Unmanned aircraft operations

The operations described in the declarations as such are the unmanned aircraft operation.

ENDORSEMENTS

ISO has not developed any endorsements to be used specifically with this coverage form. The following miscellaneous endorsement may be used with it.

IH 99 22-Loss Payable

Loss payees with insurable interests in covered property are listed on this endorsement along with the property in which they have that interest.

Note: No commitment is made to notify them of any cancellation.

UNDERWRITING CONSIDERATIONS

Unmanned Aircraft

This section underwriting will focus only on the unmanned aircraft aspect of a business or farm operation with the assumption that it is not its sole operation.

The first question must relate to how the unmanned aircraft will be used. A precise description is needed because coverage for the unmanned aircraft in flight applies only when the unmanned aircraft is being used for the described operation. This is very important because the type of use determines the hazard and the premium that should be charged. Common usages are:

· Inspection	· Real Estate	· Media
· Security	· Spraying	· Survey
· Entertainment (Rodeo)	· Inventory

The manner in which the unmanned aircraft is controlled is also needed. An unmanned aircraft that is operated by an operator and only within its line of sight is considerably less hazardous than an autonomous unmanned aircraft. The distance the unmanned aircraft travels is also very important, as is where the clients are located. Unmanned aircrafts operating in flat terrain will have less potential for obstacle damage than those operating in mountainous areas.

The training of the operators and maintenance schedule of the unmanned aircrafts and equipment are important. All must be kept up to date, especially to stay in compliance with FCC requirements.

Does the applicant hold a Certificate of Waiver or Authorization (COA) issued by the FAA, or does the operator have a pilot’s license? Unmanned aircrafts that operate out of the line of vision often must be under the control of a trained pilot. These requirements will change, but following the FCC guidelines is very important.

A list of all unmanned aircrafts and a listing of attachments to the unmanned aircraft is important for underwriting and claims. A list of all ground equipment is also needed. When blanket coverage is provided, these listings are not placed on the policy, but they are used as part of the underwriting and will be used in any claims settlements.

These lists should be updated at least every renewal and more often if the named insured is adding equipment.

Unmanned Aircraft Cargo

The Unmanned Aircraft can be used to cover the legal liability of common and contract carriers for the lawful covered property of others they accept for transportation between certain points under tariffs and bills of lading or contracts and shipping receipts. Coverage applies from the time the carrier takes possession of the cargo to be carried at the point of origin to the time the goods arrive at their intended destination and the consignee accepts them. Some general points to consider are the carrier’s experience, financial strength, loss history, and the quality of the aircraft that make up the fleet. The types of merchandise transported, their values, and susceptibility to loss, damage, or theft affect the underwriting and pricing decisions.

Key elements in underwriting carriers include evaluating and determining their financial condition and experience. The carrier’s financial condition should be sufficiently healthy so it can afford to hire a suitable number of qualified operators and purchase and maintain a safe and adequate fleet of aircraft for its operations.

A carrier’s experience may be difficult to measure because of how new this market is. However, anyone becoming involved in this type of exposure should have material handling experience and a logistics background similar to that within motor truck cargo operations. The added feature is proper licensing for operating the type of aircraft being used to transport the goods. Consistency and stability in operations enable a carrier to have a greater level of competency in the work it does. It also eliminates guesswork and learning new tasks and permits the carrier to focus on safely and efficiently performing the work it is best qualified, prepared, and experienced to do.

Operators must be evaluated carefully. The experience level of all operators and periodic scheduled training and education are essential to keeping bad habits from occurring or developing. Periodic and unscheduled drug testing and maintaining required licenses are essential activities to maintain control over operators and keep up with their status.

The radius of operations is important. The greater the distance from the base of operations, the greater the number of problems and issues that can develop through the natural loss of control as distances increase. Depending on the radius of operations, the degree and methods of control are affected and must change to respond to individual circumstances.