Published on 2016-09-19

On June 21, 2016, the Federal Aviation Administration (“FAA”) released the much-anticipated final rules for commercial use of small (under 55 pounds) unmanned aircraft systems (“sUAS” or “drones”). Compliance with the new rules is critical for commercial drone operations, but is only one aspect of a complete risk management program a company should have in place as it begins commercial drone operations.

Risk Management Program Companies using sUAS need to be aware of significant risk management issues that could impact business. While compliance with the new FAA rules is critical, companies need to think more broadly about their risk profile while initiating drone operations. For example, companies need to ensure that they have appropriate insurance for drone operations. Most Commercial General Liability (“CGL”) policies carry aviation exclusions which would avoid coverage for accidents related to drone use. Companies also need to create policies and procedures consistent with the new rules that incorporate safety and employment considerations. The new rules have qualification requirements for pilots, so companies need to set up detailed training and education programs for pilots. Also, record creation, maintenance records and document destruction policies need to be carefully developed.

Companies operating drones often enter partnerships with companies that have pilots or drones available for commercial use. It is important to ensure vendor/partner agreements contain clear provisions related to sUAS operations including FAA compliance obligations, pilot qualification provisions and clear procedures for obtaining third party approvals and safety considerations. A good contract will include insurance requirements as well as strong indemnity language that protects the business. Also, while the company must comply with the FAA regulations, there are many state and municipal laws with both registration and operational rules of which the company must be aware.

FAA Rule Compliance
The rules (Part 107 of the FAA Regulations) were initially proposed in late February 2015 and will become effective on August 29, 2016. Once in effect, companies wishing to use small drones as part of their business will no longer need to apply for the more onerous Section 333 exemptions for routine use as long as their operations comply with the new rules. The new rules allow use of any small drone for commercial purposes, as long as operations meet the following limitations:

  • Any sUAS must weigh less than 55 pounds.
  • Only visual line-of-sight operations are allowed.
  • No flight will be permissible over people who are not involved in the sUAS operation.
  • Only fair-weather flying allowed.
  • Daylight-only operation is allowed, except for twilight operations (30 minutes before sunrise and after sunset) for aircraft equipped with anti-collision lighting.
  • The maximum ground speed is 100 mph.
  • The maximum altitude is 400 feet above ground level, unless within 400 feet of a structure.
  • Operations within Class G airspace are allowed without Air Traffic Control (“ATC”) permission.         •   However, operations in Class B, C, D, and E airspaces require
    ATC permission.
  • Pre-flight inspection of sUAS is required.

Manufacturing companies hoping to use sUAS as part of their manufacturing processes must comply with these limitations. However, most of them can be waived if it can be shown that safe operation is possible, by seeking a Part 107 waiver. The new rules will provide an easier waiver process through an online portal after their effective date. Companies may continue to operate under any Section 333 exemption or Certificate of Authorization provided by the FAA until they expire. Once the rules become effective, a company will have to analyze whether it is more advantageous to operate under the new rules or under their current exemption.

Companies who hope to engage in Beyond Visual Line of Sight operations can find some relief in the new rules. Part 107 contains two major accommodations to make it easier to come close to beyond visual line-of-site. First, the pilot can “daisy-chain” operations. In other words, a remote pilot-in-command can hand off the controls to another pilot as long as a visual line-of-sight is maintained by each of the pilots. At that point, battery life will truly be the only limitation to the length of operation.

Part 107 also allows for operation of sUAS from a moving vehicle in sparsely populated areas. Therefore, for industries with extended rights-of-way where inspections could greatly benefit with sUAS, such as those in the railroad or utility industry, allowing operation in moving vehicles could replicate beyond visual line of site-type activities.

Finally, the rules establish a “remote pilot-in-command” position requiring a person operating a sUAS to either hold a remote pilot airman certificate with a sUAS rating or be under the direct supervision of someone who possesses one. To qualify for one, a person must complete knowledge testing or training provided by the FAA, be vetted by the TSA, and be at least 16 years of age. Although airworthiness certification is not required for sUAS, the remote pilot-in-command must, as stated above, conduct a pre-flight check of the sUAS to ensure it is in good condition for safe operation.

When Something Goes Wrong
While a robust risk management program can prevent a lot of problems, accidents can still happen. A company needs to be aware of potential civil liability related to drone use. Drones can be lost and can collide with other property and cause personal injuries. While many incidents will be low exposure, catastrophic injuries and events can occur. Companies also need to be aware of privacy and data breach issues in order to fully protect themselves. And, in the unfortunate event that something bad does occur, the company needs a detailed incident response plan in place to quickly communicate about the event and investigate it thoroughly and quickly before evidence is lost. Having an incident response plan in place can go a long way to mitigate damages should something go wrong and help develop case strategy in the event litigation ensues.

Sheila Kerwin                                     Brian Johnson

Should you need assistance with risk management including incident response and litigation defense for operation of sUAS for your company, contact Sheila Kerwin and Brian Johnson, who consult with companies on minimizing risk related to commercial drone use. Kerwin and Johnson are product liability and transportation trial lawyers and will be speaking at the InterDrone Conference in Las Vegas this September. Sheila can be contacted at 612.305.7515 or skerwin@nilanjohnson.com, and Brian can be contacted at 612.305.7505 or bjohnson@nilanjohnson.com.