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James Gulson
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November 2, 2016
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Business Class Ticket: Using Drones for Your Company

Enriched technology and better pricing have sparked a recent surge in drone manufacturing and use. As more of these unmanned aerial vehicles (UAVs) take to the skies, many business owners are beginning to wonder if drones could help take their business operations to new heights. Every day, people are finding new uses for UAVs across a myriad of industries. From real estate, marketing, engineering, mining and gas, to construction, mapping, utilities, insurance, government, education and meteorology – UAVs are proving to be useful tools that can provide a wide array of organizations a real operational advantage. So is it time for you to consider purchasing and operating a drone for your business? Before you make that decision, it’s important that you first understand the rules and regulations applicable to the business use of a UAV.


Getting the Green Light

The Federal Aviation Administration (FAA) categorizes the use of drones as either commercial or hobby / recreational. A Section 333 grant of exemption is required for any civil UAV operation that is not for hobby / recreational purposes. If a drone is used for anything business related, it is strictly considered commercial (regardless of whether a fee is charged for the flight) and the owner must obtain exemption under Section 333, as well as a Certificate of Waiver or Authorization (COA). This process typically takes 120 days for evaluation; however, high volumes of petitions have recently caused processing delays. At the time of this publication, more than 4,000 petitions have been granted for Section 333.1

Flying by the Rules

Once a Section 333 exemption is granted, UAV operations may begin, but only by airmen with valid certificates who have been screened by the Transportation Security Administration (TSA).
The rules and regulations also stipulate that drones must be operated within visual line-of-sight. Flights need to be below 400 feet, conducted during daytime Visual Flight Rules (VFR) conditions and maintain the following distances from airports or heliports:

  • Five nautical miles from an airport with an operational control tower
  • Three nautical miles from an airport with a published instrument flight procedure, but not an operational tower
  •  Two nautical miles from an airport without a published instrument flight procedure or an operational tower
  • Two nautical miles from a heliport with a published instrument flight procedure

Many people outside of the aviation industry are surprised to learn how much area this restricted airspace covers in most cities. If there is a need to operate within the distances from an airport or a heliport stated above, business owners need to apply for a separate COA specific to that proposed flight.

While there are exceptions to some of the rules, they are not defined nor are there any set parameters, as every Section 333 exemption is reviewed on a case-by-case basis.

Help Wanted?

Feeling overwhelmed by what we’ve covered so far? Fear not, as there are plenty of third party operators who have done the legwork to obtain their credentials from the FAA and are available for hire. When sourcing an operator, it is imperative to review their contract carefully because aviation coverage is excluded from standard general liability policies, which can create a significant exposure. Before signing on the dotted line, business owners should request the third party operator’s aviation insurance certificate and to be added as an additional insured. It is also important to verify that the operator has been granted a Section 333 exemption and a COA.

Ready for Takeoff!

If you believe a UAV could provide your organization with a competitive edge, or if you are interested in starting a UAV operating company for hire, it is important to develop a strong risk management program that will provide protection in this evolving field. Many of the large domestic aviation insurance carriers offer affordable liability coverage. Premium for $1 million in liability coverage can be as little as $1,000 per year. Securing limits up to $5 million in aircraft liability for a drone is relatively simple and cost effective when the proper credentials, pilots and safety controls are in place. Hull coverage is also available for damage to the drone itself. While it may make sense to self-insure a $1,500 drone, there are some aircraft and payload values that total $30,000 – $50,000 for more sophisticated equipment. In those instances, it makes sense to transfer that larger risk to a property policy with rates as little as $2 per $100 of value. For more information on drone usage and the risk management options available, contact the Aviation Risk Services Team at SilverStone Group.

1 The Federal Aviation Administration website. Unmanned Aircraft Systems – Key Initiatives – Section 333. Accessed on March 31, 2016. 

This article originally appeared in the 2016 | ISSUE TWO of the SilverLink magazine under the title “A Business Class Ticket: Leveraging Drones for Your Company.” To receive a complimentary subscription to the SilverLink magazine, sign up here.

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