Drone Risks within the Real Estate and Construction Industry – Part 1

The commercial real estate industry has become increasingly reliant on the utilization of unmanned air vehicles (“UAVs”), commonly known as drones.

UAVs’ can serve many useful purposes in commercial real estate. For example, UAVs can be used to quickly survey job sites, monitor progress at construction sites, ensure safety procedures are being followed by on-site workers, and assess building conditions to ensure adherence to schedules and budgets. UAVs can also be used to take photographs and gather data for accurate mapping of locations. As opposed to using costly human resources, heavy machinery and expensive surveying tools to produce complex data; UAVs can yield the same results, in half the time, at a lesser cost and with greater accuracy.

Transport Canada governs the use and operations of UAVs. The list of regulations that UAVs and their operators must adhere to are available on Transport Canada’s website (www.tc.gc.ca). The application of the regulations is dependent on the UAVs size and intended use, factors which also have bearing on liability and insurance. Transport Canada provides that: “All operators who fly a drone that weighs more than 250 grams for any purpose will need to be insured through a liability insurance provider for at least $100,000.” Transport Canada also provides that UAVs users should purchase insurance “from an insurance provider who covers the risks of public liability,” as described in subsection 606.02 (8) of the Canadian Aviation Regulations (“CARs”).

Transport Canada has proposed changes to the regulations governing UAVs and has invited stakeholders and the public to participate in consultation. One significant proposed change is that a Special Flight Operations Certificate (“SFOC”) will no longer be required for UAVs weighing between 250 grams to 25 kilograms as long as the UAV is operated within a visual line of sight. A SFOC will still be required for operation of an UAV over 25 kilograms and for operation of UAVs out of sight.

The following risk management and insurance practices should be followed when operating a UAV and when contracting a UAV operator:

UAV Operation

• Pilot must be over the age of 16 and hold a pilot permit that is specific to UAVs
• Ensure confirmation of UAV’s registration and ensure the UAV is marked with an identification code provided by Transport Canada
• Ensure prior approval from air traffic control when flying in controlled airspace or near aerodromes (to avoid potential criminal trespassing charges)
• Ensure the UAV is flown at least 150 m above open-air assemblies of people (i.e. outdoor concert)
• Ensure the UAV is flown at least 90 m above and 30 m from people, vehicles and vessels

Insurance Recommendations

UAV insurance is vital to protect your business from third-party liability. UAV insurance provides coverage for property damage and bodily injury caused by the UAV, premises liability at sites used in connection with UAV operations, as well as medical costs for bodily injury claims.

• Due to the low cost of UAVs, operators are commonly choosing to self-insure the physical damage to the drone itself. In this case, we recommend you receive a hold-harmless clause from the UAV operator.
• If the operator purchases physical damage coverage on the UAV, business owners should require a “waiver of subrogation” in their favour from the operator’s insurer.

• Business owners should be named as an additional insured with respect to the liability coverage maintained by the operator.
• The operator’s limit of liability should be no less than $1M. Your specific exposure may require higher limits and should be reviewed with your risk management consultant.
• The evidence of insurance should confirm:
  • Premises liability in relation to the operator’s actions while flying the UAV.
  • “Personal injury” coverage
  • 30-day written notice of cancellation in favour of your business should appear on the certificate.
  • Primary and non-contributory” clause.

Before you take flight, make sure you understand and follow Transport Canada’s regulations and are properly insured. Not doing so could put lives in danger, result in up to $25,000 in fines, and even land you time behind bars.

Please stay tuned for part 2 of Drone Risks within the Real Estate and Construction Industry where we will investigate business owners that operate their own UAV and outline the associated risks and how to best protect against them.

For more information on risk management and insurance options to protect your company and balance sheet from UAV risk, please contact:

Scott Badali
Risk Analyst, Risk & Insurance Services
sbadali@intechrisk.com

About INTECH:

INTECH Risk Management (“INTECH”) is an independent insurance consulting company involved in the analysis, design, development, implementation and management of insurance programs. INTECH does not sell insurance, nor is it affiliated with any insurance company or brokerage.  This unique independent position in the marketplace enables our consultants to avoid conflicts of interest and provide our clients with unbiased, expert advice. INTECH has received the 2017 Award for Excellence in Risk Management from Insurance Business Canada, the 2015 and 2016 Due Diligence Provider of the Year Award from IJGlobal Americas, and has achieved Platinum Elite Status on ReNew Canada’s Top100 Projects.