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Senior Risk Engineering Consultant, Construction, AXA XL

What is a “drone” and why do I need one?”Unmanned Aerial Systems (UAS) or “drones” are revolutionary tools changing the way construction companies do business—a dream solution to myriad complex construction challenges. They can be controlled by cell phone, tablet, or a manufacturer’s console, connected by Wi-Fi, and precisely positioned using global positioning (GPS). For many years, UAS have been used safely for commercial purposes in Australia, Japan, and the United Kingdom; though primarily for agricultural purposes. Drones used commercially in Australia have not had a major accident in over 10 years of operation.The most common type of UAS available for commercial applications is the vertical take-off and landing (VTOL) device with four, six, or eight rotary blades. More blades mean more lift, and that provides more power for attached payloads. With the VTOL design, UAS can remain in one place for extended periods without the extravagant costs associated with helicopters and small planes. However, the battery life of VTOL drones can be a limiting factor with current battery technology permitting average flight times of just 25 to 30 minutes.Fixed-wing drones typically have longer flight times and are very useful for missions like pipeline, power line and other linear survey and inspection applications, but do not have the ability to hover like the VTOL craft, and typically require some type of launch and recovery system.

Commercial Applications​Drone applications are many and include agriculture, movie making (scenes from Wolf of Wall Street, Skyfall, and the Harry Potter movies were filmed using drones), real estate, insurance (catastrophic claims documentation, roof damage inspections), mining, environmental, emergency response, law enforcement, wild land firefighting, etc. In the United States, several news organizations including CNN have acquired their own UAS for news gathering and routinely pay third parties for footage captured by drones.

With recent improvements in technology and a new streamlined regulatory process, the need for significant up-front investment to incorporate UAS into your business has been removed. Building developers, general and specialty contractors, and construction managers are increasingly using camera-mounted UAS with payloads like still/video cameras, LIDAR (Light Detection and Ranging), Laser Line Scanning, FLIR (Forward Looking Infrared), multi-gas monitors, and other payloads to monitor their construction and industrial activities. Drones provide a way to obtain real-time data to:​

  • create 3D BIM (Building Information Models)
  • document existing conditions
  • monitor job progress
  • identify potential safety hazards
  • estimate stockpiles
  • document quality control (e.g. window/roof system inspections)
  • create marketing materials
  • improve project efficiency, and
  • obtain useful information in a very expeditious and cost-effective manner.

Best of all, drones can be used to accomplish dirty, dull and dangerous jobs that employees perform, like inspecting bridges and building exteriors, entering confined spaces and monitoring environmental conditions, without exposing the worker to danger.As an example of the time efficiencies that can be achieved, Pittsburgh, Pennsylvania based Identified Technologies took less than half a day to survey two separate 1,000 acre sites in the mountains of Kentucky in September 2015 to provide precise site measurements for their customer, Kokosing Construction. The survey was conducted 200 times faster than traditional survey methods.

New FAA RulesThe Federal Aviation Administration (FAA), which controls U.S. National airspace and has federal regulatory authority over operation of all types of aircraft, maintains that there are over 7,000 aircraft over U.S. skies at any given time. The FAA is rightfully concerned about sharing limited airspace with hobby and commercial use of drones and potential interference with civil and commercial aviation, not to mention the potential homeland security issues. Until recently, the commercial use of drones in the United States was complicated by a lengthy certificate of authority/waiver process, and required companies to have an FAA certified pilot for operating UAS. New FAA rules simplify the process to operate the devices legally, and do not require a sport pilot to fly them. The FAA recently released the new 14 CFR Part 107 rules which are effective August 29, 2016. Those rules include the following requirements for the commercial use of UAS:

Who can fly drones commercially?

  • Anyone 16 years old and up can fly UAS commercially. Operators must speak, write, and understand the English language
  • You can now operate devices without an FAA airworthiness certification, pilot’s license or Section 333 exemption/COA if the requirements below are met: • Prospective operators must pass an aeronautical knowledge test at an “FAA-approved knowledge testing center.” Test locations can be found on the FAA website • If you currently hold an FAA pilot’s license you can bypass the testing center by passing an FAA online course specific to UAS operations • Once the exam is passed, you can apply for and receive a Remote Pilot Airman Certificate (RPAC) with a small UAS rating. (As with manned aviation, XL Catlin recommends keeping a flight log with hours documented for each type of craft used) • The FAA requires operators that have obtained the RPAC to pass a knowledge test every two years • Operators must be free from physical or mental conditions that may interfere with safe flight practices • Prospective RPAC operators must be vetted (background check) by the Transportation Security Administration

What are the new FAA operating parameters?​

  • Operators must register their craft with the FAA on their website (small fee) and mark the craft with the unique registration number provided
  • The UAS device must weigh less than 55 pounds (including payload) and drone operating speed cannot exceed 100 MPH
  • Drone operators must fly within Visual Line-of-Sight (VLOS) of the device and under 400 feet above ground level
  •  If operating Beyond Visual Line of Sight (BVLOS) of the craft, as when using First Person View (FPV) e.g. Oculus Rift, a visual observer is required whenever the device is out of view of the operator. This rule will likely change as BVLOS technology matures and the UAS Traffic Management (UTM) system develops
  • With a Remote Pilot Airman Certificate granted by FAA, drone operators can fly during daylight or civil twilight only. No night flights are allowed unless permitted through an FAA online waiver process. Drone operators can also file online waivers for FAA exemptions when operating closer than five miles of an airport. The process is similar to the existing 333 Exemption process.
  • Users are required to conduct preflight checks to ensure that UAS are in safe operational condition (XL Catlin recommends keeping detailed maintenance records)
  • According to FAA, you must make your drone available to the FAA for inspection and testing if requested
  • You must report any incident resulting in serious injury or property damage exceeding $500 (not including damage to your aircraft) to the FAA within 10 days

FAA currently prohibits flights over “non-participating” personnel, which is not well defined at this time. Before undertaking commercial drone operations or contracting with a provider, XL Catlin recommends verifying this prohibition by consulting with the FAA or your UAS operator to ensure compliance with both letter and spirit of the regulation. Additionally, common sense risk management would suggest you should not operate a drone over non-participating personnel any more than you would allow non-participating personnel to walk around your job site during a critical lift, for example. On construction sites, management and craft workers would be typically considered participating parties. However, third party persons outside the fence and not involved in the construction process (e.g. pedestrians and passing vehicles) would not. The way tower crane movements are managed on construction sites may be a model for UAS operations on building sites. Ideally, drone flights would be done when the least number of employees are onsite. Companies may consider incorporating UAS operations in their project orientation and have attendees acknowledge that UAS operations may occur while they are onsite.

The FAA is mostly silent on state & local regulation of UAS. Over 40 states have considered or passed legislation, and others have passed laws or resolutions around privacy and unwanted surveillance, hunting and fishing, etc. Industry groups like the Associated General Contractors would like the FAA rule to “preempt” state and local government rules outside traditional areas of state concern. However, several major cities like Washington DC, New York and Los Angeles have already passed laws to prevent any drones from operating within city limits, and this could be a barrier to using UAS to document projects located in these downtown building locales. Your company should determine what the laws are in the states and cities where they operate.

Risk Management and Safety ConsiderationsIn the context of aviation, risk management refers to the use of active technologies and other mitigatingtechniques to assist operators to fly safely and not put other non-involved parties at risk. Some risk management and safety considerations for operating UAS include:​

  • The potential for Illegal surveillance and trespass by your employees and vendors
  • Potential FAA and Homeland Security issues/conflicts, including operations near airports and trauma centers with helicopter medevac pads, military facilities, etc.
  • The possibility of drones flying in close proximity to or in the path of private or commercial aircraft.  Flight planning should include site specific operating parameters, including keeping the UAS flight path to a discreet area and altitude
  • Misuse of a drone for nefarious purposes like unwanted surveillance
  • The possibility of bird strikes or attacks on devices, which can result in drones crashing in an unpredictable manner
  • Operating in high winds. Follow manufacturers operating guidelines for maximum wind speed
  • Other environmental factors. For example, during the 2016 Alberta Wildfires, use of UAS was hampered because high temperatures were literally melting the craft.
  • The potential for cell tower/electromagnetic interference with onboard navigation systems. Issues may include lost wireless connection and problems with the onboard GPS/navigation system
  • Hacking (“spoofing”) of drone controls trying to take control of your drone
  • Loss of drone power, resulting in possible personal injury, death or physical damage to third party vehicles or structures. Most drones have a “return to home” feature when the device reaches a predetermined battery life.) The flight path used by the return to home feature needs to be considered, particularly when the device does not have “detect and avoid” technology built-in. It is important to ensure a proper and safe return home flight path.
  • Incorporating “geo-fence” software, which will not permit operation in restricted airspace. DJI recently excluded the area surrounding the 2016 Rio Olympic Games from their navigation software.

Insurance OptionsWhether you are purchaser of drone services or the provider of them, insurance is the first issue to address (after verifying proper operator certification, experience and training). Of equal importance is the contract or agreement pursuant to which the drone services will be bought or sold. Just as you would have a written contract from any other provider of vendor services, such an agreement is necessary to ensure that indemnity, hold harmless and other risk mitigation terms, conditions and requirements are properly addressed. The first line of defense is to define the contractual relationship between the parties, and properly allocate the risks and responsibilities. The ultimate safety net is having appropriate insurance. Those hiring UAS services should ensure the drone operator or vendor accepts responsibility for accidental loss of the equipment and damage to any third party property and bodily injury. UAS coverage is readily available in North America. However, you should carefully select a well-qualified broker with applicable experience in placing insurance for the small aviation sector, particularly in placing drone coverage. When speaking to your broker and carrier about insurance options, be sure to discuss how other lines of coverage (e.g. professional lines) either “dovetail” or conflict with your existing coverages. Cyber coverage may be recommended if the information you gather is sensitive or classified, and stored on a USB device or memory card on the drone.

Insurance StrategiesThere are several strategies for obtaining UAS coverage. The primary strategies are taking on the risk of operating UAS in-house, or using a vendor/subcontracting the work to others.Embrace the risk - This strategy applies to those who operate drones in-house with owned devices, various payloads, and FAA certified operators. With this strategy, companies can obtain the appropriate insurance by consulting your broker/agent and insurance carrier for options. The commercial use of drones on your project or on others sites raises the question of whether or not the company has coverage for liability arising out of their use. The standard Commercial General Liability (CGL) policy and most if not all non-standard CGL policies excludes liability arising out of the insured’s “ownership, maintenance or use” of an aircraft. Since the FAA has declared that drones are “aircraft”, the devices would trigger this exclusion and would not cover UAS. Aside from self-insuring, companies have two primary strategies when considering insurance:

  • Aviation Coverage – This insurance strategy involves purchasing an aviation policy to cover the UAS exposure. Aviation specific coverage can provide liability coverage arising out of the use, ownership, or operation of a UAS for bodily injury and property damage. Some insurers will also provide options for physical damage coverage to the drone itself. Premiums will vary based on the drone types and payloads, use, and experience of the operator. Typically, insurance coverage of $1M in liability for a small commercial drone can run $1,500 or less. Aviation coverage is recommended for operations where drone services are offered as part of their core business, like survey, photogrammetry, etc. These companies may incorporate specialized or custom (and typically more expensive) UAS devices across their operations and own multiple types of drones and special payloads like FLIR and LIDAR. This strategy may also be a good solution for companies with existing aviation policies, where UAS can be added to the existing aircraft schedule via endorsement. Many companies that have virtual design and construction (VDC) teams are uniquely suited to incorporating UAS for data acquisition into existing software like BIM 360. Companies looking for commercial insurance must have a robust UAS flight safety program and risk analysis and be able to provide proof of for the underwriter. Demonstration of operator flight experience may also be required before obtaining coverage. As a side note: Users of vendor drone services should also require such proof when selecting a provider.
  • Commercial General Liability (CGL) Endorsement – To override the aviation exclusion inherent in most CGL policies, an endorsement can be attached to the policy to allow UAS operational coverage. This option is good for incidental in-house use of drones, where it is not a part of the core business. Insurance Services Office, Inc. (ISO) recently developed and filed a suite of endorsements addressing UAS exposures. These endorsements, which became available in June 2015, treat the aircraft and unmanned aircraft exposures separately, allowing insurers to decide whether and how to cover unmanned aircraft liability independent of how any other aircraft exposures may be treated.

Transfer the risk – Another strategy for employing UAS services is to hire a specialty vendor or subcontractor with an FAA-compliant program, a robust risk management and safety program, adequate bonding and insurance, etc. This strategy makes sense for many smaller companies that do not specialize in UAS services, or have sophisticated VDC departments to process the data gathered by drones. This strategy may also make sense for many companies because the UAS technology is developing so quickly that it can require a lot of work and expense to keep up. If your company decides to use a specialty vendor or subcontractor for this task, the CGL policy exclusion does not reach an insured’s liability for a subcontractor’s use of an aircraft that is not owned, rented or maintained by the insured. Typical liability limits purchased by the smallest operators are between $1 million and $5 million per occurrence, with much higher limits being available to those who have demonstrated the appropriate risk mitigation strategies to insurers. Vendors who cannot buy more than a few million dollars of limits it may demonstrate the insurance market’s misgivings about their loss experience and/or operational standards.

The vendor/subcontractor would also have to meet FAA, state and local regulatory guidelines. Legal liabilities, whether you are the manufacturer, operator or user of a drone is anarea which requires increasing focus as the drone industry continues to grow exponentially. Remember, drones/UAS are aircraft operating in the federally controlled National Airspace System (NAS). This means that just like the manufacturer or pilot of a manned aircraft, the same potential liabilities exist for drone operators. Those hiring UAS services should ensure that the drone operator accepts responsibility for accidental loss of the equipment as well as damage to any third-party property and/or physical injury.

When hiring a vendor for UAS services, companies should consider some if not all of the following criteria to evaluate the experience, qualifications and professionalism of the vendor:​

  • Has the customer met  the FAA or Canadian regulatory requirements?
  • What are the makes/models of the drone(s) to be used for my survey? and what payloads will be used to gather data?
  • How is the data that is gathered processed, and what does the final product look like? Can the vendor provide an example?
  • What propulsion system(s) does the UAS use, e.g. Li Po batteries, fuel?
  • Are launch and recovery mechanisms required?
  • What is the degree of drone autonomy? If required, does the company have exemptions from the FAA for Beyond Visual Line of Sight or night operations?
  •  Are fail-safe systems built in to the UAS? For example, “geo-fence”, “return home, and/or “seek and avoid” technology?
  • What is the operator’s training and experience, particularly with the drone(s) used for my survey?
  • What is the vendors experience with your current and anticipated operating parameters and mission-specific dangers, e.g. operations near buildings, power lines, high density developments, over water, etc.?
  • Can customer show UAS maintenance records and flight logs?

SummaryDrones are a rapidly evolving technology with many current and future applications. And the new FAA regulations are truly a dream come true for the construction industry. Companies can realize significant cost and time savings using drones over traditional aircraft. Companies must weigh the benefits and risks of buying and using in-house UAS or using a vendor/subcontractor to perform the work. The newly issued FAA Part 107 rules take effect at the end of August 2016, making entry into the UAS market simpler and more cost effective. If you decide to integrate drones into your construction operations, implement a sound risk management and insurance strategy. Insurance coverage strategies should be discussed with your insurance broker and carrier. Hire experienced UAS operator(s) and train alternates, insure risk analysis and flight safety procedures are used using on each site. Finally, using vendors or subcontractors to perform the work demands a thorough review of prospective operator contracts and insurance.

Sources:IRMI OnlineWall Street Journal, Various articles, 8/2014- 8/16 http://online.wsj.comACLU Website DOT (FAA) 14 CFR Part 91 Unmanned Aircraft Systems, and 14CFR Part 107 - News - Small Unmanned Aircraft System industry news for professionals Aerial Online headlines@unmanned-aerial.comAUVSI’s e-Brief website mailto:info@auvsi.orgENR Future Tech Website ENRFutureTech@bnp-digital.comGlobal Aerospace SM4 Safety Resource - Global Aerospace, Inc. “Contracting With and Between UAS Operators, A guide for companies seeking professional drone services and drone companies looking to safely and legally transact business”  Global Aerospace/Denton’s White Paper.  Authors: Proudlove (Global Aerospace) and Dombroff (Dentons) ©2015 Global Aerospace, Inc.Identified Technologies Website -



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Global Asset Protection Services, LLC, and its affiliates (“AXA XL Risk Consulting”) provides risk assessment reports and other loss prevention services, as requested. This document shall not be construed as indicating the existence or availability under any policy of coverage for any particular type of loss or damage. AXA XL Risk. We specifically disclaim any warranty or representation that compliance with any advice or recommendation in any publication will make a facility or operation safe or healthful, or put it in compliance with any standard, code, law, rule or regulation. Save where expressly agreed in writing, AXA XL Risk Consulting and its related and affiliated companies disclaim all liability for loss or damage suffered by any party arising out of or in connection with this publication, including indirect or consequential loss or damage, howsoever arising. Any party who chooses to rely in any way on the contents of this document does so at their own risk.

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