Report: Over-regulation and litigation could threaten innovation as commercial drone use takes off

By Ann Maher | Apr 3, 2017

MENLO PARK - Liability challenges over the use of unmanned aerial vehicles (UAV) are expected to grow as the skies become thoroughfares for millions of commercial and recreational drones in the coming years

MENLO PARK - Liability challenges over the use of unmanned aerial vehicles (UAV) are expected to grow as the skies become thoroughfares for millions of commercial and recreational drones in the coming years.

The Federal Aviation Administration, having eased restrictions for commercial use last August, expects a 30-fold increase in the number of commercial UAVs within a year of its new rules which made the certification process more streamlined for operators, who no longer have to be licensed pilots. The FAA further predicts that by 2020, more than 2.5 million commercial and more than 4 million recreational drones will be sold annually.

With that many things entering the new frontier overhead, "accidents leading to litigation are inevitable," according to a report prepared by the U.S. Chamber Institute for Legal Reform “Torts of the Future.”

Whether claimants allege negligence, product liability, trespass, nuisance, invasion of privacy or statutory violations, the "inevitable" litigation is more likely to target "deep pocket" commercial operators rather than hobbyists, the report states.

"Tort litigation is on the horizon," the report states.

Over-regulation is another obstacle industries face as they continue to find new ways to use drone technology. The report suggests that innovation and production could suffer, particularly if state and local governments impose additional layers of regulation on top of federal regulation.

It urges “continued progress by the FAA” for lifting restrictions and for providing reasonable conditions for safely operating them. And it goes on to discourage states from enacting drone-specific laws.

“The FAA has found that state and local laws that regulate operation of drones are preempted by federal aviation regulation, given the need to keep airspace free of a patchwork of restrictions,” the report says. “If states continue to adopt their own restrictions, then the FAA may need to issue more than a fact sheet; it may need to take action.”

The intersection between state and federal law guiding the use of drones was a prominent one at an emerging technology conference held last week in the Silicon Valley.

State Farm attorney Kevin Frederick, among conference panelists discussing UAV safety and privacy concerns, said that while it's important for policy makers to straighten out federal versus state legal and regulatory issues, the "creepiness" factor seems to be getting their attention.

"Things that policy makers and courts (hear) are headline stories," he said. "Someone's voyeurism...this is influencing perceptions and having an impact on how regulators look at drones."

Frederick said those headline-makers - including near-misses with aircraft - are issues attributable to recreational, not commercial use.

He indicated that questions of how state and federal law and regulation intersect are important ones to figure out for commercial operators.

"We tend to want uniform regulations," he said, but pointed out that regulation in Montana and Manhattan are going to require different approaches.

A big concern for his company, he said, is the absence of law involving privacy, trespass and nuisance concerns and the lack of uniformity between states and federal authority.

State Farm Insurance, the first U.S. insurer to get FAA permission to test drones for commercial use in 2015, has a strong interest in using the new technology to inspect roofs for settlement purposes as well as more specifically targeting where it puts resources after storms, Frederick said.

He said its use drones is helping the company re-position mobile claims centers after catastrophes, allowing adjusters to assess where real damage is and where policy holders are relative to damage.

The Torts of the Future report shows that the insurance industry occupies approximately 15 percent of the commercial drone market. However, dominating the market is industrial inspections - bridges, roads, tracks and buildings – at 42 percent, followed by real estate and aerial photography at 22 percent, agriculture at 19 percent and government at 2 percent.

While the FAA has made things easier for businesses to operate drones, it still maintains restrictions: drones must weigh less than 55 pounds including any item it carries; flights cannot go beyond operators’ line of sight; they cannot be conducted at night, go above 400 feet or move faster than 100 miles per hour. Most of the restrictions can be waived by the FAA if the operator can show the proposed use can be done safely, the report says.

Roger Nober, executive vice president for law and corporate affairs at BNSF, said one of the oldest technologies on earth – the railroad industry – is incorporating new UAV technology for inspection of its 33,000 miles of right of way.

His company has been granted waiver by the FAA to go beyond line of sight, helping it in tracking effects of inclement weather and inspecting integrity of bridges for instance when hazardous materials are being transported.

Nober said that one of the biggest legal concerns arising from drone technology is how to handle "massive amounts of data."

He questioned what would happen "if we miss something and we have an incident." He also wondered who would read and evaluate the “massive” data collected by remotely-operated and automated drones.

"How much data and how long do you store it," he also asked. "How long do you keep the cloud...we can fill portion of sky pretty quickly."

While the use of commercial UAVs is growing in some industries, the line of sight requirement and ban over flying over people remain obstacles for law enforcement, news gatherers and companies that would like to make deliveries, the report states.

The Northern California Record is owned by the U.S. Chamber Institute for Legal Reform.

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