Insurance for Drone Flights at Industrial Locations
The use of drones and aerial robotic systems in the corrosion prevention industry is expanding exponentially. While a few years ago flying a drone close to or coming in contact with an industrial asset such as an oil storage tank was verboten, now it is standard practice to see drones flying close to in-service industrial assets for visual and other examinations and analysis. Drone use in industrial settings has become much more common, with some large asset owners having drone divisions and even fleets of drones.
I have had a few conversations with people in the industrial inspections industry, and I have learned there are times where insurance costs are actually more than labor costs for certain jobs. For example, it happens that employers pay $1.25 or more per $1.00 of labor for persons employed in a port to load and unload ships. These high insurance costs are for workers at high risk. Interestingly, some high-risk work, such as visual or contact-based inspections at elevation, can be done with drones, thereby eliminating the risk of falls.
Using drones for industrial inspections can actually reduce the risks of catastrophic events, which insurance underwriters love! Drones used as part of a risk-based industrial asset integrity inspection regimen, irrespective of existing inspection standards, can provide more information to the inspector, thus providing the asset owner and underwriter with a much more detailed and complete data record for ascertaining the structural integrity of an asset.
Regulatory Compliance and Insurance
However, as drone use in industrial settings has grown and as services that utilize drones have increased, so, too, has the need for proper insurance.
When providing services with drones, especially if you are not the asset owner, it is very important to have the correct insurance coverage in place and also a well-thought-out policy for what insurance is needed for various circumstances and jobs. In addition to insurance, it is important that you are compliant with any and all national and local regulations. For example, to fly a drone commercially in the United States, you must have what is known as a Federal Aviation Administration (FAA) part 107 license, and you must operate within the parameters specified by the FAA.
Note that there are additional insurances, such as those that cover the hardware of the drone itself. These are outside the scope of this article as I am focusing on the insurance you need to use a drone as part of a service you provide.
Drones in the Coating Industry
While visual inspection is currently the most common use of drones in industrial settings, drones with the capability to clean, coat, and measure coatings are in use and evolving. This means drones will soon be able to soft wash or chemical wash the surface of an industrial asset such as an oil storage tank, coat it, and measure the dry film thickness (DFT) of the coating.
Insurance Needs When Utilizing Drones
If you are providing drone services, it is imperative to have the correct insurance coverage in place. While the use of drones is designed to reduce risk, especially when it means moving workers from elevation or tasks where people are potentially in harm’s way, risk still exists. Insurance is a risk mitigation strategy and a hedge against unforeseen events or those potential catastrophic events with very small probabilities.
The three major insurance “buckets” to be aware of when providing services using drones are (1) general liability insurance for your company, (2) named insured insurance for the asset owner or customer, and (3) “day of” or job insurance.
1. General Liability (+ Umbrella): Commercial general liability insurance, sometimes referred to as business insurance, is a minimum requirement for basic business operations. Depending on your business and customers, you may need additional insurance over and above basic commercial general liability. Most general liability insurance in the United States is a $1 or $2 million policy and covers everything from slips and falls to natural disasters and catastrophic events.
In addition to general liability, companies may wish to add umbrella insurance for losses not covered by general liability or other insurance policies. Umbrella insurance kicks in when your business is liable to someone and your primary insurance policies have paid up to their limits, to potentially pay additional amounts. For example, you may want to consider having $2 million in general liability insurance and $5 million in umbrella coverage. Drone use can include everything from designing and building experimental aircraft to actual paid jobs using the aerial robotic systems at customer facilities, including hazardous locations such as in production oil and gas refineries.
2. Named Insured (Additional Insured): Some customers may request or even require that they are listed as an insured beneficiary under your commercial general and umbrella liability insurance policies. This provides the customer, frequently the asset owner, with additional assurance that, in the event of a claim, they receive priority. Perhaps your drone jobs are on such assets as flare stacks and above-ground storage tanks within facilities worth billions of dollars. The facility owners in these cases may want to minimize risk, so they can ask to be a named entity on your commercial general liability insurance policy.
3. Job Specific (“Day of” or “flight insurance”): Job-specific drone flight insurance is typically available based on criteria such as length of the drone flight or mission, distance traveled, and geographical location. Several such limited specific insurance is available as downloadable apps and require only a credit card or other payment type to use. This is relatively inexpensive and provides assurance to clients that you are detailed enough and care enough about them that you purchase specific insurance for the job you are performing. A recent use of this insurance at an in-service paper and pulp manufacturing facility, where there exist explosive gases and a multitude of other potential safety issues, cost about $35 for an additional $2 million of insurance. This was for a flight radius of less than 0.5 mile (0.8 km) and a time interval of 4 hours.
When completing jobs utilizing drones as part of the protection of industrial assets, whether it is measuring, cleaning, or coating the assets, one needs to be cognizant of the requirements and need for insurance. The three major insurance “buckets,” detailed above, need to be considered and arranged for in advance of the job being performed. Proper insurance protects your customer and your company and can help you “land” the job or contract because it shows foresight and concern for your customer. As drone use has grown much more common in the coatings industry, especially with large asset owners, the need for having the proper insurance has grown hand in hand.
Fly safe, fly well, and fly insured.
This article was published in the November 2020 issue of CoatingsPro. It can be found online here: https://nace.mydigitalpublication.com/publication/?i=679463&ver=html5&p=18