This document discusses the use of unmanned aerial systems (drones) in the construction industry. It provides an overview of drone technology and applications, as well as new FAA regulations for commercial drone use. Key points include: - Drones can be used for tasks like 3D modeling, site monitoring, safety inspections, and marketing, allowing dangerous or difficult jobs to be done remotely. - The FAA's new Part 107 rules allow commercial drone use with restrictions like pilot certification, 55 lb weight limit, and visual line of sight operation. - Proper risk management and insurance are important due to risks of accidents, privacy issues, and potential liability. Coverage options include aviation policies or CGL

1. Insurance
North America
Construction
Cleared for Take-Off:
Unmanned Aerial
Systems in the
Construction
Industry
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.
John Babel
Assistant Vice President
Senior Risk Engineering Consultant

2. Cleared for Take-Off: Unmanned Aerial Systems in the Construction Industry • 2
Building developers, general and specialty
contractors, and construction managers are
increasingly using 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 traditionally 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 Rules
The 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
www.faasafety.gov
• 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
Boomerang Mapping Drone
photo courtesy Identified Technologies, Inc.

3. Cleared for Take-Off: Unmanned Aerial Systems in the Construction Industry • 3
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 crane
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 Considerations
In the context of aviation, risk management refers to the
use of active technologies and other mitigating techniques
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 (or other
nefarious use) 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
• 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 for information-gathering and
incident command purposes 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.
However, 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 to prohibit operation
in restricted airspace. For example, the manufacturer
DJI recently excluded the area surrounding the 2016 Rio
Olympic Games from their navigation software.
Insurance Options
Whether 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
PhotocourtesyofIdentifiedTechnologies,Inc.

4. Cleared for Take-Off: Unmanned Aerial Systems in the Construction Industry • 4
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 Strategies
There 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 an
area which requires increasing focus as the drone industry
continues to grow exponentially. Remember, drones/UAS are
aircraft operating in the federally controlled National Airspace
VTOLUAS.PhotoSource:BNBuilders.com

5. Cleared for Take-Off: Unmanned Aerial Systems in the Construction Industry • 5
XL Catlin Construction Insider
© 2016, X.L. America, Inc.
Reproduction of material from this newsletter is permissible by request only.
XL Catlin’s enewsletter, Construction Insider, is provided for information only and does not constitute
legal advice. For legal advice, seek the services of a competent attorney. Any descriptions of insurance
provisions are general overviews only. XL Catlin, the XL Catlin logo and MAKE YOUR WORLD GO
are trademarks of the XL Group Ltd companies. XL Catlin is the global brand used by XL Group Ltd’s
insurance subsidiaries. In the US, the insurance companies of XL Group Ltd are: Catlin Indemnity
Company, Catlin Insurance Company, Inc., Catlin Specialty Insurance Company, Greenwich Insurance
Company, Indian Harbor Insurance Company, XL Insurance America, Inc., and XL Specialty Insurance
Company. In Canada, coverages are underwritten by XL Specialty Insurance Company—Canadian
Branch. Coverages may also be underwritten by Lloyd’s Syndicate #2003. Coverages underwritten by
Lloyd’s Syndicate #2003 are placed on behalf of the member of Syndicate #2003 by Catlin Canada Inc.
Lloyd’s ratings are independent of XL Catlin. Not all of the insurers do business in all jurisdictions nor is
coverage available in all jurisdictions. Information accurate as of October, 2016.
CONSTRUCTION INSIDER is a newsletter published for clients of XL Catlin.
We welcome your comments, suggestions and questions.
US
John.Babel@xlcatlin.com
Canada
Tony.Trost@xlcatlin.com
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?
Summary
Drones 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 on each
site. Finally, using vendors or subcontractors to perform the
work demands a thorough review of prospective operator
contracts and insurance.
Acknowledgment and Sources:
Thank you to XL Catlin’s Michael Simone, Underwriting Manager, Primary Casualty, North America
Construction and Tony Trost, Aviation Branch Manager who contributed to this article.
Thank you to BNBuilders and Identified Technologies for drone image use.
IRMI Online
Wall Street Journal, Various articles, 8/2014- 8/16 http://online.wsj.com
ACLU Website https://www.aclu.org/
U.S. DOT (FAA) 14 CFR Part 91 Unmanned Aircraft Systems, and 14CFR Part 107 - http://www.faa.gov/
regulations_policies/faa_regulations/
sUAS News - Small Unmanned Aircraft System industry news for professionals http://www.suasnews.
com/
Unmanned Aerial Online <headlines@unmanned-aerial.com>
AUVSI’s e-Brief website <info@auvsi.org>
ENR Future Tech Website ENRFutureTech@bnp-digital.com
Global Aerospace SM4 Safety Resource - Global Aerospace, Inc. safety@globalaerospaceinc.ccsend.
com>
“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 - identifiedtechnologies.com