When we first began insuring UAS, none of them had any type of serial number or means of identification. When asked how we were supposed to determine which UAS we were insuring, a potential client responded “that’s easy, it’s the one that crashed.”
Following is a true tale of how FAA UAS registration turned two DJI Inspire UASs into one. Like magic, they merged and caused tremendous problems for the insurance company, the UAS operator and potentially to the customer who wanted to hire the operator.
Like automobiles, each UAS must be insured separately and each must be indentified and scheduled to the policy. Each carries its own coverage and its own limits. The coverage follows the aircraft and covers the Named Insured for third party property damage and bodily injury liability arising from the operation of the insured UAS.
Starting with the very first UAS policy we placed, we were confronted by the problem of identifying and scheduling the UAS to the policy. The problem was that the home-built UAS did not have any type of serial number, registration number or vehicle identification number. Without that, we could not schedule the UAS to the policy and in fact, could not be certain it even existed or had ever existed for that matter. That conundrum required some innovative thinking our part. We then developed a system to confirm the existence and the composition of the UAS we were insuring and assigned a TRMXXXX number that could be used to identify and schedule the aircraft to the policy. Regardless if the UAS had a manufacturer’s serial number, we still require our TRMXXXX number to be assigned unless an official FAA N registration number was placed on the aircraft.
That system has work flawlessly and we have continued to use the system for more than five years on thousands of insured UAS through hundreds of claims without problems or issues. That was until now.
Our tale of two Inspires began on June 19, 2015 when an insured requested coverage on two DJI Inspire UASs. Coverage was bound and two TRMXXXX numbers were assigned. Each UAS carried a liability limit of $1,000,000 combined single limit of bodily injury and property damage (liability) in addition to hull physical damage covering each UAS for $2,200.
On February 4, 2016, the insured was bidding on a job for a new client. The client required that the insured carry a minimum of $2,000,000 liability coverage on each aircraft rather than the $1,000,000 that the insured carried at the time. This requirement meant that the insured would have to increase the liability limit on each aircraft to $2,000,000 and pay additional premium on each.
On February 5, 2016, the insured contacted our office and requested to change the TRMXXXX number on one of the DJI Inspire aircraft to their new FAA registration number beginning with FAxxxxx. The customer service representative and the insurance company did not understand the significance of that change and agreed to make the change to the policy.
On February 15, 2016, the insured deleted one of the DJI Inspire UASs from the policy and requested a return of all unearned premium.
On February 25, 2016, the insured requested that an Additional Insured be added to the policy and a Certificate of Insurance be issued verifying coverage on both UASs. It was then that it became clear that the same FAxxxx number was now being used on both DJI Inspire aircraft (as directed by the FAA) in turn eliminating any possibility for the insurance company to confirm which aircraft they were actually insuring. In reality, the insurance company found themselves insuring at least two UAS for the price of one.
After realizing that they could potentially be insuring 1 or 100 UASs with the same FAxxxx number for a single aircraft premium, the insurance company reissued the registration number changing the UAS identification number back to the original TRMXXXX number.
On February 26, 2016, the insured advised us that their customer would not hire them unless the Certificate of Insurance showed the same number that appeared on the aircraft. That requirement caused the insured to replace coverage on the previously deleted DJI Inspire UAS for additional premium. Both UAS now have the original TRMXXXX numbers reapplied.
To summarize, the insured changed the number on the aircraft to the FAxxxxx registration number then verified coverage of multiple aircraft to their customers under the same Certificate of Insurance. The insurance company was unknowingly insuring and verifying coverage on at least two aircraft in exchange for the premium of a single aircraft.
Imagine for a moment the chaos that would ensue if every aircraft was issued the same N registration number. Or worse, every automobile has the same License Tag number and with no indication of which state it was domiciled in. Well that is precisely what’s happening with UAS today.
The insurance industry is now making an effort to explain this to the FAA and offering their expertise in assisting with a factual risk based analysis of the true exposure represented by small and micro UAS. Hopefully they will have that opportunity to participate and help the FAA move forward on a fact based system rather than an interest based system.
Transport Risk Management, Inc.
12424 Big Timber Drive
Conifer, CO 80433