FAA Announces Drone Testing Partnerships Beyond Current Regulations

Drone regulations FAA

Yesterday, the Federal Aviation Administration announced three partnerships with companies to expand the operation of unmanned aerial vehicles (UAVs) in an initiative the agency is calling the Pathfinder program.

U.S.-based drone maker PrecisionHawk will be exploring the possibilities of flights over agriculture while testing tracking and a system for drones and planes to remain aware of each other in flight to avoid collisions. CNN will be testing the use of drones for newsgathering in urban areas where drones will remain in the line of sight of operators. BNSF Railroad, owned by Warren Buffet’s Berkshire Hathaway, received permission to test drone operations outside of the operator’s visual line of sight. The company will “explore command-and-control challenges of using UAS to inspect rail system infrastructure,” the FAA reported.

“Government has some of the best and brightest minds in aviation, but we can’t operate in a vacuum,” said U.S. Transportation Secretary Anthony Foxx. “This is a big job, and we’ll get to our goal of safe, widespread UAS integration more quickly by leveraging the resources and expertise of the industry.”

To that end, Pathfinder will allow these corporate entities to research operations that push the boundaries of the recent draft rules released regarding small unmanned aircraft, namely by operating both within and without the visual line of sight requirements currently mandated by the FAA.

“Even as we pursue our current rulemaking effort for small unmanned aircraft, we must continue to actively look for future ways to expand non-recreational UAS uses,” said FAA Administrator Michael Huerta, who announced the initiative at a conference held Wednesday by the Association for Unmanned Vehicle Systems International. “This new initiative involving three leading U.S. companies will help us anticipate and address the needs of the evolving UAS industry.”

This effort is also the first step in realizing some companies’ grander aspirations for drone use, such as the package delivery applications being pursued by Amazon. That being said, the information gathered by these companies will merely provide data to inform future FAA regulations, which are still pending and may only approve broader operations in a few years. Other companies looking into similar applications that are beyond the scope of current draft regulations would still need to apply for and receive a Section 333 exemption from the FAA. While about 300 of these requests have been granted, the agency has received repeated criticism for an exceptionally slow and sometimes mystifying review process.

“The impact of the Pathfinder Program could be profound for several reasons — perhaps most importantly, it shows the FAA is serious about moving quickly to safely and practically integrate commercial drone use in the U.S.,” said Anthony Mormino, senior legal counsel at Swiss Re. “Allowing drone flights beyond the sight of a drone operator is considered the key to unlocking the true potential of commercial drone use.  This collaboration could impact the future rules promulgated by the FAA regarding the line of sight requirement for commercial drones.”

Such developments could also significantly impact insurers. As discussed in “Drones Take Flight,” the April cover story of Risk Management magazine, one of the most promising near-future applications for UAVs could be in the insurance industry in the wake of natural catastrophes or other major claim events. “Reducing or eliminating the visual line of sight limitation on commercial drone use will allow insurance companies to employ UAVs to their fullest extent in insurance underwriting and claims management,” Mormino said. “Consider that the FAA has already granted a number of insurance companies permission to test and use UAVs for insurance inspection purposes. These companies include AIG, State Farm, Erie Insurance Group, and USAA. They plan to use UAVs, for example, to more quickly process insurance claims after natural disasters by allowing them to inspect damage —especially in remote locations—in real time. Insurers also plan to use UAVs to obtain imagery and data for use in underwriting, such as roof inspections. Until the FAA mitigates the visual line of sight limitation, however, the foregoing insurance uses for UAVs will remain drastically limited. Success for the FAA’s new Pathfinder program would open the door to potentially even larger scale use of UAVs by insurance companies.”

The implications for insurers also extend to the products and pricing offered. “First, the current dearth of UAS loss data makes it difficult for insurance companies to properly price insurance policies covering drone use,” said Carol Kreiling, senior claim manager at Swiss Re. “It is therefore no surprise that only a handful of insurers actually issue stand alone drone insurance coverage, such as Zurich Insurance in Canada, and Tokio Marine in the Lloyd’s of London market. An increase in commercial use of drones in the US could provide a steady flow of data that would allow more insurers to price and issue coverage for use of UAS. On the other hand, if the Pathfinder program’s goals are fulfilled—to find ways to safely use UAVs outside a pilot’s visual line of sight—increased remote use of drones could raise risk profiles for insurance coverage.”

At the conference, Huerta also announced a new smartphone app called B4UFLY, designed to help model aircraft and UAS users know if it is safe and legal to fly in their current or planned location by pairing geolocations with the relevant restrictions and requirements.

For more about drones, UAV regulations, and the potential impact these machines may have on the insurance industry, check out “Drones Take Flight,” the April cover story of Risk Management magazine.

Risks and Questions Surround 3D Printing Technology

NEW ORLEANS—One of the most promising new technologies to hit the wider market in recent years, 3D printing is poised to revolutionize manufacturing as we know it. Otherwise known as additive manufacturing, 3D printing allows users to print almost anything they can dream up, including toys, machine parts, clothing, food, and prosthetic (as well as actual) body parts. There even companies that can print a lifesize, 3D model of your unborn fetus using ultrasound scans.

Of course, as with any new technology, there are many risks to consider and just as many unanswered questions about how to address those risks. At an educational session this morning at the RIMS 2015 Annual Conference & Exhibition, Cynthia Slubowski, head o f manufacturing at Zurich, Lisa Cirando, and attorney with Jones Day and Toni Herwaldt, risk manager at Kraft Foods, provided a risk checklist, outlining at the wide range of risks and questions facing those in the 3D printing space and those whose industries will be impacted by this new technology:

Product risk. Since 3D printing changes the traditional manufacturing model, industries will need to determine who owns a 3D printed product and in the event of an accident how will liability be apportioned?

Technology risk. Who owns the software and designs used to create products, particularly when users can make endless customizations?

Operations risk. How will 3D printing impact power supplies (the printers generate a lot of heat during operation), and how will the possible toxicity of ingredients and their byproducts be addressed. In addition, what are the business interruption and transportation risks?

Cybersecurity risk. How do you protect you designs and formulas? How do you prevent counterfeiting?

Environmental risk. How do you address exhaust, housing and disposal issues?

Contract risk. What kind of risk transfer or licensing agreements do you want to have in place?

Insurance risk. Do you have the appropriate coverage and where will it be coming from?

Strategic risk. How do you handle reputation and intellectual property issues? What happens to your product development lifecycle management?

Supply chain risk. Does your supply chain risk increase or decrease?

Market risk. What differentiates your product? What happens to your geographical risk?

Avoiding Social Media’s Legal Pitfalls

Social media is now a standard communications tool for businesses, with many companies regularly using Facebook, Twitter and other social networks to engage with the public. More and more businesses are hiring social media specialists whose sole responsibility is to be the company’s “voice” on these platforms. But this activity comes with risk for both the organization and the individual. The potential for any posting to be retweeted, shared or even go viral underscores the need to be aware of the rising legal risks associated with your business’s social media accounts.

Potential Defamation Lawsuits

The first tip for anyone engaged in social media on behalf of their business or employer is obvious, but not always followed—think before you post. Even if the tweet or post contains an unintended error and is deleted immediately, postings can still be pulled and reposted or retweeted by others. Once something is out there on social media, however, you’ll need to deal with the consequences. Although the laws surrounding social media are still developing, it is possible for a business to be hit with an expensive defamation suit based on a single posting or comment.

Since most posts on social media pages are generally shorter than what a business normally has the space to say in a traditional publication, sales pitch or marketing brochure, the lack of context can present a greater risk of defaming someone or another business. Think about it like this: If a customer comments on a business’s Facebook page asking about one of their competitors, an employee might reply that the competitor provides “untrustworthy service” without much context or explanation to back up that claim. Just those two words have the potential to spiral into a defamation suit if the competitor feels the comment was untrue and harmed their reputation. Since most online statements are brief, it would be more difficult in court for the person posting the comment to prove that he or she is entitled to the same legal defenses available to a traditional publication, even if the post was true or was an opinion rather than a statement. To minimize defamation lawsuit potential, every comment, posting, tweet or retweet should be completely factual and have a positive tone. It is not always possible to check every post before it is published, but anything potentially controversial should be read by another pair of eyes before clicking ”submit.”

Personal versus Professional

Another still-developing area of social media regulation is the distinction between personal and professional profiles or accounts. Businesses are legally accountable for anything tweeted, blogged, or posted on the company’s social media accounts. But this is where it gets complicated; it is possible for a company to also be held responsible for what an employee posts on their personal accounts, especially if it’s not clear to the reader whether they are speaking on behalf of the company or only for themselves. Here’s an example: An employee who works in the food industry posts a photo to his Twitter account of himself handling food in an unsanitary way. Even though the employee may have meant it as a private joke for his followers, any customer who sees the photo could sue that business for lack of training and unsanitary conditions.

To proactively prevent this type of situation, it is important for employers to have a social media policy outlined in their employee handbook. Depending on the business and applicable law, it may also be beneficial to establish upfront that employees’ public social media accounts may be monitored. It is also worth considering a handbook policy stating that any work-related posts on an employee’s private social media accounts are not allowed, and the violation of this policy could result in termination. Some organizations require employees who have personal Twitter or Facebook accounts to post a disclaimer in their “about me” section saying something along the lines of, “I work for X Company, but all posts reflect my personal views only.” This can potentially protect both the employee and employer should a lawsuit arise, but it is not a failsafe.

The rise of social media is bringing significant benefits to businesses, but they also need to be aware of potential legal pitfalls. As the laws regulating social media continue to develop, smart business owners and managers should be prepared to implement appropriate safeguards and policies to ensure that their business can sustain a 140 character mishap, should one occur.

To protect themselves from any potential lawsuits, companies should have adequate insurance coverage in place to address social media activities. Since most commercial general liability policies do not cover online content, it’s important to truly understand what activities your policy covers.

 

Enterprise Hot Spots for 2014

If everyone had a crystal ball, risk management would be easy. But since there aren’t any wizards or fortune tellers among us (that I know of), we have to rely on forecasts to help guide us. To this end, every year, business consultant CEB develops a list of what they consider the top 10 emerging risk areas that will affect enterprises in the coming year. While the list is primarily intended to help audit teams develop and refine their plans for the coming year, the risks are really applicable to any business unit.

  1. Compliance management
  2. Cybersecuirty: Malicious insiders
  3. Risk management
  4. Cybersecurity: Malicious outsiders
  5. Emerging markets
  6. IT governance
  7. Third-party relationships
  8. Project management
  9. Intellectual property
  10. Crisis response management

In a new online exclusive article in Risk Management magazine, Friso Van Der Oord and Jeffery Ugbah, directors with CEB’s legal, risk and compliance practice, organize the list into four themes that look at the downside of business interdependence, the balance between control and value, embedding compliance in the business, and organizational blindspots. Their analysis helps put these risk into greater context.

Our current report addresses some well-known risks, such as cyber-security and third parties, but also highlights gaps in companies’ control environment such as inadequate risk management and insufficient crisis response management that may create real blind spots for companies. Not only do we see changes in the corporate risk landscape, perhaps more importantly we see organizations, despite their best intentions, struggle to maintain effective controls in light of rapid business and regulatory changes.

For more, you can read the entire article at RMmagazine.com.