CHAPTER 7: THIRD PARTY LIABILITY
195. The Commission's Communication recognises
that, despite efforts to ensure all RPAS operations are safe,
accidents can happen, and victims must have access to adequate
compensation.
196. At present, EU Regulation 785/2004 describes
the insurance obligations for all aircraft operators. It requires
that all commercial RPAS operations purchase third party liability
insurance.[252] The
Regulation defines limits for the minimum amount of third party
liability insurance required based on the mass of the aircraft
on take-off. For RPAS weighing less than 500kg the minimum cover
required is approximately 660,000.[253]
Model aircraft, including RPAS for leisure use, weighing less
than 20kg are not required to have third party liability insurance.
197. The Communication outlines the Commission's
plans to assess whether existing third party liability requirements
for manned aviation, under EU Regulation 785/2004, are appropriate
for RPAS. In 2014, the Commission contracted transport consultancy
Steer Davies Gleave to carry out research into the applicability
of the existing Regulation for RPAS. Steer Davies Gleave found
that there was no uniformity in Europe or more widely regarding
the application of third party liability to aviation. Some Member
States followed a strict liability regime (where the aviation
company was automatically liable for any damage without there
being the need to attribute a fault); others carried out a fault-based
analysis on a case-by-case basis. It suggested that there was
no appetite in the aviation sector to rectify these discrepancies
which tended to be smoothed over in practice, and so they were
likely to be carried through into RPAS insurance.[254]
This view was supported by Bird and Bird LLP, which said that
there was little appetite for a formal liability regime: "the
incidence of aircraft accidents causing surface casualties is
low and there are few if any incidents of surface victims of a
material accident going uncompensated."[255]
Exemption for model aircraft
users
198. Concern was expressed about the exemption
in EU Regulation 785/2004 for model aircraft weighing less than
20kg. The distinction between commercial, model and leisure users,
upon which the rules in EU Regulation 785/2004 on liability are
based, is no longer clear-cut: the same equipment, presenting
essentially similar risks, may be used equally by all these groups.
Mr Heath, of John Heath Insurance Brokers LLP, a company
offering third party liability insurance to small RPAS operators,
noted that existing insurance legislation relied wholly on "the
status of the operator, not the platform they are using."[256]
Mr Phippard, of Bird and Bird LPP, added: "the risk
to the public is really no different if this 10kg vehicle is being
flown in the park by a child or used for survey purposes."[257]
199. BALPA and Alvarez and Marsal, a professional
services consultancy, both recommended removing completely the
exemption for model aircraft, including RPAS, from the requirement
for third party liability insurance.[258]
Alvarez and Marsal suggested that a mandatory insurance regime
for all RPAS could be implemented through "a form of registration,
as is required on light aircraft today
and such registration
would only be possible with the correct risk training and insurance
cover in place".[259]
200. Although the British Model Flying Association
shared the concerns described above, it argued that ensuring that
all RPAS owners had adequate insurance was "difficult to
address at any meaningful level."[260]
Mr Corbett, CAA, said:
"it is about proportionality
It is
difficult, but we have to get a handle on where the risk is and
where the potential for damage is. If we tie it up to such an
extent and require insurance for everybody who has even a small
aircraft that fits in your hand, for example, I do not think we
would be able to manage that appropriately".[261]
201. While similar equipment may be used by
both leisure and commercial RPAS pilots, introducing mandatory
third party liability insurance for the leisure use of RPAS would
be disproportionate to the hazard posed by such users.
Cost of third party liability
insurance
202. A number of commercial RPAS operators and
ancillary businesses noted the high cost and difficulty of purchasing
insurance for third party liability. Resource Group Limited said
that "the cost to insure a small unmanned surveillance aircraft
(SUSA) is almost twice that of insuring a standard family car."[262]
In a joint submission, ARPAS-UK and the UAV SIG of RSPSoc said:
"the insurance market for UK SMEs is currently restricted
to a few providers and we would welcome greater competition in
this area."[263]
203. On the other hand, the Royal Aeronautical
Society and English Heritage suggested that this was already happening
and that businesses were responding to the demand for insurance.[264]
The Royal Aeronautical Society said insurers "have invested
time in understanding the risks involved in operating UA and have
spent considerable time understanding the mechanics and properties
of UA themselves." It accepted that "this is a relatively
immature technology, [and]; the premiums can be expensive",
but believed this would change "as confidence grows with
use."[265]
204. Lack of information regarding the risks
associated with RPAS partly explained the high cost of premiums
for RPAS businesses. Alvarez and Marsal said companies offering
bespoke insurance for commercial RPAS businesses "are the
exception rather than the norm and they are expensive in premium
terms because it is impossible, in the early days of the product
and without any real risk data, to truly rate the risk."[266]
The lack of information regarding the risks present in RPAS operations
also raised questions about the quality of insurance products
already in use. EuroUSC said that its own database on safety,
collated from reports from over 1,000 companies, suggested that
"regulators and underwriters are underestimating future risk",
and that "the probability data is based on many false assumptions".[267]
205. At present information is gradually being
collated by insurance companies. Mr Heath said that his company's
premiums were calculated according to whether the pilot had received
permission to fly from the CAA, completed pilot training, the
value of their equipment, the total flying hours to date, and
the level of liability required.[268]
His business kept a record of accidents, detailing types and models
of aircraft, in order to identify trends and compare risks, but
he was reluctant to share this information for commercial reasons.[269]
In order to generate shared knowledge of the risks involved in
RPAS operations, Steer Davies Gleave said in its report to the
Commission that national aviation authorities should improve the
data collected on RPAS operations and accidents and share this
information with insurers and operators.[270]
206. The Commission hoped that the cost of premiums
would fall following the introduction of clear safety regulations
governing commercial RPAS flights.[271]
Resource Group Ltd said that insurance companies should have "a
price scaler where premiums are reduced subject to [a] number
of demonstrated safety processes", similar to a 'no claims'
bonus.[272]
207. In order to improve the information used
to determine third party liability premiums, we recommend that
any future EU legislation governing RPAS operations should require
national aviation authorities to share statistics regarding RPAS
incidents with regulators, insurers and operators in other Member
States.
COMPLIANCE WITH EU INSURANCE REQUIREMENTS
208. The cost of insurance premiums could also
fall in response to growing demand from operators. However, increased
demand would only lower premiums if commercial pilots complied
with their obligation to purchase third party liability insurance.
AM-UAS Ltd said that demand for third party liability insurance
was already being affected by its cost because new pilots took
the risk of not being insured, "in order to become a part
of a fast growing and exciting market."[273]
Blue Bear Systems Research Ltd said that commercial pilots failing
to take out adequate insurance meant that "ultimately this
will increase overall industry costs rather than the risk being
shared throughout".[274]
The high cost of premiums had also incentivised the creation of
cheaper insurance products which excluded third party liability
cover altogether. Alvarez and Marsal suggested that these products
were more attractive to start-up companies and hobbyist associations,
but that they were unlikely to stand the test of a significant
incident or claim.[275]
209. In order for EU Regulation 785/2004 to be
effective, and for the cost of premiums to reflect growing demand
from pilots, more needs to be done to ensure that commercial pilots
are aware of their legal obligation to purchase third liability
insurance. Mr Heath said that although "there is an
awareness amongst many that insurance is required, but there are
also an equal number who are not aware".[276]
While Bird and Bird LLP said that trade and model aircraft associations
played an important role in informing members, Mr Lee suggested
that the CAA also needed to reach out to prospective users and
the public to explain RPAS regulations.[277]
210. While raising awareness should deliver some
benefits, witnesses were clear that commercial pilots without
the requisite insurance should not be allowed to operate. Bird
and Bird LLP noted that Member States were obliged under EU Regulation
785/2004 to ensure that their pilots complied with the insurance
requirement.[278] Mr Corbett
said that the CAA "expect people to have appropriate cover
against third-party risks when we issue permissions."[279]
211. Compliance with EU Regulation 785/2004 could
be improved if confusion regarding its scope was removed. Bird
and Bird LLP said that the applicability of EU Regulation 785/2004
to RPAS could be clarified by providing a revised definition of
model aircraft, in line with a suggestion made in an EASA working
group. This would define model aircraft as those used "exclusively
for air display, recreational, sport or competition activity".
It continued: "Such terminology would have the effect of
requiring all commercial operations to be insured, regardless
of weight, and reduce significantly any confusion which currently
exists as to the scope of the insurance obligation."[280]
212. This would also serve to give assurance
to operators that their insurance was adequate. Mr Meuleman
said that confusion existed as to whether European law required
specific third party liability insurance for RPAS: "An issue
that could be clarified is the extent to which European law
as the regulation on insurance requirements for air carriers and
aircraft operatorsapplies here."[281]
213. The cost of third party liability insurance
premiums is likely to decrease with greater demand from RPAS pilots.
We therefore recommend that trade associations and national aviation
authorities raise awareness of and enforce commercial RPAS pilots'
obligations under EU Regulation 785/2004 to purchase insurance.
This will reduce the number of operators running the risk of not
taking out insurance and encourage a safer RPAS industry.
214. To address confusion regarding the scope
and applicability of EU Regulation 785/2004, we recommend that
the Commission brings forward amendments that would clarify that
the legal requirement to purchase public liability insurance depends
on whether the RPAS is being used for hobbyist or commercial use.
Minimum liability limit under
EU Regulation 785/2004
215. Some witnesses considered that the minimum
limit for third party liability insurance for commercial RPAS
below 500kg of approximately 660,000 was insufficient. Mr Heath
said that his business did not offer insurance products totalling
less than £2 million.[282]
The British Model Flying Association said that it "takes
a strong stance on insurance hence the provision of £25 million
of public liability cover as standard to all members."[283]
Simon Phippard, of Bird and Bird LLP, said that if an RPAS pilot
caused a major air accident but was only insured for the minimum
amount, then "There is not enough insurance, ultimately,
for it all to come back through that operator". He added:
"the airline would handle the issue in the first place, as
well as their insurers, and there would be sufficient cover at
least for the passenger claims to be resolved."[284]
216. Thales UK noted that the current limit stemmed
from aviation regulations, which were written by reference to
the weight of an aircraft.[285]
As it stands, the Regulation requires the same minimum amount
of third party liability cover for RPAS weighing 500kg or 1kg.
As discussed earlier in this report, the Commission is moving
towards adopting a proportionate approach to risk for RPAS safety
regulations. Such an approach would consider factors in addition
to weight, including whether operations will take place in congested
or rural areas.
217. In line with a risk-based approach to
RPAS safety regulations, we recommend that the Commission increases
the minimum amount of public liability cover required by commercial
RPAS operators under EU Regulation 785/2004. The Regulation currently
stipulates a minimum amount of 660,000 for all commercial
RPAS weighing up to 500kg.
252 Regulation (EC) No 785/2004 of the European Parliament
and of the Council of 21 April 2004 on insurance requirements
for air carriers and aircraft operators. Back
253
Q138. This is approximately equivalent to 750,000 Special
Drawing Rights Back
254
Steer Davies Gleave, A Study on the Third Party Liability and
Insurance of Remotely Piloted Aircraft Systems (RPAS), (November
2014) pp 1-2: http://ec.europa.eu/DocsRoom/documents/7661 [accessed
on 26 February 2015] Back
255
Written evidence from Bird and Bird LLP (RPA0027) Back
256
Q136 Back
257
Q140 Back
258
Written evidence from BALPA (RPA0031) and Alvarez and Marsal (RPA0044) Back
259
Written evidence from Alvarez and Marsal (RPA0044) Back
260
Written evidence from British Model Flying Association (RPA0043)
Back
261
Q23 Back
262
Written evidence from Resource Group Ltd (RPA0009) Back
263
Written evidence from ARPAS-UK and UAV Sig of RSPSoc (RPA0005) Back
264
Written evidence from Royal Aeronautical Society (RPA0018) and
English Heritage (RPA0007) Back
265
Written evidence from Royal Aeronautical Society (RPA0018) Back
266
Written evidence from Alvarez and Marsal (RPA0044) Back
267
Written evidence from EuroUSC (RPA0037) Back
268
Q141 Back
269
QQ144, 146 Back
270
Steer Davies Gleave, A Study on the Third Party Liability and
Insurance of Remotely Piloted Aircraft Systems (RPAS) (November
2014) p 4: http://ec.europa.eu/DocsRoom/documents/7661 [accessed
on 26 February 2015] Back
271
Q94 Back
272
Written evidence from Resource Group Ltd (RPA0049) Back
273
Written evidence from AM-UAS Ltd (RPA0006) Back
274
Written evidence from Blue Bear Systems Research Ltd (RPA0023) Back
275
Written evidence from Alvarez and Marsal (RPA0044) Back
276
Q140 Back
277
Written evidence from Bird and Bird LLP (RPA0027) and Peter Lee
(RPA0040) Back
278
Written evidence from Bird and Bird LLP (RPA0027) Back
279
Q23 Back
280
Written evidence from Bird and Bird LLP (RPA0027) Back
281
Q117 Back
282
QQ136-138 Back
283
Written evidence from the British Model Flying Association (RPA0043) Back
284
Q146 Back
285
Written evidence from Thales UK (RPA0030) Back
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