Philadelphia Indemnity Insurance Company v. Hollycal Production is, as far as I know – and I’m pretty sure I’m right about this – the first decision to address whether coverage is owed, under a liability policy, for injury or damage caused by a wayward drone.  For years now I’ve be hearing about how drones are going to change my life.  No more carrying the recyclables to the curb every other Tuesday.  Nope, I’ll have our family drone do that as part of its chores.  But my life has not changed since drones came along.  The pizza delivery guy is still, well, the pizza delivery guy.

Nonetheless, I suspect that drones will find enough day to day uses to cause some injuries or damage.  As Blood, Sweat and Tears said, what goes up must come down.  So the first decision to address whether coverage is owed, under a liability policy, for such injury or damage, merits inclusion as one of the year’s ten most significant coverage cases.  When it comes to new exposures, the first decisions addressing the issue are often-times given outsized importance. 

At issue in Hollycal Production was the availability of coverage for a photographer, whose drone, being used to photograph a wedding, came into contact with Darshan Kamboj, a guest, causing her to lose sight in an eye.  The drone did not fall from the sky.  Rather, it was hovering at eye level when the unfortunate collision took place.    
         
Hollycal was insured under a general liability policy issued by Philadelphia Indemnity Insurance Company.  Following Ms. Kamboj’s unsuccessful efforts to settle the matter with Philadelphia Indemnity, she filed suit against Hollycal Production and related individuals.  Philadelphia Indemnity undertook Hollycal’s defense, under a reservation of rights, and filed an action seeking a determination that it had no obligation to defend or indemnity. 

As Philadelphia Indemnity saw it, no coverage was owed on account of two exclusions in the policy: (1) “Bodily injury” or “property damage” “arising out of the ownership, maintenance, use or entrustment to others of any aircraft, ‘auto’ or watercraft owned or operated by or rented or loaned to any insured;” and (2) the Policy does not apply to bodily injury “[a]rising out of the ownership, operation, maintenance, use, loading, or unloading of any flying craft or vehicle, including, but not limited to, any aircraft, hot air balloon, glider, parachute, helicopter, missile or spacecraft.”  [The first exclusion is contained in ISO’s standard commercial general liability policy.  The second one is not.]       

Philadelphia Indemnity filed a motion for summary judgment.  It was unopposed.  However, the argument by plaintiff’s counsel, pre-suit, was that the aircraft exclusions did not apply because a “drone equipped with a camera is not capable of transporting persons or cargo,” but, rather, is “unmanned and operated remotely.”  Ms. Kamboj’s counsel argued that the drone was “a piece of equipment” and not “an aircraft or vehicle.”

But the court held that the aircraft exclusions applied to preclude coverage.  While the analysis was not extensive, the court did not believe that that it was necessary for the drone to transport anything.  The court’s succinct analysis went like this:  “The Policy specifically excludes any bodily injury arising out of the use of an aircraft operated by an insured.  While the policy does not define the term ‘aircraft,’ the term ‘aircraft’ is unambiguous and its ordinary meaning, as defined by Merriam-Webster’s Collegiate Dictionary, is ‘a vehicle (such as an airplane or balloon) for traveling through the air.’ . . . Here, Ms. Kamboj was injured when a drone, hovering at eye level and operated by Defendant Satyam Sukhwal, came into contact with her eye. A drone, as a ‘vehicle . . . for traveling through the air’ is an aircraft under the term’s ordinary and plain definition. The ordinary definition of an aircraft does not require the carrying of passengers or cargo. Additionally, that a drone is unmanned and operated remotely does not make it any less of an aircraft.”

So there you have it – bodily injury, caused by a drone, comes within the aircraft exclusion of a liability exclusion.

But what about this?  Some liability policies now include a drone exclusion (fancy name – “Unmanned Aircraft” exclusion).  If an insurer is using a drone exclusion on its liability policies, does that mean that a policy, without a drone exclusion, is intended to provide coverage for injury or damage caused by a drone?  Otherwise, so the policyholder argument goes, why add the exclusion?  Insurers argue that the exclusion was added for the avoidance of doubt.  Courts throughout the years have addressed whether, the addition of an exclusion in a policy, means that the now-excluded scenario was initially intended to be covered.  The decisions on this issue go both ways.