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Vol. 9 - Issue 4
May 31, 2020


Encore: Randy Spencer’s Open Mic

The Drone Coverage Case That Flew Out Of Nowhere






There has been a lot of talk these days about drones.  They supposedly have a million and one uses.  This means that they have the potential for a million and one things to go wrong.  As a result, another part of the drone story that has been getting a lot of chatter is insurers providing coverage for individuals and entities whose drones cause damage to people or property.  It is not hard to imagine that the widespread use of drones will lead to such claims.  A drone crashes onto a person or property.  I can definitely see that.  Cargo being delivered by a drone is damaged or destroyed or injures someone.  Sure, that makes sense.  The insurance industry has a long history of quickly responding to emerging technologies with risk transfer products.  The availability of drone insurance is no exception. 

But as is so often the case, no matter how hard you try to think of potential loss scenarios, especially for a new risk, along comes one that nobody, no way, no how, could have ever seen coming.  That’s what happened last summer with a drone in a small town in Maine. 

The Penobscot County Public Library, located in Bangor, has long had a tradition of providing delivery services.  The county’s large elderly population had made it necessary for the library to bring books, DVDs and CDs to its borrowers.  The library, run by Biblio, LLC, a private company following the state’s privatization push a few years back, had decided to try its hand at using a drone to make deliveries.  Biblio’s decision was also made with self-interest. Lending was down.  The county’s decision, whether to renew its service contract, was going to be made based on the library’s usership.

To get word out about its unique delivery service, Biblio took its shiny new drone and affixed a large banner to it stating: “Library Uses A Drone For Delivery.”  Like a prop plane pulling an ad across the beach, Biblio’s drone crisscrosssed Penobscot County for a week announcing the library’s new service.  However, many of the county’s residents were not familiar with the concept of using a drone to make deliveries.  Some looked at the banner and thought that Skippy McDougal, the long-time and beloved delivery man for the library, was being called a drone.

After hearing about this from a dozen people, Skippy filed suit against Biblio for defamation.  He alleged that, being called a drone, had caused emotional distress, as well as his imaginary girlfriend to break-up with him.  Skippy also alleged that the incident led to the loss of his long-time weekend job delivering pizza for Mordechai’s Italian Bistro.  As Mordechai Greenbaum put it, “I tell you, only a meshugenah would order a pizza if the delivery guy is a drone.” 

Biblio sought coverage for Skippy’s suit from its liability insurer, Maine’s oldest, Crustacean Insurance Company.  The insurer acknowledged that the defamation claim qualified as a “personal and advertising injury” under its CGL policy, being, in relevant part, “written publication, in any manner, of material that slanders or libels a person.”  The insurer also did not argue that the Employer’s Liability exclusion, added to Coverage Part B by endorsement, did not apply.  Skippy was not injured in the course of employment.    

However, Crustacean denied coverage based on the policy’s newly added drone exclusion, formally called the “Unmanned Aerial Vehicle” exclusion.  Crustacean had recently introduced a stand-alone drone policy.  To help sales of its nascent insurance offering, the company added a drone exclusion to its CGL policies.  The Unmanned Aerial Vehicle exclusion applied to “injury and damage arising out of the ownership, maintenance, use or entrustment to others of any unmanned aerial vehicle owned or operated by or rented or loaned to any insured.  Use includes operation and ‘loading or unloading.’”

Biblio, lacking insurance, settled Skippy’s suit for $22,000 and incurred $9,000 in defense costs to get there.  Biblio then set out to claw back its money from Crustacean.  Biblio filed a breach of contract action against Crustacean in Penobscot County Superior Court.  Crustacean and Biblio both filed motions for summary judgment.  The court granted Biblio’s motion and denied Crustacean’s. 

In Biblio, LLC v. Crustacean Insurance Company, No. CV-2016-0037 (Me. Super. Ct. Aug. 16, 2017) the court explained that the UAV exclusion did not preclude coverage because it did not specify whether it was applicable to “personal and advertising injury.”  The court stated: “By using the term ‘injury and damage’ in its exclusion, Crustacean has not made it unambiguous, as it must, that it is intending to exclude claims for ‘personal and advertising injury.’  A reasonable insured could conclude that the term ‘injury’ means only ‘bodily injury.’  Crustacean’s argument, that the term ‘injury’ is simply a device to conveniently state both “bodily injury” and “personal and advertising injury,” is belied by its own words.  In several places throughout the policy Crustacean uses both ‘bodily injury’ and ‘personal and advertising injury’ together.  In all those instances the insurer chose not to employ its so-called ‘device for convenience.’  Based on this state’s long-held view that exclusions in insurance policies must be construed narrowly, we are constrained to find that the UAV exclusion is ambiguous and does not preclude coverage for Biblio for its settlement of the McDougal action.”  Id. at 6.  

The court also found support for its decision in the brochure that Crustacean had prepared for its new stand-along drone policy: “Crustacean touts the need for a drone policy by pointing to a parade of horribles that can come from the operation of a drone, all of which it explains, in its advertising piece, are now excluded by its CGL policy.  But nowhere on this laundry list of mishaps is the risk of defamation.  This lends support for this court’s conclusion that defamation is not a drone-related risk that Crustacean was concerned with excluding from its general liability form.”  Id. at 8.   
As I said, sometimes no matter how hard you try to think of potential loss scenarios… 


That’s my time. I’m Randy Spencer. Contact Randy Spencer at

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