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3. CU-21-72

What the form is

The CU 21 72 is an endorsement to the ISO Commercial Liability Umbrella Coverage Form (CU 00 01). Its primary purpose is to explicitly exclude coverage for "bodily injury" and "property damage" (Coverage A) that arises from the ownership, maintenance, use, or entrustment to others of "unmanned aircraft," commonly known as drones. This endorsement effectively carves out unmanned aircraft from the standard aircraft exclusion found in the umbrella policy, applying a specific and often more restrictive treatment to drone-related exposures for Coverage A. It ensures that the umbrella policy does not provide coverage for these types of claims unless specifically bought back through other endorsements.

Classes of business it applies to

This endorsement can be applied to virtually any class of business that carries a Commercial Umbrella policy where the insurer wishes to exclude liability for bodily injury and property damage stemming from drone operations. It is particularly relevant for insureds that:

• Directly use drones in their operations (e.g., construction companies for site surveys, real estate agencies for aerial photography, agricultural businesses for crop monitoring, media companies for filming).
• Hire subcontractors or have vendors who might use drones in a way that could lead to vicarious liability for the insured.
• Operate in industries with increasing drone usage, thereby heightening potential exposure.

For example, a roofing contractor using a drone to inspect roofs would find Coverage A claims related to that drone excluded under their umbrella policy if this endorsement is attached. Similarly, a large retail company hosting an outdoor event where a third-party vendor operates a drone for promotional filming could also see related bodily injury or property damage claims excluded.

Special considerations

• Coverage A Specific: This endorsement applies only to Coverage A – Bodily Injury and Property Damage Liability. It does not affect Coverage B – Personal and Advertising Injury Liability. For excluding unmanned aircraft exposures under Coverage B, endorsement CU 21 73 would be used. A broader exclusion for both Coverages A and B is available via endorsement CU 21 71.
• Exclusionary Nature: It's crucial to understand that this form removes coverage. If an insured requires umbrella liability coverage for their drone operations, this endorsement should not be used, or its effect must be countered by adding a specific coverage endorsement, such as CU 24 50 Limited Coverage For Designated Unmanned Aircraft.
• Definition of "Unmanned Aircraft": The policy's definition of "unmanned aircraft" is critical. Generally, it refers to an aircraft that is not designed, manufactured, or modified after manufacture to be controlled directly by a person from within or on the aircraft.
• Tracks CGL Endorsement: The CU 21 72 is designed to align with the CGL endorsement CG 21 10, which provides a similar exclusion for unmanned aircraft under the primary general liability policy. This helps maintain consistency in coverage approach between the CGL and umbrella layers.
• Strengthened Aircraft Exclusion: This endorsement often broadens the exclusion for unmanned aircraft compared to the standard aircraft exclusion in an unendorsed policy, potentially applying even if the drone is not owned, operated, rented, or loaned to the insured.

Key information for agents and underwriters

• Risk Assessment: Underwriters must carefully assess the insured's current and potential exposure to drone-related liability. If the exposure is present and the intent is to exclude it from umbrella Coverage A, this endorsement is appropriate.
• Client Communication: Agents have a responsibility to clearly explain the impact of this exclusion to their clients, especially those known to use or considering the use of drones. Misunderstanding its effect can lead to significant coverage gaps.
• Coverage Alternatives: If drone liability coverage is needed under the umbrella, agents and underwriters should discuss alternative endorsements that can provide buy-back coverage (e.g., CU 24 50, CU 24 51). This will likely involve additional underwriting information and premium.
• Consistency with Underlying Coverage: Ensure that the approach to drone liability (excluded or covered) is consistent between the primary CGL policy and the umbrella policy to avoid gaps or confusion at the time of a claim. The CU 21 72 helps achieve this consistency for exclusion of Coverage A.
• Regulatory Landscape: While the form itself doesn't dictate FAA compliance, the use of drones is subject to aviation regulations. The insurability of drone operations can be influenced by the operator's adherence to these regulations.