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3. CU-21-73

What the form is

The CU 21 73 is an endorsement to the ISO Commercial Liability Umbrella Coverage Form. Its primary function is to explicitly exclude coverage for 'personal and advertising injury' liability (Coverage B) that arises from the use of unmanned aircraft, commonly known as drones. This means if a drone operation leads to a claim alleging, for example, invasion of privacy, libel, slander, or copyright infringement in advertising, this endorsement aims to prevent the umbrella policy from covering such a claim. It is designed to follow the intent of the underlying CGL endorsement CG 21 11, which applies a similar exclusion to Coverage B of the CGL policy.

Classes of business it applies to

This endorsement can be applied to virtually any commercial insured that has a Commercial Liability Umbrella policy, particularly if the insurer wishes to mitigate exposures related to unmanned aircraft. It is especially relevant for businesses where drone use, even if incidental, could lead to personal or advertising injury claims. Examples include:

• Real Estate Agents: Using drones for property photography could lead to invasion of privacy claims from neighbors.
• Media and Marketing Companies: Utilizing drone footage in advertising campaigns could result in claims of unauthorized use of likeness or copyright issues if not properly managed.
• Construction Companies: Drones used for site surveys or monitoring might inadvertently capture images or information leading to privacy concerns.
• Event Organizers: Drones filming events could lead to various personal injury claims from attendees if their images are used inappropriately or privacy is breached.
• Any business that owns or operates drones, or hires third parties to operate drones on their behalf, where personal and advertising injury exposures are a concern for the insurer.

Special considerations

• Specificity to Coverage B: It's crucial to understand that this endorsement only applies to Personal and Advertising Injury Liability (Coverage B). It does not affect Bodily Injury or Property Damage Liability (Coverage A) that might arise from unmanned aircraft. For exclusions related to Coverage A, or both Coverage A and B, different endorsements like CU 21 72 or CU 21 71 would be used.
• Potential Coverage Gap: If this endorsement is attached, the insured will have no personal and advertising injury liability coverage under their umbrella policy for incidents involving unmanned aircraft. They would need to rely on any underlying coverage (if not similarly excluded) or procure specialized drone liability insurance that covers these exposures.
• Follow Form Principle: Umbrella policies often 'follow form' to the underlying CGL policy. This endorsement helps ensure consistency in excluding unmanned aircraft personal and advertising injury exposures if a similar exclusion (like CG 21 11) is on the CGL.
• Evolving Risk: The use of drones presents evolving liability risks, and insurers use endorsements like CU 21 73 to manage these uncertainties, particularly concerning privacy and advertising-related torts.

Key information for agents and underwriters

• Risk Assessment: Underwriters should carefully evaluate the insured’s current and potential use of unmanned aircraft. If drone operations are part of the insured's business, the underwriter must determine if the standard umbrella policy's unendorsed terms are acceptable or if this exclusion is necessary to align with the company's risk appetite.
• Agent's Role: Agents must clearly communicate the impact of this exclusion to their clients. If an insured uses drones, the agent should discuss the resulting coverage gap for personal and advertising injury under the umbrella and explore alternative risk transfer solutions, such as dedicated drone insurance.
• Pricing Implications: While adding an exclusion might theoretically lead to a premium reduction, the primary driver for this endorsement is often the insurer's desire to avoid unpredictable or unwanted drone-related personal and advertising injury claims rather than a significant pricing adjustment.
• Underwriting Guidelines: Insurers will typically have specific underwriting guidelines detailing when this endorsement should be applied. It might be mandatory for certain industries or based on the insured's specific drone usage profile.
• Alternatives to Exclusion: If an insured requires coverage for unmanned aircraft exposures under their umbrella, and the insurer is willing to provide it, endorsements offering limited coverage for designated unmanned aircraft (e.g., CU 24 52 for Coverage B only) might be considered instead of a full exclusion. However, these are less common and subject to stricter underwriting.