An agent has some questions after reading an article on the Big “I” Virtual University about exclusions for personal drone use.  

Q: "Were you referring to an ISO endorsement that included coverage for model or hobby aircraft? I don’t find this coverage in the HO policies of [four insurers]. And wouldn’t the business exclusion remove coverage for an insured real estate agent who uses a drone to take pictures of homes?"

A: “The aircraft liability exclusion in all ISO HO policies defines ‘aircraft’ as follows: ‘Aircraft means any contrivance used or designed for flight except model or hobby aircraft not used or designed to carry people or cargo’ [emphasis mine].

A lot of carriers don’t make this ‘model or hobby aircraft’ exception. That’s why we say personal lines insurance is not a commodity—significant differences often exist between policy forms. And, as evidenced by one of the very upscale carriers you mention, inferior coverage doesn’t necessarily result from cheaper product.

Consider the following: Several years ago, a claim involved $25,000 water damage in a condo unit due to a water leak in the unit above. The downstairs condo had coverage under a ‘deluxe’ condo policy that was superior to the ISO HO-6 in many ways—but water damage wasn’t one of them. The claim would have been covered under the plain vanilla ISO HO-6, but the insured was out $25,000 under the more expensive and overall better form. This forced the downstairs condo owner to go after the upstairs unit owner, whose condo insurer at least initially denied the liability claim.

Another example is the exclusion for ‘repeated seepage or leakage for weeks, months or years’ water damage in many homeowners policies. ISO got rid of this exclusion around 1991—as long as the water damage is hidden and reported promptly, the ISO HO-3 covers the damage. Considering this is a major source of claims, a purchasing decision between several HO policies should reflect the value of an ISO form if there is a greater risk of this happening.

P.S.: The business exclusion in the ISO HO policies would likely remove liability coverage for BI or PD arising from any excluded business activity. Not every ‘business’ activity is excluded—some exceptions apply—but an adult who makes their living selling real estate would likely be unable to secure coverage under the HO policy for using a drone in that business activity.”

Bill Wilson is director of the Big “I” Virtual University.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.