CARS THAT CAN TAKE TO THE AIR ARE HERE, BUT WHAT ARE THE INSURANCE AND CLAIMS IMPLICATIONS? BY ANDREW L. SMITH FlyingAND BRIAN P. HENRY Blind28 CLM MAGAZINE JANUARY 2018 Fifty-five years ago, the cartoon “The according to my Apple Watch it is not yet secure a fully functional flying car by the Jetsons” introduced a space-age family 2062, but flying cars are here. end of 2018, if not earlier. complete with George, Jane, Judy, Elroy, a The transition from drones to dog named Astro, and, last but not least, flying cars is only natural and is already AVAILABLE OPTIONS a robot maid named Rosie. The family well-underway. Police in Dubai, for Terrafugia, the first flying car lived in Orbit City in the year 2062 and example, are already using a HoverSurf manufacturer, is now beginning to sell “the its mode of transportation was none manufactured drone/motorcycle hybrid Transition,” which was initially developed other than a bubble-shaped flying saucer to fly around human police officers. So if in 2006. According to the company’s called an Aerocar. you are in the market for a flying car and website, “The Transition is the world’s In 1940, Henry Ford declared, you have a rather large bank account at first practical flying car. A folding-wing, “Mark my words: A combination your disposal, you’re in luck: Nineteen two-seat, roadable aircraft, the Transition airplane and motorcar is coming. You different companies are currently is designed to fly like a typical Light Sport may smile, but it will come.” Well, developing flying car products. You can Aircraft in the air and drive like a typical THECLM.ORG CLM MAGAZINE 29 Flying Blind car on the ground. It will run on premium INSURANCE AND to aircraft other than airplanes (see unleaded automotive gasoline, fit in a UNDERWRITING ISSUES Metro. Prop. & Cas. Ins. Co. v. Gilson standard construction single-car garage, Robert Hartwig, clinical associate in 2011, involving an ultralight vehicle; and convert between flight and drive professor of finance and co-director of Farmers Ins. Co. v. Daniel in 2008, modes in under a minute.” the Center for Risk and Uncertainty involving a helicopter; and Hanover Ins. The Transition’s first recorded flight Management at the University of South Co. v. Showalter in 1990, concerning took place back in 2009. This option is Carolina’s Darla Moore School of airplanes, balloons, helicopters, kites, kite capable of reaching speeds of up to 100 Business, told MarketWatch in 2012, balloons, orthopters, and gliders). mph and can reach altitudes of 10,000 “There is no off-the-shelf policy for feet. For just $300,000, this flying car can something like this.” Therefore, flying LIABILITY AND ACCIDENT COST be delivered right to your garage/hangar. cars present a novel risk to insurers. They Any accident involving a flying car will Meanwhile, the AeroMobil 3.0 share characteristics of both personal likely be significant. Every claim will is still a concept car, scheduled for aircraft and cars, but when combined, involve costly property and bodily injury release in 2020. This option will use they present unique, distinct issues. Little, damage, not to mention that flying cars electric power on the roadway and if any, useful data on flying-car risks cost hundreds of thousands of dollars to conventional aircraft fuel while in currently exists. purchase and repair. There will also be flight. However, the expected price tag The MarketWatch article notes inevitable growing pains. Early design is much higher at $1.3 million. annual premiums could run as high as and engineering hiccups are likely, as These options pale in comparison $60,000. It quotes insurance expert and history has shown with the inventions of to the sleek and elegant new PAL-V consultant Scott Simmonds as saying, automobiles and airplanes. Liberty, which combines the features of a “It’s the flying aspect of the car. That’s An AeroMobil prototype crashed three-wheeled sports car and a helicopter. the exposure with hair on it.” Policies for in 2015 during a test flight in Slovakia. First developed in 2012, this vehicle is light aircraft can cost as little as $3,000, Fortunately, the pilot was able to walk scheduled for release in 2019. Classified he says, but a flying car is likely to fall away with only minor injuries. However, as a “Gyroplane,” the PAL-V can reach a into the more expensive experimental the potential for severe and catastrophic speed of 112 mph. The listed price is now aircraft category. accidents and claims is readily apparent. $599,000, and, yes, you can pre-order Terrafugia Vice President Richard New issues in assessing fault may one in your choice of color. Gersh says in the MarketWatch article that be created as “fault shifting” potentially Kitty Hawk is an all-electric flying premiums would more likely be “in the comes into play. For example, the car company started by Google founder $20,000 range, plus or minus.” Association of California Insurance Larry Page. Its vehicle, known as “the Flying car manufacturers are also Companies (ACIC) is advocating just this Flyer,” looks like a large flying drone/ working hand-in-hand with insurers to fast- with autonomous vehicles. The group is pontoon boat, and is designed to operate track available insurance coverages. Two asking “for changes clarifying that the over water. The contraption reportedly insurance companies have preliminarily autonomous vehicle’s manufacturer retain does not require a pilot’s license because agreed to insure Samson’s “Switchblade” all liability for damage, losses, or injuries it is classified as an ultralight aircraft flying car, which the company calls “the caused by the operation of these vehicles.” under current FAA regulations. Kitty world’s first flying sports car.” There will The onus could soon be on the flying Hawk promises people will be able to be an insurance manager at Samson to car product and software manufacturers learn to fly the Flyer “in just minutes.” A assist purchasers with their coverage to disprove liability in these complicated consumer version will be available soon, needs, and the cross-over training scenarios, especially as software capabilities according to the company. included with each kit can be used by and automation settings are put in place. Ride-sharing giant Uber is existing pilots to seek a reduced insurance exploring Vertical Takeoff and rate. Those who train exclusively in INVASION OF PRIVACY Landing (VTOL) aircraft and the Samson’s Switchblades will, in turn, Liability coverage typically includes large-scale process of creating flying receive a reduced insurance premium. protection for personal injury, which also car short-term transportation systems. The definition of “insured vehicle” covers invasion of privacy. Flying cars, Uber has partnered with NASA to will be key to any coverage. For like drones, will likely fly over homes, explore the infrastructure necessary to example, most standard commercial backyards, and other personal spaces, make this a reality. The project, Uber general liability policies exclude increasing the likelihood of invasion Elevate, aims for flying-car taxis to be coverage for bodily injury and property of privacy claims. Policies may provide in circulation in large cities, such as damage resulting from the ownership, specific coverages or exclusions for Los Angeles, by 2020. The closing line maintenance, or use of aircraft or from trespass, nuisance, and invasion of privacy. in Uber’s current promotional videos aviation operations. The standard aircraft You may have heard of the so- is, “Closer than you think.” policy exclusion has already been applied called “drone slayer” in Kentucky who 30 CLM MAGAZINE JANUARY 2018 Flying Blind shot down a drone allegedly spying on • The FAA could be sued for its insurance issues associated with his daughter sunbathing in the family’s authorization of operations in certain flying cars are truly endless and backyard (see Boggs v. Merideth, March airspace. will only be refined over time. How 21, 2017). Similar instances could occur • Owners could be sued for negligent will courts and juries assess fault with flying cars and related products. operation, or for the training/hiring of in flying car accidents? What types Policy exclusions may arise for a pilot. of claims will plaintiffs file? How illegal activities—such as invasion • Pilots could be sued for their own will flying cars be regulated at the of privacy or illegal surveillance or negligence. federal, state, and local levels? How filming—or where questions exist as to • Product and component will insurers underwrite these new whether a flying car was operated in manufacturers could face suits for risks? How will existing insurance violation of FAA regulations. Indeed, it software malfunctions, design and policies grapple with flying cars? Be took the FAA years to determine how manufacturing defects, inadequate sure to stay abreast of these constant to regulate drones. Hundreds of pages warnings, breach of warranty, changes in technology, especially of FAA rules, regulations, and guidelines or failure to comply with to-be- as flying cars begin to impact our are now available for drones. Flying determined safety standards. insurance industry. K cars will present even more complicated • Operation training facilities may be regulatory and licensing issues for state subject to liability. Andrew L. Smith is a partner in the and federal governments alike. • Flying cars could be deemed an ultra- Cincinnati office of Smith, Rolfes & hazardous activity and subject to Skavdahl Company LPA. He can be POSSIBLE DEFENDANTS strict liability. reached at [email protected]. When considering all of the potential defendants flying car litigation could Flying cars are no longer just Brian P. Henry is president of Smith, involve, insurers will need to keep the in cartoons.