Drone Insurance Exclusions That Kill Claims (With Real Scenarios)

Quick TL;DR

• Insurance policies look generous until you hit an exclusion. Those one-line exclusions are claim killers.

• The most dangerous exclusions: operations in violation of law, unlisted pilots, unscheduled payloads, theft from unattended vehicles, data/cyber, wear and tear, and war/intentional acts.

• Fixes: read exclusions first, schedule payloads, get permissive pilot language, buy inland marine or theft riders, add cyber coverage, and document everything immediately after an incident.

Drone Insurance Exclusions That Kill Claims (With Real Scenarios)

Why this matters

People lose money not because accidents happen but because they assumed a policy covered something it did not. The exclusion clause is the insurer’s safety valve. Read one real denial letter and you will see how the smallest omission or ambiguous word destroys a claim. 

This article gives you the exclusions that actually cause denials, exact policy language to avoid, real scenarios showing how claims are killed, and immediate, practical fixes you can implement today.

If you operate commercially, treat this as mandatory reading.

The exclusions that actually kill claims

1) Operations in violation of law or regulation

Typical language: "This policy does not apply to loss or liability arising out of operations in violation of any federal, state, or local law or regulation."

Why it kills claims

• If FAA rules or a required waiver were not followed, insurers rely on this exclusion to deny both liability and hull claims. Administrative lapses like an expired waiver or missing Remote ID can be used against you.

Real scenario

• A pilot attempts a BVLOS test without an issued waiver. The drone crashes into a parked truck. Insurer denies hull and liability citing "operations without required authorization." The operator pays $12,500 in damages and legal fees.

Fix

• Get waivers and approvals before risky ops. Keep copies in the job folder and email a copy to your broker before the flight.

2) Named pilot or limited pilot language

Typical language: "Coverage applies only to pilots named in the declarations page."

Why it kills claims

• If a subcontractor or temp pilot flies and a loss occurs, the insurer may deny the claim because that person was not listed.

Real scenario

• Company hires a local pilot for a single job. Drone damages roofing shingles. Insurer denies liability because pilot was not named. Company pays repairs and suffers client fallout.

Fix

• Insist on permissive pilot language or get all likely pilots added to the policy. If you rotate pilots, require your insurer to accept a permissive-named-pilot endorsement with clear minimum qualifications.

3) Payload not scheduled or excluded

Typical language: "Detached payloads and removable equipment are excluded unless listed on the schedule page."

Why it kills claims

• Cameras, LiDAR, cinema rigs and SSDs are often excluded by default. A policy might repair the airframe but refuse to pay for your $15,000 camera if it was not scheduled.

Real scenario

• A crash destroys a camera valued at $11,500. Policy pays for hull repair but refuses the camera value because it was not listed. Owner receives ACV of a much smaller amount or is paid nothing.

Fix

• Schedule every expensive payload with serial numbers and invoices. Use agreed-value for high-end gear.

4) Theft from unattended vehicle or inadequate security

Typical language: "Theft is excluded when property is left unattended in a vehicle overnight unless secured in a locked, out-of-sight compartment."

Why it kills claims

• Simple oversight like leaving a case visible in a car can void a theft payout. Insurers check scene photos and statements.

Real scenario

• Operator leaves a case in the backseat during a 20 minute site meeting. Case is stolen. Claim denied under theft exclusion for unattended vehicle.

Fix

• Use locked, hidden compartments or bring gear inside. Add inland marine or theft-in-transit coverage if you must leave gear in vehicles frequently.

Read: Insurance Checklist for Starting a Drone Service Company (Legal + Insurance Steps)

5) Data, cyber and privacy exclusions

Typical language: "This policy excludes liability or costs arising from data breach, unauthorized disclosure, or cyber extortion."

Why it kills claims

• Damaged SSD or leaked client imagery can create large notification, legal and remediation bills that hull or liability will not cover.

Real scenario

• An SSD with client site plans is lost and later published online. Operator has hardware replacement covered, but not the $80,000 in forensic, notification and legal costs because no cyber coverage was purchased.

Fix

• Buy cyber/data liability coverage and enforce encrypted storage and documented custody procedures.

6) Wear and tear, maintenance and manufacturer defect exclusions

Typical language: "This policy does not cover loss arising from wear and tear, gradual deterioration, or latent defects."

Why it kills claims

• If a motor fails because of overdue maintenance or a manufacturing defect, an insurer may attribute the cause to wear and tear and deny the claim.

Real scenario

• Motor fails midflight. Investigation shows last service was 14 months ago. Insurer denies because maintenance schedule was not followed and wear and tear is cited.

Fix

• Follow manufacturer maintenance schedules, keep logs, and present invoices. Use a maintenance SOP and keep proof accessible.

7) Intentional acts, criminal acts and gross negligence

Typical language: "No coverage for intentional, wilful or criminal acts, or for acts done under the influence of alcohol or drugs."

Why it kills claims

• This is a near-universal exclusion. If the incident involves intoxication, reckless disregard, or intentional misuse, the insurer refuses coverage and you face legal exposure.

Real scenario

• Pilot admits on social media to flying under the influence. Claim denied and operator faces civil suits and regulatory penalties.

Fix

• Zero tolerance policy for alcohol or drugs. Make pilot concurring statements standard in your SOPs.

8) Contractual liability or liability assumed by agreement

Typical language: "We do not cover liability assumed under contract or agreement, except where such liability would have applied in the absence of the contract."

Why it kills claims

• If you sign a client contract that shifts more liability to you than your insurer recognizes, the insurer can deny claims that arise solely because of that contract term.

Real scenario

• A venue contract required operator to accept all liability beyond limits. After a $40,000 claim the insurer argued that excess contractual liability was not covered and refused to pay the overage.

Fix

• Ask clients to accept a reasonable indemnity or require them to list you as additional insured. Do not sign unlimited indemnities without broker and legal review.

Patterns insurers use to deny - the procedural trap

Insurers do not always deny on a single exclusion. They use procedural missteps as grounds:

• Late notice of claim.

• Failure to preserve evidence like raw telemetry or SD cards.

• Incomplete maintenance or pilot logs.

• Contradictory statements in emails or social media.

Procedural errors are the easiest way for insurers to avoid payment even when the loss might otherwise be covered.

Fix

• Have an incident SOP: export telemetry immediately, bag SD cards, take scene photos, get witness contacts, and notify your broker within policy timelines.

How to spot a dangerous clause during quoting

When you get policy text, highlight any lines that look like:

• "This policy does not apply to..."

• "Coverage is limited to named pilots"

• "Payloads are excluded unless scheduled"

• "Theft is excluded from unattended vehicles"

• "Data breach costs are excluded"

Ask your broker to translate each into plain English, and demand they show how the clause would have applied to two recent claim examples. If the broker cannot justify the clause, find a different broker or carrier.

Immediate checklist - what to do right now with your policy

• Read the exclusions section top to bottom and paste the most important five into an email.

• Cross-check your most valuable recent job against those five exclusions. Could one have applied? If yes, fix immediately.

• Prepare a payload schedule with serial numbers and invoices and submit it to your broker.

• Add inland marine or theft rider if you transport gear frequently.

• Buy cyber/data liability if you hold client images or PII.

• Get permissive pilot wording if you use contractors.

• Update SOPs to force preflight and maintenance log entries and store them per job.

Two real claim files and how to fight a denial

Below are two anonymized, realistic appeal strategies you can use.

Case 1 - Denied for footage of private property (privacy claim)

Denial reason: Insurer cites an exclusion for "intentional invasion of privacy" or "statutory damages arising from privacy statutes."

Appeal strategy

1. Obtain denial letter and exact clause citation.

2. Produce signed client release and job sheet showing permission to shoot.

3. Provide GPS telemetry showing flight path remained within the client property boundary.

4. Provide emails where client confirmed boundaries and approvals.

5. Request internal claim file and adjuster notes.

6. If denied after appeal, escalate to broker, file a regulator complaint, and consult counsel. Many privacy claims depend on fact patterns; documented permission matters.

Case 2 - Denied for theft from vehicle

Denial reason: Insurer cites unattended vehicle exclusion.

Appeal strategy

1. Produce timestamped photos showing vehicle was locked and equipment was secured in a concealed, locked compartment.

2. Provide witness statement showing operator checked equipment after returning from meeting.

3. Provide GPS logs showing operator was on site for less than 30 minutes and did not leave equipment unattended overnight.

4. If insurer still denies, ask for salvage and subrogation basis. Sometimes the carrier will offer a partial settlement.

In both appeals, escalate fast, push for the claim file, and keep communications tight and professional.

Sample clause templates to request from your broker

Use these copy-paste endorsements to close common gaps.

Permissive pilot endorsement request

"Coverage extends to any pilot who meets the insured's minimum documented training and flight hour criteria, provided the pilot's log and certificate are delivered within five business days of the loss."

Payload scheduling clause

"All detachable payloads listed on Schedule A are covered at the agreed value specified. Insurer agrees to pay agreed value on total loss less deductible."

Theft-in-transit endorsement

"Theft in transit is covered when insured equipment is under the direct control of the insured or secured within a locked vehicle interior out of plain view. Overnight leave in vehicle excluded unless stored in a locked, permanently affixed safe."

Cyber first-party coverage

"Insurer will provide first-party cyber coverage for forensic, notification, legal defense and remediation costs arising from an insured data event, subject to the policy limit and deductible."

Final advice

Exclusions kill claims faster than crashes do. The difference between getting paid and getting nothing is often a two sentence clause you missed. 

Do not be embarrassed to treat your policy like a contract you must master. Read it, highlight exclusions, force your broker to put protections in writing, and fix operations so you never walk into an exclusion trap.

Read: What Drone Insurance Actually Covers (And What It Never Covers)

Author

Svetlana - I am a Drone Insurance Writer and Researcher. I write about drone risk management and insurance for US pilots. Not a licensed broker. For policy advices contact a licensed insurance professional.