Everywhere you turn these days the talk is drones, drones, drones. They supposedly have a million and one uses, including, we’re told, by Amazon for the delivery of packages. I’m dubious that Amazon will ever be dropping books from the sky onto my front porch. The awesome guy who delivers The Wall Street Journal at 5 AM every day virtually always misses my driveway. And he’s throwing the paper from ten feet away -- and while on Earth.

Another part of the drone story that has been getting a lot of chatter is insurers providing coverage for individuals and entities whose drones cause damage to people or property. It is not hard to imagine that the widespread use of drones will lead to such claims. And I’m sure we can all envision some invasion of privacy claims being brought against drone users. The insurance industry has a long history of quickly responding to emerging risks with risk transfer products. The availability of drone insurance is no exception.

But, until now, as far as I can tell, decisions addressing coverage for injury and damage caused by wayward drones have been non-existent. This is why the New Hampshire Superior Court’s recent decision in Rosenberg’s Pizza v. Live Free Insurance Co., No. 16-237 (N.H. Super. Ct. (Merrimack) Feb. 23, 2017), the first coverage decision involving a drone, is likely to get a lot of attention.

Morty Rosenberg was the third generation owner of Rosenberg’s Pizza in Concord, New Hampshire. Morty was a drone enthusiast long before drones had come to the attention of the public at large. So it came as a surprise to no one when he decided to offer pizza delivery by drone. He testified at deposition that it wasn’t meant to replace pizza delivery by car. It was “just for fun” and he called it “a publicity stunt.” Indeed, within a week of his first delivery, a local news channel did a story on it.

There were several necessary restrictions on pizza delivery by drone. The customer had to be located within 2 blocks of the restaurant, have an open front yard for a safe landing and delivery was restricted to a single pizza.

The first ten deliveries were successful. Then things came crashing down – literally. Rosenberg’s drone – nicknamed Air Sauce One -- was delivering a pizza to a house when the box disengaged from the drone too soon. The pizza box was tightly sealed and fell two hundred feet, landing on the roof of Robert Floyd’s Tesla as he was getting inside. After hitting the car the box struck Floyd in the face, causing serious injury. He required 22 stitches in his cheek and will have a permanent scar. The Tesla sustained $5,500 in damage. Thankfully Floyd’s Toy Manchester Terrier, Daisy, who he was holding at the time of the collision, was not injured. Daisy ate a slice after the box opened on impact and the pizza hit the ground.

Floyd sued Rosenberg’s Pizza for his injuries sustained. Rosenberg’s commercial general liability insurer disclaimed coverage, citing the “aircraft exclusion.” Rosenberg’s had little in the way of a defense to liability or money to satisfy a judgment. By all appearances the pizza place was a goldmine – but the company’s tax return somehow showed it losing money. Floyd and Rosenberg’s entered into a consent judgment for $325,000. Floyd agreed not to execute against Rosenberg’s and Rosenberg’s assigned to Floyd its rights under its commercial general liability policy.

Floyd filed suit against Live Free Insurance in New Hampshire Superior Court, in Merrimack, seeking coverage for the judgment. The court in the coverage action concluded that Live Free was obligated to provide coverage for Floyd’s injuries and the damage to his automobile. In a decision addressing the parties’ competing motions for summary judgment, the court held that the “aircraft exclusion” in the CGL policy did not apply.

The exclusion in the Live Free policy provided as follows:

This insurance does not apply to:

g. Aircraft, Auto or Watercraft

“Bodily injury” or “property damage” arising out of the ownership, maintenance, use, or entrustment to others of any aircraft, “auto” or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and “loading or unloading”. ***

The court, after a lengthy analysis, held that the drone was not an “aircraft.” It observed that the term “aircraft” was not defined, while the term “auto” in the exclusion was. That didn’t help the insurer, nor did the fact that exclusions must be interpreted narrowly. The court concluded that, since the aircraft exclusion had been in place long before individuals and non-military organizations were using drones, the term aircraft must be interpreted based on its meaning at the time it was drafted – a vehicle that carries passengers. This made it easy for the court to conclude that the drone was not an aircraft since, as the judge put it, “the drone carried pizza and not people.”

So, with no aircraft exclusion, Floyd got the dough.