Drone attacks and insurance cover

Drone damage has become an ordinary risk for industrial companies and one of the most disputed for insurers. The dispute is almost always about the same thing: is a particular incident an insured event, or does it fall under an exclusion?

Where the dispute arises

Article 964 of the Russian Civil Code allows an insurer not to pay if the insured event resulted from military action, manoeuvres or other military measures, unless otherwise provided by law or the contract. Most refusals are built on this rule: the insurer calls a drone incident “military action” and takes it out of cover.

In practice the dispute rarely concerns a direct hit. More often it arises in borderline situations:

• secondary damage — a fire or flooding that began after the attack and caused most of the harm;
• a drone falling due to electronic warfare without detonation — there is damage but no explosion;
• debris from air defence interceptions — the harm was caused by something other than the attacking object;
• business interruption after the incident, even where the property is insured.

In each of these scenarios the outcome depends on exactly how the policy describes the risk and the exclusions. General wording such as “terrorism”, “sabotage” or “unlawful acts of third parties” without reference to specific scenarios leaves the insurer room for interpretation.

What practice shows

In such disputes courts look not at the name given to the event but at the causal link between the event and the loss, and at what the parties agreed in the contract. General guidance on property insurance was given by the Plenum of the Russian Supreme Court in Resolution No. 19 of 25 June 2024. The party that described disputed scenarios and their consequences in advance therefore wins.

Two more trends to take into account:

• “Paper tigers”. Declaratory clauses that effectively deprive the policyholder of cover do not work, but the insurer may delay payment by requesting excessive expert reports. Such demands should be blocked at the pre-trial stage rather than complied with “just in case”.
• VAT in the payout. Courts increasingly examine the policyholder’s right to a deduction and move away from including VAT in the indemnity. The damage calculation method is best fixed in the policy.

How to close the risk in advance

1. Describe the scenarios in the policy. State expressly that secondary damage from fire and flooding, a drone falling without detonation and damage from debris are covered, and distinguish them from the military action exclusion.
2. Check alignment with reinsurance. After the RNRC Concept, the terms of the direct policy and the reinsurance cover must match; otherwise the insurer will defend its position before the reinsurer at the policyholder’s expense.
3. Prepare an incident procedure. Who records the circumstances, which documents are collected within the first day, who notifies the insurer. Mistakes made in the first days are later used as grounds for refusal.
4. Address BI. Business interruption is excluded from subsidised reinsurance, so its cover has to be built separately.

If the loss has already occurred

Do not accept the insurer’s qualification or sign documents describing the event as “military action” before a legal assessment. First, the facts need to be recorded: what exactly happened, whether there was an explosion, what directly caused the damage. That picture then determines whether the exclusion applies.

Our Insurance and Loss Recovery team handles the settlement of drone-related losses both at the pre-trial stage and in court.