In a previous blog post I talked about some of the new liability areas that are created when your rent home or room through HomeAway and Airbnb. Today we will review the insurance coverage that Airbnb provides to those who rent their homes through them. I’ll refer to these homeowners as hosts which is what Airbnb calls them. The individuals who rent your home will be called guests.
First let me explain the current problem with homeowner’s insurance coverage. A homeowner’s policy is designed to cover a person living in his home. When you start to rent that home out you become a landlord which brings a different exposure to the insurance carrier. Renters, generally speaking, are not interested in taking care of a home nor its personal belongings. Less lack of care could mean more claims, therefore, higher premiums are charged. What insurance carriers do then is exclude the rental of a home but grant certain exceptions. One of those exceptions is the occasional rental.
Insurance carriers have different perspectives on what “occasional rental” means. To help bridge this gap, Airbnb provides insurance coverage to protect the host from liability and damage to the property.
I have to give credit to Airbnb for providing some form of protection. The coverage they provide does cover the biggest exposure of hosts and that is trip and fall claims. The goal of this article is for a host to understand what they have coverage for and what remains uncovered.
The documents that I’m going over are the Host Protection Insurance Summary dated November 16, 2016. You can find this on Airbnb’s web site here. In a separate blog post I’ll talk about the Host Guarantee Terms and Conditions that are dated June 19, 2017.
A few pointers I want to make first. The Host Protection Insurance Summary is just a summary document and not the actual insurance policy. Airbnb states that the summary is based on an insurance policy purchased through certain underwriters at Lloyd’s of London. My review is not of the specific policy language but a commentary of the summary. This is important because specific policy language overrides any summary, including my commentary of the summary.
Contrast this with the Airbnb Host Guarantee which is not an insurance policy, but a contract. Why is that important? An insurance policy is regulated in some form by a State Department of Insurance. As a consumer if you have a complaint you can file with the Department of Insurance to assist you. Since this is a contract, if you have any complaint to make you are going to have to get a lawyer involved.
The Host Protection Insurance
From the language in the summary this appears to be a liability policy that is only in effect during the time a guest is staying at your home or apartment (aka Accommodation). Coverage ends at the checkout date. Limits of Liability Coverage are $1,000,000 in United States Dollars. There is no coverage if the guest cancels his stay or does not show up.
Who is covered by Host Protection Insurance?
You, the host, are included as an insured under this policy. If you have any staff that is providing services to the guest on your behalf, they are also included as insureds. Family members and your roommates who live there are included as insureds.
A Condo Association, a Homeowners Association, or your Landlord are included as Additional Insureds automatically. What I don’t see is language that says a Co-Op is covered as an additional insured. Again, not having direct access to the actual policy language, this question is left unanswered. If you live in a Co-Op you should check with Airbnb to see if the Co-Op would be an additional insured. I also recommend you get that from them in writing or in an email.
When it comes to having an apartment, you should read through your lease agreement to see if you are allowed to rent your room through a service like Airbnb. Later on when we talk about the Host Guarantee Terms and Conditions, Airbnb assumes you have secured permission from your landlord to allow you to sub-rent your room. Some landlords don’t approve of this kind of activity. Therefore, you could be in violation of your rental agreement.
What does Host Protection Insurance Cover?
Coverage is only for bodily injury or property damage where you, the host, can be held legally liable. The idea of legal liability is that you as the host would have to be found negligent, to some degree, for the injury or property damage that was suffered. Laws establishing negligence of a host will vary from state to state.
This exposure – of someone being hurt on your property while someone is checked in – is probably the biggest exposure you have. This is the bodily injury coverage that Host Protection Insurance provides.
Property damage deals with damage to physical property that is not your own. This could mean the guest’s property or property of a third party. I can’t go into specifics here, because we don’t have the physical policy language to read from.
Finally, what is also included are investigative costs of the claim and legal fees that are incurred to defend you for a claim for bodily injury and property damage. The one thing I can’t tell from this summary is if the $1,000,000 limit includes investigative costs and legal fees or if those costs & fees are kept separate from the policy limit. In an ideal world you would want the costs & fees to be separate, leaving the $1,000,000 to pay for damages.
What are the coverage concerns that you should have?
There are four distinct points I want to make here.
Number 1:
As I mentioned earlier this coverage only starts once the guest checks-in and ends when he checks out. But your liabilities don’t stop there.
For example if after the guest stay he leaves a horrible review of your place and even goes as far to say you were a horrible host. The review is so damaging that you respond by saying something that disparages the person.
Remember the Host Protection Insurance from Airbnb ceased after the person checked out. The summary goes on even further and says that it will exclude Personal Injury coverage. Personal Injury deals with libel, slander, or disparagement of a person. The Host Protection Policy affords you no protection what-so-ever.
Number 2:
What happens when someone has a party at your home which is in violation of your agreement and you decide to kick them out? Because this is your house, you decide to take matters into your own hands. This could be considered wrongful eviction which you could be sued for.
The Airbnb Host Protection Policy does not afford you any coverage in this matter. This is a Personal Injury issue that their policy does not provide coverage for.
Number 3:
You only have $1,000,000 of liability coverage. That may seem like a lot of money to some but if the injuries a person receives is severe enough, $1,000,000 may not be enough. Airbnb does not offer you the ability to purchase higher coverage if you so desire. Also, your personal umbrella policy would not provide additional coverage over this policy from Airbnb.
If you have a high-net worth home or have a property that is pretty expensive, you may want to look hard at this $1,000,000 limit and see if you want to take a chance.
Number 4:
The other concern I have is more on an administrative point. The summary document says the coverage it is reviewing runs from October 22, 2015 to December 31, 2016. Airbnb promises to update any changes after 12/31/2016 if coverage has changed. As of the writing of this article (August 1, 2017) they have not released any changes.
In my opinion, I think Airbnb should take a step that Uber did and place a copy of the policy online so that you can read the policy or have your insurance agent review it with you.
In Summary:
When it comes to people getting hurt on your property while they are checked-in at your home I’ll give Airbnb a thumbs up for having some form of coverage in place. However, the coverage is not comprehensive enough to cover all of the exposures that you face.
It would be wise to check with your insurance agent or insurance company to see how you can secure proper coverage for yourself.
