Yes! Can I Rent That House?

Why yes! "I will rent to you"

"Service-sharing" services are popping up all over the place. Services such as Uber, Lyft and Airbnb have been the talk of the town lately. These services provide a car with a driver to take you to your destination and you can also rent your destination when you get to it. All this can be done with an app on your smart phone.

Today I am writing a "Service-sharing" app for homeowners. The name of the app is Airbnb and perhaps is the best-known "home-sharing" app, but many individuals with second homes, especially in typical "vacation" areas, may also exchange or lease their properties. Property providers should consider potential exposures to confirm the have appropriate coverage for the property.

Airbnb provides "Host Protection Insurance," which is primary liability coverage for Airbnb host and landlords up to $1,000,000 through Lloyd's of London. While this is a substabtial coverage, each host or landlord should determine if $1,000,000 is sufficient. The risk around the property as well as the financial condition of the guests should be considered.

The coverage also excludes some items that may represent a substantial gaps in protection. For example, the coverage description states the the "program does not apply to liability arising from (1) intentional acts including: (i) Assault and battery or (ii) Sexual abuse or molestation- (by the host or any other insured party), (2) Loss of earnings, (3) Personal and advertising injury, (4) Fungi or bacteria,  (5) Chinese drywall, (6) Communicable diseases, (7) Acts of terrorism, (8) Product liability, (9) Pollution, and (10) Asbestos, lead or silica."Let's take a few of these exclusions to examine the potential exposures.

1. Intentional Acts including: (ii) Sexual abuse or molestation - (by the host or any other insured party) "Potential Gap" If you are the landlord but a property lessee exchanges the property with or without your permission. What is your exposure if a guest is sexually abused or molested by a lessee or someone they hire to provide services (e.g., caterer, housekeeper)?
2. Loss of earnings "Potential Gap" A guest sustains a significant injury and is unable to work for a long period or unable to work for the remainder of his/her life. What is your exposure for loss of earnings?   
3. Personal and advertising injury
4. Fungi or Bacteria "Potential Gap" A guest is exposed to bacteria while staying in the property that causes an illness. What is your exposure?
5. Chinese drywall "Potential Gap" You may not know if Chinese drywall is in your property.
6. Communicable diseases "Potential Gap" A guest is exposed to a communicable disease while staying at your property even though no one was aware or it at the time of exposure. What is your exposure?
7. Acts of terrorism "Potential Gap" This is not something we thought much about until recently. What if your guests were injured or killed in a terrorist attack even though you thought your property was in a safe area? While you would argue that you had no involvement in the terrorist attack and should have no liability, the guest(s) could argue that your security was inadequate and they were injured in a terrorist attack due to that security failure. What is your exposure? 

​Owners should also be aware that their own Homeowners coverage may not apply if they are exchanging or leasing their property. Even if it did, there are many exclusions that may also prevent them you from having the coverage you need.  Homeowners insurance and Commercial Property insurance are constantly evolving, with new exclusions and conditions appearing annually.

There are a number of potential risks in providing these services, too many to be covered in-depth here. Some of these "service-sharing" apps are opportunities to provide owners with additional income or ways to swap with others to allow travel to areas that may otherwise be unaffordable. However, it is wise to be cautious and ensure that this extra income or property-swapping event does not turn into an incident from which you can never recover.

Please let us know what your thoughts are:
Bobby Bates
Sterling Peaks Insurance
529 25 1/2 Rd Suite B111
Grand Junction, CO 81505
970-314-9188