AirBNB – Are you covered? – Guest Blogger

AirBNB, the website that allows people to list their homes for “rent” like hotel rooms, has been in the news lately – for one, because of its monetary valuation of billions of dollars, and second because of what is being called a vacation rental horror story where an AirBNB user’s apartment was ransacked by her so-called guests.

To make a long story short (you can read the full story here) a user (known as EJ) of AirBNB listed her apartment on the website, an individual contacted her to rent the space, EJ hands over the keys and goes on a business trip, returns a week later to an apartment that has been destroyed.

A month after the incident AirBNB issued a public apology to EJ and announced several new measures that will be implemented to protect hosts, and guests.  AirBNB’s Trust & Safety Center has noted that as of August 15^th they will provide up to $50,000 of coverage for property that is vandalized or stolen.  Of course there will be terms and conditions that apply to such a guarantee – it will be interesting to see how people will make claims, and how AirBNB will handle investigations.

Even with this $50,000 guarantee AirBNB recommends that people carry insurance to protect their belongings, to mitigate their risk, and to make sure they are protected if anything is damaged.  There are two big issues that I see unaddressed. Firstly, assuming that the AirBNB guarantee does cover damage up to $50,000, what about damage beyond that, for example, if a house were to be completely destroyed by “guests”? Would a personal homeowners or tenants policy cover property damage when the policy holder is renting out their space for money to people they meet on the Internet? And, secondly, would such a policy provide any protection for a homeowner’s, or occupier’s, legal liability, for example, should a “guest” get injured on the property?

Property policies all contain a section called Statutory Conditions.  One of these conditions is called Material Change.  The condition states that the insured (person that purchased the policy) must inform the insurance company (in many cases by way of their broker) of anything material that changes during the policy term from when the policy was first purchased.  A material fact is one that would result in a different decision being made had it been known – in the case of insurance this could mean a change to the premium being charged, coverages being offered, or even the willingness of an insurance company to offer coverage at all.

The question now is whether a person who has purchased a homeowners, or tenants, insurance policy has violated this Statutory Condition if they do not tell their insurance company that they are charging people a fee to use his or her home, apartment or even rooms.

It is up to the insured to inform the insurance company of any changes that may be material to the acceptance of his or her “risk”.  If this condition is not upheld, it could result in a claim being denied by the insurance company and potentially large bills (or legal settlements/judgments) hanging over the head of the insured.

Would you be willing to open up your home to someone you meet through a website? Why or why not?

By David Bugo

Tags: airbnb, claims, coverage, damage, insurance, Liability, risk, safety