Insurance Issues With Airbnb
I’m Ed Smith, a Sacramento Personal Injury Lawyer. The popular Airbnb service comes with a liability insurance coverage provided to Airbnb hosts. But under the law in California, if you host your property on Airbnb, it is typically treated as a ‘business pursuit.’ Let us take a look at the nuances of the insurance coverage from Airbnb and the potential legal risks involved for a host in California.
Airbnb’s HPI Cover for Hosts
In early 2015, Airbnb launched a revamped version of its Host Protection Insurance (HPI) program. HPI provides coverage for Airbnb hosts of up to $1 million in the event of a guest getting injured during their stay in the host’s property. The coverage may also include situations such as damage caused to another’s property in the vicinity accidentally by a guest.
As this insurance coverage is available to all Airbnb hosts in the US, ideally there should not be any cause for concern while hosting your home or property. Unfortunately, it is not so simple. The HPI program has serious flaws, even after it was revamped.
Coverage is Restricted to Actual Stay
Early arrivals and overstays are not uncommon in the hospitality business. But if a guest gets injured on your Airbnb property during any of these periods, which are not a part of their actual stay, insurance coverage may not be applicable. Similarly, if the actual guest fails to turn up, and someone else substitutes in their place, the host will cease to have the coverage.
Secondary coverage is typically unavailable to most hosts due to the exclusions in their homeowner policy. This implies that the host will have a personal liability if a guest gets injured merely hours after the official check-out time.
Limitations of the Coverage Amount
In each occurrence, Airbnb’s insurance coverage is limited to $1 million. For each location, the limit is $2 million. For all insured locations within the US, the limit of the master policy is $10 million a year. In other words, however early in the year your master policy limit is reached, you are left without any coverage for the remaining part of the year.
Coverage will only be in excess to any other coverage
If the host has any other coverage available, Airbnb’s coverage will only apply in excess to that. In simpler words, the host is first required to submit their claim to their homeowner insurance. Airbnb will release a penny only once the claim has been denied by that insurer.
The HPI program of Airbnb also has the following important exclusions:
- Acts of intention
- Loss of income
- Bacteria or fungi
- Communicable illnesses
- Chinese drywall
- Terrorism acts
- Personal and advertising injury
- Product liability
- Silica, lead or asbestos
- Airbnb suing the host or vice versa
Implications of the host having ‘business pursuits’
Under the law in California, a business pursuit is defined as a “regularly engaged activity” performed with an aim to earn profit. However, irrespective of the term “regularly engaged activity” used in the legal definition, various cases in California have established that to qualify as a ‘business pursuit’, it is not necessary that the activity should be primary, full-time, or even a major income source.
Dual Purpose of the Injury Site
In the West American Insurance vs. California Mutual Insurance case (1987), the appellate court said that the insurance policy did not indicate anywhere that the business pursuit should be entirely related to business in order for the exceptions to apply.
The court further said that any application of the doctrine of ‘concurrent causation’ in this case would be incorrect. The doctrine of concurrent causation is applicable only when the injury occurs due to a combination of a covered risk and an excluded risk.
Broad Application of Business Pursuit
Looking at the past cases, it is evident that the exception of business pursuit has a history of being applied in a fairly broad sense. Chances are, if an Airbnb host has a conceivable benefit, it could be interpreted as a business pursuit.
Although it is important to consider the specific wordings used in an insurance policy, more often than not, the exclusion of business pursuit will be applicable to any injury that was sustained due to something even distantly business related, except when there are independent causes of that injury.
Risk from Sophisticated Swindlers
An Airbnb host may believe that they are discerning enough to differentiate between a genuine guest and a scammer, but the harsh reality is that scammers can be extremely suave and outwit the host. Most of the Airbnb hosts are unaware that Airbnb holds the potential of providing an unintended opportunity for sophisticated swindlers to enjoy at the host’s expense, while not having to bear the trial costs.
Under the California law, once a property is rented to an individual for 30 days, the guest will legally be considered as a tenant on a lease extendable month to month. There have been cases where scammers have exploited this loophole and Airbnb adopted a hands-off approach. It is left up to the host in such a situation to get the “tenant” evicted – a process which could take months and cost a significant amount of legal expenses.
Airbnb refuses to extend any support to the hosts to get the squatters out. It counters that it is the responsibility of the host to be aware of the laws in their state. Furthermore, Airbnb’s insurance program does not provide coverage for the rental or legal costs that may be incurred on account of an unwanted squatter.
Buy a Business Insurance Policy
Airbnb hosts on average earn a gross annual income of $14,000. In most cases, with this level of average gross income, it makes logical sense to spend a part of it in getting the right insurance coverage.
If you are a host renting property on Airbnb, I would recommend that you purchase a business insurance policy, which will adequately cover you when you rent your home out on Airbnb.Sacramento Personal Injury Lawyer
I’m Ed Smith, a Personal Injury Lawyer in Sacramento. Have you or someone you love been injured in an accident and need the help of a skilled attorney? I am here to help. Please contact me right away at (916) 921-6400 or (800) 404-5400 for free and friendly advice with no obligation. You can also reach me online through my website, AutoAccident.com.
For over 35 years I have served the Sacramento and Greater California community, helping those people injured in accidents and their families get back on their feet. See some of my valued client reviews on: Google Plus, Avvo, and Yelp.
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