March 9, 2018
The Kiley Law Group
It’s been a great winter with New Englanders reveling in the fresh powder on Mount Snow, the Berkshire Mountains in Mass, and other peaks throughout the region. Often times, this means renting a room, reserving a bed at a B&B, or searching home sharing sites like Airbnb and HomeAway.
For those in the region with a condominium or a second home, it can be tempting to net some extra cash through this season by setting up short-term lease agreements with guests.
Liability insurance protects a homeowner financially if someone is injured on their property. Most personal injury and property damage cases can be handled by filing a claim against the at-fault party, helping the victim receive compensation for their medical bills, treatment, and property damage.
However, when dealing with a second home, insurance companies may not always be as easy to work with. With the surge of short-term leases through home sharing services, many insurance companies are making it very clear that they will not cover events if they feel the home is being used as a commercial venture.
“That term ‘sharing’ can cut two ways. What if you or a family member is injured while staying in someone else’s home? What if your guest causes a fire or other serious damage while staying in your home? Who will ‘share’ in the expenses? Who will file an insurance claim — and will either party be covered,” asked an article in USA Today. “The answers to those types of questions remain works in progress.”
Because of that assumed ambiguity, the Insurance Information Institute suggested caution.
“Before you consider renting out your home, your guest room—or even your couch—first contact your insurance professional so you fully understand the financial risks and can take the proper precautions,” they said. “Peer-to-peer home sharing opportunities such as Airbnb can be a great way to bring in extra money and are increasingly popular; however, they can also leave you financially vulnerable.”
Unlike some other states, Massachusetts does not have particular laws on home sharing and insurance, though legislation was suggested in 2017 to pursue higher taxes and regulate services like HomeAway and Airbnb. Santa Monica, California, for example, added strict regulations that included homeowners registering for a business license and a 14% hotel tax if they used home-sharing services.
“The city estimated this would eliminate about 80% of peer-to-peer rentals,” USA Today reported.
Since insurance companies may say that the rental of the couch, bed or home is a commercial venture, it may not be covered under a typical homeowner insurance policy. Liability lawsuits can be very expensive.
Say a guest trips on the rug and breaks a wrist, the treadmill inside the home breaks while they are using it and they are hurt, or if there is a fire, a disaster, or another type of personal injury. They can sue. They can also win.
With more regulations cropping up around the US, both Airbnb and HomeAway have offered their own insurance plans. Airbnb offers Host Protection Insurance which offers a $1 million coverage automatically to every listing and they say it acts as primary insurance over homeowners insurance whenever the home is being rented. They also offer a program that covers property damage for the host if a guest breaks something. However, in both cases, there are things they don’t cover (such as vehicles striking a house, purposeful injury as opposed to an accident, and theft.)
HomeAway offers a discounted insurance plan for property damage called HomeAway Assure, which partners with big-name insurance companies to cover some liability.
“Obtaining details and even specific prices online can be difficult, and experts warn there are many caveats and exclusions, so you may want to consider such direct-buy products for secondary rather than primary coverage,” warned USA Today.
Condo rentals are a very common practice as well and even predate home-sharing services. Though condo-owners pay dues to the condo association to cover maintenance of outdoor and common areas, the association’s liability insurance usually stops at the door.
It is advisable to carry condo liability insurance.
In addition to keeping an updated insurance policy, one that the homeowner is sure is covering any home sharing services or condominium rentals, it’s also important to reduce liability in the first place.
Having a legal contract, understanding the fine print, and minimizing dangers in the home while it is being used are all vital to reducing liability and the legal headache down the road.