Exchange of goods or services is an old practice, but advances in technology and communications have helped the “sharing economy” boom in recent years. Perhaps your home will be vacant for a period while you’re away, or maybe you have an under-utilized room in your home. Technology makes it easy to connect with people around the world who may need accommodations when they visit your community.
On the flip side, as a guest in one of these situations, you now have access to private residences to experience a community as a local might, or can stay in unusual places that would otherwise be off limits - like an actual castle. Companies such as Airbnb facilitate connections between hosts and guests. While most stays are positive and uneventful, what happens if a guest suffers an injury while using a rental?
Insurance Requirements and Safety Inspections
Licensed accommodations, such as hotels and traditional bed and breakfasts, are required to follow regulations in order to operate. Critics of the sharing economy note that hosts of non-licensed rentals have been bypassing some of these requirements, notably safety inspections. Moreover, these established businesses must carry commercial liability insurance policies. People who occasionally rent out all or a part of their home may only have liability coverage through a home insurance policy. If a renter suffers a personal injury while on site, the commercial nature of their stay can create serious problems when it comes to insurance.
Home Insurance: “Limited Use” Clause
If you are occasionally renting out all or part of your home to guests, you probably wouldn’t list “hotelier” as your occupation. But you are still running a hotel-like accommodation business in your home. Unless you inform your insurance company about this commercial activity, your standard home insurance policy may not protect you from liability arising from this activity. In fact, it may completely void your policy.
While home insurance policies generally offer liability coverage for residents and their guests (even uninvited ones), they have “limited use” exclusions that prohibit commercial use of private property. This should be a concern for the host, who may be personally exposed for any personal injury or property damage that occurs during the stay, and for the guest who may not be able to access adequate funds to compensate them for injury or loss.
The nature of Airbnb-like rentals makes it a “high risk” area according to insurers. Many providers do not yet offer policies to cover it. Some companies are specializing in the area, but they are not yet common. In response to concerns and requests from guests and hosts, Airbnb created its own Host Protection Insurance program for its hosts against third party claims for bodily injury or property damage. If you use a third-party facilitator to arrange your short-term rentals, confirm what, if any, coverage you might have with them. Regardless, it is crucial to contact your home insurance provider to notify them if you are changing the way your property is being used. As a guest in a short-term rental, in addition to ascertaining what coverage your host or third-party facilitator provides, check to see if your personal insurance would cover you.
Tips for Hosts and Guests
To minimize the risk of personal injury, especially by guests who may be unfamiliar with a property, hosts should identify any potential hazards, such as slippery floors, gaps, cracks, missing handrails, holes, or sudden changes in elevation. Fix them. Clearly mark them with warning signs. Provide a list of emergency contact numbers for guests unfamiliar with the city. General precautions such as keeping the property well-lit, keeping walkways free of debris and cleared of ice and snow are always advisable. Prior to each stay, it would be wise to take photographs of the property.
Guests should also be sure to take reasonable precautions for their own safety. For example, if you have difficulty accessing a part of the property and continue to attempt to access it despite this difficulty, you may be found to be contributory negligent if you are injured during these attempts. If you are injured during a stay, seek medical treatment immediately. Document the event with a detailed description, photographs and witness accounts. Report it to the host, the third-party facilitator and your own insurance provider as soon as possible.
An Ounce of Prevention
Only 1% of all Airbnb reservations resulted in claims under its Host Insurance Program during its first full year of operation in Canada. If you do have the misfortune to be a host or guest involved in a stay where there is a personal injury, learning that you are not insured or that your actions have voided your policy can be very costly. Always consult your insurance provider before taking the plunge into the sharing economy.