Home Sharing – A Growing Market for Liability Insurers

Home-sharing services such as Airbnb and HomeAway have quickly become a popular part of the “sharing economy.” A May 2016 study by the Pew Research Center confirmed that 11% of American adults have used one or more online service to book an overnight stay in a private residence. In fact, Airbnb now accounts for “as much as 17% of available short-term room occupancy in several major cities across the globe, and offers more rooms to the public than many major hotel chains.”¹

Home sharing is not without risk, however, and uninsured or underinsured hosts may not appreciate their potential liability. Renters could sustain bodily injuries during their stay or damage to their personal property or cars. Landlords and condominium or homeowners’ associations may also face liability if individuals are injured using amenities or in common areas. Some cities, including San Francisco, require hosts who home-share to maintain at least $500,000 in liability coverage.² Thus, while home sharing presents risks, it also presents opportunities for insurers.

Specialized coverage is likely necessary for hosts who regularly engage in home sharing, as most homeowner’s or renter’s policies are not designed to cover commercial activities. Many policies expressly prohibit or limit coverage for short-term rentals. The Insurance Information Institute states that homeowner’s or renter’s policies may cover one-time rentals of all or part of a residence for events such as the Super Bowl or graduation at a major university.³ But, even then, some insurance companies require advance notice before they will extend coverage for a renter. For regular home sharing, most personal liability insurers require hosts to purchase an endorsement or a separate commercial policy—such as a hotel or bed-and-breakfast policy, vacation rental policy, or landlord policy.⁴

The home-sharing industry has attempted to address users’ liability risks in different ways. For example, HomeAway has partnered with CBIZ Insurance Services to offer its hosts “HomeAway Assure,” a specialized vacation rental insurance policy geared toward home-sharing users.⁵ The CBIZ policy essentially combines homeowner’s and short-term commercial rental insurance. HomeAway recommends that its hosts purchase this coverage at their own cost in lieu of—not in addition to—traditional homeowner’s or renter’s insurance.

In contrast, Airbnb provides some liability coverage at no additional charge for hosts in the United States and a number of other countries. Airbnb’s “Host Protection Insurance” program, implemented in 2015, provides liability coverage for third-party bodily injury or property damage claims occurring during a guest’s stay.⁶ Significantly, the policy provides primary coverage regardless of whether the host has a homeowner’s or renter’s insurance policy.

Under Airbnb’s program, if a renter slips and falls in the shower and sues the host, the claim would likely be covered. The policy may also cover landlords, homeowner’s associations, and condo associations as additional insureds under certain limited circumstances.⁷ Thus, a homeowner’s association may have coverage if an Airbnb guest is injured while using a common area, such as a gym or pool, and sues the association.

The Airbnb coverage is not without limits, however, and is capped at $1 million per occurrence for the policy term (usually one year).⁸ Airbnb’s website does not identify the policy’s aggregate limits. There are also a number of policy exclusions. Damage to a renter’s car or boat, for example, is not covered. Injuries and damages due to mold and bacteria are also excluded.⁹ Thus, even home-sharers on Airbnb may benefit from additional, specialized liability coverage.

Though home sharing is still a relatively new industry—HomeAway and Airbnb were founded in 2005 and 2008, respectively—it appears to be here to stay. Airbnb alone boasts 3 million listings in more than 191 countries.¹⁰ There is, and will continue to be, a market here for insurers who can offer hosts creative and comprehensive solutions for their liability risks.