What happens if an Airbnb guest gets injured on your property? Accidents happen and, if you’re not adequately protected, the outcome can be financially catastrophic.
Consider the tragic case of a man who died after a backyard swing collapsed and fell on his head during a stay at an Airbnb rental in Texas. Several guests were injured when a balcony collapsed at an Airbnb rental in Brighton, England. A similar incident occurred at a Poconos house rented on Airbnb.
While devastating to the people and families involved, you have to feel sympathy for the homeowners. They didn’t do anything wrong though, arguably, they could have done more to prevent these tragedies. But in the eyes of the law, they are responsible.
Not all incidents involve bodily injury. There was a case recently of a guest accidentally flooding an Airbnb rental. The guest didn’t notice the problem (or chose to ignore it) and checked out. The owner of the property was alerted by neighbors whose own apartments were being flooded. Once again, the Airbnb host is most likely responsible for the damage caused to the neighbors’ apartments.
Cross your fingers, touch some wood, hang a garlic braid outside your home, hopefully you will never suffer such misfortune. But even with the best intentions and careful prevention, unforeseen incidents can occur and financial consequences could be devastating.
Do I have adequate liability insurance protection?
This is a question that all Airbnb hosts should be asking but few actually do. Some hosts assume that their homeowners policies will protect them in the event of a claim. Others might think Airbnb will be there to protect them. For some people, the thought of being sued for damages by a third-party as a result of their Airbnb hosting has not even crossed their minds.
Personal Liability & Bodily Injury Insurance
Before figuring out if you’re adequately covered, let’s take a look at what’s typically included in the liability section of a homeowners insurance policy.
Standard homeowners insurance policies contain 4 sections:
- Definitions: This section provides the legal definitions for all terms in your policy that are shown in quotations marks (“”). For example, “bodily injury” or “business”.
- Section I – Your Property: This is the part of the policy that outlines your coverage in the event of damage to your home (and/or possessions).
- Section II – Your Liability: This part describes your coverage in the event a third-party claims damages from an incident that occurred on your premises.
- Conditions: These are the general policy rules governing the entire policy such as cancellation and termination.
The liability section of the policy covers 2 types of coverage: 1) personal liability, and 2) medical payments to others. It may also include a third section titled “additional coverages” that covering such things as legal expenses.
As an Airbnb host, there are several scenarios where a guest could suffer injury and loss. The most common incident would be an accidental injury from a slip or fall. If the injury was serious, it could involve a claim for medical expenses, loss of earnings, emotional distress and more. In this case, both personal liability and medical payments to others would be involved. Personal liability coverage would hopefully protect you against all parts of the claim not involving medical payments to the injured guest.
A less common example would be a loss resulting in damage to property owned by the guest. This might happen if a storm causes a tree to fall on your guest’s car or a fire destroying their personal belongings. Most policies provide very limited coverage for the “personal property of others” because it is assumed that these guests have their own automobile, homeowners or renters insurance policies that protect them in these situations.
You hope you never experience such a situation but in the event you do, you pay for homeowners insurance because you want that peace of mind. But will the policy actually cover you when you need it?
Homeowners Insurance Exclusions
The dirty secrets of any insurance policy are revealed in the exclusions. When reviewing your policy, you can see that it covers a and b except in situations c through z. The exclusions sections are always far longer than the actual coverage sections! Not that you’ve probably ever read your policy. Few people do.
The all-important clauses to look for in your homeowners insurance policy are those mentioning “business”. Any standard homeowners insurance policy will exclude coverage for “business” related activities. We use the quotation marks because every home insurance company offers a different definition of “business”.
Is My Airbnb Hosting Really a Business?
The answer is maybe. This is the grey area where short-term renting (Airbnb hosting) currently falls. Some companies have already made their stand by excluding claims from homeowners who were hosting on Airbnb.
State Farm’s basic homeowners policy defines a business as “a trade, profession or occupation. This includes farming.” It’s unclear if Airbnb hosting would be considered a trade or not. However, State Farm has made it clear how they feel about Airbnb hosting because they’ve cancelled the policies of customers who have admitted to hosting guests.
Travelers Insurance denied a claim from a lady after a tree fell on her house. Their claims adjusters found her house listed on Airbnb and despite the fact that no one guest was present at the time, and her Airbnb hosting had absolutely nothing to do with the tree falling, they chose to deny the claim based on the business exclusion.
Look in the definitions of your policy. If you see “business” defined, and your short-term rental income could conceivably fall within that definition, then your insurance company could deny any claim.
Airbnb Host Protection Insurance (short-term rental liability insurance)
Airbnb recognizes this problem and, thankfully, provides a solution. The Airbnb Host Protection Insurance provides every host $1 million of liability coverage. The coverage is provided for all covered incidents that occur during an Airbnb stay, i.e. the claim resulted from an incident that occurred on the host’s premises in the time period booked by the guest on the Airbnb platform.
Why would Airbnb provide this protection on your behalf? They do it because their best interests are aligned with yours when it comes to claims from third parties. As soon as a lawyer is involved, they’re not just going after you for compensation, they’re going after Airbnb. Any lawsuit will name both you as the host, and Airbnb as the booking company as defendants.
It’s in Airbnb’s best interest to control the defense of these suits. They’re not doing it to protect you. They’re doing it to protect their interests and brand. Lawsuits filed against Airbnb are usually settled out of court with stipulations that plaintiffs (injured guests) sign non-disclosure agreements. These agreements prevent them from speaking in public about the incident and settlement.
As long as you follow Airbnb’s terms and conditions when accepting reservations on their platform, you are protected by Airbnb’s Host Protection Insurance. Follow these simple rules and you should be covered:
- Don’t accept direct payments from guests. All payments must be made through Airbnb’s system.
- All communications with your guests should be done through Airbnb’s messaging system.
- All property (or parts of your property) available to the guest should be included in your Airbnb listing.
- Don’t allow guests to use your car, boat, or ATV without a separate agreement. Any accidents as a result of guests using these machines will not be covered.
- For any particularly hazardous areas of your home, clearly stipulate rules for guests in the house rules section of your listing.