Coverage Corner

SHORT-TERM HOME RENTAL: BACK IN A BIG WAY

By Kevin C. Amrhein, CIC, CBIA

Short-term home rental companies, diminished during the height of quarantines and travel restrictions, have returned in a big way. With a record number of travelers responsible for a record number of bookings, a logical conclusion is that more of your homeowner insureds will cash in (if they haven’t already.)

Companies like Airbnb attempt to ease the obvious concerns of hosts by including various insurance products on a per-rental basis, and it’s likely you will receive inquiries regarding the extent of coverage offered. As is the case any time you are asked to provide counsel regarding coverage for which you have no control or aren’t familiar, proceed with caution. Advise your insured that such products are likely proprietary and that inquiries should be posed directly to the home rental company’s risk management team.

On the flip side, when the insured’s inquiry is regarding coverage (or lack thereof) in the homeowners’ policy sold by your agency, your counsel is necessary. While the ISO never intended its HO form to be appropriate for owners who frequently rent their homes, prior editions made exceptions for some short-term exposures as well as remained silent regarding other risks and perils …

… but oh how times have changed. Following are some key provisions from the latest edition of the ISO’s 2022 homeowners form (specifically, the HO 00 03 03 22) regarding home-sharing. In summary, coverage is virtually non-existent. Insureds concerned with the protection implied by the rental company must consider an endorsement or separate policy.

THREE DEFINITIONS

In prior editions of the ISO HO-3, specifically defined terms regarding home-sharing were added by endorsement. In the 2022 edition, the definitions are incorporated into the policy form as follows:

6. “Home-sharing host activities” means:

a. The:

(1) Rental or holding for rental; or

(2) Mutual exchange of services; of the “residence premises”, in whole or in part, by an “insured” to a “home-sharing occupant” through the use of a “home-sharing network platform”; and

b. Any other related property or services made available by an “insured” for use during such:

(1) Rental; or

(2) Mutual exchange of services; except those property or services provided by another party.

7. “Home-sharing network platform” means an online-enabled application, web site or digital network that:

a. Is used for the purpose of facilitating, for money, mutual exchange of services or other compensation, the rental of a dwelling or other structure, in whole or in part; and

b. Allows for the agreement and compensation with respect to such rental to be transacted through such online-enabled application, web site or digital network.

8. “Home-sharing occupant” means a person, other than an “insured”, who:

a. Has entered into an agreement or arranged compensation with an “insured” through the use of a “home-sharing network platform” for “home-sharing host activities”; or

b. Is accompanying or staying with a person described in Paragraph 8.a. above under such “home-sharing host activities”.

A “BUSINESS” WITHOUT EXCEPTION

“Home-sharing host activities” are considered a “business” and are not subject to any of the valuable exceptions which apply to part d. of the “business” definition.

A CLASS OF THEIR OWN

The policy states that the terms roomer, boarder, tenant, or guest do not include a “home-sharing occupant.”

PROPERTY NOT COVERED

Property of a “home-sharing occupant” is not covered, nor is property of a person occupying the “residence premises” as a result of any “home-sharing host activities.” Further, any property used primarily for “home-sharing host activities” is not covered.

LOST RENT? GET BENT!

The policy does not cover any fair rental value arising out of or in connection with “home-sharing host activities.”

EXCLUDED PERILS

The policy excludes claims of theft or vandalism to the dwelling or other structures arising out of or resulting from “home-sharing host activities.” The same goes for claims of damage to personal property.

LIABILITY AND MEDICAL PAYMENTS EXCLUSIONS

The valuable exceptions to the “business” exclusion for certain rental exposures do not apply to “home-sharing host activities.” Medical payments coverage does not apply to a “home-sharing occupant.”

That’s all for now. Until the next round…cheers!

Kevin C Amrhein, CIC, CBIA is IA&B's education consultant. He works with our CISR and CIC programs, as well as our special topic seminars and live webinars. Catch him at one of our upcoming professional training offerings: IABforME.com/education