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Uninvited Risks: Protecting Hosts, Guests, and Insurers from the Perils of Home Sharing

By William C. Schlager December 15, 2015

home sharingIt’s relatively easy to begin earning extra income through a home-sharing service. You simply create an online listing that features the home or space you want to rent, along with photos, daily rates, and availability. Guests can then search the listings and book your space for a specific time period.

The complicated part is what happens after the guests arrive when a host may face a myriad of loss exposures.

In recent years, a number of incidents have been reported involving excessive property damage, theft of valuable items, and personal injuries as a result of participation in home sharing. Some of the reported incidents include the following:

  • In May, a Canadian family returned home to find dented walls, flooded toilets, and sofa cushions covered in mayonnaise, according to CBC News.
  • In July, neighbors and officials in a town north of New York City complained that a mansion listed on home-sharing services was being rented out for risqué parties, according to The Journal News.
  • In August, CBS Chicago reported on a homeowner who had rented his home through a traditional lease arrangement, but the tenant subsequently listed the home on a home-sharing service. The homeowner found strangers in his bed, his liquor cabinet empty, and a hookah on the dining room table.

Reducing the risks

Home-sharing companies have taken some steps to help reduce the risks that their customers may encounter. To assist in preventing possible misrepresentation and identify fraud, many home-sharing services perform background and identity verification checks. In addition, both hosts and guests can receive ratings based on their experiences. Those ratings can then assist in screening potential guests and hosts.

Home-sharing companies have also promoted safety tips for both hosts and guests. These include reading profiles and listings carefully, checking references when available, and knowing the phone numbers of local emergency responders. And, according to publicly available information,they’ve made insurance coverages and other protections available.

However, while they provide certain protection for property and liability exposures related to home sharing, this protection is subject to limitations and exclusions. For example, here’s what one company provides:

  • up to $1 million of first-party property coverage, but limited or no coverage for cash, jewelry, and collectibles, among other things
  • up to $1 million of third-party liability coverage per occurrence in the event of a covered claim for bodily injury or property damage, but may be subject to a cap per policy year and may not be applicable for claims within certain countries

Home-sharing companies generally advise users that this protection is not insurance and that they should review their own homeowners insurance policy to understand whether coverage is provided for their property when used asa rental.

ISO products in development

Recognizing that insurers may have differing appetites as to the desirability of the home-sharing exposure, ISO is currently developing several different products for its customers’ use:

  • Advisory Notice to Policyholders: ISO has developed an advisory policyholder notice for use with a base (unendorsed) homeowners policy. This notice provides a mechanism for insurers to advise their policyholders of the extent of coverage provided under their homeowners policies and also encourages notification to the insurer of any home-sharing activity by the policyholder.
  • Home-Sharing Exclusion: ISO anticipates developing an optional endorsement that would exclude coverage for certain property and liability exposures under a homeowners policy arising out of participation in home sharing.
  • Homeowners Enhanced Home-Sharing Coverage Option: Recognizing that some insurers may wish to provide a broadened level of coverage for home-sharing activities beyond the coverages currently available under the ISO base homeowners policies, ISO is currently developing an option that would provide some enhanced coverages.

If you would like to learn more about the risks of home sharing and the ways that states and ISO are addressing the issue, please visit our Home-Sharing Insurance Resource Center, where you can download our free white paper on the topic; you can also access our Advisory Notice to Policyholders if you have an ISOnet login. If you have any questions, please feel free to contact me at wschlager@iso.com or 201-469-2696.