The insurance pitfall of Airbnb: Who’s responsible?

The incident shone a spotlight on the insurance gap that exists if the property owner (host) does not have specialist short-term landlord cover.

Okay, but:

I have home and contents cover

Ordinary owner-occupier insurance is generally insufficient to cover death and injury if the property is being rented – either through a standard lease or via a share accommodation platform like Airbnb.

Most home and contents policies stipulate that there is no legal liability cover if the premises are being used to generate an income – and that includes rent.

If you are intending to use the property for Airbnb you can ask if your insurer will extend cover but, as most insurers consider this ‘high-risk’, there’s a good chance you’ll be refused.

I have landlord insurance

Typical landlord insurance will only insure stays longer than 90 days and usually requires copies of residential tenancy agreements, which means it won’t cover short-term stays.

If you have standard (fixed-term lease) landlord cover, you should confirm with your insurer if it is possible to switch to short-term cover if you want to go down the Airbnb route – it may not be, as not all landlord insurers offer cover for short-stay leases and even if they do, they may specifically exclude Airbnb.

By the way: If you think a bit of ‘secret squirrel’ is best and intend to keep your plans to rent the property via Airbnb quiet from your insurer, you should think again.

It is a requirement under the Insurance Contracts Act 1984 (Cth) for policyholders to notify their insurer if there is any change in circumstances, such as a decision to offer their premises for short-term rental.

Failure to notify an insurer of a change in living conditions could be considered a breach of the contract and may void the policy.

What about host protection?

Relying on Airbnb’s Host Protection Insurance is fraught. Although it offers up to US$1 million in cover “in the event of a third-party claim of bodily injury or property damage” during an Airbnb stay, it generally only applies when the host or landlord has been at fault or been negligent in the circumstances of the injury.

In this specific case, there would be a need to prove that the owner of the property was aware, or should have been aware, that the swing posed a risk to children who used it – and in light of that knowledge, that they had failed to repair and maintain the swing or remove it. If it is determined that no-one was at fault, then there would be no compensation payable.

If, however, it could be proved that the swing was clearly unsafe and the property owner should have been aware it posed a risk, but still failed to repair or remove it, then the children’s family could have grounds for a claim against the host.

How can I protect my legal liability?

The best way for you as a host/landlord to protect your legal liability when you rent your property via Airbnb is to have the right landlord insurance. You need a specialist policy that covers the risks associated with short-term leasing – including legal liability – and one which specifically covers renting via share accommodation platforms like Airbnb.

You and your agent should reduce the risk of being responsible for damage to property or for compensation for an injured guest by making sure you take steps to avoid any liability in the first place. A key to this is ensuring the property is safe and well-maintained.

Despite the best intentions, sometimes things don’t go to plan and you can face a compensation claim from a guest.

Having a guest injured or worse on the property is bad enough, finding out that you are legally liable but not insured could be a financial disaster. So, it pays to make sure if you’re hitching your wagon to the Airbnb star that you have the right short-term insurance in place.