United States: The Sharing Economy: Are You Covered If Something Goes Wrong?

Companies like Airbnb and Uber are considered pioneers in this new era of the "sharing economy." This innovative way of doing business, allowing individuals to commercialize what ordinarily is for personal use, has created an entirely new marketplace in many cities around the world. However, as with most emerging markets there are new and unexpected risks. Airbnb, Uber, and other new companies who operate in these emerging markets are challenged to respond to change and manage these unforeseen risks quickly. Airbnb is currently receiving pressure from numerous states to be more proactive in managing and curing potential risks.

Of late, Airbnb has been in the headlines due to a devastating death at a rental in Texas.1 Many questions are being asked. One of the biggest is, "Who is responsible for keeping renters safe?" And whoever that is, do they have adequate insurance coverage?

A family rented a Airbnb cottage in Texas. A rope swing hung from a tree directly outside of the cottage. A father was testing the swing before he would let his children use it, when the tree trunk broke in half and fell, hitting him in the head. The tree trunk hit him so hard that most of his brain activity ended immediately and he eventually died from the injury. Airbnb sent condolences to the family, and the family was eventually able to recover from the homeowner's insurance policy.

However, many guests might find there is no insurance to recover. Many homeowner's policies for residences exclude coverage for commercial activity, such as Airbnb rentals.2 For example, USAA allows homeowners to rent out a room occasionally, but not for business purposes. Allstate has a homeowner's policy that allows homeowners to rent out their residence while still maintaining liability coverage, but only for a few weeks a year.

In an attempt to protect those who may become injured, and whose claims are denied by homeowner's policies, Airbnb has recently introduced free "secondary" coverage up to $1 million in liability to its hosts in the United States. The program is called Host Protection Insurance. Other than this secondary coverage, Airbnb has a limited list of safety tips for hosts but does not appear to actually inspect any of the properties or verify that homeowners have in fact notified their homeowners insurance companies of their commercial activity.3 For renters, Airbnb has a list of safety tips for renters, which includes a suggestion to sign up for travelers insurance and tips on how to be a "considerate guest," but does not provide a free travelers insurance program to match the one it provides to hosts.

Uber, the widely popular phone app that connects riders and passengers, has been working over the past two years to rectify its insurance gaps as well. When Uber first started, its insurance strategy was to have drivers make claims under their personal automobile insurance if they were involved in an accident while working. Uber would only cover the cost once the personal automobile insurance denied coverage. However, just as with most home insurance policies, standard automobile insurance policies contain standard exclusions for commercial use of vehicles. Even more, a driver's failure to disclose commercial use may render her auto policy void.

Last year, in response to pressure in many states, Uber was forced to change its insurance strategy. Uber began providing primary insurance and contingent collision insurance for the period when a driver is matched with a passenger or has a passenger in the car, and expanded that coverage this year to include the time the driver spends waiting for a passenger. However, just like Airbnb, Uber's problems have become more serious, extending beyond the expected automobile accident to several incidents where its drivers have been accused of sexual assault.4 On its website Uber says it "is committed to safely connecting driver and riders."5 Uber states that it conducts background checks on its drivers and provides a code of conduct. Many are arguing that this is not enough, that companies like Uber and Airbnb owe a greater duty to their customers, and should require more from their drivers and hosts. Or, at minimum, they should be required to carry complimentary insurance for all customers in the event of death or injury.

Time will tell if Airbnb's Host Protection Insurance program will provide adequate protection for renters.6 Consider the time and difficulty of first requiring the injured person to make a claim under the property owner's homeowners insurance, go through the claims process and be denied, and then start an entirely new claims process through another insurance program. Imagine being denied under both policies and having to bring a lawsuit. It seems as if this program may be geared more at deflecting adverse publicity than protecting customers. Similarly, Uber has changed how cities talk about accessibility and travel on their roads, but is it doing enough to protects its passengers? It just recently began providing collision insurance for its drivers. However, when people all over the world come into contact with strangers in a car, anything can happen. Who should be responsible when a customer is injured or assaulted during a ride?

Regardless, Airbnb is in the hot seat in cities like New York, San Francisco, and Washington DC. With this new Home Protection Insurance program many questions are left unanswered. Will Airbnb be there when claims are filed and lawsuits follow? Will renters continue to feel that Airbnb is a safe and trustworthy way of vacationing? Airbnb is valued at over $25 billion. Is it doing enough? What will become of Airbnb now that it has stepped into the role of insurer? And are you as a homeowner, property owner, host, or renter adequately insured?


1 https://medium.com/matter/living-and-dying-on-airbnb-6bff8d600c04

2 http://www.oregon.gov/DCBS/insurance/news/Pages/2014/sept192014.aspx

3 Not only would site visits be costly for Airbnb, conducting visits would expose it to potential liability for the conduct of its hosts.

4 See e.g., http://www.huffingtonpost.com/entry/uber-driver-sentenced-rape-female-passenger_56264dffe4b0bce347022d25

5 https://www.uber.com/safety

6 Also, note that Airbnb still maintains international host rentals in countries like Taiwan. This Host Protection Insurance program will not provide coverage for guests outside of the United States.

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