The idea of home-sharing using sites like Airbnb, is, like ride-sharing, rapidly growing in popularity. “Home-sharing” is when people rent rooms or their homes to others, often through an app or a website. Guests select a property and pay for the stay like a hotel. An important difference is that the property is not a licensed hotel or bed and breakfast, and is often a privately-owned apartment, condo, or house. In fact, anyone can register as a host or guest.
Airbnb began in 2008 when two designers hosted three travelers looking for a place to stay. CEO and co-founder Brian Chesky now has a net worth of $3.3 billion. He is the seventh richest entrepreneur under 40, and Airbnb is currently valued at roughly $25 billion. To say business is booming would be an extreme understatement.
In its company description, Airbnb states, “Whether an apartment for a night, a castle for a week, or a villa for a month, Airbnb connects people to unique travel experiences, at any price point, in more than 34,000 cities and 190 countries. Airbnb is the easiest way for people to monetize their extra space and showcase it to an audience of millions.”
It is well known that insurance generally provides coverage for negligence but not intentional conduct. Policies usually have exclusions for criminal or illegal activities. Furthermore, personal lines insurance policies typically exclude coverage for commercial or business activity.
According to Rebecca Hirsch, a USAA spokeswoman, “If you’re conducting a business on a full- or part-time basis by renting out your home or apartment (or a room in your home or apartment) as a way to earn money, your homeowner’s or renter’s insurance policy probably would not provide liability coverage.” Hirsch adds that, for people who “very occasionally rent a room out (as opposed to doing this as a business), liability coverage may be available.”
It’s important to never assume a homeowner’s policy will or will not provide coverage for damages or claims related to an Airbnb rental. Each policy is unique, and claims and litigation professionals should always review key definitions of terms such as “insured,” “insured location,” “residential premises,” and “business.” In addition, remember to carefully review all exclusionary language, including the relevant exclusion for business usage at the insured home.
Real-Life Stories and Claims
While the usage of Airbnb continues to increase in popularity, there have been a number of downright bizarre stories reported across the country.
Not only have instances of property damage or personal injury been reported, but also, more recently, multiple situations of videotaping and recording of tenants have come to light. Most notably is the case Yvonne Edith Maria Schumacher v. Airbnb Inc. et al, which involved Yvonne Schumacher, a German woman who stayed with a man at a California apartment owned by Fariah Hassim and Jamil Jiva in December 2013. Schumacher was walking around the apartment naked and having intimate conversations before she discovered that she was being watched the whole time by an active camera and sound recording system.
Schumacher filed suit in the U.S. District Court for the Northern District of California against both the homeowners and Airbnb. The case quickly settled less than four months after the complaint was filed, and, of course, the settlement is confidential. However, the Schumacher case was the first of its kind—a direct action against Airbnb for conduct of a homeowner or host. The allegations asserted in the complaint offer insights into what insurers and attorneys alike can expect to see in the very near future.
The amended complaint alleged a common-law negligence claim against Airbnb. Specifically:
• “This affirmative act by Airbnb of bringing lessors and lessees of real property together through its internet portal places upon Airbnb an obligation of ordinary care.”
• “In failing to engage in little, if any, investigation of lessors before allowing lessors to post their properties on the internet portal, Airbnb created and continues to create a foreseeable risk of harm to parties such as this plaintiff who rely upon Airbnb’s assertion that it has created ‘a trusted community marketplace for people to list, discover, and book unique accommodations around the world.’”
• “In this instance, Airbnb, upon information and belief, conducted no background investigation of the lessors, nor did the defendant engage in any reasonable evaluation of these lessors prior to posting their property upon the internet portal, nor did Airbnb have reasonable policies and procedures in place in order to protect lessees who would give consideration to the rental of lessors’ property and any individuals who would stay at the property.”
• “Such failure created a foreseeable risk of harm from the lessors for this plaintiff, and, in fact, plaintiff was subjected to a hostile, intimidating, and humiliating environment during her stay within the property.”
The complaint alleged Airbnb violated a California statute because it failed to register as a licensed real estate broker, amounting the negligence per se.
Along with claims of negligent infliction of emotional distress, trespass, and breach of quiet enjoyment, the complaint also alleged common-law and statutory invasion of privacy against Airbnb. To link the conduct of the homeowners directly to Airbnb, the following facts were alleged:
• “Airbnb acted as operator, manager, and/or entity in full or joint control of the leasing process of the property and/or, at minimum, acted as the agent of the lessors.”
• “As such, Airbnb stood in the shoes of the lessors and had a responsibility to provide…any invitee a property that was free of electronic devices capable of observing and/or capturing visual images and/or audio recordings, as well as physical impressions, of the plaintiff engaging in private, personal, or familial activity.”
• “By failing to ensure that the lessors’ property did not contain such electronic devices, Airbnb tacitly allowed lessors to violate this statute and cause damage to individuals utilizing Airbnb’s platform and services, as well as to any invitees on the property.”
Identical claims were also alleged against the homeowners, Fariah Hassim and Jamil Jiva.
A motion to dismiss for failure to state a claim upon which relief can be granted was quickly filed by Airbnb. Legal arguments were asserted that contended the intentional, criminal conduct of the homeowners was unforeseeable, and, therefore, the elements of duty and proximate causation were absent. However, before the court could rule on the motion, a global settlement was reached.
In October 2017, headlines across Florida told of yet another Airbnb incident. An Indiana couple rented a room in Longboat, Florida, through Airbnb, and Derek Starnes stated that he and his wife noticed a tiny black hole in a smoke detector. When he inspected the smoke detector, he discovered the hole was actually a tiny camera with a microphone.
Police arrested Wayne Natt, the homeowner, and charged him with video voyeurism. He told police that he placed the camera there for sex parties. Records show that Natt had an Airbnb account for two years, and there were 40 reviews for the room. Police believe there could be more victims. A civil suit has yet to be filed stemming from the incident.
A similar lawsuit, Colin Marshall, et al. v. Christopher Gregory Rogers, et al., was filed in the U.S. District Court for the District of Nevada (Las Vegas) on Jan. 12, 2018. This was actually filed as a class action against the homeowners and Airbnb, stemming from repeated incidents of conduct similar to the Schumacher case.
The complaint alleges plaintiffs noticed smoke detectors in bathrooms, bedrooms, and other private areas in the house all containing small cameras inside. Law enforcement also obtained copies of private images of the renters on the homeowners’ computer.
Similar to Schumacher, the amended complaint alleges claims of invasion of privacy, negligence per se, negligent infliction of emotional distress, and intentional infliction of emotional distress. The complaint also alleges negligent misrepresentation, fraud, deceptive trade practices, and a request for a permanent injunction against Airbnb.
This lawsuit is still pending. It will be interesting to see how the matter proceeds and if the court issues any decisions concerning the merits of the claim.
SIU and Claims Investigation Tips
Hosts and renters who thought they were protected through Airbnb insurance for up to $1 million in coverage may be angered to learn that Airbnb can deny their losses, and they must then resort to presenting claims to their home insurance companies in hopes that they can be indemnified.
What would normally be a simple insurance claim is complicated by the fact that the property may not be insured properly to cover home-sharing activities. Insurance companies could potentially deny any loss at an Airbnb property regardless of whether it was being rented out at the time of the loss, while other companies may only deny losses that occur during an Airbnb stay.
While any number of legitimate losses can occur during an Airbnb stay, insurance claims professionals need to be on the lookout for questionable losses. Many of the fraud indicators that apply to standard homeowner’s and renter’s policies also apply for homes used as home-sharing properties, such as not having a police report or a delay in reporting. Scenarios that should be investigated include:
• Theft of contents but no sign of forced entry.
• Interior vandalism damage to a home that is not “typical.”
• Theft of contents or vandalism but no police report.
• Delay in reporting.
• An insured claims theft of contents while on vacation or a business trip.
If the facts of loss lead a claims professional or investigator to believe that an Airbnb property may be involved, then there are several things that can be done:
• Ask if the house is an Airbnb property.
• Search the Airbnb website.
• Google the loss location/insured property’s address.
• Search social media. If someone has a negative Airbnb experience, then they are putting it out for the world to see on social media. Be sure to search not only the insureds’ profiles, but also any mention of their names.
• Look for police reports. Even if an insured claims that he did not make a police report, contact the police station to verify.
• Request cellphone and bank records. Are there calls to an 800 number that trace back to an Airbnb help line? What about calls to a contractor, carpet cleaning service, or police? Are there debits or credits in large amounts to PayPal or other online payment services?
How insurers and courts will address and handle claims against Airbnb property owners, and directly against Airbnb, remains to be seen. What is certain is Airbnb and similar home-sharing companies and start-up enterprises are here to stay. Home-sharing sites are firmly planted in our economy and growing in popularity by the day. Deciding how you will prosecute, defend, and investigate claims and litigation involving home-sharing losses is only a matter of time.