Investors who open up their homes for use as short-term rentals could find themselves in hot water without adequate insurance cover to cover tenant injury or damage, a lawyer has warned.
Slater and’s national practice group leader Barrie Woollacott has flagged how many investors aren’t aware that more than just regular home and contents insurance is usually required to provide coverage for commercial activities like Airbnb or a short-term rental arrangement.
While Airbnb does provide limited insurance – of up to US$1 million for a third-party claim for injury or property damage – it’s unlikely to be adequate to cover catastrophic injury or any significant loss and damage claim, the public liability and personal injury specialist has said.
“We know that serious injuries can and do occur at these properties,” Mr Woollacott said.
“In September 2018, a four-year-old boy suffered serious head injuries when a swing set fell on top of him at an Airbnb on theCoast. He died after being taken to hospital.”
When a person’s home becomes a business, they do require commercial insurance, the lawyer advised.
He noted “home and contents insurance won’t necessarily cover a guest for compensation in case they are injured on the property”.
Guests aren’t the only ones who could be at risk – the lawyer also argued that if property is damaged by guests and a host only has home and contents insurance, “it’s unlikely they would be covered”.
“Hosts should be taking out a policy that covers them for public liability insurance and some form of landlord insurance, particularly when the property is available for rental at any time year-round as opposed to holiday rentals available for a few weeks each year.”
And while there is “some potential relief for hosts who find themselves denied indemnity cover by their home and contents insurer when a claim is made by a guest for compensation”, this cover is only in respect of personal injury or property damage claims where the host has legal liability for the loss and damage up to the million-dollar figure.
Mr Woollacott said in circumstances where Airbnb declines or refuses to pay out on a claim on behalf of the host, then the injured guest will have to look to the host directly and hope that they have had the foresight to take out additional cover to protect themselves and their guests for any negligently caused loss and damage.