EmptyRoom
3 years ago
 

HomeAway thinks $1M Airbnb Host Guarantee is as empty as a vacant apartment

Is Airbnb’s new $1 million Host Guarantee more fluff than substance?

That’s the viewpoint of a HomeAway co-founder and also an insurance executive at CBIZ Insurance Services, a major vacation-rental insurer, both of whom think the Airbnb guarantee is relatively empty when it comes to additional coverage.

Carl Shepherd, co-founder and chief strategy and development officer at HomeAway, an Airbnb competitor, praises Airbnb’s  Host Guarantee for drawing attention to insurance issues for vacation-rental owners, but he dismisses the initiative merely as “great marketing.”

The Airbnb Host Guarantee does little in the way of providing any “any additional protection,” Shepherd argues.

Both Shepherd and Scott Wolf, president of the national program insurance division of CBIZ Insurance Services, contend that Airbnb’s Host Guarantee would only come into play after existing homeowners’ insurance is exhausted.

And, this analysis goes a long way toward explaining how Airbnb might be able to afford to give hosts free property-damage protection of up to $1 million per booking.

The financial burden wouldn’t be great if claims are rarely paid out, goes the thinking.

Wolf argues that the insurance premium that Airbnb pays its provider, Lloyd’s, likely is minimal because the coverage is “excess of the owner’s policy.”

Thus, as homeowners generally are required to have property insurance, the Airbnb coverage would kick in — at Airbnb’s discretion — only after the owner tried first to collect from the guest and then through an existing homeowner’s insurance policy, Wolf adds.

Wolf points to the following paragraph in Airbnb’s 25-page host-guarantee terms as defining its excess-coverage nature:

You must use your best efforts to seek recovery from the Responsible Guest for any Covered Losses. If you are unable to recover such Covered Losses or damages within a reasonable period, then you must seek recovery to which you may be entitled, from any person or entity other than the Responsible Guest or Airbnb, with respect to such Covered Losses.

Or stated another way, you must collect from the guest or your existing insurer before considering submitting a claim to Airbnb, Wolf says.

“My concern about Airbnb promoting this coverage is that it gives a false sense of security to the vacation rental owner,” Wolf says.

When you read Airbnb’s Host Gurantee terms, it reads like a typical lawyer-crafted document.

However, when asked to clarify the language in the above paragraph and, in particular, these words, “…then you must seek recovery to which you may be entitled, from any person or entity other than the Responsible Guest or Airbnb, with respect to such Covered Losses,” Airbnb spokesperson Kim Rubey says: “The clause you point to was not meant to convey a legal term.”

And Rubey denies that the Airbnb Host Guarantee is only for coverage beyond existing homeowners’ policies, saying:

We typically pay on the claim prior to the host seeking such coverage from his or her insurance.  We do expect our Host Guarantee to be the primary source of coverage for our hosts.

Rubey says the Host Guarantee provides homeowners with “the ultimate peace of mind” and is the “greatest protection” available in the sector.

The quandary then is: Should you believe Airbnb’s clarification that its coverage comes before existing policies or should you rely on an insurance expert’s advice that the language of its terms means the guarantee is only triggered after homeowners’ policies pay for damages?

Wolf of CBIZ Insurance Services also examines other loopholes, noting that the Airbnb Host Guarantee doesn’t cover homeowners’ main areas of exposure: liability for a guest injury and loss of business income due to damage from weather-related events such as hurricanes or tornadoes.

Among other problem areas, Wolf says, property owners are required to have ensured there were positive reviews about guests before renting to them, and must submit a claim within 14 days of the incident or before the next guest stays at the property.

And, Wolf argues that the following paragraph in the Airbnb Host Guarantee terms reinforces the notion that its introduction is mostly about promoting the site. It states:

Airbnb provides Hosts with the Airbnb Host Guarantee benefits described herein free of charge solely for the purpose of promoting use of the Site, Application and Services by building customer loyalty and strengthening customer confidence as to use of the Site, Application and Services.

Meanwhile, HomeAway takes a different tack, marketing CSA Property Damage Protection to owners and guests for a maximum of $5,000 in coverage for a $59 fee.

Owners can sell it to guests in lieu of demanding deposits and travelers can take out coverage on their own, as well.

“Property Damage Protection enables travelers to replace deposits with insurance designed to cover damages a traveler may accidentally cause to a vacation rental,” Shepherd says. “The vast majority of security deposits are returned in full, so the purpose of PDP is to make the rental transaction easier for both the property owner and the traveler by reducing the efforts of paying, collecting and refunding deposits.”

Let’s see: As Airbnb and HomeAway clash in the vacation rental marketplace and vie for owner listings, Airbnb is marketing its $1 million Host Guarantee for free while HomeAway is pushing $5,000 Property Damage Protection to both owners and guests for a fee.

Shepherd of HomeAway argues that both companies are “essentially doing the same thing.”

“In terms of meaningful protection, I think we match it [Airbnb], although our absolute numbers are smaller,” Shepherd says.

But, if vacation-rental owners don’t look deeply into Airbnb’s Host Guarantee and list with Airbnb based on the $1 million glitz, it looks like HomeAway could have a big public relations problems on its hands.

UPDATE: Another insurance expert has taken a look at Airbnb’s Host Guarantee and interpreted it as amounting to “excess coverage,” meaning hosts would collect any damages from guests and existing homeowners’ insurance policies before Airbnb’s coverage gets triggered.

In other words, Airbnb’s insurer would end up compensating hosts for damages very infrequently.

Several paragraphs of Airbnb’s terms advise guests that their credit cards will get charged if damage is done to the property “so why would you need the Host Guarantee,” the insurance expert says.

Importantly, the insurance expert pointed to the following statement in Airbnb’s terms detailing some of the “excluded losses” as meaning that existing homeowners’ insurance policies are “primary” and Airbnb’s policy is excess coverage:

losses or damages for which you are compensated or reimbursed from a source other than Airbnb including without limitation: (i) amounts received under an insurance policy, guarantee or indemnity; (ii) a security deposit; or (iii) payment directly by the Responsible Guest or an Invitee, or other party or an insurer or guarantor of such party.

 

 

 

 

 
 
Dennis Schaal

About the Writer :: Dennis Schaal

Dennis Schaal was North American editor for Tnooz.

 

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  1. Airbnb Host

    I’ve been an underwriter in the insurance industry for the last 8 years and I’m also an Airbnb host. From reviewing Airbnb’s terms of service and host guarantee, as an underwriter I would most definitely adjust any claims only after all claims have been filed through a homeowner’s policy first based on their policy. However most homeowner’s policies will not cover any claims arising from this because it would be considered a commercial operation and you would need commercial insurance, not homeowner’s insurance to cover these operations. Moreover, as someone else pointed out, the Airbnb host guarantee only covers property damage, NOT liability. And with people being so litigious these days, liability coverage is what hosts should be more concerned about as an injury can result in claims in excess of $1MM. I think Airbnb is definitely very marketing/PR saavy and is being a bit misleading in their claims, or at the very least, not doing enough to educate consumers about having the adequate insurance coverage in place through their primary insurer first.

    If a property damage claim was filed and denied by a host’s primary insurer, there is still an obligation on Airbnb’s part to pay for the claim, as long as all other means have been exhausted first (i.e. from the guest and a primary insurance policy). However, it is unclear whether Airbnb would actually follow through on this obligation. It’s pretty interesting to see what kind of lawsuits and rulings will arise in the near future as this is a new area for insurance. Although I have to say that traditionally, even for commercial insurers, shared housing/bnbs are traditionally not considered favorable risks anyway and can be more difficult to find coverage for.

     
  2. Anton

    I’m in the UK and have been renting my house out when i go away for a couple of years on Airbnb. This year i thought to ask my insurers if there was an issue in renting with airbnb and they told me that they would not pay any claim for damage, fire, theft etc etc if it occured when i was renting the house as this is outside the terms of the insurance. I then contacted at least 10 insurers and got the same story, until i found one that would cover the house in these terms.

    During the process I phoned airbnb to ask what i should do as i have several pending rentals. They were very dismissive, but i stressed the urgency that i had only two days before i had to renew my policy. They promised to call back. About 3 weeks later i got an email from airbnb saying they couldn’t help!

    So terrible customer service in relation to an issue that if it was properly understood could destroy the whole business model. If your home is not insured when you have either a paying guest staying or you rent out your home when you are not there then I imagine few people would take the risk of renting with airbnb. This seems to be a huge can of worms…

     
  3. Michael

    Most homeowners policies aren’t going to pay out anything on these losses because the homeowner is operating a bed & breakfast business in a single family home, and is probably doing so in violation of zoning and other laws. And if there is a mortgage lender involved, the owner is probably also in violation of those terms as well.

     
  4. Kenny Bavoso

    Property damage is one issue, but the Liability issue seems to be much bigger, which neither Homeaway nor Airbnb cover! I believe if you are using Airbnb it requires special homeowners or renters Insurance. Every insurance company I have spoken with has told me they would deny any claim since Airbnb and HomeAway are commercial use. So for Airbnb Policy to say it takes affect after exhausting your homeowners policy seems crazy, since it is consistent across insurance companies that this type of use is not covered. In my research it seems commercial and bed and breakfast policies are two options for owners but potentially, making renting out your place no longer economically feasible for lots of people. I believe one option is to create a large pool of hosts and self insure. Lloyd’s could also put together an appropriate liability package and sell directly to hosts and/or through the providers.

    If I am missing the boat here and there is already a viable insurance solution, do please let me know, as I am a buyer.

     
  5. craig

    I can write from personal experience that the host guarantee is empty. I had an incident involving a guest who broke my AC thermostat and repairs cost $360..an insignificant amount for a claim…
    Airbnb refused to pay the difference after the 100 security deposit after a mediation period that determined the guest should only pay $160 and not the full amount. Here’s my response:
    “Hi Craig,

    I hope this message finds you well. Thank you for your Host Guarantee submission. Unfortunately, at this time a final decision has been made regarding the security deposit payout for reservation XWFDXH.

    We understand this is not the outcome you were seeking. However, as a third party we are required to make the fairest decision possible for both host and guest with the documentation presented.

    All the best,

    Julie ”

    As I said, its a small amount of money for a legitamate claim. Obviously, I am discontinuing this Airbnb venture..

     
  6. Luxury Villas

    Airbnb seems to have a much better marketing team working for them, $1 million host guarantee does sound pretty impressive! I just hope those hosts are reading the small print!

     
    • sarah

      Airbnb’s $1 million guarantee is only marketing. I just recently had an issue with a guest who turned my rental into a photoshoot and scratched the hardwood floors when he moved the furniture. Airbnb has been impossible to work with even to get the security deposit which was only $300, not enough to cover the damage.

      They waited 5-6 days to respond to the photos I sent as well as my 2 calls checking to see if I needed to provide anything further. When they finally did respond, they said they needed an estimate by a professional within 48 hours. It’s a challenge to get professionals out on a normal week, let alone Easter week. When I responded after the holiday, they said it was too late and there was nothing they could do despite my previous communication and photos. When I asked to speak to the dept assessing the claims (Samuel), they said they are only available by email. When I emailed requesting to understand how they came to their conclusion, they ignored the emails.

      I don’t know how this company is going to survive with policies like these. For future rentals, I’ll will be collecting and controlling the deposit because companies like Airbnb can’t be trusted to protect people’s property.

       
  7. A Round-Up of News from the Vacation Rental Industry « LiveRez Vacation Rental Software Blog

    […] Austin Bulldog) • HomeAway thinks $1M Airbnb Host Guarantee is as empty as a vacant apartment (Tnooz) • New “Short Term Rentals” Law Explained (MauiNow) • Weather Trends: Best Weeks to Book a […]

     
  8. Gary

    This is very interesting to see these 2 giants butt heads like this (Jazz had a great analogy!). It really does seem a bit over-the-top on behalf of AirBnB making it indeed seem like more of a big PR stunt than anything.

    As a homeowner I honestly prefer the classic method of simply collecting a security deposit. Otherwise with insurance guests know that they are covered and may consider not caring as much for the home. I would much rather have the piece of mind that they are being cautious in the hopes of retrieving their deposit. Sites like AirBnb.com and rentini.com allow you to do this without worrying about the transaction itself. They act as the middle man and only charge the deposit if you file the claim. Otherwise neither party has to worry about sending/receiving anything.

     
  9. Sam Milful

    You need to read both HA and Airbnb policies. Not worth the paper it is written on. At least with Airbnb it is for free. HA knowingly is just ripping you off.

     
  10. Jazz Poulin

    Watching HomeAway vs AirBnB kinda makes me think of a Mayweather vs Pacquiao fight in the making. They say we’ll never see it but it’s going to happen….who are you betting on? :)

     
  11. Dennis Schaal

    Dennis Schaal

    Kristen: For guests, not hosts, HomeAway tweaked its Carefree Rental Guarantee http://www.homeaway.com/guarantee/tac.html to provide some coverage in case of “Internet fraud.” Just fyi.

     
    • Carl Shepherd

      Dennis, HomeAway advises anyone who is thinking about renting all or part of his residence to call his or her insurance agent and verify there is adequate insurance on the property, its furnishings, and for any personal liability that may be incurred should someone be injured during the rental period. Only the owner’s insurance representative can tell if the owner is covered or not, and, in pretty much every situation, we think it makes sense for anyone advertising his property to the public to deal directly with his insurer to receive a proper binder before doing so. After all, the owner is already paying for home insurance anyway, so doesn’t it make sense that he first make sure it protects him if he rents to the public?

      The time to find out that you’re not covered is before anyone ever rents your home, not, for example, when your dog–that has never been anything but gentle–attacks the guest staying in your garage apartment, or when the guest knocks over a candle and burns down your house.

      As I though I mentioned during our interview, concern about one’s property is a rational concern, but it pales in comparison to the liability one has should a guest, or a guest of a guest, be injured while staying with you. That is where the uncapped liabilities lie, and that is why the owner has the most to lose should he not first speak to his insurer before renting.

      Carl Shepherd

       
  12. Quora

    Why are there so few negative reviews on Airbnb?…

    Airbnb in general is very unustworthy with reviews. i’d like to point out two things:- 1. That they dont mention dates on the reviews and only have an arbitrary month at the top implying that the reviews are recent though they are not. 2. They blend r…

     
  13. Kristin Zern

    I use both HomeAway and Airbnb for my rental property. Everyone is always worried about fraud perpetrated against renters and very few consider the extreme risk that owners experience when they put their greatest asset up for rent to complete strangers on these sites.

    I have experienced recent hacking incidents (3 in 4 weeks) on my HomeAway account. The first 2 that I reported got a phone call each and I was instructed to change all my touch points. In fact, they took my account down until I actually completed the changed email addresses, passwords, etc.

    The third attack was far more serious to me as an owner, someone in the UK pretended to want to rent our property but what he really wanted was my bank information so that he could drain my account, not to make a payment.

    This breach received a form email (2 weeks after I reported it), telling me to check out how to spot a hacker on their site. Not too impressive a response.

    Dear HomeAway CEO, I would be more than happy to pay a premium to have insurance protection against fraud.

     
    • Carl Shepherd

      Kristin:

      Your posting caught my eye and so I asked our T&S department for an update on your case. If you could please call into our T&S department, they can complete the case and get you back to normal. Let me know if for some reason we fall short.

      Carl Shepherd

       
 
 

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