BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
SB 1092 (Monning)
Version: March 28, 2016
Hearing Date: April 12, 2016
Fiscal: No
Urgency: No
TH
SUBJECT
Advertising: Internet Private Residence Rental Listings: Notice
DESCRIPTION
Existing law requires residential hosting platforms to provide
notice to occupants listing a residence for short-term rental
stating that if the occupant is a tenant, listing the residence
may violate their lease or contract and could result in legal
action by their landlord, including possible eviction.
This bill would additionally require residential hosting
platforms to provide a notice disclosing information regarding
the availability or unavailability of insurance coverage
provided by the hosting platform, as specified, and would make
other technical and conforming changes.
BACKGROUND
In recent years, California has seen a rise in what is known as
the "sharing economy," with the influx of ridesharing businesses
such as "Lyft" and "Uber," and homesharing businesses such as
"Airbnb," "FlipKey," and "VRBO." Generally speaking,
homesharing consists of an agreement between two parties in
which one party rents out all or part of his or her home to
another party on a temporary, one-time basis. Service providers
like "Airbnb," "FlipKey," and "VRBO," advertise homes offered
for temporary rental and facilitate connecting renters with
offerors for a fee.
According to the National League of Cities, "[s]haring economy
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businesses have been growing in cities, and presenting a new set
of challenges and opportunities for policy makers and city
leaders. While the sharing economy represents new and exciting
possibilities offered by technology platforms, cities are
finding that these innovative services also present a new set of
safety, taxing and business challenges." (DuPuis and Rainwater,
The Sharing Economy: An Analysis of Current Sentiment
Surrounding Homesharing and Ridesharing, National League of
Cities (2014) [as of March 31, 2016].)
Last year, the Legislature addressed a concern that tenants
subletting their rented accommodations through a homesharing
service provider could place themselves at risk of eviction if
such activity violated their rental or lease agreement. SB 761
(Hall, Ch. 239, Stats. 2015) directed homesharing service
providers - termed "hosting platforms" - to provide a specified
notice to offerors that would make them aware of possible
restrictions in their rental agreements and leases that could
subject them to eviction should they offer their unit for
short-term rental.
This bill would direct a hosting platform to provide a similar
notice disclosing the availability or unavailability of
insurance coverage provided by the hosting platform to offerors
who chose to list their homes for short-term rental.
CHANGES TO EXISTING LAW
Existing law requires a hosting platform to provide the
following notice to occupants listing a residence for short-term
rental on a hosting platform:
If you are a tenant who is listing a room, home, condominium,
or apartment, please refer to your rental contract or lease,
or contact your landlord, prior to listing the property to
determine whether your lease or contract contains restrictions
that would limit your ability to list your room, home,
condominium, or apartment. Listing your room, home,
condominium, or apartment may be a violation of your lease or
contract, and could result in legal action against you by your
landlord, including possible eviction. (Bus. & Prof. Code
Sec. 22592.)
Existing law states that the above notice shall be in a font
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size that is equal to or greater than 100 percent of the
standard font size of the other paragraphs on the hosting
platform's Internet Web site or equal to the default font size
on the hosting platform's Internet Web site. Existing law
specifies that the notice shall be provided immediately before
the occupant lists each real property on the hosting platform's
Internet Web site, and shall require the occupant to interact
with the hosting platform's Internet Web site to affirmatively
acknowledge he or she has read the notice. (Bus. & Prof. Code
Sec. 22594.)
Existing law defines "hosting platform" to mean a marketplace
that is created for the primary purpose of facilitating the
rental of a residential unit offered for occupancy for tourist
or transient use for compensation to the offeror of that unit,
and the operator of the hosting platform derives revenues,
including booking fees or advertising revenues, from providing
or maintaining that marketplace. (Bus. & Prof. Code Sec.
22590.)
This bill requires a hosting platform to provide an offeror,
prior to the offeror's listing of a residential unit for
short-term rental on the hosting platform, a notice disclosing
information regarding the availability or unavailability of
insurance coverage provided by the hosting platform, as
specified.
This bill specifies, for purposes of the above notice, that if
the hosting platform provides primary insurance coverage for the
offeror for any liabilities or property losses the offeror
incurs as a result of activity related to the short-term rental,
the hosting platform shall disclose the coverage limits for
death, personal injury, and property damage, and shall
explicitly explain to the offeror all of the following:
that primary insurance means that the hosting platform's
insurance coverage shall be primary to all other insurance and
first in line to cover liabilities or property losses;
that the policy is not contingent on the offeror's homeowners'
or renters' insurance policy first denying a claim before the
hosting platform's primary insurance provides coverage; and
that the offeror should review any restrictions on coverage
under the offeror's own homeowners' or renters' insurance
policy related to short-term rental activities.
This bill specifies, for purposes of the above notice, that if
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the hosting platform provides only secondary or excess insurance
or does not provide insurance, the hosting platform shall:
disclose that the offeror's homeowners' or renters' insurance
policy may be primary and first in line to cover liabilities
or property losses;
explicitly request that the offeror review the offeror's
homeowners' or renters' insurance policy to ensure that there
is appropriate insurance coverage in the event that a person
sustains an injury or loss for which the offeror is
responsible, a person damages or causes loss to the offeror's
personal or real property, or a claim or lawsuit is made
against the offeror or otherwise arises out of activities
related to the hosting platform; and
disclose that the offeror's homeowners' or renters' insurance
may exclude coverage arising out of activities related to the
hosting platform.
This bill makes other technical and conforming changes.
COMMENT
1.Stated need for the bill
The author writes:
Many homeowners and renters list their residences for short
term rental on internet hosting platforms, such as Airbnb,
HomeAway, and Vacation Rentals by Owner. Unfortunately, many
are unaware of the insurance ramifications if damage to
property or injury at the property occurs during the rental
period. Some homeowners or renters policies may provide
coverage when a "guest" is injured or when the "guest" breaks
or damages an item in the home or apartment. Many current
insurance policies allow some period of limited commercial
use, but the terms can vary significantly based on the
insurance company. If the activity is explicitly excluded by
the policy, the homeowner or tenant may be liable for injuries
or property loss.
It is important for homeowners and renters who make their
properties available through internet hosting platforms to
understand their insurance coverage and whether it will
protect them in the event that something unfortunate occurs
during the short term rental of their property. SB 1092
requires internet hosting platforms to provide a disclosure to
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homeowners and renters that they should check their
homeowners' or rental insurance policies to find out if they
are covered before engaging in home sharing activity.
2.Insurance coverage for homesharing activities
In 2014, the New York Times published an article describing the
applicability of residential insurance policies to losses
connected with homesharing activities. After surveying major
insurance carriers, the Times concluded that most homeowner's
and renter's insurance policies do not cover regular commercial
activity in the home. According to a USAA representative quoted
in the article, "[i]f 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." (Ron Lieber, A Liability Risk for
Airbnb Hosts, New York Times (Dec. 5, 2014)
[as of
March 31, 2016].) Unfortunately, many homesharing hosts may not
realize that limitations in their insurance policies may exclude
losses that occur while their property is being rented.
According to the CSAA Insurance Group, who writes in support,
[M]any homeowners and renters who participate in hosting
platform activities are unaware of their own insurance
coverage and what may or may not be covered in the event of a
loss while the home is being rented. In addition, they are
often unaware of the coverage the hosting platform may have
and how it would interact with the howmeowner or renter's
insurance coverage. Simple questions like who pays and up to
what amount are questions that should be answered prior to
participating in hosting platform activities.
Some hosting platforms advise homeowners and renters who choose
to offer their home for short-term rental that they do not
provide insurance coverage for losses occurring in connection
with the rental. VRBO, for example, states:
We do not provide liability insurance protection for owners,
property managers, or travelers; regardless of whether a user
obtains insurance coverage through one of our third party
providers. Users are solely responsible for obtaining
insurance coverage sufficient to protect their properties and
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guests or their trip, as applicable. Members agree that they
have or will obtain the appropriate insurance coverage
sufficient to cover the rental of the properties they list on
the Site prior to the arrival of their first traveler and will
maintain adequate insurance coverage through the departure
date of any traveler they have obtained via one of our Sites.
Further, Members agree to provide us with copies of relevant
proof of coverage upon request. (See VRBO Terms and
Conditions [as
of Apr. 1, 2016].)
Other hosting platforms advise offerors listing properties for
rental to check their insurance coverage amounts and
limitations. Airbnb, for example, states:
Airbnb recommends that Hosts obtain appropriate insurance for
their Accommodations. Please review any insurance policy that
you may have for your Accommodation carefully, and in
particular please make sure that you are familiar with and
understand any exclusions to, and any deductibles that may
apply for, such insurance policy, including, but not limited
to, whether or not your insurance policy will cover the
actions or inactions of Guests (and the individuals the Guest
invites to the Accommodation, if applicable) while at your
Accommodation. (See Airbnb Terms of service
[as of Apr. 1, 2016].)
Additionally, some hosting platforms have begun offering
insurance products to offerors either as part of the hosting
agreement or as a supplementary product available from
third-party insurers that can be purchased when a property is
listed for short-term rental.
This bill would help ensure consumers are aware of the insurance
coverage, or lack thereof, governing their homesharing
activities by requiring hosting platforms to make specific
disclosures before properties are listed for rent.
Specifically, the bill requires hosting platforms to notify
consumers immediately before listing a property whether the
hosting platform provides primary, secondary, or excess
insurance coverage to offerors, and what conditions or
limitations, such as policy limits, govern that coverage. When
no such insurance is offered, this bill requires hosting
platforms to advise offerors that their own insurance might be
first in line to cover liability or property losses arising out
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of their homesharing activities, and that they should check
their insurance coverage to determine whether coverage is
available and sufficient.
3.Technical changes to existing law
This bill makes several technical and clarifying changes to
existing law to eliminate redundant statements concerning the
font size of required notices, to correct spelling errors, and
to clarify that notices are to be made to all offerors, not just
offerors that occupy a unit or house offered for short-term
rental. During the course of making these technical changes, a
requirement in existing law that notices be provided immediately
before a property is listed on a hosting platform's Internet Web
site was inadvertently eliminated. The requirement that
specified notices be provided immediately before listing ensures
that such notices are well-placed to capture the attention of
the offeror, and that they do not become lost amongst other
disclosures or terms presented to the offeror during the listing
process. The author offers the following amendment to restore
this requirement.
Author's Amendment :
On page 4, following line 6, insert: "The notices required by
Sections 22592 and 22593 shall be provided immediately before
the occupant lists each real property on the hosting
platform's Internet Web site."
Support : California Apartment Association; CSAA Insurance
Group; National Association of Mutual Insurance Companies;
Pacific Association of Domestic Insurance Companies
Opposition : None Known
HISTORY
Source : Association of California Insurance Companies
Related Pending Legislation : AB 2881 (Cmte. on Judiciary, 2016)
would add mobilehomes to the types of residences listed for
short-term rental on a hosting platform that would be subject to
existing notice and disclosure requirements.
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Prior Legislation : SB 761 (Hall, Ch. 239, Stats. 2015) required
hosting platforms, as defined, to provide a notice to hosts
listing a residence for short-term rental stating that if the
occupant is a tenant, listing the residence may violate their
lease or contract and could result in legal action by their
landlord, including possible eviction. This bill specified that
the notice must be provided immediately before the occupant
lists each real property on the online platform or Internet Web
site, and must require the occupant to interact with the online
platform Internet Web site to affirmatively acknowledge that he
or she has read the notice.
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