BILL ANALYSIS                                                                                                                                                                                                    





                             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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