BILL ANALYSIS Ó
SB 1092
Page 1
Date of Hearing: June 21, 2016
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
SB
1092 (Monning) - As Amended June 8, 2016
SENATE VOTE: 36-0
SUBJECT: ADVERTISING: INTERNET PRIVATE RESIDENCE RENTAL
LISTINGS: NOTICE
KEY ISSUE: should the operator of An online hosting platform
that allows persons to list their residences for short-term
rental be required to notify such persons that they should
REVIEW THEIR HOMEOWNERS' OR RENTERS' INSURANCE POLICIES TO SEE
IF THEY ARE COVERED FOR POSSIBLE LOSSES OR DAmages that may
arise as a result of the rental?
SYNOPSIS
Internet-based companies such as AirBnb, VRBO, and Homeaway have
created popular online marketplaces that allow people to list
their residential properties for rent on a short-term basis,
primarily to travelers and tourists, and facilitate
communication between the parties to make arrangements for
short-term rental of the properties. According to the author
and sponsor of this bill, the Association of California
Insurance Companies (ACIC), most homeowners' and renters'
insurance policies provide minimal or no liability coverage for
short-term rentals of the homes through such hosting platforms,
and many individuals listing residences for rental are unaware
of what may or may not be covered by their policies in the
unfortunate event of loss or damages while the residence is
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being rented to guests.
Accordingly, this bill prudently seeks to require operators of
such websites ("hosting platforms") to provide a specified
notice recommending that a person check his of her homeowner's
or renter's insurance policy for appropriate coverage before
listing their residence for short-term rental on the platform
website. The proposed notice requirement is very similar to a
notice requirement enacted last year by SB 761, which required
hosting platforms to provide a specified notice to tenants who
use the platform, informing them that listing their residence
for short-term rental may be a violation of their lease, and
recommending that they check their lease before listing the
property. Proponents contend that compliance with this bill can
be as simple as expanding the existing SB 761 notice by a single
additional sentence while following the same form and placement
requirements that were enacted by last year's bill.
In addition to ACIC, the bill is supported by the California
Apartment Association (CAA), several other insurance companies
and associations, and the City of Santa Monica, among others.
Recent amendments to the bill clarify that mobilehomes are also
included within the meaning of "residence" and make other
technical changes. The bill has no opposition and was approved
unanimously in the Senate. It is not opposed by Airbnb or any
other hosting platform, and these companies remain neutral on
the bill.
SUMMARY: Requires the operator of a hosting platform, as
defined, to provide a specified notice recommending that a
person check their homeowners' or renters' insurance policies
for appropriate coverage before listing their residence for
short-term rental on the platform website. Specifically, this
bill:
1)Requires a hosting platform to provide the following notice to
offerors listing a residence for short-term rental on the
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platform:
2)"You should review any restrictions on coverage under your
homeowners' or renters' insurance policy related to short-term
rental activities to ensure that there is appropriate
insurance coverage in the event that a person sustains an
injury or loss for which you are responsible, a person damages
or causes loss to your personal or real property, or a claim
or lawsuit is made against you or otherwise arises out of
activities related to this hosting platform."
3)Clarifies the existing notice directed at tenants listing a
residence for short-term rental on the platform to include a
mobilehome (in addition to a room, home, condominium or
apartment) within the meaning of "residence."
4)Makes other technical changes.
EXISTING LAW:
1)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. (Business & Professions Code
Section 22590. All further references are to this code unless
otherwise stated.)
2)Requires a hosting platform to provide the following notice to
occupants listing a residence for short-term rental on a
hosting platform:
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"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." (Section 22592.)
3)Requires the above notice to 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.
Clarifies that this affirmative acknowledgment may be
accomplished by the inclusion of a statement in the notice
that the occupant acknowledges reading this notice before
proceeding to list a real property with the hosting platform's
Internet Web site. (Section 22594 (b).)
4)Provides that the above notice shall be in a font 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. (Section 22594 (a).)
FISCAL EFFECT: As currently in print this bill is keyed
non-fiscal.
COMMENTS: This bill, sponsored by the Association of California
Insurance Companies (ACIC), seeks to require internet hosting
platform companies to provide a specified notice recommending
individuals to check their homeowners' or renters' insurance
policies before listing their properties on the platform to
ensure they have insurance coverage for potential loss or
damages that may arise out of renting the properties to paying
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guests. The simple premise behind the bill is that users of
these hosting platforms should be notified, prior to offering
their properties for short-term rental, that their homeowners'
or renters' insurance policies may not cover any damages or
liability that might unfortunately arise if an accident, injury,
or other incident occurs on their property during the rental
period.
Background on short-term rentals of residences through hosting
platform companies. In recent years, there has been an
explosion in popularity of Internet-based companies that allow
people to list a room or their entire residence for rent on a
short-term basis. These companies, such as AirBnb, VRBO, and
Homeaway, have created online marketplaces to allow travelers
and tourists to peruse listings for properties in a destination
city, and then contact the listing party to make arrangements
for short-term rental of the property. Typically, the companies
hosting these online platforms make money through advertising
and by charging a fee on each listing (in the case of Airbnb,
typically a fee of 9% to 15% of the total amount paid for the
rental). These companies generally make no distinction with
respect to who may list a property on the platform, allowing not
only property owners, but also tenants, to list properties for
short-term rental. Under Airbnb's terms of service, for
example, the "Host" of the property is required to be someone
registered with Airbnb who owns or legally controls the
residence during the period of the guest's stay.
Last year the Legislature enacted SB 761, Ch. 239 Stats. 2015,
which required internet hosting platform companies to provide a
specified notice to renters that they should check their lease
to see if listing their residence for rent on the hosting
platform is permitted, or instead may even violate the terms of
the lease. According to the author, this bill simply proposes a
similar disclosure with respect to insurance coverage when a
person is considering listing his or her residence for rental.
The author explains:
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Unfortunately, many (individuals) are unaware of the
insurance ramifications, if damage to property or
injury at the property occurs during the rental period.
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. SB 1092 simply requires
these websites to provide a notice to the homeowner or
renter to review their insurance coverage before
listing their property.
A precautionary notice is appropriate because damage to
residential property during a short-term rental is typically not
covered by homeowners' insurance policies. Proponents of the
bill, primarily members of the insurance industry, contend that
residential insurance policies often don't cover commercial
activities such as short-term rental of a residence through a
hosting platform, and thus, as a precaution, individuals seeking
to list their residences for rent should be directed to check
their insurance policies before doing so, as established by this
bill. According to the CSAA Insurance Group:
Many 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 homeowner 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.
According to a 2014 New York Times article, an informal survey
of major insurance companies concluded that most homeowner's and
renter's insurance policies do not cover regular commercial
activity in the home. According to Rebecca Hirsch, a
representative of the insurer USAA quoted in the article, "If
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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."
(A Liability Risk for Airbnb Hosts. (Dec. 5, 2014); New York
Times.)
Furthermore, failure to inform one's insurer of commercial
activity such as renting out residential property could
jeopardize the homeowner's insurance policy going forward.
According to Laura Stryoski, a representative of Allstate
Insurance quoted in the article, "An insured has the obligation
to be forthcoming about all facts relating to his/her insured
property. Not doing so could impact coverage and jeopardize the
continuation of insurance." (Id.)
Uncertainty about what is and is not covered under homeowners'
insurance policies is the result, not surprisingly, of the fact
that rules and terms of coverage vary from insurer to insurer.
According to the same New York Times article, for example,
Allstate allows people to rent out their residences for a week
or two while still maintaining liability coverage for guests;
Chubb Insurance offers liability coverage for guests as long as
the host's annual rental income does not exceed $15,000. (Id.)
On the other hand, USAA allows very limited exceptions, only for
occasional short-term rentals, and some insurers do not allow
liability coverage for guests at all.
Recently some hosting platforms, including Airbnb and Homeaway,
have started to offer their own liability coverage to persons
seeking to list residences for rent. For example, Airbnb's Host
Protection Insurance program, designed to protect hosts against
third party claims of bodily injury or property damage,
automatically provides up to $1 million in liability coverage to
most people listing properties, subject to certain terms.
("Airbnb beefs up liability insurance offering for hosts"
(October 22, 2015); available at: www.cnet.com/news/
Airbnb-beefs-up-liability-insurance-offering-for-hosts.) By
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contrast, to protect hosts against damage to their own
possessions or to the residence caused by guests, Airbnb runs a
Host Guarantee program which is not insurance coverage, but
rather a reimbursement fund from which a host can be compensated
for damages caused by the guest-but only for any leftover amount
that a host is unable to collect through an insurance policy, a
security deposit, or a direct payment from the guest. (Available
at https://www.airbnb. com/terms/host_guarantee .) Some hosting
platforms, however, do not provide any liability insurance
protections to hosts or homeowners. VRBO, for example, informs
its users that they are solely responsible for obtaining
insurance coverage sufficient to protect their properties, and
that they have or will obtain the appropriate insurance coverage
sufficient to cover the entire duration of any property rental
hosted on its platform. (See https://www.vrbo.com/
info/termsandconditions (as of June 15, 2016).)
Because not all hosting platforms or insurance companies provide
liability coverage for damages or losses associated with
short-term rentals, in order to alert and protect consumers, it
is reasonable and prudent for the hosting platform to provide a
short notice simply recommending that individuals check their
appropriate insurance policies before they list a residence.
Affirmative acknowledgement of the notice required by the user
of the platform who lists the property. This bill requires that
the notice is provided immediately before the person lists the
property on the hosting platform's website and also requires the
person to interact with the website to affirmatively acknowledge
reading the notice. Under this bill, this affirmative
acknowledgment may be accomplished by the inclusion of a
statement in the notice that the person acknowledges reading
this notice before proceeding to list the property with the
hosting platform.
Recent amendments clarify that a residence expressly includes
mobilehomes as one of the types of residences covered by the
notice. At the request of the Western Manufactured Housing
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Communities Association (WMA), representing managers and owners
of mobilehome parks, the author has recently amended the notice
directed to tenants, enacted last year by SB 761, to expressly
reference "mobilehomes" in addition to rooms, homes,
condominiums, and apartments. As a result of this technical
amendment, the SB 761 notice now cautions a tenant who is
listing a mobilehome for rent to check the lease for
restrictions that would limit his or her ability to list the
mobile home for rent on the hosting platform.
REGISTERED SUPPORT / OPPOSITION:
Support
Association of California Insurance Companies (ACIC) (sponsor)
American Insurance Association
California Apartment Association (CAA)
City of Santa Monica
CSAA Insurance Group
National Association of Mutual Insurance Companies
Pacific Association of Domestic Insurance Companies
Opposition
None on file
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Analysis Prepared by:Anthony Lew / JUD. / (916)
319-2334