BILL ANALYSIS                                                                                                                                                                                                    



                                                                    SB 1092

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          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