BILL ANALYSIS Ó
SB 1092
Page 1
SENATE THIRD READING
SB
1092 (Monning)
As Amended June 8, 2016
Majority vote
SENATE VOTE: 36-0
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Judiciary |10-0 |Mark Stone, Wagner, | |
| | |Alejo, Chau, Chiu, | |
| | |Gallagher, | |
| | | | |
| | | | |
| | |Cristina Garcia, | |
| | |Holden, Maienschein, | |
| | |Ting | |
| | | | |
| | | | |
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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
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short-term rental on the platform Web site. Specifically, this
bill:
1)Requires a hosting platform to provide the following notice to
offerors listing a residence for short-term rental on the
platform:
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.
2)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."
3)Makes other technical changes.
FISCAL EFFECT: None.
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 (Hall), Chapter 239,
Statutes of 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 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 United Services Automobile
Association (USAA) quoted in the article, "If 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.)
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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-fo
r-hosts .) By 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
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insurance policy, a security deposit, or a direct payment from
the guest. (Available at 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
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
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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.
Analysis Prepared by:
Anthony Lew / JUD. / (916) 319-2334 FN: 0003504