Existing law requires a hosting platform, as defined, to provide a specific notice to an occupant listing a residence for short-term rental on a hosting platform that states, among other things, that, if the occupant is a tenant, listing the room, home, condominium, or apartment may violate the lease or contract and could result in legal action by the landlord, including possible eviction. Existing law requires the notice to be in a particular font size and be provided immediately before the occupant lists each real property on the hosting platforms Internet Web site in a manner that requires the occupant to interact with the hosting platforms Internet Web site to affirmatively acknowledge he or she has read the notice.

This bill would require that notice to also be provided to mobilehome offerors and include a statement advising the offeror to review any restrictions on coverage under the offerors homeowners or renters insurance policy related to short-term rental activities, as specified, and would make technical and conforming changes.

Existing law requires a hosting platform, as defined, to provide a specific notice to an occupant listing a residence for short-term rental on a hosting platform that states, among other things, that, if the occupant is a tenant, listing the room, home, condominium, or apartment may violate the lease or contract and could result in legal action by the landlord, including possible eviction. Existing law requires the notice to be in a particular font size and be provided immediately before the occupant lists each real property on the hosting platforms Internet Web site in a manner that requires the occupant to interact with the hosting platforms Internet Web site to affirmatively acknowledge he or she has read the notice.

This bill would require that notice to also be provided to mobilehome offerors and include a statement advising the offeror to review any restrictions on coverage under the offerors homeowners or renters insurance policy related to short-term rental activities, as specified, and would make technical and conforming changes.

Existing law requires a hosting platform, as defined, to provide a specific notice to an occupant listing a residence for short-term rental on a hosting platform that states, among other things, that, if the occupant is a tenant, listing the room, home, condominium, or apartment may violate the lease or contract and could result in legal action by the landlord, including possible eviction. Existing law requires the notice to be in a particular font size and be provided immediately before the occupant lists each real property on the hosting platforms Internet Web site in a manner that requires the occupant to interact with the hosting platforms Internet Web site to affirmatively acknowledge he or she has read the notice.

This bill would require that notice to also be provided to mobilehome offerors and include a statement advising the offeror to review any restrictions on coverage under the offerors homeowners or renters insurance policy related to short-term rental activities, as specified, and would make technical and conforming changes.

Existing law requires a hosting platform, as defined, to provide a specific notice to an occupant listing a residence for short-term rental on a hosting platform that states, among other things, that, if the occupant is a tenant, listing the room, home, condominium, or apartment may violate the lease or contract and could result in legal action by the landlord, including possible eviction. Existing law requires the notice to be in a particular font size and be provided immediately before the occupant lists each real property on the hosting platforms Internet Web site in a manner that requires the occupant to interact with the hosting platforms Internet Web site to affirmatively acknowledge he or she has read the notice.

This bill would modify that font size requirement and would discontinue the requirement that the notice be provided immediately before the listing of each real property. The bill would require the hosting platform to additionally provide to an offeror, prior to the offerors listing of a residential unit for short-term rental on the hosting platforms Internet Web site, a notice disclosing specified information regarding the availability or unavailability of insurance coverage provided by the hosting platform. The bill would require the new notice to comply with the above-described affirmative acknowledgment and modified font size requirements require that notice to also include a statement advising the offeror to review any restrictions on coverage under the offerors homeowners or renters insurance policy related to short-term rental activities, as specified, and would make technical and conforming changes.

Existing law requires a hosting platform, as defined, to provide a specific notice to an occupant listing a residence for short-term rental on a hosting platform that states, among other things, that, if the occupant is a tenant, listing the room, home, condominium, or apartment may violate the lease or contract and could result in legal action by the landlord, including possible eviction. Existing law requires the notice to be in a particular font size and be provided immediately before the occupant lists each real property on the hosting platforms Internet Web site in a manner that requires the occupant to interact with the hosting platforms Internet Web site to affirmatively acknowledge he or she has read the notice.

This bill would additionally require the typeface of that notice to be clear, legible, and one of the typefaces used elsewhere on the hosting platforms Internet Web site. modify that font size requirement and would discontinue the requirement that the notice be provided immediately before the listing of each real property. The bill would require the hosting platform to additionally provide to an offeror, prior to the offerors listing of a residential unit for short-term rental on the hosting platforms Internet Web site, a notice disclosing specified information regarding the availability or unavailability of insurance coverage provided by the hosting platform. The bill would require the new notice to comply with the above-described affirmative acknowledgment and modified font size requirements and would make technical and conforming changes.

Existing law requires a hosting platform, as defined, to provide a specific notice to an occupant listing a residence for short-term rental on a hosting platform that states, among other things, that, if the occupant is a tenant, listing the room, home, condominium, or apartment may violate the lease or contract and could result in legal action by the landlord, including possible eviction. Existing law requires the notice to be in a particular font size and be provided immediately before the occupant lists each real property on the hosting platforms Internet Web site in a manner that requires the occupant to interact with the hosting platforms Internet Web site to affirmatively acknowledge he or she has read the notice.

This bill would additionally require the typeface of that notice to be clear, legible, and one of the typefaces used elsewhere on the hosting platforms Internet Web site.

SENATE THIRD READING

STR Bill Id:SB 1092

Author:(Monning)

As Amended Ver:June 8, 2016

Majority vote

SENATE VOTE: 36-0

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 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.

1. 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."
2. 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 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:

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.)

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 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 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 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

 UNFINISHED BUSINESS  

Bill No: SB 1092

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 6-0, 5/3/16

AYES: Jackson, Moorlach, Anderson, Leno, Monning, Wieckowski

NO VOTE RECORDED: Hertzberg

SENATE FLOOR: 36-0, 5/16/16

AYES: Allen, Anderson, Bates, Beall, Berryhill, Block, Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hancock, Hernandez, Hertzberg, Hill, Huff, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell, Nguyen, Nielsen, Pavley, Roth, Stone, Vidak, Wieckowski, Wolk

NO VOTE RECORDED: Hall, Hueso, Pan, Runner

ASSEMBLY FLOOR: 77-0, 6/23/16 - See last page for vote

SUBJECT:

SOURCE: Association of California Insurance Companies

DIGEST: This bill requires residential hosting platforms to provide a notice warning individuals to review any restrictions on coverage under their homeowners’ or renters’ insurance policy related to short-term rental activities to ensure that there is appropriate insurance coverage in the event of a loss arising out of those activities.

Assembly Amendments add mobilehomes to the list of housing units for which a separate notice concerning possible violations of a lease or contract which could result in legal action must be provided.

ANALYSIS:

Existing law:

1. 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.)

1. States 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. 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 that he or she has read the notice. (Bus. & Prof. Code Sec. 22594.)
2. 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:

1. Requires a hosting platform to provide the following notice to offerors listing a residence for short-term rental on a hosting 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.

1. Expands the notice required under existing law stating that 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, to include mobilehomes listed on a hosting platform.
2. Makes 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 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) <http://www.nlc.org/Documents/Find%20City%20Solutions/City-Solutions-and-Applied-Research/Sharing%20Economy%20Brief.pdf [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, Chapter 239, Statutes of 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 directs a hosting platform to provide a similar notice to homesharing hosts that warns them to review their insurance coverage to ensure that they are adequately covered for losses arising in connection with short-term rental activities.

Comments

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 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.

Related/Prior Legislation

AB 2881 (Committee on Judiciary, 2016) adds 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.

SB 761 (Hall, Chapter 239, Statutes of 2015) required hosting platforms 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. The bill specified that the notice must be provided immediately before an occupant lists each real property on an 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.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 6/24/16)

Association of California Insurance Companies (source)

American Insurance Association

California Apartment Association

City of Santa Monica

CSAA Insurance Group

National Association of Mutual Insurance Companies

Pacific Association of Domestic Insurance Companies

OPPOSITION: (Verified 6/24/16)

None received

ASSEMBLY FLOOR: 77-0, 6/23/16

AYES: Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Achadjian, Harper, O'Donnell

Prepared by:

6/24/16 14:33:56

**** END ****

Date of Hearing: June 21, 2016

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

SBPCA Bill Id:SB 1092

Author:(Monning) – As Amended Ver: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 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 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:

"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.)

1. 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).)
2. 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 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:

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 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 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 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

Analysis Prepared by: Anthony Lew / JUD. / (916) 319-2334

 THIRD READING  

Bill No: SB 1092

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 6-0, 5/3/16

AYES: Jackson, Moorlach, Anderson, Leno, Monning, Wieckowski

NO VOTE RECORDED: Hertzberg

SUBJECT:

SOURCE: Association of California Insurance Companies

DIGEST: This bill requires residential hosting platforms to provide a notice warning individuals to review any restrictions on coverage under their homeowners’ or renters’ insurance policy related to short-term rental activities to ensure that there is appropriate insurance coverage in the event of a loss arising out of those activities.

ANALYSIS:

Existing law:

1. 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.)

1. States 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. 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 that he or she has read the notice. (Bus. & Prof. Code Sec. 22594.)
2. 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:

1. Requires a hosting platform to provide the following notice to offerors listing a residence for short-term rental on a hosting 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.

1. Makes 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 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) <http://www.nlc.org/Documents/Find%20City%20Solutions/City-Solutions-and-Applied-Research/Sharing%20Economy%20Brief.pdf [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, Chapter 239, Statutes of 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 directs a hosting platform to provide a similar notice to homesharing hosts that warns them to review their insurance coverage to ensure that they are adequately covered for losses arising in connection with short-term rental activities.

Comments

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 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.

Related/Prior Legislation

AB 2881 (Committee on Judiciary, 2016) adds 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.

SB 761 (Hall, Chapter 239, Statutes of 2015) required hosting platforms 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. The bill specified that the notice must be provided immediately before an occupant lists each real property on an 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.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 5/10/16)

Association of California Insurance Companies (source)

American Insurance Association

California Apartment Association

CSAA Insurance Group

National Association of Mutual Insurance Companies

Pacific Association of Domestic Insurance Companies

OPPOSITION: (Verified 5/3/16)

None received

Prepared by:

5/10/16 11:32:13

**** END ****

 THIRD READING  

Bill No: SB 1092

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 6-0, 5/3/16

AYES: Jackson, Moorlach, Anderson, Leno, Monning, Wieckowski

NO VOTE RECORDED: Hertzberg

SUBJECT:

SOURCE: Association of California Insurance Companies

DIGEST: This bill requires residential hosting platforms to provide a notice warning individuals to review any restrictions on coverage under their homeowners’ or renters’ insurance policy related to short-term rental activities to ensure that there is appropriate insurance coverage in the event of a loss arising out of those activities.

ANALYSIS:

Existing law:

1. 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.)

1. States 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. 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 that he or she has read the notice. (Bus. & Prof. Code Sec. 22594.)
2. 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:

1. Requires a hosting platform to provide the following notice to offerors listing a residence for short-term rental on a hosting 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.

1. Makes 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 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) <http://www.nlc.org/Documents/Find%20City%20Solutions/City-Solutions-and-Applied-Research/Sharing%20Economy%20Brief.pdf [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, Chapter 239, Statutes of 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 directs a hosting platform to provide a similar notice to homesharing hosts that warns them to review their insurance coverage to ensure that they are adequately covered for losses arising in connection with short-term rental activities.

Comments

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 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.

Related/Prior Legislation

AB 2881 (Committee on Judiciary, 2016) adds 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.

SB 761 (Hall, Chapter 239, Statutes of 2015) required hosting platforms 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. The bill specified that the notice must be provided immediately before an occupant lists each real property on an 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.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 5/3/16)

Association of California Insurance Companies (source)

California Apartment Association

CSAA Insurance Group

National Association of Mutual Insurance Companies

Pacific Association of Domestic Insurance Companies

OPPOSITION: (Verified 5/3/16)

None received

Prepared by:

5/6/16 14:26:27

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: SB 1092 (Author:Monning)

Version: April 21, 2016

Hearing Date: May 3, 2016

Fiscal: No

Urgency: No

Consultant: 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 warning individuals to review any restrictions on coverage under their homeowners’ or renters’ insurance policy related to short-term rental activities to ensure that there is appropriate insurance coverage in the event of a loss arising out of those activities.

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 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) <http://www.nlc.org/ Documents/Find%20City%20Solutions/City-Solutions-and-Applied-Research/Sharing%20Economy%20Brief.pdf> [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 to homesharing hosts that warns them to review their insurance coverage to ensure that they are adequately covered for losses arising in connection with short-term rental activities.

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 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 the following notice to offerors listing a residence for short-term rental on a hosting 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.

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 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.

1. 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) <http://www.nytimes.com/2014/12/06/your-money/airbnb-offers-homeowner-liability-coverage-but-hosts-still-have-risks.html> [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 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.

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 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 <https://www.vrbo.com/ info/termsandconditions> [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 <https://www.airbnb.com/terms> [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 immediately before properties are listed for rental. Specifically, the bill requires hosting platforms to advise offerors to check their insurance coverage before listing a property for short term rental to determine whether coverage is available and sufficient. Like other existing disclosure requirements, offerors would be required to interact with the hosting platform’s Internet Web site to affirmatively acknowledge having read the disclosure before their property is listed for rental.

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.

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.

**************

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: SB 1092 (Author:Monning)

Version: March 28, 2016

Hearing Date: April 12, 2016

Fiscal: No

Urgency: No

Consultant: 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 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) <http://www.nlc.org/ Documents/Find%20City%20Solutions/City-Solutions-and-Applied-Research/Sharing%20Economy%20Brief.pdf> [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 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 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 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.

1. 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) <http://www.nytimes.com/2014/12/06/your-money/airbnb-offers-homeowner-liability-coverage-but-hosts-still-have-risks.html> [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 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 <https://www.vrbo.com/ info/termsandconditions> [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 <https://www.airbnb.com/terms> [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 of their homesharing activities, and that they should check their insurance coverage to determine whether coverage is available and sufficient.

1. 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.

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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