These articles discussing the implications of short term rental insurance cover when apartments are let using sites like Airbnb has been supplied by Whitbread Insurance Brokers.
Question: I’ve been involved in a confusing situation where a sub let (Airbnb) neighbouring apartment caused flooding, which caused water damage to my goods. Should the landlord have short term rental insurance cover?
I’ve recently bought an apartment in a 12 storey building in Melbourne, Victoria. I only received the keys two weeks ago and had no furniture in the apartment other than a mattress as I hadn’t fully moved in yet. I didn’t have contents insurance at the time, as I was planning on getting this when I had furnished the apartment.
A flood originated at the property next door to mine due to a negligent act (tampering with fire sprinkler), which flooded several levels of the property. Water damage has occurred to both my walls and carpets. Wall damage is being addressed under the Owners Corporation insurance, however, the cost to replace my carpets and mattress are on me.
I have subsequently discovered that the next door apartment is being leased to a person (person A), and person A is subletting the apartment on Airbnb. Person B was renting the Airbnb and caused the flooding damage. Person B also happens to have just purchased a property in the same building (confusing I know).
I don’t think I should have to pay for my damaged contents (i.e. carpet and mattress) as I was at no fault. Who would be the liable party – the apartment owner, the leaser who is subletting on Airbnb (person A) or the actual culprit who was renting the Airbnb (person B)? Should there be some type of short term rental insurance cover to pay for the damage?
Answer: We believe the crux of this question is: Who is liable for the damage? There is no clear outcome from an insurance perspective.
We believe the crux of this question is: Who is liable for the damage?
Unfortunately, it is not a straight-forward answer, and there is no clear outcome from an insurance perspective.
From our point of view, however, in this situation, the most logical first port-of-call when seeking damages would be the party who caused the damage in the first instance i.e. the short-stay tenant.
If unsuccessful here, it may then be worth considering the short-stay letting firm, or the property owner who was responsible for leasing the property. These parties may have insurance policies in place that cover their third party liability.
General recommendation when purchasing property
As a side note, we always recommend purchasing appropriate property insurance policy as soon as any property settlement takes place. Once the new owner takes possession of the property, they also take on responsibility for:
a) The legal liability within the lot e.g. if a third party suffers an injury the property owner could be held liable,
b) Any contents in the lot e.g. furniture, carpets, blinds, possessions etc.
Without the appropriate insurance, a new owner could be left without protection should something happen.
Hello Airbnb guests … goodbye insurance cover?
June 2015: The boom in internet accommodation sites like Airbnb has led to more Australians opening their doors to people we don’t know. But what if something goes wrong? Lia de Sousa, General Manager, Strata, at Whitbread Insurance Brokers, checks out what happens after strangers check-in.
It’s Saturday night and you’re catching up over a few quiet drinks with friends who tell you about this wonderful new way of making money off your property – Airbnb. This prospect gets your brain ticking.
You have a five-week holiday booked in a month’s time, and your home will be sitting there empty while you venture off overseas. So you think, why not give Airbnb a go? It’s a great opportunity to make a little money on the side. It could even pay for most of your overseas accommodation costs.
Sounds wonderful, right? We think so too. However, there is one thing you should check out before taking the Airbnb plunge with your property; your insurance.
You shouldn’t assume your Strata or Home Contents Insurance policy will cover you for any malicious damage or theft whilst Airbnb tenants are living in your home.
Take this claim scenario, for example, Kate and William let their apartment out to a couple via Airbnb while they travelled to London for six weeks to visit their son, George. They returned from their holiday to find their apartment trashed, and their entertainment system worth more than $10,000 gone. Bad turned to worse when they tried to lodge a claim under their Contents Insurance policy and it was denied in full.
Why your insurer can deny your contents claim…
When entering into an insurance contract, you are required to notify the insurer if there is any change to your circumstances, as this may affect your insurance cover. A Contents policy will generally not cover your possessions when your property is being used for short-term letting. Failure to notify your insurer of a change in living conditions could be considered a breach of the contract, and as such your policy can be voided, leaving you exposed.
No evidence of forced entry
For theft of contents to be covered, many Contents Insurance policies require clear evidence of “break and enter” to respond. In the instance above, Kate and Will willingly gave their keys to a short-term tenant, and as such there was no sign of a break and enter when their home entertainment system was stolen.
You are making an income
Your insurer may perceive an Airbnb short-term letting as carrying out a business activity within your home. This may void your cover, as the intention of a domestic Contents Insurance policy is not to cover business activities in your home. You may be exposed to a significant financial loss where your Contents Insurance policy fails to provide cover when letting your apartment through Airbnb or another peer-to-peer leasing site. If, after reading this, you still think Airbnb is for you, then we urge you to follow our tips to protect your assets.
- Do your homework – read reviews on prospective tenants.
- Before committing your property to Airbnb, notify your insurer immediately.
- If your insurer agrees to provide Contents cover despite changes to your circumstances, request the insurer’s confirmation of cover in writing.
- If your insurer chooses not to provide Contents cover for short-term letting, we would strongly recommend that you speak to your insurance advisor.
- Obtain clarification from your insurance advisor on what your Strata building Insurance will provide cover for. Each policy will vary regarding their specific exclusions and inclusions, and you should be well informed before opening yourself up to any potential asset exposures.
Is there a solution for short term rental insurance?
You will be pleased to know that there are definitely solutions out there to cover your Public Liability exposure. However, the Australian market has no tailored insurance solution designed for Airbnb or other peer-to-peer leasing websites to cover the contents of your home.
While short term rental insurance solutions are now becoming available in the United States, Australian insurance companies appear to be slow in responding to this disruptive business model. There may, however, be a light at the end of the tunnel. The emergence of specific Airbnb insurance cover in the US may inspire the Australian market to develop an appropriate policy and capitalise on what is fast becoming a burgeoning industry. Watch this space!
- VIC: Q&A – Is There A Maximum Number of Tenants Allowed in Apartments?
- Strata & Airbnb: How to stop airbnb in your building
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as Whitbread Insurance Brokers for further information or refer to our website: www.whitbread.com.au.
Are you interested in more information about short term rental insurance or more generally, strata insurance or information about strata living in your state or territory? Visit our Strata Insurance OR Strata Information Pages by State.