Insurance market mystifies Airbnb host
Ms. Pfeffer got better news at Liberty Mutual’s office in Wilmington, Del. There, the agent stated that she did not need any special endorsement or commercial coverage for the rental of her room; standard owners’ coverage was fine. Considering what had happened with State Farm, she was suspicious, so she wrote it down.
Then she read my column, however, and wondered if her agent was wrong. In this column Liberty Mutual didn’t answer any of the questions I asked about its rules, but a state insurance commissioner made it very clear that homeowners’ policies generally do not cover business activities in the area. House.
When Mrs Pfeffer and I first spoke, she didn’t want to go public. As she said, she had at least one leg to stand on, given that she had her coverage settings in writing from the agent. Why go to Liberty Mutual with all your concerns and run the risk of completely losing your insurance if the agent is wrong? Liberty Mutual eventually agreed to have a real conversation with me about their policies, but was understandably reluctant to comment on a client who didn’t come up with their name.
We went back and forth, and finally everyone came. It turns out the agent was right from the start. Liberty Mutual’s policy in Delaware provides liability coverage for the “occasional” use of a residence for rental purposes, which covers its activity a few times per month. This is true even though the previous paragraph of his policy makes it clear that there will be no liability coverage when the policyholder is “engaged” in a “business”.
Any random owner could be forgiven for not knowing the precise definitions of engaged and casual and business, especially in this context. Maybe we could ditch the insurance agents as well, although that’s a bit of a stretch considering that others and I have been asking versions of these insurance questions for years.
However, insurance companies should do better. It’s not too much to ask that for every policy in every state, they have a list that has been reviewed by an attorney and contains frequently asked questions. This document should also define the casual, define the activity and define the engagement. Better yet, they could just do what Chubb does and set a reasonable cap on rental income or some other clear rule as to when that no longer covers the business.
Insurance company actuaries eat data for breakfast. Airbnb has a lot of them at this point. They should share it with insurers so they can figure out what level of coverage they want to offer and then explain it to the rest of us in plain English.