The owner of an Airbnb in Ithaca, New York, is suing Cornell University and the vacation rental platform in a lawsuit that claims a group of international students who rented her home caused $200,000 in severe and “bizarre” damages during their eight-day stay. In the lawsuit, the owner alleges that the exchange students — reportedly “hand-picked” for a summer program at the elite university — extensively damaged woodwork, walls, stairs, countertops and cabinetry, including scraping down and gouging flooring and molding, The Independent reported last month.
Antique rugs and a cast-iron pan that was handed down through her family were also damaged, the outlet reported. The woman is seeking $540,000 in damages, including $180,000 from Cornell and $360,000 from Airbnb.
“Unfortunately, things like this do happen,” said Anella Niewenhous, Associate Vice President, Regional Practice Group Leader, Personal Insurance, Burns & Wilcox, Morehead City, North Carolina. “By renting out your house, you are opening yourself up to that.”
Whenever you are trying to do something different with your personal property, you should always consult your insurance advisor. No policy can cover you for all scenarios, but it can help mitigate or offset risks.
The damage could be covered by Homeowners Insurance if the property owner had the necessary endorsements for short-term rental use of the home, said Roy Geilen, Senior Underwriter, Personal Insurance, Burns & Wilcox, Tampa, Florida. For the antiques and other high-value items, a Personal Articles Floater could also be needed.
“The Airbnbs and Vrbos of the world have sold the idea that you can rent out your house while you are not there and make money, but the average consumer may not understand the risk,” Geilen said. “Whenever you are trying to do something different with your personal property, you should always consult your insurance advisor. No policy can cover you for all scenarios, but it can help mitigate or offset risks.”
Unusual damage ‘a good lesson’ about rental risks
According to The Independent, Airbnb claimed that its third-party investigator determined that the damage at the Ithaca home “pre-dated the guests” and was caused by years of standard wear-and-tear. The owner of the home told the publication that she was “discouraged” about the possibility of a fair resolution with Airbnb.
“This is a very upsetting case for the owner and is certainly an unfortunate scenario,” said Michelle Allemang, Manager, Personal Insurance, Canada, Burns & Wilcox, Vancouver, British Columbia. “A lot of damage was done and in particular, unique damage. Clearly, this is a historical home with much value inside. You never expect something like this to happen, of course, but if you have valuable items, it is a risk engaging in rental activities.”
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“It is important that the homeowner has appropriate coverage for the true occupancy of the home,” Allemang said, adding that this particular situation could be a “gray area” as to who will ultimately be held responsible for the loss. “Whoever insures the property itself would likely assess and see how they can make their client whole and then subrogate against the responsible parties.”
This is a very upsetting case for the owner and is certainly an unfortunate scenario. … You never expect something like this to happen, of course, but if you have valuable items, it is a risk engaging in rental activities.
Homeowners may also be advised to consider a Personal Articles Floater for antiques and collectibles, and Personal Umbrella Insurance to provide additional liability limits in the event a guest is injured at the home.
“When purchasing a Personal Articles Floater, the carrier may ask about the occupancy of the home and who is going to be around those items,” Niewenhous said. “For example, if you have Persian rugs in the home and you are renting it out but don’t tell the carrier, there is a possibility that it could be denied because it is not the exposure the insurance company signed up for.”
Damage caused by short-term rental guests not uncommon
While data is not readily available on how often short-term stays result in property damage, incidents involving damage to short-term rental properties appear somewhat regularly in the news. In Evergreen, Colorado, last month, the owner of an Airbnb told KDVR she is facing $16,000 in damages after guests held a “massive party” in her house. In July, a man who rents out his Hilton Head condo said a group of vacationers caused thousands of dollars in damages after a three-week stay, The Island Packet reported; and in April, a host in Philadelphia filed a lawsuit against Airbnb alleging damages of more than $75,000 after an individual squatted at his property for months, Fox News reported.
In Toronto, Ontario, in October, an Airbnb host reportedly lost $40,000 after the guest staying at his home was arrested and police raided the property, causing various damage and resulting in lost income, CBC News reported. Last fall, an Airbnb host in San Francisco said she incurred $300,000 in damages after guests clogged a toilet and caused major flooding in her home, KGO News reported.
“It just takes that one renter to do that and sometimes, unfortunately, you learn the hard way,” Geilen said.
These incidents, as well as the recent case in New York, could help homeowners better grasp the possible risks of opening their home to short-term rentals, particularly if they have valuable collectibles, Allemang said. “It is definitely a good lesson for owners as to how best protect yourself,” she said.
Having an open conversation with your insurance consultant to make sure they are targeting the proper coverage for the exposures you have is extremely important. They cannot help you if they do not know what is happening.
Individuals who own homes with antique or higher-value materials should also ask about whether their Homeowners Insurance policy would cover Functional Replacement Cost or Guaranteed Replacement Cost, Geilen said. “A lot of times, the materials used are either nonexistent now or are hard to come by and very expensive. If you have your home covered with a Functional Replacement Cost endorsement you will only get the functional replacement of those items damaged and not the actual replacement cost of the item if it is an antique or a material that no longer can be reproduced,” he said.
It is one of many details that can be discussed with a Homeowners Insurance broker before committing to renting out your home to short-term guests, Niewenhous said. “Having an open conversation with your insurance consultant to make sure they are targeting the proper coverage for the exposures you have is extremely important. They cannot help you if they do not know what is happening,” she said. “If the home is not insured for what it is being utilized for, you open yourself up for a claim possibly being denied.”
Protecting your property against a loss
According to Reuters, Airbnb is working to expand its long-term rental business as short-term rentals face increasing scrutiny in the U.S. Although companies like Airbnb and Vrbo utilize tools like identity verification and reviews to help protect hosts, homeowners should still take additional precautions. Pre-screening tenants and having written agreements in place are essential steps, as well as consistently documenting the condition of the home to avoid disputes about when damage occurred, Allemang said.
“Documenting the condition of your property is very important,” she said. “When we are underwriting these risks, especially in older properties, there should be recent photos of the condition of the interior and exterior of the home.”
Homeowners should also review their insurance coverage with their insurance broker before making any decisions about using Airbnb or other services — a step that “9 times out of 10, does not happen,” Geilen said.
“You just have to understand what your risks are and know there could be solutions, which you may have to pay for, to mitigate — but not completely exonerate — your risk,” he said. “The average consumer does not read their policy contract, which has exclusions for property and liability exposures that might not be covered.”
