Property owners owe a duty of care for harm caused to others by defects on or within their property. As a result, if a property owner rents out his property as a short-term rental and the renter or the renter’s guest is injured on the property, the property owner can face liability for those injuries. This can include defects that have not been repaired prior to renting out the property or something as simple as failing to warn that certain floors become slippery when they are wet. Either a failure to repair or a failure to warn is a breach of the duty of care a property owner would owe to one who is renting his property through a short-term rental.
Some homeowners believe that by using a short-term rental service company said companies would pay in the event there is an injury on the property. However, this may not always be the case. As these services do not have control over the property, these companies do not have the duty to those renting the property. Instead, it is the property owner’s legal obligation.
This issue is of particular importance to homeowners of properties at or near the Southern California Coast since beach rentals, whether Newport Beach, Laguna Beach or Huntington Beach, are often short-term, resulting in many different families renting over one three-month summer period. When accidents and injury do occur, there can be help as to how the liability is paid; the homeowners need not be on their own in paying for the injuries. Some sort term rental companies offer insurance to protect a homeowner in the case that an injury is found to have been caused by a homeowner’s negligence.
Homeowner’s Insurance taken out by the property owner can also serve to protect a homeowner. But as California does not require a homeowner to have homeowner’s insurance unless they have a mortgage on their property, many homeowners skip this expense. While this may be a reasonably calculated risk for the home one lives in themselves, when renting out the property as a shortn term rental the level of risk expands greatly. Some homeowner’s insurance policies specifically limit coverage when the property is used as a short term rental. It is important that one examines his or her homeowner’s insurance policy for the specific coverage and exceptions to be sure of coverage.
A homeowner who wishes to rent out her property as a short term rental could also take out an insurance policy specifically to cover for liability as a result of that short term rental. These policies are often called Landlord Protection Insurance or Vacation Rental Insurance. As one might expect, they are very popular in the California Coastal rental properties where short term rentals are ubiquitous.
The order in which these policies of coverage come into play are also of note. Obviously, without having coverage homeowners must pay for any liabilities themselves. But if one or more of the above-mentioned insurance policies have been taken out, which policy pays and/ or in what order? If there is a covered injury, the first would be the Landlord Protection / Vacation Rental Insurance. If the policy limit is insufficient to cover the entire liability, the property owner’s homeowner’s insurance would be next in line to pay. If the policy limit is below the remaining liability, or the homeowner’s insurance policy excludes coverage for the liability, it would fall on the insurance taken out through the short term rental company if such policy had been taken.
One form of liability that is not covered by any of these insurance policies is the possibility of fines as a result of renting out property in violation of local rules or laws. Some cities have banned renting out homes for short term rental purposes or require a license to do so. In addition, some Homeowner’s Associations prohibit homes in their communities from being rented out as short term rentals. If a homeowner violated either local laws or a Homeowner’s Associations Covenants, Conditions, and Restrictions (CC&R’s) the homeowner will be personally liable to the city or the HoA for any fines due to renting the property in violation of the laws and rules. In Orange County, many cities have taken positions to limit or prohibit short term rentals. The cities of Fullerton, Huntington Beach, and Newport Beach require homeowners who rent their homes as short term rentals to register with the city, make themselves available to respond to any disturbances, and to pay a transient occupancy tax. Huntington Beach adds the additional requirement of a minimum age of 25 in order to rent a short term rental in the city. Other cities such as Irvine have completely banned short term rentals within the city altogether.
Informational Sources AIM Auto Insurance Service, AirBnB Insurance (https://aimautoinsurance.com/airbnb-insurance/) S M S, What you Need to Know About Premises Liability (https://siegelmoreno.com/short-term-rentals-subrogation/) Motz-Rusin Insurance Agency, Short Term Rental Insurance (https://www.motzrusin.com/short-term-rental-vrbo-airbnb-insurance-california/) Voice of OC, Short Term Rentals See Countywide Crackdown Following Resident Complaints (https://voiceofoc.org/2021/01/short-term-rentals-see-countywide-crackdown-following-resident-complaints/)
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