The gig economy has taken the United States by storm, but none may be more prominent than that of the short-term rental industry.
Don’t mess with TX
Cities across the country have taken various measures to address the burgeoning industry, ranging from outright bans to stricter regulations. The state of Texas is unique in that their state legislature has opted to prohibit the banning of short-term rentals by communities in Texas. While the bill proposed in the state legislature that would curtail banning of the practice, certain cities are getting the hint that they will need to at least begin regulation of the industry to attempt to appease all concerned parties.
Arlington’s regulations are not unique and come on the coat tails of other communities and even states as they navigate how to address the challenges associated with the regulation of short-term rentals. In the case of Arlington, they have opted to follow the move of many communities in requiring licensing with the city as well as requiring a minimum of $1 million in liability insurance, though they fail to mention the type of liability insurance should be carried. This could create a problem among short-term rental operators, as they may find that having the wrong type of liability and property insurance could cost them should the time come to use their coverage.
Commercial activity requires commercial insurance
Short-term rental is generally viewed as a commercial activity and as such, requires commercial liability insurance. Personal liability, which many homeowners carry, is not designed to handle commercial exposure and may decline a claim if they find that the liability issue is related to short-term renting.
Operators of short-term rentals need to check with their liability coverage to ensure that they are appropriately covered so as to avoid the unfortunate and costly mistake of having the wrong insurance. City officials likewise should evaluate their rules to ensure that compliance does not lead to the aforementioned mistakes, leaving their law-abiding citizens incorrectly covered. Many resources exist for short-term rental owners to research in determining how best to insure their properties and their business activity while maintaining compliance with their local municipalities. Regulations can be rewarding for all involved parties, but should be written so as to not endanger one party or another.