What a $1.2M Lawsuit Taught This Airbnb Host About Insurance
Most short-term rental hosts spend time thinking about the risks they can see: a guest who damages the kitchen table, a broken hot tub, and a bad review. What short-term rental (STR) hosts rarely plan for is the lawsuit that comes from the mundane.
For one Berkeley Hills, California, Airbnb host, that moment arrived more than a year after a garbage truck backed into a tree on his property and a worker was injured. No guests were involved. No booking was active. And yet, he found himself in the crosshairs of a personal injury lawsuit seeking $1,000,000—with no idea what to expect next.
What followed was a $1.2 million claim, hundreds of thousands in legal defense costs, and a crash course in why short-term rental insurance isn’t just about protecting your property; it’s about protecting everything you’ve built.
- An Ordinary Incident, an Extraordinary Claim
- Why Short-Term Rental Hosts Face Elevated Liability Risks
- The Coverage Gap Most Hosts Don’t Know About
- What $1.2 Million Actually Looks Like—and Why Defense Costs Matter
- Don’t Wait for a Lawsuit to Find Out You’re Misinsured
- Airbnb Host FAQs: Who Needs Short-Term Rental Insurance?
An Ordinary Incident, an Extraordinary Claim
This host horror story started with something completely routine. A garbage truck on its normal route made a turn, backed into a tree on the host’s property, and in the process tore part of it loose, which fell and injured a worker on the sanitation crew. The host felt terrible about it. But with no guests involved and no active booking, it seemed like something that would be sorted out and move on. Then, more than a year later, he got notice that he was being sued.
“As I’ve never been sued before, never had a home insurance claim before—it’s a little bit terrifying,” California Airbnb host, David, recalled.
At the time, he had recently started short-term renting his property and had done his research on the best insurance for STRs, before landing on Proper Insurance. That decision, made months earlier without any of this in mind, is what made all the difference. The plaintiff sued up to his $1,000,000 liability limit, and with legal defense costs on top of that, the total claim against this Airbnb host reached $1.2 million.
Watch How a Garbage Truck Accident Caused $1.2M Vacation Rental Lawsuit
Learn exactly what happened from this Berkeley Hills host—the incident, the lawsuit, and how a $1.2 million claim got resolved with help from Proper Insurance.
Why Short-Term Rental Hosts Face Elevated Liability Risks
“Liability” at short-term rentals is often imagined as pool injuries or a slip on the stairs. Those are real risks. But as this claim makes clear, short-term liability extends well beyond your guests and your property line.
When your property operates as a business, you take on a level of legal exposure that standard Homeowner and Landlord/Dwelling policies aren’t designed to cover. Third parties like delivery workers, contractors, and yes, garbage truck crews, can be injured in connection with your property, and you can be held liable.
Justin Brodin
Personal injury attorneys know this, and they’re increasingly targeting STR hosts specifically. Justin Brodin, CMO, recently noted: “We’re starting to see these advertisements, ‘Have you been bit by a dog at an Airbnb?’ It’s wild.” And as this claim shows, short-term rental liability doesn’t clock out between bookings—a guest doesn’t even have to be involved.
The Coverage Gap Most Hosts Don’t Know About
Most hosts who get caught without coverage weren’t uninsured; they were misinsured. They had a Homeowners or Landlord policy in place and assumed that was enough. Standard policies won’t cover the vast risks of short-term renting, and only a purpose-built STR policy sufficiently closes these gaps.
“Once you get in the sights of one of these attorneys who are going after you, it’s a little bit terrifying,” David said. “They’re going after everything.”
Homeowners (HO) insurance is built for personal residential use, not the business activity that comes with operating a short-term rental, and business activity is explicitly excluded from HO policies. A carrier can deny a claim outright on those grounds, and a majority of STR owners are carrying policies that don’t align with their risk. Landlord (LL or DP-3) policies are a step closer but still fall short: A standard Landlord policy may only cover liability for incidents that occur on your property, with no protection for off-premises incidents, guest-caused damage, or lost business income. DP policies could deny any liability claim because of a “business pursuits” liability exclusion, voiding coverage due to the income your STR generates. Neither HO or LL policy was designed for what short-term renting actually looks like.
AirCover Isn’t a Substitute for STR Insurance
It’s important to remember that AirCover is not comprehensive insurance and doesn’t close any of these liability gaps. With AirCover, you’re not a named insured, which means you have no policy rights and no contractual guarantee of payout.
AirCover only applies to bookings made through Airbnb’s platform, and Airbnb decides whether and how much to pay. For hosts who treat Airbnb’s platform protections as a safety net, the fine print is worth reading before a claim, not after.
What $1.2 Million Actually Looks Like—and Why Defense Costs Matter
A $1 million liability policy sounds like a lot until you see how a real claim actually adds up. This host’s liability limit was $1,000,000. The plaintiff sued to that limit and settled there. So, why did the total claim reach $1.2 million? The answer is legal defense costs. Under a properly written policy, those are covered on top of your liability limit—not drawn from it.
That distinction matters enormously. Justin put it plainly during the interview: “That’s what it takes: a quarter million dollars just for attorneys to represent you, and that’s not even going to court.” It’s also worth noting what happens when coverage isn’t in place. If you’re taken to court for something your policy doesn’t cover, those legal defense costs come entirely out of your pocket (attorney fees, court costs, etc.) before any judgment is even reached.
“There is a prospect of very significant exposure,” Airbnb host, David, said. “Which could have been financially devastating for us.”
For covered claims, Proper defends you with no deductible. That means from the moment a lawsuit is filed, you’re not fronting anything while you wait to find out how it resolves. What kept it from being devastating wasn’t luck. It was a policy that showed up with legal counsel, consistent communication, and someone in his corner through every step of a process he had no experience navigating.
What This Lawsuit Teaches Every Airbnb Host
Liability doesn’t require a guest; third parties can be injured in connection with your property at any time, and lawsuits often surface long after the incident itself. This host found out he was being sued more than a year later. The right coverage needs to be in place before any of that happens.
“It’s like being tossed in a storm in uncharted waters,” he said. “You really have no idea what’s going to hit you next…Proper Insurance really stood by us—not just financially, but emotionally. We never had to chase anyone down.”
What made the difference wasn’t just that the policy paid, but that it showed up with legal counsel, covered defense costs above the liability limit, and was there through every step of a process he had no experience navigating.
Don’t Wait for a Lawsuit to Find Out You’re Misinsured
This host didn’t know he’d test the strength of his policy within months of securing coverage. No host ever does.
“Get the best insurance you can get and leave it at that,” David said.
If you’re operating a short-term rental without a purpose-built STR policy, there’s a good chance you’re exposed in ways you haven’t considered—business activity exclusions, property entrustment gaps, defense costs, on- and off-premise liability, and lost revenue. The gap between what you think you have and what you actually have tends to show up at the worst possible time.
Airbnb Host FAQs: Who Needs Short-Term Rental Insurance?
Do I need short-term rental insurance if I only rent occasionally?
Yes. Even a single booking crosses the line from personal residential use to business activity in the eyes of most insurance carriers. One incident during one stay is enough—and if your policy excludes business activity, it won’t respond to any claim even if it’s not directly tied to the business.
Does Airbnb’s AirCover replace short-term rental insurance?
No. Airbnb is explicit that AirCover is not a replacement for your own insurance policy. You’re not a named insured, which means you have no policy rights and no guaranteed payout. It only applies to bookings made through Airbnb’s platform and doesn’t cover you during vacancies, personal use, or direct bookings.
Will my Homeowners insurance cover my Airbnb?
In most cases, no. Standard Homeowners policies exclude business activity, which can void your coverage once your property starts generating rental income. Some carriers offer home-sharing endorsements, but these are limited to primary residences and still leave significant gaps in liability, guest-caused damage, and business income protection.
How much liability coverage do I need as an STR host?
Proper recommends a minimum of $1,000,000 in Commercial General Liability per occurrence, with the option to increase to $2,000,000 through their policy. Unlike premises liability found in Landlord policies, Proper’s CGL extends off-premises and also covers incidents tied to amenities like pools, bikes, and golf carts.
Does short-term rental insurance cover legal defense costs?
With Proper, yes, defense costs are covered above and beyond your liability limit, not drawn from it. For covered claims, Proper defends you with no deductible from the moment a lawsuit is filed.
What does the best short-term rental insurance actually cover?
A purpose-built STR policy should include Commercial General Liability ($1M–$2M), Business Revenue Coverage for actual lost income; guest-caused damage and theft; legal defense costs above your liability limit; amenity liability for pools, hot tubs, bikes, and golf carts; pet and animal liability; and bed bug and flea protection. Proper’s policy helps shield you from the risks of short-term renting—and replaces your current Homeowners or Landlord policy entirely.
