In Spring 2019, D.C. joined the growing number of cities across the U.S. implementing short-term rental regulations, particularly those which include a liability insurance requirement. View the complete ordinance here.
The regulation includes the following:
- 24-hour emergency contact posted for each guest
- Current business license with a short-term rental endorsement
- Current liability insurance of at least $500,000
The City states the liability insurance can be provided by a booking website or through a traditional insurance carrier. There are two-fold concerns with this requirement.
Primarily, the City does not define the type of liability insurance. There are three main types of liability insurance available to short-term rental hosts: personal liability, premise liability, and commercial general liability (Click here to submit a 5-minute online quote). Both personal and premise liability policies exclude business activity, so while the policy provides liability to protect the insured against claims of bodily injury, if something were to occur at their short-term rental, the coverage would be void due to the business activity.
Additionally, while booking sites may provide liability “guarantees” such as those offered through Airbnb, these platforms do not provide hosts with proof of insurance, such as a certificate of liability (COI). In the insurance industry, all carriers use a standardized form called a “certificate of insurance” or COI to show proof of insurance to various interested parties, including banks and mortgage lenders. This COI shows the named insured, any additional insureds, the location address, the effective date, the coverage limit and the type of liability.
Proper coverage for short-term rental properties
We’ve discussed how personal liability or premise liability will not cover a host due to the short-term rental business. What’s left? The third category of liability insurance is commercial general liability, which hotels, and other such businesses hold. Short-term rentals are hospitality businesses, as hotels are. If this is the case, why should they hold different liability insurance coverage? The answer is simple – they shouldn’t.
Commercial general liability is found in business insurance policies and protects the insured against claims of bodily injury or property damage they could be found legally liable. It does not exclude business activity. With this, hosts can have peace of mind knowing coverage is in place for accidents or damages during rental periods.
With these concerns in mind Proper recommends the following adjustments to the D.C. ordinance:
“Each owner shall maintain on the short-term rental(s), for the full duration of their license term, a minimum of $500,000 in commercial general liability insurance and add the city as additionally insured. The owner shall provide proof of both via a certificate of insurance.”
Give Proper a call today to discuss how insurance fits with short-term rental requirements – (888) 631-6680!