Airbnb Laws in San Francisco Require Hosts to Carry $500k in Liability Insurance
New San Fran “Airbnb Law” In Effect Feb 2015
Anyone who follows Airbnb has heard. It’s been all over the headlines! San Fran has passed, what most are calling, the “San Francisco Airbnb Law”. For those not up to speed, we will post some “informative links” at the end of this post.
More or less, since Airbnb went live in August 2008, Airbnb hosts have been operating illegally in San Francisco and most other cities. Forget insurance at this point. It’s illegal in San Francisco to rent a personal property/dwelling for less than 30 days at a time. Until February that is, when the law goes into action The new short-term rental, aka “San Francisco Airbnb Law” is going to permit owners to rent their properties for less than 30 days at a time, with the yearly net being 90 days, as long as the hosts pay “hotel taxes”, the property is their “primary residence”, and they obtain $500,000 in liability insurance. What exact type of liability insurance are they referring to? Airbnb does not offer liability insurance, Airbnb liability insurance. We will delve into this in a minute. Note: hefty fines will be used to enforce the law.
It’s important to recognize why San Fran and most other big cities would have laws/regulation in place to prevent owner’s from short-term renting their properties in the first place. Rental property values! It’s sad enough for San Fran to have “Silcon Valley Waelth” just to the south pushing up rental property prices, but now they have short-term rental cash too. Let’s think about it, why rent out your property for $3,500 per month to a young professional, when you can charge $250 per night renting it out on Airbnb? Wow. I’m glad I’m not a young buck or doe in San Francisco looking for a livable apartment to rent!
It is election day, so let’s talk politics!!! TAXES. Think about how much “tax revenue” San Francisco will collect when it’s legal in February? Yes, it’s all about the taxes. It’s reported there are over 5,000 Airbnb hosts in San Francisco alone. If they all rent 90 days per year (like the law allows), that’s 450,000 nights. Lets say the average rental is $300 and the hotel tax rate in San Francisco is 14%. So $300(0.14) = $42 per night to SF. That’s 450k nights ($42) = $18.9M!!! Yes, it’s all about the taxes
Now let’s look at the “Airbnb Law”liability insurance requirement of $500k. We have found nothing that actually specifies what type of liability is written into this law? Personal liability, or commercial general (business) liability? There is a big difference and it’s imperative everyone understands.
Personal liability (PL) is found in homeowner’s and renter’s insurance policies and is standard at $300,000 and “excludes business activities”. It has never been more clear that if you short-term rent your property on Airbnb it’s a business activity. You are NOW required by law to pay a 14% hotel business tax to the city of SF. This is very serious and there is serious exposure for the owners. Forget the fine for not having it, how about the $1,000,000 lawsuit the owner gets hit with after a guest seriously injures themselves while staying at the Airbnb rental. Personal liability coverage will not respond. Not going to help.
There is an Airbnb Insurance solution for HOSTS!
Commercial general liability (CGL) is what a businesses carry, what they have always carried, and what they will always carry. So by it’s very nature, there is no “business exclusion”. This is the same business liability a coffee shop or grocery store carries. It’s very broad/deep in coverage and is precisely what an Airbnb hosts needs to carry on their property. The problem is, what insurance company is going to provide an Airbnb Host with CGL? In fact, there are very few. Proper Insurance Services Inc is one of them! We encourage you to get a quote and get yourself properly insured.