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Short-Term Rental Claim Summaries
by Kelly Troy on May 23rd, 2011
As the landlord and owner of a short-term rental property, you’re obviously concerned about the potential for a loss or claim arising from your guests – but what could really happen? After all, they’re probably only in the home for a few days, right?
Below are some of the claims we have experienced related directly to short-term rental exposures. As a disclaimer, many of these actually occurred prior to the property owner’s contacting us to properly insure the homes – and, unfortunately, the claim itself was simply the catalyst for the call. We obviously cannot provide any identifiable details related to the claimants themselves or their associated properties, but we can give you a summary of the issues as they occurred. While you yourself may never have a claim of any type (and we hope that you never do), it’s important to understand that no one is immune from disaster and unexpected situations can arise without notice.
Rotted Railing
At a rental property in a lakeside location, which was being rented to a family for a 4-day vacation, the wife of the couple renting the home, while having morning coffee, leaned against the railing on a deck built approximately four feet above a hillside slope. The post holding the railing upright broke loose from the deck (due to rotted wood the screws were anchored into) and she fell off of the balcony and several feet down the slope. This was on the morning of the second day of their occupancy. She suffered a broken arm, lacerations, and a mild concussion. The family brought litigation against the property owners for her injuries, financial loss due to lost income and contracted household services, and pain and suffering due to the children seeing their mother injured along with the sudden and unexpected termination of a planned vacation period. The owners were found negligent with regards to property maintenance, especially related to occupant safety (due to the rotted wood around the railing). Settlement Amount: $46,000
Tree Branch
During a couple’s stay at a rental property located in an area populated with a number of large trees, they parked their Cadillac Escapade in the property’s driveway under a canopy of large established oak trees. A late-night storm approached and during the wind and rain, a medium-sized branch from one of the trees unexpectedly broke and fell onto the roof and hood of their SUV. Over $20,000 of physical damage occurred to the vehicle. They filed a premises liability claim against the property’s insurance policy only to have the claim denied because the policy had been improperly issued by the agent as a standard ‘dwelling’ policy – not as a short-term rental exposure – and there was no coverage. The property owner’s policy was cancelled due to an improper risk being insured and the vehicle’s owners filed a suit against the property owner. The property owner chose to fight the suit but without insurance to cover legal costs, he paid over $4,500 in legal fees, lost the suit, and was ordered to pay the $20,000 in damages in addition to the other party’s legal fees and ancillary costs associated with the rental vehicle and other expenses.
Property’ Owner’s Dog Destroyed Wedding Dress
Approximately 3,000 square feet of a very beautiful (and very large) owner-occupied home in a very-desirable area of Central-Texas was regularly rented out on weekends and holidays for $350 – $500 per night. Because of this size and layout of the home, the owner-occupant lived in one portion of the home and rarely had interaction with the guests renting the other portion. The home was complete with a large pool, sport court, and other amenities. On this particular weekend, a group of young women (college friends) had rented the available portion of the home as a ‘weekend getaway’ and bridal event prior to one of the women getting married within the next two weeks. The would-be bride had brought her $4,200 wedding dress with her in order to show off to her friends. After returning from an afternoon out at the pool, the bride-to-be discovered that the property-owner’s dog had ventured into the part of the home that they had rented and had proceeded to tear up and urinate on her wedding dress as it laid upon on of the bed. She was furious and in tears and inflamed emotions obviously made a bad situation worse. The property owner filed an insurance claim only to be denied coverage due to the fact that the policy had been improperly issued as a standard homeowner’s policy (with one of the well-known ‘big-name’ companies) and that because the property was being partially used as a short-term rental with the increased liability exposure. The policy was immediately terminated (due to the risk violating eligibility guidelines) and the property owner ended up having to unexpectedly pay over $6,000 in damages, rental refunds, and other costs prior to the wedding. In addition, the owner was forced to finally purchase the proper coverage (as a Bed and Breakfast with Innkeeper Liability) – but the uninsured financial loss had already occurred.
Kitchen Fire
A group of four young men from California had rented a small home in a trendy area of Central-Austin for one week in order to attend the annual ‘South by Southwest Music Festival’ held each year. The home was the primary residence of another couple who only rented it out twice a year in order to take advantage of the additional income they could receive at a rental rate of $2,000 per week. They would stay with friends during the time that the home was rented. The home itself was insured by one of the ‘big name’ insurance companies as a standard homeowner’s policy. However, during the week that it was being rented, one of the tenants inadvertently started a grease fire in the kitchen that ended up causing a large amount of damage in addition to a great deal of resulting smoke damage to the remainder of the home. The owner’s filed a claim on their homeowner’s policy – which was quickly denied – due to the fact rather than occupying the home as owner-occupants as the policy required, they had actually rented the property to others (especially on a short-term basis) and that was a blatant violation of the policy language. The owners tried pursuing legal action against the tenants responsible for the fire, but all four were young males (musicians) under the age of 25, each lived in an apartment or with friends, they were out-of-state, and none of them had any renter’s insurance with liability coverage or any monetary resources for which to sue for. The result was that the homeowners had to slowly make repairs to their home paying for all labor and materials with their own money. While they utilized labor from friends to lower costs, they still had to purchase new materials, manage the City’s permitting process, obtain inspections, and perform the work themselves. The total repairs took over six months and cost over $25,000.
Of course – we do! Even if we are not yet doing business in your state yet, we can still direct you to resources and provide information that may help you.
Any suggestions for insurance companies or brokers that do this kind of work?
thanks,
dan