Vacation Home Liability

Albuquerque news outlet KRQE, a FOX News affiliate, reported that 2018 was on track to becoming one of the best years for real estate in New Mexico with a majority of buyers being from out of state, but also a good number of New Mexicans buying new homes.

“Albuquerque is three hours or less to come to Angel Fire. To be at 8,500 feet with 1.5 million acres of the Carson National Forest, golf course, tennis courts, trout fishing and to get out of Albuquerque in less than three hours. We are getting those people,” KRQE quoted REMAX Mountain Realty owner Michael Woolley.

“I think the affordability, plus the fact of the sheer beauty of our area and kind of the undiscovered part of it, is a big plus. We’re probably going to ruin it by talking about it. But it’s just a great place to be for a family.”

Insurance on a Second or Vacation Home

Having a second property, particularly one that is not regularly lived in by the homeowner can open up a host of liability issues. This is because of the inherent added risk that comes from having a second home.

“People with vacation homes frequently invite guests for weekends of fun. Unfortunately, such activities raise the risk someone will be injured on the property, leaving you liable for the loss,” warns NetQuote.com.

Since vacation properties are not often watched closely, they can be at risk of unauthorized access. If a trespasser is injured on the property, the homeowner is not necessarily off the hook for liability. Negligence and “attractive nuisance” laws can apply, particularly if the property includes a swimming pool or hot tub.

Additionally, in the event of a storm or natural disaster, a typical homeowner’s insurance policy may not cover external buildings such as sheds or boathouses that aren’t attached to the home.

Geography may also be a concern to insurers.

“Many people own vacation homes located far from their primary residence, often in another state. Because insurance is regulated at the state level, it’s important to know which rules apply in your vacation home’s community,” NetQuote adds. “If possible, talk to your agent before you buy a prospective vacation home to find out if coverage will be available.”

Airbnb and HomeAway

As more people buy second homes or vacation homes, a larger number of short-term rental possibilities become available. Services like Airbnb and HomeAway are connecting owners of otherwise un-used properties, with short-term renters.This though can pose concerns.

It is best to check with your insurance agent to be sure anything that happens on your property is covered since listing your home as a vacation property might be seen by insurance companies as a commercial endeavor. For example, a guest slips on a rug in the home and breaks their wrist. The guest files a personal injury lawsuit against the homeowner. Who pays the costs if the homeowner is found liable? The short answer is that it depends.

HomeAway recommends getting a commercial home insurance plan or buying into their boilerplate insurance policies with HomeAway Assure.

“Most insurance policies are designed to cover owner-occupied properties or second homes that will be used only by the family (or rented out year-round). Vacation rentals are rented monthly, weekly, or even nightly, so they are often considered a different type of activity than what is covered under homeowner policies.  A homeowner’s policy typically does not cover vacation rental activities, nor does personal liability coverage,” HomeAway warns.

Airbnb offers a free and automatic primary liability coverage plan called Host Protection for all the properties listed on their service that covers up to $1 million in personal injury or property damage related to an Airbnb stay.

“The Host Protection Insurance program will only act as the primary insurance coverage for incidents related to an Airbnb stay, but it’s available to hosts regardless of their other insurance arrangements,” says Airbnb.

In the case of the person that slipped and fell on the rug, the Host Protection program will cover it. Their website says they will also cover situations such as a guest “working out on the treadmill in the gym of the apartment building” and “the treadmill breaks and the guest is injured when they fall off.”

They would even cover a situation where a guest accidentally drops their suitcase on a third party’s foot in the building lobby, and the third party brings a claim for the injury against the host and the landlord of the host’s building.

However, their plan will not cover other situations, such as intentional acts (as opposed to accidents), accusations of slander or defamation of character, auto accidents and property issues such as mold, bed bugs or asbestos.

A similar program called The Host Guarantee, run by Airbnb, offers $1 million protection to a host for damages to their property if a guest damages their property. However, Airbnb is quick to explain that the Host Guarantee program does not cover theft, collectibles, rare artwork, or wear and tear issues.

Ron Lieber of the NY Times recently cautioned that this free program is a major concern, especially in the wake of recent reports of Uber instituting a similar program, but receiving flack in the media for allegedly pushing liability back onto the driver’s personal auto insurance. You can read that article here, which also compares HomeAway’s alternate approach.

The Bottom Line

Whether buying a second home, a vacation home or turning an existing property into a home-share opportunity for some extra cash, it’s best to remember that extra liability is to be expected. When it comes to home-sharing, being sure that the insurance company that carries the homeowner’s policy covers such activity and damages.