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The Sharing Economy – Who Insures It?

November 19, 2015

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The sharing economy is an economic and cultural phenomenon. Ride sharing, house sharing. We now share our labor and our property with complete strangers at an ever increasing rate. This phenomenon has evolved so quickly that there is little by way of regulation, which includes having insurance coverage. When you rent a ride or rent a home and get injured, is there insurance to pay your damages? For instance, take Uber or Lyft. Both are alternatives to a taxi or car service. You download their App, set up an account, schedule your ride through the App and pay through the App. Extremely convenient. No money changes hands, no tipping and a great alternative to a taxi. But what happens if the driver causes an accident and you get injured? Is there insurance coverage for your loss? Most personal auto policies (which are held by the driver) exclude coverage for ride sharing; there would be no coverage unless the driver specifically purchases coverage for ride sharing. Uber and Lyft have now agreed to provide $1 million in coverage for its drivers. But what insurance is available to a non-passenger who is injured by an Uber or Lyft driver when the driver is heading to pick up a fare? These drivers are looking at their phones or GPS to find the location of the fare. They are the very definition of distracted drivers. At this point, there are many unanswered questions about when coverage begins and who is covered. If you are considering becoming on Uber or Lyft driver, be certain you have the proper insurance coverage. If you think you have "full coverage," you don't. There is no such thing. The home sharing insurance coverage question is easier. Most homeowners' policies have a similar exclusion for commercial activity like renting out your home. Airbnb provides free, automatic insurance coverage for liability. This coverage is considered secondary to the homeowner's insurance coverage since the homeowner may have purchased specific commercial coverage. If the homeowner's carrier denies coverage, then the Airbnb coverage applies. The limits of the coverage are $1 million per incident and a maximum of $10 million annually. This means that the total amount of coverage for a year is $10 million. So if there are 10 large claims, the coverage can be exhausted quickly and then there is no more coverage for the rest of the year. And Airbnb is global. $10 million might sound like plenty of insurance but in a worldwide market, in countries without any regulations like fire and smoke alarms, it can become a significant issue. HomeAway, another home/room rental company acquired most recently by Expedia for $39 billion, takes a vastly different approach. It encourages homeowners to buy comprehensive coverage and earns a marketing fee when its customers buy from its recommended insurance provider, but HomeAway, unlike Airbnb, does not provide any insurance coverage for injuries sustained on the property. If you're renting out your home or a room in your home, contact your homeowner's insurance carrier regardless of whether you think Airbnb has sufficient coverage. Find out the cost of additional coverage to protect you and your property. Make sure the fire and smoke alarms are working properly, there are no hidden defects that may cause injury, and all exits are clearly marked. Make sure your heating and cooling system are in good working order. Protect your renters and yourself at all costs.

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