Agribusiness and the Sharing Economy

An Overview of Risk Management and Coverage Concerns

#IRMI2016

This session will examine coverage concerns that the average agribusiness account may have if involved in part-time exposures to en- terprises such as Uber or Airbnb. It will examine the gaps and other coverage concerns found in standard farmowners property insurance and auto insurance.

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2 Agribusiness and the Sharing Economy

An Overview of Risk Management and Coverage Concerns

#IRMI2016

Agribusiness and the Sharing Economy

Where is the coverage? What do I tell my customer?

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3 Seminar Objectives

• Identify the risk exposure to our customers • Airbnb and similar short term internet rentals • Exposures to FP, FL, and HO (if any) • “Host” coverage limitations • Rideshare applications (LYFT, UBER etc.) • Family Auto policy response • “Master Policy” limitations • Regulatory and contractual issues

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Realities

• Does your customer tell you they are involved in these activities? • When they do tell you, what do you do? • When they tell you and ask for your advice, what do you say? • Do you let your insurance company know about what is going on?

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4 Airbnb

• 190 countries • Have had 20,000,000 guests • 34,000 cities • 800,000 listings worldwide

Source: Airbnb’s website (www.airbnb.com)

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Terms

Legal and regulatory Issues to consider for the “host” • Airbnb is not an owner or operator of properties, including, but not limited to, hotel rooms, motel rooms, other lodgings or Accommodations, nor is it a provider of properties, including, but not limited to, hotel rooms, motel rooms, other lodgings or Accommodations and Airbnb does not own, sell, resell, furnish, provide, rent, re-rent, manage and/or control properties, including, but not limited to, hotel rooms, motel rooms, other lodgings or Accommodations or transportation or travel services. • NOTE: refers to spaces as “other lodging or accommodations.”

Source: Airbnb’s website (www.airbnb.com)

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5 Payment

• Airbnb Payments will collect the Total Fees at the time of booking confirmation (i.e. when the Host confirms the booking request) and will initiate payment of the Accommodation Fees (less Airbnb’s Host Fees and any Taxes in respect of the Host Fees, such as VAT in Europe) to the Host within 24 hours of when the Guest arrives at the applicable Accommodation (except to the extent that a refund is due to the Guest).

Source: Airbnb’s website (www.airbnb.com)

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Terms

Legal and regulatory Issues to consider for the “host” • Some cities have laws that restrict your ability to host paying guests for short periods. These laws are often part of a city's zoning or administrative codes. In many cities, you must register, get a permit, or obtain a license before you list your property or accept guests. Certain types of short-term bookings may be prohibited altogether. Local governments vary greatly in how they enforce these laws. Penalties may include fines or other enforcement.

Source: Airbnb’s website (www.airbnb.com)

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6 Is Airbnb Legal?

• Airbnb’s website simply says “Please review your local laws before listing your space on Airbnb.” • Does this EVER happen?

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Homeowners Insurance

Does it respond to short term rental?

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7 Insurance Industry Response

• Insurance Companies sending out notice that they do not want to cover homes working with Airbnb and others • Ineligibility for a Homeowners Policy if disclosed (Renters or Condo) • Should agent disclose? • Inadequacy of endorsements that might be added • There has been a material change in the risk

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Realities

• Despite the benefits, there are concerns for both hosts and guests. Perhaps the biggest risk for hosts is that their property will get damaged. While most transactions occur without incident, there are stories of entire houses being trashed by dozens of party-goers when the Airbnb hosts thought they were renting to a quiet suburban family, or an instance when a host came home to find his property had been damaged, items had been stolen and the place was littered with meth pipes.

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8 Don’t Depend On Homeowners Insurance

“Insured Location”: Residence premises used by an insured as a “residence” • “Insured”: You and residents of household. Not an Insured. Non Resident Non Relative vacationing tenants. • “Business”: A trade or profession or occupation full time, part time or occasionally in which the insured receives no more than $2,000 in compensation during the policy period. (varies by company) in the business pursuits exclusion. • “Material Misrepresentation”?

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Total Peace of Mind for Airbnb Hosts?

Airbnb Host Guarantee • The Host Guarantee provides protection for up to $1,000,000 in damages to eligible property in the rare event of guest damages which are not resolved directly with the guest in specific countries. These payments are subject to certain conditions, limitations, and exclusions, the details of which can be found in the Host Guarantee terms and conditions. • This is limited to one million per occurrence, two million per location.

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9 Is this coverage?

• “The Host Guarantee is not insurance and should not be considered as a replacement or stand-in for homeowners or renters insurance. We strongly encourage all hosts to review and understand the terms of their insurance policy and what it covers and does not cover. Not all insurance plans will cover damage or loss to property caused by a guest that books yours space.”

Source: Airbnb’s website (www.airbnb.com)

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Host Guarantee Terms (25 pages)

• You must use your best efforts to seek recovery from the Responsible Guest for any Covered Losses. If you are unable to recover such Covered Losses or damages within a reasonable period, then you must seek recovery to which you may be entitled, from any person or entity other than the Responsible Guest or Airbnb, with respect to such Covered Losses. • NOTE: This means the host must collect from the guest before considering submitting a claim to Airbnb.

Source: Airbnb’s website (www.airbnb.com) #IRMI2016 16

10 Airbnb

WE SHALL NOT BE LIABLE FOR DAMAGES OF ANY KIND (INCLUDING, BUT NOT LIMITED TO, ANY DIRECT, INCIDENTAL, GENERAL, SPECIAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES) EVEN IF WE HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING FROM OR RELATING TO:

Source: Airbnb’s website (www.airbnb.com)

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Airbnb

(A) THE USE OR INABILITY TO USE OUR SERVICES; (B) HARM OR DAMAGE TO YOUR PROPERTY AS A RESULT OF USING OUR SERVICES; (C) DISCLOSURE OF, UNAUTHORIZED ACCESS TO OR ALTERATION OF YOUR CONTENT; (D) ANY HARM TO YOU CAUSED IN WHOLE OR PART BY A THIRD PARTY, INCLUDING BUT NOT LIMITED TO ANOTHER USER OF THE SERVICES.

Source: Airbnb’s website (www.airbnb.com)

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11 Host guarantee requirements

• Homeowner must first attempt to resolve property damage with guest. • Damage must be reported within 14 days. • The payout may be on actual cash value rather than replacement cost. • Not covered: cash, securities, personal liability and common areas

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Host Beware

• If the hosts homeowners policy doesn’t cover these activities neither will the umbrella. • Many hosts report that their insurance companies advise buying commercial coverage for business operations. • Others report giving notice of cancellation when insurance companies find out that rental operations are being carried out. • Best practice: deal with these problems before the claim happens. #IRMI2016 20

12 The Rideshare Conundrum

What do you tell your customer?

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Ride Sharing the “Old” Way

• Carpooling • Office ride sharing • One person drives and the others pay (Share the expense car pooling)

• NOTE: Policy says OK for these • PAP 00 01 01 05 - exception for share the expense carpooling

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13 Ride Share for Hire

How Does It Work…Basically • Rideshare companies connect mobile app users with people willing to drive strangers around in their personal vehicles within minutes and offer the convenience of payments via app. • Are they a “taxi” or “public livery”?

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Just Some Examples

• Lyft • UberX • Sidecar • InstantCab

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14 Personal Auto Coverage

• Your customer asks “Am I covered?”. • This is assuming they bothered to ask you. • The livery exclusion in the policy effectively bars coverage from the minute they are available to hire. • A business auto policy does not have this exclusion. • To clarify how coverages arranged we will look to Uber as an example.

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Where is the coverage?

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15 Where is the coverage?

•UBER •Drivers •Passenger PAP

Probably Definitely Perhaps NOT Not

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Rideshare provider auto coverage

Go on line Accept Trip End Trip

Lower Higher End Limit limit coverage

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16 Rideshare Provided Policy

• Logged in and waiting – Liability with 50/100/25 limits • En Route to and for duration of passenger pick up – Commercial Liability $1 million single limit • Ride completed – insurance terminates

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What do you tell your customer?

• Their PAP clearly excludes coverage. • The Uber policy may not drop down to primary coverage for them. • Some companies offer an endorsement to the PAP or will write a tailored policy. • It will (should) cost more!

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17 Share rides, Share risk, Share information!

• A worst case scenario always follows a situation in which an insurance company believes all relevant information was not disclosed. • The sharing economy does not share risk equitably. Ride hailing companies still consider drivers to be independent contractors, which is a clear signal that your customer needs to take steps to be sure they are protected. They depend on you to help them. • If they don’t ask the question, you need to bring it up anytime you have “face time” with your customer. • The Sharing Economy works best if we share all risk exposure information as well!

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