A host of claims for guests

Whether booking a penthouse in Paris, catching a ride in Rio or borrowing money from an investor in Beijing, the internet means the solution is just a few screen taps away. International communication is now cheap, instantaneous and straightforward, putting a new world of online communities at our fingertips. This has facilitated what has been termed a “global sharing economy”, allowing individuals to borrow or rent assets from others, even if they may live on the other side of the globe. Although this is not a new economic model, it has been revived by apps such as taxi service Uber and its rival Lyft, which are reporting unprecedented growth.

This online marketplace has revolutionised the way we travel. One of the most successful travel platforms is the holiday rental website Airbnb. Having started life as a few airbeds on the floor of a shabby apartment in San Francisco, Airbnb now has over 1.5 million listings in 190 cities worldwide, with 25,000 in the UK alone. You can use Airbnb as a “guest” or a “host”. Guests can rent a room or even an entire property for a fraction of the price of a hotel, giving hosts the chance to make some extra money. Everything is paid for online with one payment before the guest’s stay and another 24 hours after their arrival.

While it takes only a few mouse clicks to advertise a home, hosts should take a moment to consider the potential legal risks in light of recent case law before succumbing to the lure of a quick buck. What they may not realise is that they bear the same risk of liability as any hotel or traditional B&B, which standard home insurance may not offset.

Establishing liability

When a hotel fails to maintain a safe environment and a guest injures themselves, the situation is usually clear-cut: the hotel is liable and public liability insurance will potentially pay damages to the injured party. On the other hand, if an Airbnb guest suffers an injury in a host’s property in Scotland, the situation becomes more complicated.

Occupiers’ liability imposes a duty of care in relation to guests entering your own home (or in the case of Airbnb, a host’s home), meaning that you may be liable for any accidents or injuries they suffer due to negligence. This is codified under the Occupiers’ Liability (Scotland) Act 1960, which contains similar terms to equivalent English legislation.

Under the Scottish Act, an occupier is a person who occupies or has “control of the premises”. Where the host is the owner and occupier of a property, liability for an act or omission lies with them. What may come as a surprise to Airbnb users is that, even if the host is a tenant, they are likely to qualify as an occupier in terms of the Act and could therefore be liable in damages to an injured guest. A landlord meanwhile, although not an occupier, may find they owe general common law duties of care, subject to any tenancy agreement and depending on whether the accident was caused by their negligence. It is worth nothing that since guests inhabit a property on a short-term basis, they do not occupy it within the terms of the Act.

Identifying potential risks

Occupiers, and therefore Airbnb hosts, can only be liable, however, for certain dangers in their premises that are caused by negligence. Tomlinson v Congleton Borough Council [2003] UKHL 47 confirms that a “danger” must arise from the “state of the premises” or from “things done or omitted to be done on the premises”. Therefore, an Airbnb host could be liable for things such as slippery floors, rickety furniture, unfinished handiwork, open electrical wires, high windows without adequate safety measures, unstable banisters or blocked exits.

That is not to say every risk should be eliminated; occupiers need only take reasonable steps in all the circumstances to prevent injury. The foreseeability of injury is also considered. If a guest suffers an injury due to a freak event that the host could not reasonably have anticipated, liability would not attach. For instance, an injury caused by a window breaking in extreme weather conditions would not be foreseeable.

A recent English case flags up a further warning for would-be hosts welcoming “vulnerable” guests into their homes. In Pollock v Cahill [2015] EWHC 2260 (QB) a couple was liable for a catastrophic injury to their blind friend who fell out of a second-storey window. The court held that, although an open window on the second floor would not ordinarily pose a risk to guests, the risk was foreseeable in this instance because of the guest’s disability.

Crucially, the couple had prior knowledge that their friend was blind. If a host is aware of a guest’s particular vulnerability – for instance, a guest accompanied by young children, or a guest with impaired mobility or vision – risks specific to those guests should be anticipated. Furthermore, the “thin skull” rule will apply: hosts must take their guests as they find them and will be responsible for any injury arising out of an accident, even if this is more extensive due to a pre-existing condition.

It would be difficult, however, to argue that this equates to a positive obligation to identify a guest’s vulnerability. The case of McGlone v British Railways Board 1966 SC (HL) 1 reminds us of the reasonable limits to the duty of care. In that case a young boy broke into a railway site and suffered burns on a transformer. However, British Railways had discharged its duty by erecting a fence and warning signs. Hosts would therefore do well to remind guests of the dangers in their homes, thereby taking steps towards discharging their duty of care.

Insurance issues

While most home insurance policies provide cover in respect of occupiers’ liability, policy restrictions are common – carrying on a business or trade within the home is generally excluded from cover. A standard home insurance policy includes cover for legal liability to pay damages, claimants’ costs and expenses for accidental bodily injury or illness arising as occupier of the home. It specifically excludes cover for liability in connection with any trade, business or profession. Whether letting a room through Airbnb constitutes a trade or business is a question for insurers to consider, and it would be wise for a host to confirm the extent of any cover. Equally, a failure to disclose activities to an insurer could see claim indemnity and future claims refused, so prospective hosts would be well advised to check their policy.

In the United States, Airbnb has provided some reassurance to hosts by creating the Host Protection Insurance programme, which covers hosts for personal injury claims up to $1 million. However, it only applies as secondary insurance: any other insurance the host has must be used first. The company reports plans to roll this out to other countries in due course. Hosts in the UK do benefit from the Host Guarantee, a scheme providing protection of up to £600,000 for damage to a property. Unsurprisingly, this is subject to a number of exclusions, particularly for higher value property such as antique jewellery or art and, more significantly, it does not extend to include personal liability for injuries to third parties.

With a 66% growth rate this year, the Airbnb success story looks set to continue. As a great alternative to traditional holiday accommodation, its popularity is well founded. However, users could be in for a nasty surprise should things go wrong. Hosts may find that their insurance policy is invalidated and they are personally liable in damages. Similarly, guests should be aware that a host’s empty pockets may not be backed up by an insurer in the event of an accident. In any case, there is certainly an opportunity for insurers to take advantage of the current uncertainty by developing new products tailored to the Airbnb user.