When You Turn On The APP , You Turn Off Your Coverage

1. When You Turn On The APP ,You Turn Off Your Coverage An examination of the “sharing economy” and Personal Auto and Homeowners coverage

2. THE SHARING ECONOMY AND YOUR CUSTOMER • Do they drive for a “Transportation Networking Company” such as Uber, Lyft or Sidecar? • Do they rent out their premises through sites such as Air BnB or VRBO? • Did they tell you? • Should you ask? • What effect does this activity have on their HO and PAP coverage? • What do they think?

3. CUSTOMER PERCEPTION • What do you think? • If you asked them, would they think they are covered? • Why wouldn’t they? • Unfortunately, the sharing economy doesn’t share equally. • Let’s take a closer look!

4. THE THREE PHASES OF RIDESHARING

5. THE PAP “OFF SWITCH” • When your customer drives for a Transportation Network they turn on the application to announce their availability. They are in their personal vehicle ready for assignment. • They are now “for hire” and have “switched off” their PAP, which contains the following exclusion: 5. For that "insured's" liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance. This Exclusion (A.5.) does not apply to a share-the-expense car pool. 2005 Version of ISO PAP • What follows is a general description of the TNP’s policy to provide a coverage response.

6. THE PAP “OFF SWITCH” • Carriers could use endorsement PP 23 40 10 15 to amend Exclusion 5 of the 2005 version of the PAP as previously shown: • It was felt this was necessary in order to make it clear that “public or livery” included participation in a TNP • Definitions • The following definition is added: • "Transportation network platform" means an online-enabled application or digital network used to connect passengers with drivers using vehicles for the purpose of providing prearranged transportation services for compensation. • Part A – Liability Coverage Exclusion A.5. is replaced by the following: • We do not provide Liability Coverage for any "insured": 5. For that "insured's" liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance. This includes but is not limited to any period of time a vehicle is being used by any "insured" who is logged into a "transportation network platform" as a driver, whether or not a passenger is "occupying" the vehicle. This exclusion (A.5.) does not apply to a share-the-expense car pool.

7. 2018 PAP REVISION • When used, the 2018 ISO PAP will incorporate the language of the PP 23 40 endorsement into the body of the policy • Endorsements are available to allow the carrier to include coverage: • PP 23 41 Transportation Network Driver Coverage (No Passenger) • PP 23 45 Limited Transportation Network Driver Coverage (No Passenger)

8. THE TNP COVERAGE SOLUTION • First responder, the TNP’s insurance policy • Their policy is designed to cover the driver and their vehicle on two levels: • Liability • Waiting for a rider: Coverage Limits vary by state, but are at least: • $50,000 per person/$100,000 per accident for bodily injury • $25,000 per accident for property damage • Contingent collision and comprehensive coverage • This insurance covers your vehicle in case of an accident whether it was your fault or not, as long as you maintain auto insurance that includes collision coverage for that vehicle while not on a (TNP) trip. • It is subject to a $1,000 deductible (varies by rideshare company)

9. THE TNP COVERAGE SOLUTION

10. WAITING PERIOD DEFICIENCY • While waiting for assignment, this is clearly not adequate coverage, your customer’s PAP has better limits (I hope) • Fortunately, the industry responded to fill in that gap • Check with your carrier for their version of a “Rideshare Gap Endorsement” that maintains their policy’s protection during this interval • It keeps coverage “switched on” until they pick up a passenger.

11. TNP Extension

12. PASSENGER PICK UP • When they engage a passenger, it shuts off PAP coverage for the duration of the ride • While you drive to pick up a rider after accepting a request and during a TNP trip, you are covered for three things: • 1. Third party liability coverageThis insurance covers your liability for damages to any third party such as another driver, pedestrian, or property in case of an accident when you’re at fault. Coverage limits vary by state, but are at least $1,000,000 per accident. • 2. Uninsured or underinsured motorist bodily injury coverageThis insurance covers you and anyone else in your vehicle in case of an accident where another driver is at fault, but does not have sufficient insurance. This also covers hit and run accidents where the at-fault driver cannot be identified. Coverage limits vary by state, but are at least $1,000,000 per accident. • 3. Contingent collision and comprehensive coverageThis insurance covers your vehicle in case of an accident whether it was your fault or not, as long as you maintain auto insurance that includes collision coverage for that vehicle while not on an Uber trip. Coverage limit is up to the actual cash value of your vehicle. There is a $1,000 deductible.

13. HOW DO WE KNOW? • Anyone driving in the “gig economy” needs to address their exposure to avoid total reliance on the TNP policy • Their PAP, even when endorsed, will not extend coverage while en route to or carrying a passenger • How do we get the word out to have them talk to us about the risk of getting “their side hustle on” • “I have always depended on the kindness of strangers” Blanche Dubois in A Streetcar Named Desire by Tennessee Williams • Great line, bad risk management strategy

14. THE HOMEOWNER’S DILEMMA • Airbnb is the largest web-based “peer to peer” property rental facilitator • Airbnb is a new kind of “aggregation” platform. It’s a portal that connects producers and consumers in the marketplace for accommodations—like Facebook does for content, or Amazon for commerce, or Uber for driving. • If you want to use them to rent out your house to strangers, is there an “off switch” for Homeowners coverage?

15. DOUBLE SWITCH • First: While in rental, the home is no longer an “owner occupied” dwelling • Second: The Business Pursuits exclusion in the ISO HO can exclude coverage: • The policy does not cover: c. Other structures from which any "business" is conducted; or d. Other structures used to store "business" property. However, we do cover a structure that contains "business" property solely owned by an "insured" or a tenant of the dwelling provided that "business" property does not include gaseous or liquid fuel, other than fuel in a permanently installed fuel tank of a vehicle or craft parked or stored in the structure. 3. "Business" means: a. A trade, profession or occupation engaged in on a full-time, part-time or occasional basis; or b. Any other activity engaged in for money or other compensation, except the following: (1) One or more activities, not described in (2) through (4) below, for which no "insured" receives more than $2,000 in total compensation for the 12 months before the beginning of the policy period; (2) Volunteer activities for which no money is received other than payment for expenses incurred to perform the activity; (3) Providing home day care services for which no compensation is received, other than the mutual exchange of such services; or (4) The rendering of home day care services to a relative of an "insured". • Failure to disclose this activity to the insurance company can also invoke the “misrepresentation” exclusion or “increase in the hazard insured against” cancellation • Can Airbnb’s “host guarantee program” provide any hope?

16. PROMISES, PROMISES • The Host Guarantee is not insurance. It’s simply a promise by Airbnb to repair or replace any property damaged by a Guest during a stay. • There are many conditions that must be followed in order to qualify for the protection, such as: 1. The Host must attempt to settle the damage with the Guest, and that attempt must be done within the earlier of 14 days of check-out, or before the next Guest checks-in. That puts the Host in an adversarial position, causing anxiety and frustration - the exact opposite of the peace-of-mind provided by insurance. Plus, with back-to-back stays, this condition effectively precludes any coverage on the first stay. 2. The Host must have complied with all of Airbnb’s Safety Guidelines. 3. Airbnb must be notified of the damages within 14 days of check-out or before the next guest checks-in, whichever is earlier. This creates a very short reporting window.

17. PROPERTY COVERED UNDER HOST GUARANTEE • Property is only covered for its “actual cash value”, which takes into consideration the depreciation of the damaged property. For example, a damaged TV that originally cost $1,200 would likely be worth only $200 once it’s a few years old. • By contrast, an insurance policy will cover the “replacement cost” (if endorsed) of the damaged property, which means the cost of buying a similar item new. So, the Host would collect about $1,300for that three-year old TV. • The limit of protection is only $1,000,000. That may sound like a lot, but what if a fire caused by the Guest destroys the home and all of its contents? What if the Guest has a wild party that trashes the entire home? Fine Arts are restricted to the point of effectively not being covered. • Coverage for loss of income is restricted only to confirmed bookings lost as a result of covered damage to covered property, and of course only to bookings that were confirmed with Airbnb. An insurance policy will cover the Host for loss of both confirmed and potential bookings, and for bookings acquired from sources other than Airbnb.

18. AN AGREEMENT, NOT INSURANCE • The Host must first try to collect damages from other sources, such as their Homeowners insurance policy, any other type of insurance, or a security deposit. • A detailed Proof of Loss form must be submitted within 30 days of incurring the damage, and it must be signed and sworn, and accompanied by an Airbnb Payment Request Form. • In total, there are 29 limitations and exclusions, and 12 instances of excluded property - far more than most property insurance policies

19. WHAT ABOUT LIABILITY? • The purpose of the Host Protection Insurance is to provide primary liability insurance for Airbnb Hosts. This sounds good, and it’s certainly better than nothing, but we don’t recommend that Hosts rely on this insurance because of the restrictions and limitations to the program. • The limit of coverage is only $1,000,000 per occurrence and also carries a $1,000,000 maximum for the total of all claims at each listing location. This is insufficient, in our opinion! • The policy is shared by all Hosts. On the surface, since the limit is $1,000,000 per occurrence, this doesn’t seem like a problem. However, the policy is most likely subject to a total maximum payout each year With over 60 million Guests using Airbnb, there is potential that the limit of insurance could be used up by the time any one Host presents a claim.

20. WHAT’S THE ALTERNATIVE? The only proper way for Hosts to protect themselves is to buy their own insurance policy, on which they are the Named Insured, and they are covered for their short term rental activities. Online companies, such as Slice Insurance and Home Away (Lloyds), provides on-demand, pay-per-use insurance to home share Hosts, so the Host never has to rely on Airbnb or any other home share company for protection. (Slice indicates over 50% of its customers purchase insurance in excess of $1,000,000) Slice’s policy provides: • for replacement cost on property, protection against lost rental income, a $2,000,000 limit • for liability and many specialty coverages designed specifically for home share Hosts, such as infestation coverage, all at an average cost of only $7 per day! Turn Slice on and off the same way that you do with your availability calendar. Slice was designed to work with hosts in a way that matches their life – only pay for when you are using.

21. HOME AWAY • Think of it as a homeowners policy, a landlord policy, and a business policy all wrapped into one! • It’s all-inclusive insurance that was custom-penned with Lloyd’s of London for the unique risks of short-term vacation rental properties.  It’s the most comprehensive insurance available today for vacation rental property owners.  Available in all 50 states.

22. CLAIM EXAMPLES • Uber driver is San Francisco had app on and ready for assignment. Hit Mother and 9-year-old child in a crosswalk. Suit seeks $500,000 in damages. • Rideshare driver has an unendorsed PAP with Direct writer. • How much coverage can he expect? • (TNP’s policy covers 50/100 BI during waiting period)

23. CLAIM EXAMPLES • Insured rented their Aspen home through Airbnb. Staircase added to new addition on premises collapsed, severely injuring guest. • Stairway construction was not permitted and not up to code. • Homeowner has a High Value “Masterpiece” type HO 5. • CPL limits $1,000,000 CSL with $5,000,000 PUP • Host Guarantee the only other coverage. • What do you think? • (No HO coverage, PUP follows HO, Home guarantee may cover but they have to argue against initial declination and may not have enough limit with no guarantee of “duty to defend”)

24. Reference • https://www.uber.com/drive/insurance/ • For a look at their current policy conditions • https://www.proper.insure/ • For a look at the Lloyd’s Home Away Program • https://slice.is/ • Insurance Cloud Services for rideshare and home share • Fr a look at the Slice Program • https://www.airbnb.com/guarantee • For a look at the Airbnb Host Guarantee