ISO Watercraft Liability Endorsements

ISO HOMEOWNER MANDATORY AND OPTIONAL HOME-SHARING ENDORSEMENTS

(July 2020)

In 2017, Insurance Services Office, Inc. (ISO) introduced several forms to address an emerged exposure from the sharing economy: home rental to travelers via 3rd party hosting platforms such as Airbnb, HomeAway or Roomorama. The forms were necessitated by the popularity of formal networks (referred to as home-sharing or peer-to-peer rentals) that facilitated the rental or mutual exchange of residences for, primarily, recreational purpose but, increasingly, for profit. ISO homeowner forms had long contemplated absorbing the  exposure of having an insured occasionally renting or mutually exchanging use of residences. The establishment of national, even global, networks has created larger, more complicated risks for residential insurers.

ISO’s mandatory amendatory Home-Sharing Endorsements are intended to properly isolate network-facilitated residential rental activities in order to exclude them from coverage under base HO policy forms. As with many mandatory takeaways, ISO is providing   a set of optional endorsements  to provide defined coverage for a premium.

Primary items that needed to be addressed (and which will likely continue to be closely monitored) are how such rentals are treated with regard to a personal or a business activity, what coverages are provided by home-sharing agreements (as a source of other coverage) and recognition of the need to gather information on transactions that occur. For instance, after monitoring use and loss information, ISO may decide in the future to add an aggregate limit provision.

The forms include the following:
MANDATORY AMENDATORY FORMS

For use with the HO 00 02 Policy

For use with the HO 00 03 Policy

For use with the HO 00 04 Policy

For use with the HO 00 05 Policy

For use with the HO 00 06 Policy

For use with the HO 00 08 Policy

Changes to Definitions Section

New Definitions

The mandatory forms modify the various base home policies by adding several new definitions. The new terms are “Home-sharing host activities,” “Home-sharing network platform,” and “Home-sharing occupant.”

Home-sharing host activities—refers to making the location deemed by the applicable policy as a residence premises available to others through renting or via an exchange. Any services or property provided that are connected to the rental or exchange of the defined premises also qualifies as an activity under this term.

Home-sharing network platform—refers to an electronic channel designed for transacting property rentals, complete with compensation for that service.

Home-sharing occupant—any person who has agreed to rent and compensate an insured for renting property via a home-sharing network, including a person accompanying a renter.

Revised Definitions

The definition of business is changed by the addition of the defined term “home-sharing host activities” to the definition of business.

The base HO forms definitions of “roomer”, “boarder,” “tenant” and “guest” are changed to specifically not include “home-sharing occupant.” This keeps “home-sharing occupant” is a unique party.

Changes to Section I– Property Coverages

The forms make several revisions in this section. Specifically they do the following:
Under Coverage C– Personal Property, the form replaces parts of Property Not Covered by adding wording that excludes property that belongs to a “home-sharing occupant” and also denying coverage to any property that is located in areas during the time those areas are actually rented to but also while those primary purpose is to be used for a “home-sharing occupant.”
The form also adds wording to exclude coverage for property that is intended to be used in “home-sharing activities.”

Under Coverage D– Loss of Use, the form adds wording to exclude reimbursement for loss of rents (fair rental value) involving an inhabitable area when that area is used in “home-sharing host activities.”

 

Example: Wendy’s home is damaged by a tree being blown onto her home during a violent storm. She is unable to live in her home for nearly a month and she has to cancel a home-sharing agreement she made, returning the advanced two-weeks rent. She includes that loss in her claim to her insurer, but that part of the claim is denied as it is an excluded home-sharing activity.

Changes to Section I – Perils Insured Against

Under the Coverage A and B section, the following changes have been made:

The theft exclusion is changed to bar coverage for theft losses related to use of the home in “home-sharing activities.”

The V&MM exclusion is changed so that, in addition to no coverage  applying to a home that has been vacant for 60 days or longer, no coverage is available  when the damage is related to “home-sharing host activities.”

 

Example: Sharon and her family saved for months to spend their vacation at a home near a famous race. Unfortunately, the weather in the area is terrible and the event is rained out. The night before they leave, Sharon’s two teenaged children, angered over the race, deface and damage property in the home. The rental was via a home-sharing arrangement. The loss to the property owner is not covered.

 

Under Coverage C the following changes are made:

The VMM peril is changed to not apply for losses that come from “home-sharing activities”.

The theft peril does not apply to any loss that comes from “home-sharing activities.

Changes to Section II – Exclusions

Under the section’s business exclusion, wording is added to specifically deny coverage for “home-sharing host activities.”
Under Medical Payments to Others, the Med Pay coverage to a “home-sharing occupant” is excluded.

Changes to Personal Injury coverage if attached

The mandatory forms include a new, additional provision. If the applicable policy happens to be modified with Personal Injury Coverage, that endorsement is revised by wording which rewords the form’s occasional use of property for rental activities to exception to specifically not cover “home-sharing host activities.”

OPTIONAL FORMS

For use with the HO 00 02 Policy

For use with the HO 00 03 Policy

For use with the HO 00 04 Policy

For use with the HO 00 05 Policy

For use with the HO 00 06 Policy

For use with the HO 00 08 Policy

Changes to Definitions Section

The optional forms modify the various base home policies by adding several new definitions. The new terms are “Home-sharing host activities,” “Home-sharing network platform,” and “Home-sharing occupant.”

Home-sharing host activities—refers to making the location deemed by the applicable policy as a residence premises available to others through renting or via an exchange. Any services or property provided that are connected to the rental or exchange of the defined premises also qualify as an activity under this term.

Home-sharing network platform—refers to electronic channel designed for transacting property rentals, complete with compensation for that service.

Home-sharing occupant—any person who has agreed to rent and compensate an insured for renting property via a home-sharing network, including a person accompanying a renter.

Next, the forms make a change to the definition of “business.” The optional forms add the defined term “home-sharing host activities” as a business activity. Further, the endorsement adds a new section C which clarifies that a “home-sharing occupant” is a unique party. A person designated as such is excluded from consideration as a boarder, guest, roomer, or tenant.

Note: These are the same definitions used in the Home-Sharing Host Activities Amendatory Endorsements.

Changes to Section I– Property Coverages

The forms make several revisions in this section. Specifically, they do the following:
Under Coverage B– Other Structures, the form replaces parts of Property Not Covered, adding wording that expands the item on rental of other structures. The result is that an exception is created to cover such structures when rented or held for rental to a “home-sharing occupant.” It also makes an exception, allowing protection for another structure used in “home-sharing host activities.”

Under Coverage C– Personal Property, the form replaces parts of Property Not Covered, adding wording that excludes property that belongs to a “home-sharing occupant” or any other person in the home related to a “home-sharing host activities.”

Under Coverage D– Loss of Use, the form revises the title of item 2. From “Fair Rental Value” to “Lost Rental Value of “Home-sharing Host Activities.”

The revised wording applies specifically to providing coverage for loss of income related to making covered property available to another party under a defined home-sharing transaction. Coverage applies when an eligible peril occurs and makes that area unavailable. Another unusual coverage is that lost rental income is also available if it occurs because of an agreement that permit cancellation when an official, National Weather Service Hurricane notice is announced. The notice must include the location of the home-shared property.
The amount of any payment also depends upon the storm cancellation provisions of the applicable home-sharing agreement.
Any reimbursement is net of expenses that terminate during the period that the affected property is inhabitable or unavailable.

Under Coverage E– Additional Coverages, the forms revise Landlord Furnishings. The coverage wording is expanding so that the limited coverage available also applies to furnishings related to use in “home-sharing activities.”

Changes to Section I – Perils Insured Against

Under Coverage C, Personal Property, the following changes have been made:

Under the theft exclusion, an exception is made for such occurrences from parts of a residence that are used by a “home-sharing occupant.” The coverage has a significant limitation because it continues to bar coverage for valuable classes of property including money (and similar property), precious metals (including plated utensils), coins, securities (and similar valuable papers), jewelry, watches, furs, and gemstones.

Changes to Section I – Conditions

Under this section, the forms modify the Other Insurance and Service Agreement. The forms wording is expanded to make specific reference to home-sharing network platforms. It makes the ISO policy primary over any coverage available under a home-sharing agreement. Further, it specifically classifies home-sharing agreements as a form of a guarantee or protection plan rather than insurance.

Changes to Section II – Exclusions

Under the section’s business exclusion, wording is added to make “home-sharing host activities” an exception to this exclusion.

Changes to Section II – Additional Coverages

The forms replace the base forms’ Coverage C. Damage to Property of Others with Coverage C. Home-Sharing Host Activities Damage to Property of Others. The result is to make the section’s payment subject to the greater of $1,000 or the limit of liability that appears in the home-sharing host activities endorsement schedule. It also carves out an exclusion exception for home-sharing host activities.

Changes to Section II – Conditions

Under this section, the forms modify the Other Insurance condition. The forms wording is expanded to make specific reference to the home-sharing network platform. It makes the ISO policy primary with respect to coverage for eligible home-sharing host activities. Further, it specifically classifies home-sharing agreements as a form of a guarantee or protection plan rather than insurance.

Changes to Section I and II – Conditions

Under this section, the optional forms add the following provision:

Home-sharing Host Activities Verification Requirements

The optional endorsements obligate the named insured to supply the insurance company with full information on the type and number of rental agreement transactions made and home nights the covered residence was occupied by home-sharing occupants. The information must be supplied whenever requested by the insurer, but no number is referenced regarding requests except that the amount should be reasonable.

Changes to Personal Injury coverage, if attached

A new, additional provision if the applicable policy happens to be modified with Personal Injury Coverage. That endorsement is revised by wording which creates an exception to the business exclusion that applies to “home-sharing host activities.”