Softwood Lumber Prices Keep Climbing
As the lumber dispute between Canada and the United States continues, uncertainty over the softwood lumber supply has increased prices by more than 12 percent since January, according to a National Association of Home Builders (NAHB) analysis. Although the Trump administration is eager for a quick deal to end the dispute, the Canadian government doesn’t see an agreement any time in the near future.
In April, the U.S. Department of Commerce announced an average preliminary 20 percent import tax on Canadian softwood lumber. That could increase to 30 percent after a U.S. decision on new anti-dumping penalties, according to RBC Capital Markets.
The United States imports one-third of its lumber supplies, and more than 95 percent of that comes from Canada, according to the NAHB.
Trump Signs Apprenticeship Order
In an effort to fill some of the 6 million open jobs in the United States, President Donald Trump signed an executive order providing more money for private companies to design apprenticeship programs. The order nearly doubles the $200 million in taxpayer money spent on learn-and-earn programs under a grant system called ApprenticeshipUSA. To avoid using federal money to fund the order, Trump is directing a government review, hoping to streamline over 40 workforce programs across 13 agencies.
There are about 500,000 apprenticeship positions in the country, representing less than 1 percent of the entire U.S. workforce. The executive order addresses the nation’s “skills gap” that has left millions of open jobs unfilled. Apprenticeships would give students a way to learn skills without facing the debt associated with attending four-year colleges.
Critics are concerned about limited government oversight, since Trump’s order does not require all apprenticeships to be registered, and the Labor Department would review the apprenticeships under broader standards. They are also concerned about the oversight of apprenticeship programs that operate under private companies’ control.
Heat App Updated in Time for Summer
The National Institute for Occupational Safety and Health (NIOSH) and OSHA have recently redesigned their Heat Safety Tool mobile app. The free app provides information on what precautions outdoor workers should take to stay safe in hot and humid conditions.
The updated app uses a cellphone’s geolocation capabilities to gather weather data from National Oceanic and Atmospheric Administration satellites. It can forecast the hourly heat index and determine whether the user’s current risk level is minimal, low, moderate, high or extreme. The information can help employers adjust work schedules and workloads.
According to OSHA, more than 65,000 people seek medical attention each year for extreme heat exposure.
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Summer Weather Safety Tips
Severe weather causes thousands of injuries and hundreds of deaths each year in the United States. Stay safe this summer by taking the following precautions:
- Create a disaster plan and a disaster supplies kit. Check the American Red Cross website for guidance.
- Identify a safe place to take shelter.
- Check the weather forecast before working outdoors.
- Set up severe weather alerts on your cellphone.
- Purchase a National Oceanic and Atmospheric Administration (NOAA)
“Weather Radio All Hazards” receiver unit with a warning alarm tone and battery.
Many Farmers Upset Over Cuba Policy
On June 16, 2017, President Donald Trump signed a presidential directive rolling back parts of former President Barack Obama’s efforts to improve the United States’ trade relationship with Cuba. Farmers saw the directive as a step backward, as it is expected to tighten restrictions on exports and complicate agricultural trade.
Shipments of U.S. grain and soy to Cuba have soared between 2016 and 2017, thanks to Obama’s 2014 diplomatic breakthrough. Within the first four months of 2017, the United States shipped 142,860 tons of grain and soy to Cuba, up from 49,090 tons during the same period of 2016. Although U.S. farmers have just gotten a taste of the profitability from exporting to Cuba, Trump’s move breakthrough is expected to cost U.S. farmers $125 million per year.
President of the U.S. Grains Council Tom Sleight said in a recent statement that, “Trump’s move could cut off near-term sales and stymie economic development that would drive longer-term demand growth.” Although the amount of exports to Cuba are small in comparison to total U.S. exports—corn exports were close to 56 million tons last year—every bit helps as farmers face a decline in farm income for the fourth consecutive year.
$20 Million Raised for Vertical Farms
Indoor agricultural startup Bowery has raised $20 million in Series A funding to build more farms, plant more crops and hire more people. The urban farming startup is one of many that intend to reimagine farming by growing produce vertically in warehouses across the country, as opposed to planting crops in sprawling fields that are reliant upon good weather.
Co-founder Irving Fain stated that since vertical farms can be built in any city, produce would be more accessible to customers and reach them more quickly.
According to Research and Markets, the vertical farm market is expected to grow to $5.8 billion by 2022.
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The Affordable Care Act (ACA) requires applicable large employers (ALEs) to offer affordable, minimum value health coverage to their full-time employees in order to avoid possible penalties. Because this employer mandate has been criticized as burdensome for employers and an impediment to business growth, it seems likely that its repeal will be part of any Republican plan to repeal and replace the ACA.
If the employer mandate is repealed, many ALEs will likely want to modify their plan designs to go back to pre-ACA eligibility rules (for example, requiring employees to have a 40-hour per week work schedule to be eligible for benefits). Employers may also consider increasing the amount that employees are required to contribute for group health plan coverage.
When making plan design changes, employers should review their compliance obligations under the Employee Retirement Income Security Act (ERISA) and the ACA mandates that may remain intact
EMPLOYER MANDATE RULES
Under the ACA’s employer mandate provisions, ALEs that do not offer affordable, minimum value health coverage to their full-time employees may be subject to penalties if any full-time employee receives a subsidy for health coverage through an Exchange.
These employer mandate provisions, which are also known as the “employer shared responsibility” or “pay or play” rules, only apply to ALEs, which are employers with, on average, at least 50 full-time employees, including full-time equivalent employees (FTEs), during the preceding calendar year.
| The employer mandate rules took effect for most ALEs beginning on Jan. 1, 2015. However, medium-sized ALEs (those with fewer than 100 full-time and FTE employees in 2014) generally had an additional year, until 2016, to comply with the employer mandate rules, if they satisfied specific criteria to qualify for this delay.
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For purposes of the ACA’s employer mandate, a full-time employee means an employee who works an average of 30 or more hours per week.
The Internal Revenue Service (IRS) provided ALEs with two methods to determine whether employees are full time under the employer shared responsibility rules—the monthly measurement method and the look-back measurement method.
| Monthly Measurement Method |
Under this method, an employee’s full-time status for a calendar month is determined based on hours of service for that month. |
| Look-back Measurement Method |
The look-back measurement method involves:
- A measurement period for counting hours of service;
- An optional administrative period that allows time for enrollment and disenrollment; and
- A stability period during which coverage is provided if the employee averages full-time hours during the prior measurement period.
If an employee had, on average, at least 30 hours of service per week during the measurement period, the ALE must treat the employee as a full-time employee for the stability period. This rule applies regardless of the employee’s number of hours of service during the stability period, as long as he or she remains an employee, unless a special rule applies.
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To comply with the ACA’s employer mandate, many ALEs were required to expand their health plan’s eligibility criteria to include employees who work 30 or more hours per week. ALEs that use the look-back measurement method have also implemented complex systems for tracking and measuring employee hours in order to identify the employees who must be offered coverage.
In addition, to satisfy the ACA’s affordability requirement (9.5 percent, as adjusted from year-to-year), ALEs have analyzed their employees’ premium contribution rates and made adjustments when necessary.
CURRENT STATUS OF EMPLOYER MANDATE
At this time, the ACA, including its employer mandate rules, remains intact as a federal law. Proposed legislation to repeal and replace the ACA is currently making its way through the federal legislative process. The current bill that is being considered by Congress, which is referred to as the American Health Care Act (AHCA), would reduce the penalties for failing to comply with the ACA’s employer mandate to zero beginning in 2016. This change would effectively repeal the ACA’s employer mandate (although it would technically still exist).
| ACA Reporting: The AHCA would not repeal the ACA’s employer reporting requirements under Internal Revenue Code (Code) Sections 6055 and 6056. Under these tax provisions, ALEs are required to report on full-time employee offers of coverage and employers with self-insured health plans must report on minimum essential coverage. Under the AHCA, employers would still be obligated to report and subject to penalties for failing to report until the proposed AHCA tax credit system is effective in 2020. Starting in 2020, employers would report offers of coverage on employees’ Forms W-2. |
The AHCA’s future is still uncertain. The bill has been amended several times and will likely be subject to additional revisions in the near future. Since the bill has not been signed into law, the ACA’s employer mandate, and its penalty provisions, remain intact. However, because the employer mandate has been criticized as burdensome for employers and an impediment to business growth, it seems likely that its repeal will be part of any Republican plan to repeal and replace the ACA.
REPEAL’S IMPACT ON EMPLOYERS
If the ACA’s employer mandate is repealed, ALEs will no longer be required to provide affordable, minimum value coverage to their full-time employees in order to avoid possible penalties. Many ALEs will likely want to modify their plan designs to go back to pre-ACA eligibility rules. Possible modifications that ALEs may consider include:
- Changing health plan eligibility rules so that only employees who have a full-time work schedule (for example, 40 hours per week) are eligible for coverage;
- Eliminating health plan coverage for employees who are part time, seasonal or temporary;
- No longer using the monthly or look-back measurement method to track employee hours and make eligibility determinations; and
- Increasing the amount that employees who elect group health plan coverage are required to contribute.
| Effective Date of AHCA Repeal: The AHCA would effectively nullify the employer mandate by eliminating potential penalties effective Jan. 1, 2016. Because the employer mandate took effect for some employers in 2015, penalties could technically still apply for the 2015 calendar year, although it is unclear whether the IRS would pursue these penalties under the Trump administration. Also, an audit report released by Treasury Inspector General for Tax Administration (TIGTA) reveals that, due to system and operational problems, the IRS has been unable to identify the employers that are potentially subject to an employer mandate penalty or to assess any penalties. |
It is difficult to predict whether federal agencies, such as the IRS and DOL, will issue guidance in the event the ACA’s employer mandate is repealed in order to help ALEs work through the changes. Even if federal agencies plan on issuing implementation guidance, it may take a while before it is available. In the meantime, ALEs will likely want to make changes to their health plans. In general, ALEs that are considering changes to their health plan’s design and administration should consider their compliance obligations under ERISA and the ACA mandates that may remain intact.
ERISA Rules
Making Plan Changes
In general, under ERISA, employers may amend, or make changes to, their health plans at any time, provided those changes do not violate other federal laws. An employer’s decisions about plan design, including who is eligible for coverage, are generally viewed as “settlor” functions that are not subject to ERISA’s rules that require fiduciaries to act solely in the interests of plan participants or beneficiaries. Thus, employers may make decisions about plan design based on their business interests, even if those decisions negatively impact plan participants or beneficiaries.
Although most employers implement plan design changes at the start of the plan year, an employer may change the terms of its health plan during the plan year. Employers with insured plans should review their insurance documents and consult with their carriers, if necessary, before making mid-year plan design changes. The following are two types of mid-plan year design changes that an ALE may consider making if the employer mandate is repealed:
Change the plan’s eligibility rules to raise the number of hours needed to be a full-time employee who is eligible for plan coverage. Changing the plan’s eligibility rules is not a “qualifying event” for COBRA purposes, so individuals who would lose coverage because they are no longer eligible are not entitled to elect federal COBRA continuation coverage. These individuals would, however, be eligible for a special enrollment period under an ACA Exchange or another employer’s group health plan.
Increase the amount that employees are required to pay for coverage. If employees pay their health insurance premiums on a pre-tax basis, the Code Section 125 rules limit when they can change their elections during the plan year. Certain mid-year changes are permissible (for example, automatic increases or decreases to employees’ contributions for insignificant cost changes). Also, if the cost increases significantly during a plan year, the plan may allow participants to make an election change, including dropping coverage in certain situations.
| Compliance Concern—Vested Benefits: Unlike retirement plan benefits, welfare benefits (for example, group health plans) are not subject to ERISA’s vesting requirements. Because welfare benefits are not vested under ERISA, they can be amended or changed at any time, as a general rule. However, there are some circumstances when group health plan benefits may vest under the terms of the plan documents. The case law on this issue generally provides that, once a participant satisfies all of the plan’s conditions for receiving a benefit, those benefits cannot be reduced or eliminated for that participant. The application of this rule depends on the specific facts of each situation, including the terms of the plan document. Employers that are making changes to their eligibility rules, particularly mid-year changes, may want to consult with their legal counsel regarding any vested benefit concerns. |
Communicating Changes to Participants
Any changes that are made to plan design must be formally adopted by the plan sponsor as part of the health plan’s documentation. These changes also must be communicated to participants through either an updated summary plan description (SPD) or a summary of material modifications (SMM).
ERISA provides generous deadlines for communicating plan design changes to participants—the deadline is 210 days following the close of the plan year in which the amendment was adopted, except that notice of material reductions in benefits and services generally must be given no later than 60 days after the date of the adoption of the modification. However, to help avoid benefits disputes and possible litigation, employers should communicate changes to their health plans’ eligibility rules as soon as possible, and before the changes take effect, as a best practice.
In addition, federal courts have addressed what information an employer is required to provide to plan participants when it is considering whether to make a plan amendment. These cases often arise in the context of retirement plan benefits, but the same ERISA fiduciary principles would also apply to welfare plan benefits, such as group health plan coverage. In general, most courts have ruled that ERISA plan fiduciaries (that is, plan sponsors) have a duty to provide truthful information about potential plan amendments when participants ask about the possibility of plan changes.
Other ACA Reforms
When considering plan design changes, employers should remember that many ACA reforms will likely remain in place even if the employer mandate is repealed, including the following ACA reforms that impact plan eligibility.
| ACA Reform |
Description |
| Waiting Period Limits |
The ACA prohibits group health plans from applying any waiting period that exceeds 90 days. A “waiting period” is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll in the plan becomes effective. This waiting period limit does not require an employer to offer coverage to any particular employee or class of employees, including part-time employees. It only prevents an otherwise eligible employee (or dependent) from having to wait more than 90 days before coverage under a group health plan becomes effective. |
| Dependent Coverage to Age 26 |
The ACA requires group health plans and health insurance issuers that provide dependent coverage to children on their parents’ plans to make coverage available until the adult child reaches age 26. This provision does not require plans and issuers to offer dependent coverage at all. It only requires plans that otherwise offer dependent coverage to make that coverage available until the adult child reaches age 26. |
| Prohibition on Rescissions |
The ACA prohibits group health plans and health insurance issuers from rescinding coverage for covered individuals, except in the case of fraud or intentional misrepresentation of a material fact. A “rescission” is a cancellation or discontinuance of coverage that has a retroactive effect (such as one that treats a policy as void from the time of enrollment). Thus, as a general rule, changes to a health plan’s eligibility rules should be effective on a prospective basis only. |
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Ever since the first ride-sharing app debuted in 2011, they’ve experienced exponential growth in usage. In fact, in the cities where such apps have joined the market, taxi ridership has declined anywhere from 10 to 30 percent. However, while the popularity of ride-sharing apps is increasing, so is the host of risks associated with using them. Most of the companies are in the stages of infancy, and the situations they’re facing are in uncharted territory.
How the Apps Work
While they’re most commonly referred to as ride-sharing apps, any company that uses an online platform to connect passengers with drivers (using the driver’s own vehicle) is called a transportation network company (TNC). These companies each have their own unique differences, but they all operate under the same basic concept.
Through their smartphones, passengers are matched with available drivers via GPS. Most apps display the driver’s route and estimated time of arrival, in addition to the driver’s name, photo and vehicle information. The TNC gets a cut of the fare, typically between 20 to 25 percent, for each ride a driver completes.
The apps are convenient for passengers and for drivers looking to supplement their income. Still, they’re not without flaws. For example, it can be difficult to determine what regulations the TNC and its drivers need to follow, what insurance coverages apply to them and who is considered liable in the event of an accident.
When Insurance Kicks in
Since TNC drivers use their vehicles for both business and personal purposes, TNCs have to clarify when drivers are covered by different types of insurance.
When a driver is driving with the TNC app off, the driver is not accepting rides, so the driver’s personal auto insurance is the primary coverage. When the driver turns the app on, but has not yet accepted a ride, TNCs generally offer contingent liability coverage if the driver’s personal auto insurance does not offer protection. When a passenger is picked up, the TNC’s policy is the primary policy until the end of the ride.
State Involvement
Unlike taxis, which are regulated by the city and have to follow strict guidelines, TNCs haven’t had to adhere to the same strict regulations. This is beginning to change, as legal concerns have grown. Some states are enacting laws to set standards and insurance requirements for TNCs. Furthermore, cases that are currently in the courts will help shed light on who is to be held liable in ride-sharing accidents in the future.
Driver Risks
Some ride-share companies provide liability insurance for their drivers in excess of the driver’s personal liability coverage. However, this does not mean that the driver will always be covered.
Drivers also face the risk of being dropped by their insurance company if they’re found to be misleading them. Drivers need to be honest about what the primary use for the vehicle is when they obtain the policy. If a driver fails to indicate the intention to drive for commercial purposes, the insurer could not only deny claims, but also drop the driver from the policy. Some insurers have created hybrid policies that allow drivers to switch between personal and commercial coverage for that same reason.
Passenger Risks
When a passenger gets into a car arranged by a TNC, the passenger agrees to a host of terms and conditions by default. If the driver gets into an accident and the passenger is hurt, there is no guarantee that the driver’s insurance company, nor the TNC, will pay for damages. For example, the driver’s personal insurance company may say that he or she was driving for profit and, for that reason, it is not required to pay the medical bills. The passenger would need to take the driver to court for damages, which can be a costly and time-consuming process.
Safety is a concern for both the driver and for the passenger. A driver never knows the type of person about to get into the back seat. Likewise, a passenger only knows how reliable a driver is from what the TNC shares about the driver on its app.
However, no transportation service can guarantee safety, and the same concerns arise for people who take taxis. But if something happens to the passenger in a taxi, he or she may receive monetary compensation without having to go to court.
Tips for Passengers
Using a ride-sharing app is generally a safe and reliable method of transportation. Nonetheless, there are safety risks to consider. If your employees use ride-sharing apps when they travel, make sure they’re aware of the following safety tips:
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- Share your trip details with someone. Some apps allow you to share your route and driver information.
- Before you get in the car, check that the driver’s photo, name and license plate match what’s listed on the app. Never enter a car with
a driver who claims to be with a TNC and offers you a ride.
- Never share any personal information that the driver does not need to complete the ride. This includes phone numbers, as TNCs typically anonymize their passengers’ phone numbers to protect their privacy.
- Always wear your seat belt. If the car you’re riding in doesn’t have one or appears to be unsafe, instruct your driver to cancel the ride. Be sure to report it to the TNC immediately.
While the TNC insurance landscape evolves to meet the safety needs of drivers and passengers, insurance companies are taking different approaches to claims. Consult with Scurich Insurance for information on new and changing regulations and to be sure you and your employees are always covered.
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Employee Drug Use Reaches 12-year High
The positive drug test rate for the U.S. workforce was 4.2 percent in 2016, according to the Drug Testing Index (DTI) released by Quest Diagnostics. This represents a 5 percent increase over the positive rate in 2015, and the largest single-year positive rate since 2004.
The DTI analyzed over 10 million workforce drug test results from 2016 and categorized employees into three categories, including employees with federally mandated drug tests, the general workforce and the combined U.S. workforce. Here are additional details about the DTI’s findings for specific drug types:
- Marijuana—The positive test rate for marijuana increased nearly 75 percent in oral fluid testing, which is used in the general workforce. Federally mandated marijuana tests only utilize urine tests, and the positive test rate increased 10 percent in 2016.
- Cocaine—Positive test rates for cocaine in post-accident drug tests were more than twice as high as pre-employment screenings.
- Amphetamines—Positive test rates for amphetamines have risen 64 percent between 2012 and 2016 for the general workforce. Quest Diagnostics attributes this increase to the prevalence of prescription drugs, including Adderall.
In order to create a safe, productive workplace, you need to watch out for potential drug use at your business.
Political Discussions Hurt Job Performance
Many people can get worked up about politics, but a new survey from the American Psychological Association (APA) has shown that political discussions in the workplace can have a big impact on your employees’ job performance.
The APA surveyed U.S. employees about the impact of political discussions after the 2016 presidential election, and found that these discussions have a detrimental effect on job performance and relationships with co-workers. The survey found that 40 percent of employees have experienced a negative outcome following a workplace political discussion, such as reduced productivity or difficulty getting work done. Additionally, 24 percent of employees said they avoid some co-workers solely because of their politics.
According to the APA, social networks and constant news reports can cause individuals to adopt an “us versus them” political mentality, which can lead to conflict. As a result, it’s important to encourage respect, collaboration and courtesy in your workplace to ensure that your employees feel supported and remain productive.
New Executive Order Aims to Improve Cyber Security
President Donald Trump recently signed an executive order to improve the country’s cyber security and protect key infrastructure from cyber attacks. The order also emphasized the importance of strengthening the cyber security of federal agencies. According to a survey from Thales Group, a cyber security company, 34 percent of federal agencies experienced a data breach in the last year, and 95 percent of agencies consider themselves vulnerable to cyber attacks.
The executive order did not create any ongoing cyber security requirements, but instead laid out goals to assess the current state of cyber defenses and develop deterrence strategies. Here are some of the requirements of the executive order:
- Federal agencies must draft reports on their ability to defend themselves against cyber threats.
- The departments of Energy and Homeland Security must assess potential vulnerabilities to the country’s electrical grids. The executive order specifically mentions that prolonged power outages could pose a threat to national security or damage the economy.
- Various federal agencies must review the cyber defense plans of U.S. allies in order to cooperate during international cyber attacks.
Apple Creates $1 Billion Fund to Support U.S. Manufacturing
Apple, the world’s largest technology company, recently announced that it will create a $1 billion fund to support U.S. manufacturing. Although the company is based in the United States, it has faced criticism for outsourcing most of its manufacturing and taking jobs from U.S. workers.
Apple’s CEO stated that one goal of the fund was to support smart manufacturing and to create a ripple effect in industries that support smart manufacturers. For more information on the manufacturing fund, visit Apple’s website.
DID YOU KNOW?
A U.S. Court of Appeals recently barred the Federal Aviation Administration (FAA) from requiring recreational drone owners to register their unmanned aircraft. The FAA had originally required recreational drones to be registered in order to help identify aircraft that posed a hazard, and to pass on safety information to operators. However, the court’s ruling will not impact the use of drones for commercial use, as these aircraft must still be registered with the FAA before they are used.
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Just a few years ago, taking a trip involved contacting travel agencies, booking hotel rooms and making plans far in advance. Today, however, smartphones and the internet have helped create new sharing services that allow homeowners to connect with travelers and rent out their homes, spare bedrooms or other accommodations for a fee.
Airbnb, the most popular of these sharing services, offers a convenient platform that can provide homeowners with an extra source of income. However, renting through Airbnb can also expose you to substantial risks and leave you with costly property damage and liability claims.
Potential Insurance Gaps
Relying strictly on your regular homeowners or renters insurance policy while hosting guests through Airbnb can lead to significant gaps in coverage. These policies are designed to protect you and your family from everyday risks, and not from commercial renting.
If a renter uses your home for even a small amount of time, you and your family will be exposed to significantly different risks that weren’t considered when your policy was drafted. As a result, most homeowners and renters policies won’t cover property damage that’s caused by Airbnb guests.
If you’re considering renting through Airbnb, your first step should be to contact your insurance broker to review your current homeowners or renters insurance policy. While your homeowners or renters policy may allow you to rent your property to a guest, it’s important to keep in mind that each insurer has its own restrictions and requirements. Some insurers may require advanced notice of any short-term rental, whereas others might insist that you purchase an endorsement to expand your coverage.
If you plan to rent out your residence on a regular basis, many insurance companies will consider this commercial use. In many cases, regular Airbnb hosts will need to obtain a commercial insurance policy in order to be properly insured. However, a growing number of insurance companies now offer home-sharing liability insurance policies that can be purchased on a month-to-month basis.
Issues with Airbnb’s Provided Protection
Airbnb does offer its hosts two forms of protection through its host guarantee program and host protection insurance. While hosts may be inclined to rely exclusively on these programs to manage their risks, there are significant gaps related to these offerings.
Host Guarantee
Airbnb backs every one of its bookings with its host guarantee program at no cost, which will reimburse eligible hosts for damages up to $1 million. However, Airbnb readily admits that its host guarantee is not insurance and should not be considered a replacement or stand-in for homeowners or renters policies.
Moreover, payments through the host guarantee are subject to a lengthy list of terms, conditions and exclusions. Therefore, hosts should be aware of the following issues related to Airbnb’s host guarantee:
- Hosts must attempt to resolve any issues with the guests involved prior to receiving any compensation. This also means that a host would have to make a claim on his or her own insurance policy before the host guarantee would apply.
- Any sum collected from a standard policy or a security deposit would be deducted from the host guarantee.
- The guarantee will only repair or replace covered property that is damaged during the time frame of an online booking.
- This guarantee does not cover certain items including, but not limited to, cash, collectibles, jewelry, pets, watercrafts or any damage to property that is not considered a covered accommodation.
For more information on specific elements of Airbnb’s host guarantee program, hosts can review its terms and conditions in full on the company’s website.
Host Protection Insurance
In addition to its host guarantee program, Airbnb offers coverage to its patrons through its host protection insurance. Airbnb indicates that the program provides primary liability coverage for up to $1 million per occurrence in the event of third-party claims of bodily injury or property damage. Despite these claims, hosts should be wary of relying solely on this insurance program for a number of reasons:
- Intentional acts that aren’t the result of an accident are not covered under this policy. In addition, Airbnb’s home protection insurance does not cover what it refers to as property issues, which can include things like mold, asbestos and bedbugs.
- Neither Airbnb’s home protection insurance nor its fine print is readily available for review. The policy is also subject to limitations, conditions and exclusions. Together, this means that the specifics of these coverages are vague, and Airbnb hosts may not know exactly what’s protected.
- The personal property of any guest is generally not covered. Additionally, any theft or damage caused by a guest may not be covered either.
With Airbnb’s host protection insurance, it’s best to assume that you aren’t equipped with the proper coverage. For full protection, it is likely that you will need to speak with an insurance professional to better understand the policy adjustments you will need in order to be fully covered.
Considerations for Condo Owners and Renters
While Airbnb opens its services to condo owners and renters, multi-unit buildings often have restrictive bylaws, homeowner association rules or lease terms that could impact the ability to host guests through Airbnb.
In many instances, commercial activities like renting out accommodations—even for short periods of time—are forbidden by lease or condo board policies. In some cases, hosts will need to contact their landlord or condo board before subletting or renting out any accommodations. Failure to do this can result in eviction or other forms of legal action.
Even if you’re allowed to rent out your condo or apartment through Airbnb, doing so can cause tension with neighbors. There’s always the potential that your guests may not be respectful to property in common areas, act inappropriately or noisily, or make other tenants feel uncomfortable.
Local Laws and Considerations
In response to the rising popularity of Airbnb, many states, cities and towns are moving to regulate short-term property rentals through their municipal codes or zoning regulations. In some cases, home rental services like Airbnb could be prohibited altogether.
If you break these local regulations, purposely or otherwise, you could face thousands of dollars in fines. What’s more, Airbnb says alignment with laws and regulations is the responsibility of those renting out accommodations. As a result, you need to review your local laws and regulations before using Airbnb to rent out your accommodations.
The Bottom Line
While Airbnb offers a unique and potentially profitable service to users, it’s not without its faults. Before you decide to try it for yourself, be sure to consider all of the risks. For more information on sharing services, or to review your homeowners or renters policy, contact us at 831-661-5697 today.
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