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State Legislators Accuse Airbnb of Offering False Assurance to Illegal Hotels

Frank Lovece in Legal/Financial on September 19, 2014

New York City

Illustration by Danny Hellman for Habitat
Sept. 19, 2014

Insurance v. "Guarantee"

The legislators said they believed Airbnb's "$1 Million Host Guarantee" deliberately misleads hosts "into believing they have sufficient coverage" when fine print on the company's website "reveals that it only applies to property that is owned or legally controlled by the host." This excludes New York City apartment dwellers whose leases or bylaws prohibit renting out the unit for fewer than 30 days.

They also questioned "whether or not insurance for short-term rentals like Airbnb is a legally sanctioned insurance product in the state of New York." State laws do not license insurance for short-term rental of permanent residences, the state officials wrote.

The Airbnb website states that the $1 million guarantee "is not insurance" and warns users that not all insurance will cover damage to property caused by a guest renting the space.

Airbnb Responds

An Airbnb spokesperson said the company's policy was straightforward and that competitors were spreading confusion.

"First they said they don't want us to pay taxes, and now they are after our million-dollar Host Guarantee, which is simply designed to give some peace of mind to our amazing community of people who open up their homes to travelers," Airbnb spokesman Nick Papas told the anti-hoteling coalition Share Better. "The facts are simple: the Host Guarantee provides additional peace of mind and protection for the Airbnb community and follows the law."

Espaillat and Moya both were backed in their most recent election campaigns by the New York Hotel and Motel Trades Council, the workers' union that has called home-sharing sites such as Airbnb a threat to hotel business.

Espaillat and Moya said in their letter that two-thirds of Airbnb's 19,000 short-term rentals in New York City were operating as illegal hotels in violation of the State's multiple-dwelling law. The figures are based on findings from the independent data-extraction company Connotate, which said that of the 19,522 New York City listings on Airbnb as of January 2014, nearly two-thirds (64 percent) covered an entire apartment, in violation of state law, and that more than 200 of the offerings came from just five hosts. It said, 12 percent of hosts control 30 percent of all New York City listings. 

A Department of Financial Services spokesperson said Lawsky's office would review the letter. 


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Illustration by Danny Hellman

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