Are short-term renters covered by condo insurance?

An Airbnb renter can be considered an insured under a strata’s insurance policy but may not necessarily rely on other liability protections in a strata’s bylaws, a B.C. Supreme Court justice determined in Strata Plan VR 2213 v Schappert, 2023 BCSC 2080. A subrogated claim brought by the plaintiff’s insurers led to a special case submitted under a portion of the Supreme Court Civil Rules.

John Schappert spent several nights in a strata unit in April 2019 under an Airbnb service agreement with the unit’s owners. While there, he unintentionally started a kitchen fire that triggered the building’s sprinkler system. “Discharge of water from the sprinklers caused resultant damage to the [condo’s] common property,” court documents said. Airbnb charged Schappert $499 as a security deposit after the fire.

The insurers’ subrogated claim against Schappert was in negligence for the cost of repairing common property damaged by the sprinklers. The special case sought determination of two of Schappert’s defences and asked whether the subrogated claim is barred by either the common law ‘no subrogation’ rule or the covenant to insure and waiver of liability in the strata’s bylaws.

Schappert argued his status as a short-term renter meant he was ‘insured’ under the strata’s policy, which would prohibit subrogation against him as a matter of insurance law. He also claimed the bylaws waived his liability to the strata for damage covered by insurance that the strata covenanted to obtain. The strata’s coverage was via a subscription policy.

The insurers asserted the defendant was not someone who ‘normally occupied’ the unit — so he could not be considered ‘insured’ under the strata’s policy — and that the ‘no subrogation’ rule did not apply. The insurers also stated the waiver of liability and covenant to insure extended only to strata lot owners, not short-term renters.

The judgement’s text showed the strata’s bylaws had been updated to include provisions for Airbnb rentals prior to April 2019. Those changes required unit owners to be approved to rent on the platform, which the unit holders were.

After the fire, the strata submitted a claim under the first-party property damage coverage, and coverage was provided for the costs arising from the resultant damage. On October 20, 2020, the strata commenced legal action against Schappert alleging his negligence caused the fire. “The within action is a subrogated claim advanced by the insurers to recover amounts paid out under the insurance claim,” the decision text noted.

In the Nov. 27 decision, Justice Simon Coval noted Airbnb’s terms of service said Schappert was “granted a limited licence to enter, occupy and use the unit, but not the exclusive right of possession, all of which is consistent with a licensee and not a tenant.

“Applying the straightforward meaning of the words in their statutory context to these circumstances, a short-term renter such as Mr. Schappert was among the persons who did normally occupy the strata lots.

“I agree with Mr. Schappert, however, that he had an insurable interest capable of making him an insured. As a short-term renter with a right to use and occupy the unit, he could be detrimentally impacted by the insured perils.”

The insurers also argued that, even if Schappert was an insured under one section of the policy, “they may still subrogate against him because the Release and Subrogation clause in the Policy does not extend the no subrogation right to his situation.”

Coval said he agreed with defendant that, due to the common law no subrogation rule, the insurers could not subrogate against him as an insured under their policy absent clear language that would entitle them to do so. “The insurers provided no authority for avoiding the no subrogation rule in these circumstances or pursuant to wording…” he wrote.

As to whether Schappert can benefit from the waiver of liability in the strata’s bylaws for damages covered by the strata’s insurance, the documents noted “[bylaws] Section 4.4 requires an owner to indemnify the strata for various repair costs caused by their ‘visitors, occupants, guests, employees, agents, tenants or a member of the owner’s family,’” and waives “the owner’s obligation to indemnify for expenses that are reimbursed by insurance.”

The insurers further argued Schappert does not own the unit and therefore is not entitled to rely on the bylaws.

“On the second question, I find for the insurers,” Coval wrote. “The insurers’ subrogated claim is not barred by the strata’s covenant to insure, or waiver of liability, because they do not extend to Mr. Schappert.”

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