Airbnb is the latest corporate victim of Washington State’s Insurance Commissioner, Mike Kreidler, who has fined the technology company $20,000 for acting as an unauthorised insurer in Washington state.
The enforcement action, which also requires Airbnb to secure a surplus lines policy through a broker licensed in Washington by August 5, 2023, is in relation to the home-sharing platform’s Host Damage Protection (HDP) programme.
“Kreidler’s office opened its investigation based on the HDP program, which advertised $1 million in coverage for damages caused by a guest,” the regulator said in a statement.
“It was included with each booking as part of the company’s AirCover program, provided under a general liability policy with hosts covered as insureds.”
The Office of the Insurance Commissioner (OIC) initially issued a Cease and Desist order on Airbnb on 7 February, ordering it to immediately cease from:
“(i) engaging in or transacting the unauthorized business of insurance in the state of Washington, (ii) seeking, pursuing, or obtaining any insurance or service contract business in the state of Washington, and (iii) soliciting Washington residents to induce them to purchase any travel insurance contract.”
Due to the complexity of the matter, the order was stayed on 15 February, effective from 6 February, with the OIC and Airbnb agreeing to “fully resolve this matter by entering into a compromise resolution”.
As part of the agreement with the OIC, Airbnb will now require its surplus lines broker that Washington State be treated as Airbnb’s “home state” for the policy “and will receive surplus lines premium tax on 100% of the Policy’s premium”. This will only be the case for hosts located in Washington State.
It is not stated whether Airbnb’s Hawaii-domiciled captive, Launa Insurance Company, Inc, is directly implicated in the rules breach, but it does play a role in some of the insurance programmes offered to hosts and users of the platform.
“We have a wholly-owned captive insurance subsidiary to manage the financial exposure related to our Host and Experiences liability insurance programs along with certain corporate insurance programs,” Airbnb said in a February SEC filing.
“Our captive insurance subsidiary is a party to certain reinsurance and indemnification arrangements that transfer a portion of the risk from our insurance providers to the captive insurance subsidiary, which could require us to pay out material amounts that may be in excess of our insurance reserves.”
As well as the captive, Airbnb also operates its own US insurance agency.
Kreidler became well known to the captive insurance industry in 2018 when he began targeting self-insurance subsidiaries owned by Washington-headquartered businesses, accusing them of being unauthorised thus insuring risk in the state illegally.
Microsoft, Costco, Alaska Airlines and Starbucks were among those corporates caught up in enforcement action before a legislative fix was landed upon in 2021.