Enrico Schaefer - April 4, 2020 - Airbnb Refund Claims, Complex Litigation
Airbnb Attorney Representing Hosts: Airbnb unilaterally, and in violation of hosts cancellation policies, refunded guests who booked reservations between the dates March 14th and May 31st. Our analysis of the contract terms, relevant law and facts has led to the conclusion that Airbnb hosts have a viable breach of contract case against Airbnb.
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Why did Airbnb refund guests? Airbnb recently relied on the “extenuating circumstances clause” of its standard terms / agreement with property owners and guests to justify its first and second round of guest cancellations and refunds due. Airbnb concluded that the Covid-19 / coronavirus was an extenuating circumstance.
Key Issue: Does a pandemic fall within the language of Airbnb’s extenuating circumstances clause? Not the language that existed before Airbnb unilaterally and without notice changed the policy. Here is what the extenuating circumstances policy looked like before Airbnb changed it and scrubbed all evidence of the change from its website. https://web.archive.org/web/20170321054702/https://www.airbnb.com/help/article/1320/what-is-airbnb-s-extenuating-circumstances-policy Here is an article written by Amber Carpenter at VRMIntel also noting the change. https://www.vrmintel.com/airbnb-changes-extenuating-circumstances-cancellation-policy-to-override-managers-and-hosts/
Do hosts have legal claims against Airbnb? As you will read below, our attorneys represent Airbnb hosts and have determined that Airbnb may be in breach of its platform agreement with hosts as a result of providing traveler refunds in response to coronavirus. Stated another way, guests were arguably NOT entitled to refunds under the rental agreement and Airbnb’s standard terms and policies.
What can hosts do about the forced refund? Airbnb could be liable for money damages to hosts for allowing booking cancellations and providing refunds. The terms of service contain a mandated arbitration clause for all disputes. This arbitration clause may, or may not, be enforceable. A possible class action is being analyzed as the class action waiver clause could also be considered unreasonable under California law or if the class action waiver is determined a violation of public policy.
What should you do if you are a Airbnb Host who was affected by the cancellation and refund decision? We are on the front line of the factual and complicated legal analysis for hosts. While this virus has taken the world by surprise, unexpected circumstances are drafted into your hosting agreement with Airbnb. In short, a pandemic is one of the contingencies which was foreseen and the risk that was adjusted under the extenuating circumstances policy. Airbnb should follow those policies and terms. Instead, Airbnb has diverted what appears to be one billion dollars in host revenue by allowing cancellations for traveler reservations between April 1 and May 31. While Airbnb has pledged 250 million to hosts, that leaves hundreds of millions in damages to be pursued by property owners. As any hosts point out, travelers have the option of buying insurance against these types of events. Hosts do not.
While both guests and hosts are suffering under this pandemic known as covid-19 / coronavirus, the terms of service clickwrap agreement that all parties – Airbnb, hosts and guests – agreed. Airbnb included numerous extenuating circumstances such as an endemic, but did not include an epidemic / pandemic in adjusting the risk between host and guest. Hosts want to know why Airbnb didn’t just follow the extenuating circumstances pocky and the cancellation policy they selected in the platform.
Airbnb host attorneys can also infer this since Airbnb appears to have covered-up its recent change in the policy to specifically include a pandemic which might apply to guests booking after April 1, 2020 or whenever it was put in place. The risk of pandemic which would limit guests refund rights is part of the terms of service. Those terms should be followed. The current coronavirus / covid-19 refund policy seems to conclude that the hosts policy at the time of reservation controls and that the pandemic is not covered under its policy.
Our attorneys are representing Airbnb hosts and will address legal rights, liability issues, possible claims, and lawsuits and potentially class actions against Airbnb as result of its decision to refund guests under the extenuating circumstances clause in future articles. The purpose of this article is to help Airbnb property hosts / owners understand the legal language in the Airbnb terms of service agreement so hosts can understand their legal rights. Here are some highlights set forth in more detail in the article below:
What does Airbnb say your contract says? Here is what our lawyers want you to know. Guests (renters) and Hosts (property owners) agree to standard rental and software platform terms when rentals occur on the Airbnb platform. While there is more to the Airbnb terms of service than will be analyzed here – such as what terms apply to which reservations given the recent change of policy) – one portion of the rental policy discussed here governs refunds as a result of an emergency or unavoidable circumstances. Essentially, the rental terms allow renters to cancel their reservation without penalty under limited circumstances, such as when a rental is not habitable. For other circumstances, Airbnb is allowed to override the rental terms and refund policy selected by the host (read below for the agreed cancellation policy), and are agreed to by the guest, Airbnb may allow for a refund if in its discretion it decides to do so because of extenuating circumstances and the traveler can establish that they are ‘directly affected’.
One such extenuating circumstance is an ENDEMIC. Note the spelling ‘e-n-d-e-m-i-c.’ An EPIDEMIC – note the spelling – (or pandemic) is not listed as an exceptional circumstance under Airbnbs terms. Endemic refers to the constant presence and/or usual prevalence of a disease in a geographic population or particular population or demographic. Endemics are defined by characteristics of a particular population (race, gender, age), environment, or region. Examples of endemic diseases include chicken pox that occurs at a predictable rate among young school children in the United States and malaria defined by region in some areas of Africa.
Coronavirus is an example of an epidemic which became a pandemic. It is unreasonable to interpret coronavirus as an endemic disease. Without providing notice, Airbnb attempted to change the policy to include epidemics and pandemics, then unilaterally refunded travelers citing the the exceptional circumstances clause. I understand the guests argument on the equities. But how are refunds outside the agreed terms by all parties fair to hosts? Shouldn’t the contract terms control?Litigation Attorney Enrico Schaefer
Airbnb empowers hosts to set and manage their cancellation policies. If a host or guest needs to cancel a reservation, it’s their responsibility to cancel as soon as possible. At times, certain circumstances outside of a host or guest’s control can impact their ability to meet the terms of a reservation.
In rare instances, if Airbnb determines that a Guest’s reason for cancellation falls within Airbnb’s Extenuating Circumstances Policy, Airbnb may override the Host’s cancellation policy (ex: flexible, moderate, strict) and make refund decisions. If Airbnb determines that a Host’s reason for cancellation falls within Airbnb’s Extenuating Circumstances policy, Airbnb may waive the host cancellation penalties outlined in Airbnb’s Terms of Service and Airbnb’s Payments Terms of Service.
Valid extenuating circumstances include:
– Unexpected death or serious illness of a host, guest or immediate family member.
– Serious injury that directly restricts a guest’s ability to travel or a host’s ability to host
– Significant natural disasters or severe weather incidents impacting the location of destination or location of departure
– Urgent travel restrictions or severe security advisories issued after the time of booking, by an appropriate national or international authority (such as a government office or department)
– Endemic disease declared by a credible national or international authority (such as the US Center for Disease Control or the World Health Organization)
– Severe property damage or unforeseen maintenance issues that directly impact the ability to host safely
Claims can only be considered after a reservation has been canceled. Once you have informed your host or guest and canceled a reservation, if you feel that your reason for cancellation is covered by Airbnb’s Extenuating Circumstances Policy, contact Airbnb for consideration. We generally require claims to be submitted no later than 14 days from the original check-in date and we may require valid supporting documentation.
Suffice it to say that coronavirus is not and endemic disease. Endemic refers to the constant presence and/or usual prevalence of a disease in a geographic population. Things like Malaria are endemic disease.
Contract and endemic with and epidemic or pandemic. An Epidemic refers to a sudden increase in the number of cases of a disease above what is normally expected. A Pandemic refers to an epidemic that has spread over several countries or continents, usually affecting a large number of people.
Clearly Covid-19 was a epidemic in China which turned into a pandemic across the world and the United States.
We noticed the change in policy sometime between March 28 and April 2, 2020. Our attorneys had already identified the possible breach of contract issue for clients. This article at VRM Intel is one of the few web pages which more recently the change in Airbnb’s refund policy, although the article fails to analyze the legal implications. The following factors suggest that Airbnb knew or has become aware that they were providing refunds to guests was a potential breach of contract and liability issue:
Airbnb reserves the right to modify these Terms at any time in accordance with this provision. If we make changes to these Terms, we will post the revised Terms on the Airbnb Platform and update the “Last Updated” date at the top of these Terms. We will also provide you with notice of the modifications by email at least thirty (30) days before the date they become effective. If you disagree with the revised Terms, you may terminate this Agreement with immediate effect. We will inform you about your right to terminate the Agreement in the notification email. If you do not terminate your Agreement before the date the revised Terms become effective, your continued access to or use of the Airbnb Platform will constitute acceptance of the revised Terms.
Every host and traveler agree to Airbnb’s general terms of service when they sign up. Those terms also address refunds. Paragraph 9.5 provides:
In certain circumstances, Airbnb may decide, in its sole discretion, that it is necessary to cancel a pending or confirmed booking and initiate corresponding refunds and payouts. This may be for reasons set forth in Airbnb’s Extenuating Circumstances Policy or (i) where airbnb believes in good faith, while taking the legitimate interests of both parties into account, this is necessary to avoid significant harm to Airbnb, other Members, third parties or property, or (ii) for any of the reasons set out in these Terms.
It is unclear what Airbnb did to decide to refund guests. However, hosts will be entitled to argue that:
The second contingency is the one Airbnb would likely argue. Putting aside the fact that Airbnb arguably did not include pandemic in its list of exceptional circumstances, travel was only limited in a few states at the time of the refund. Certainly, moving forward, it is unclear how travel will be restricted, and if guests will still be able to travel of car or plane to their destinations. The clause could also be considered illusory or unenforceable for other reasons if argued broadly by Airbnb. What is a mystery is why Airbnb would go through the trouble of providing detailed reasons for refunds under its various policies, including the extenuating circumstances policy, if it indeed at the same time to be able to refund whenever it wanted. It is likely Airbnb already believes that a broad interpretation of paragraph 9 would be unenforceable .
While our lawyers are still analyzing this matter, we are unaware of any notice given to Airbnb hosts or guests concerning its revised language for what would constitute extenuating circumstances. Here is what the Airbnb terms of services say as of this post date. We are still trying to determine what the language was prior to covid-19.
If your are a host who had guests refunded who had previously booked stays on the platform with a check-in between March 14th and May 31st under the company’s “extenuating circumstances” policy, regardless of the host’s cancellation preference so long as the booking was made before March 14th, you may have legal rights to receive full, not part, compensation and damages for those refunds. If you are a property owner, property manager or Airbnb host, we can help you secure compensation for Airbnbs unilateral refund of guests arguably in violation of the terms of service. Contact us for more information about your rights, arbitration provisions, class action waiver and analysis of the relevant law.