This is worth five minutes of your reading time.

If you have a liability claim at your vacation rental, the claimant is alleging negligence on your part and asserting that you are then liable for damages as a result. Liability claims typically arise as a result of property damage, human injury, or human death. Claims come in all shapes and sizes, and a myriad of circumstances. A lot of homeowners like to play lawyer and think they can avoid any liability by having an all-inclusive disclaimer and rental contract. That doesn't fly.

About four years ago, we had a "slip and fall" claim at a client's property. An elderly woman claimed to have slipped on some stairs climbing onto the porch, which caused her to fall and sustain a compound fracture of her leg. Both my management company and the homeowner were sued. I never felt that the claim against either of us was a valid one, but my opinion didn't make any difference: Someone was suing us for damage and seeking a significant amount of money, and both we and our homeowner client had to cooperate fully with the insurance company.

The insurance company zeroed in on the condition of the stairs and railings. Were any of the stairs rotting? No. Were the railings solid and secure? Yes. Were any of the stair treads uneven? No. There was, however, moss/algae growing on two of the stair treads which made them slippery when wet. And it rains a lot in the Smokies. Were we negligent not to notice the algae and remove it? The insurance company said yes. In the end, our insurance, combined with the homeowner's policy, paid out $240,000 to the claimant.

But a much greater problem could have arisen if the insurance company concluded that we were guilty of GROSS NEGLIGENCE. This is a biggie for STR investors: Depending on the state, gross negligence claims are eligible for not only actual damages but "punitive" or "exemplary" damages of up to four times actual damages. These damages are intended to punish the defendant for egregious or malicious behavior. Worst of all, insurance companies are often not required to pay in the event of gross negligence, leaving the homeowner to pay the damages.

So what is "Egregious or malicious behavior"? The bar is lower than you might think. Gross negligence means:

• An act taken without exercising even the most basic amount of care owed to others.
• A deliberate disregard for the safety or well-being of another person.
• A lack of care that demonstrates reckless disregard for the safety or lives of others.
• A conscious and voluntary disregard of the need to use reasonable care, likely to cause foreseeable grave injury or harm.

In other words, if there are potential hazards that exist at your property that you are ignoring, you could be considered grossly negligent. You could also be considered grossly negligent if you are failing to continuously inspect and monitor the safety of your property. Here is how to avoid GROSS NEGLIGENCE:

1. Inspect your property regularly, or have it inspected professionally, and document these with checklists and signature stamps.

2. Do not defer repairs if a potentially dangerous situation arises.

3. When you have a claim, the less said, the better. Help the claimant with an immediate need - finding medical care, etc. But otherwise, keep your mouth shut.

4. Contact your insurance company, connect them with the claimant, and get out of the way. Your actions/reactions may well serve to hurt your case.