Here's a map showing where these rentals are allowed: Vacation Rentals Allowed MapHomestay Rental - Lastly, there is the option of a "Homestay Rental," but these are unrealistic for most investors.

or should I file a claim with my own landlord ./ homeowners insurance?

After everything was fixed and they listed the unit, apparently they claimed that I was not allowed to have any understanding of who would be renting my home due to potential bias and discrimination (this is the first time I have not been able to view applicants general profile (credit score/occupation(removing any identity markers)), but fine, I let them choose the tenant and so far there hasn't been any issues.

Having a deposit in hand guarantees being paid but suing in small claims court even if you win probably means you will get paid LESS than 50% of the time in most states.

You can usually just quit claim the property to an LLC - but you will want to consult your mortgage company and/or an attorney about this prior to doing it. 

Should I find an attorney that can Quit Claim??

Deal with enough section 8 tenants and you will find out it not as rosy as some podcasts or books claim them to be.

Better to be aware of it beforehand before being blindsided should you file a claim. 

While this rarely happens, it allows the banks the opportunity to call your loan, claiming you've breached the terms of the loan agreement.

You are fed unrealistic expectations, and told if you don’t succeed it’s your fault, because you’re being provided all the tools you need for success.