Emotionally devastating story, but it seems like there is an easy solution to this. Have AirBnb contract include an insurance policy (superseding the homeowners insurance) for the time of rental. Also, have Airbnb keep credit card info on hand and hold guest responsible for any damage. Pretty standard business practices.
I've had terrible experiences while travelling extensively and staying semi-permanently where landlords do anything they can to keep your deposit, especially when you don't speak the language so well. I'd not be comfortable having a stranger be able to claim I made some kind of damage, and it become some kind of paypal-like black-hole of unwarranted claims. Ultimately reading this, I feel so sorry for the host, as a random, rare victim of a dehumanizing crime. It could have happened on craigslist, or via a friend-of-a-friend. Not to say that AirBnB doesn't need to address this, but holding a large amount in escrow like a car rental deposit would be offputting to me (with car rentals there is clear evidence, and you do a full inspection beforehand, though I'm sure it's possible to get burned on this).
I would imagine that homeowners being terrified of having their homes trashed by guests would also cut into their revenue stream, and, if the "97% of airbnb guests are wonderful people" bit is true, the premiums should be fairly negligible.
At the very least, it should be an option for property owners to purchase.
Even if you do have homeowners / renters insurance, I wouldn't be surprised if most policies have exclusions for operating your home as a rental.
"But an insurance policy would further cut into their revenue stream."
If the value of the service is so low, and the risk so high, that it's essentially uninsurable, then perhaps that's a sign that it's a bad business model.
What about regular homeowner's insurance? Surely there can be policies that can cover this kind of thing which a host can obtain on their own. AirBnB doesn't have to muddy their business model with doing insurance, let the insurance people do this.
I think this case of unofficially renting out your house/apt is difficult to buy insurance for. Most homeowner's insurance policies explicitly exclude damages caused when renting your house. You need a separate landlord insurance to cover rental, but you typically can't buy landlord insurance unless your property is properly registered/licensed/inspected by your municipality as a rental property.
In many places the business facilitated by Airbnb is illegal. New York state, Chicago, and many other places have strict hotel laws that forbid these kinds of informal apartment rentals. It is extremely unlikely that any one can buy an insurance policy to cover an illegal transaction.
If you read the Airbnb TOS you'll see that they are well aware of this and are just hoping that naive customers don't read the whole thing.
I expect the original poster's losses will not be covered by home owner's insurance.
There is virtually zero chance that a standard homeowner's insurance policy is going to cover an AirBNB-style rental. Rental insurance might -- I'm sure there are policies made for this -- but most people aren't going to have that kind of coverage unless it's bundled in some way with AirBNB as a value-add.
Um, then the anti-socials can just get a temporary/secondary card with a $500 or $1000 limit. Damage here sounds like it goes over $10000, it's not like you can put that kind of holds on people's cards for every rental you arrange.
At the risk of it being slightly poor taste to go down this tangent:
Given how rare this type of thing is, AirBNB could have a great extra source of income by offering optional insurance for an extra fee (similar to car rentals).
