This was a multi unit property. No way the lender/mortgage company would allow a policy that didn’t cover rental use.
Policies can cover long-term rental but forbid/exempt riskier AirBnB-style short-term ones.
It's less clear that this is legally a multi-unit building (as opposed to multiple single-units). If I own half a duplex, a third of a triplex, or a townhouse, I can insure the unit I live in on a residential policy. Surely the owner of a townhouse/rowhouse doesn't need to carry insurance on their neighboring unit.