Most TOS agreements limit compensation to the amount that the customer pays. That's often not enough to compensate for the damage, but then again, hosts are not insurance companies, even though customers would like them to act as such.

As brianf said, local laws are very important, which is why one should have a good lawyer look at the terms of service that will be used, to give the right amount of protection and to put you in guard to the risks that the law forces you to take.