@StanHants Agree with all of the posts that state this was a really bad situation to agree to. However, I also think the HO’s took advantage and are abusing an exchange service. And now you’re in a bad spot and just trying to navigate through it best you can. It sounds stressful and miserable.
I don’t know that I agree with others that the dog is not covered by the THS policy or the HO’s property policy. They included the dog in their listing, so it could be seen as them taking temporary ownership. I’d suggest contacting THS Support ASAP, in a written form that you can keep copy of both the questions and responses. Include the health issues of the SIL dog that were not disclosed. I would also ask the HO about their property policy and if it covers the SIL dog for any damages to the home or individuals. Since you didn’t know the dog was pedigree and had health issues, which were not disclosed until the SIL dropped off, these are now major concerns.