$5 seems like way too low of a fee for a dress worth > $100 to prevent potential damage. That's going to be less than the cost of the drink that I spilled on it.
Definitely, I think it's still too early to know for sure. Interestingly we only had one incident out of the 300 or so rentals in our first semester. The damage wasn't permanent so we just paid to have the dress dry cleaned. Our policy regarding cleaning is "use good judgement." Because it's peer to peer, there seems to be social pressure; you're much less likely to ruin a dress after you've met the owner in person. And on the flip side, owners won't want to hand over a dress that isn't in good, rentable condition