Section I Perils Insured Against and Exclusions

Named Peril vs. Open Peril

The coverage trigger is the single biggest difference among homeowners forms. Two systems exist:

• Named-peril (specified-peril) coverage pays only if the loss is caused by a peril listed in the policy. The insured carries the burden of proof that a listed peril caused the loss.
• Open-peril (special / all-risk) coverage pays for any direct physical loss unless it is excluded. Here, the insurer carries the burden of proof that an exclusion applies.

This allocation of proof is heavily tested. On an HO-3, the dwelling (Coverages A and B) is open peril, so a denial requires the insurer to point to an exclusion; the contents (Coverage C) are named peril, so the insured must connect the loss to a listed cause.

The practical effect favors the insured under open peril. Mysterious disappearance, accidental spills, and one-off events with no obvious named cause are typically covered on an open-peril structure but not on named-peril contents, because the contents claim fails when the insured cannot tie the loss to a listed peril. This is exactly why the HO-5, which makes contents open peril too, is positioned as the premium product.

The Named Perils (Coverage C Basic List)

The HO-2 and the contents portion of the HO-3 are written against these broad-form named perils. A common mnemonic is "WE A FROST CCC VAVA" style lists, but learn the substance:

1. Fire or lightning
2. Windstorm or hail
3. Explosion
4. Riot or civil commotion
5. Aircraft
6. Vehicles
7. Smoke
8. Vandalism or malicious mischief
9. Theft
10. Falling objects
11. Weight of ice, snow, or sleet
12. Accidental discharge or overflow of water/steam
13. Sudden/accidental tearing apart, cracking, burning, or bulging of a heating/AC/sprinkler system
14. Freezing of plumbing/heating/AC
15. Sudden/accidental damage from artificially generated electrical current
16. Volcanic eruption

The first eight (through theft) are the basic perils of the older HO-1; perils 9-16 are the broad-form additions.

Section I Exclusions

Even open-peril forms exclude the same core list. Memorize these because they appear on nearly every state exam:

These are often called the excluded perils and several are subject to the anti-concurrent causation clause: if an excluded cause contributes in any sequence with a covered cause, the loss is still excluded.

Anti-concurrent causation is a frequent exam subject because it overrides the older proximate-cause analysis. Under the clause, the order of events does not matter: if mudslide (earth movement, excluded) combines with heavy rain in any sequence to damage the home, the loss is excluded even if a covered peril also contributed. This is why courts and exams treat hurricane wind-versus-surge disputes so carefully, and why insureds buy separate flood and earthquake coverage rather than relying on a covered companion peril.

Flood and Earthquake Are the Classic Traps

Wind and hail are the most frequent homeowners loss causes and ARE covered, but flood and earthquake are excluded regardless of frequency. A hurricane illustrates the split: wind-driven rain damage is covered, but storm-surge flooding is not. The insured needs an NFIP/private flood policy for surge and a DIC or earthquake endorsement (HO 04 54 / state CEA program) for ground shake.

Sewer/drain backup is excluded but can be added by the Water Back-Up endorsement (HO 04 95). Mold is generally excluded or sub-limited and may require a buy-back.

Learn the difference between the kinds of water. Accidental discharge or overflow from a plumbing system inside the dwelling (a burst supply line) is a covered named peril, while surface water, flood, and sewer backup are excluded. So a pipe that bursts and floods the kitchen is covered, but the same kitchen flooded by a backed-up municipal sewer is not, absent the HO 04 95 endorsement. Exam questions hinge on whether the water originated from a covered internal discharge or an excluded external/ground source.

Open-Peril vs. Named-Peril in the HO-3

The HO-3 covers the dwelling and other structures (Coverages A and B) on an open-peril ('all-risk') basis — every direct physical loss is covered unless excluded. Personal property (Coverage C), however, remains on a named-peril basis, covering only the 16 listed perils. The HO-5 upgrades Coverage C to open peril.

The named perils for Coverage C include: fire/lightning, windstorm/hail, explosion, riot/civil commotion, aircraft, vehicles, smoke, vandalism, theft, falling objects, weight of ice/snow/sleet, accidental discharge of water/steam, sudden tearing/cracking of a heating system, freezing, sudden electrical damage, and volcanic eruption. Trap: under an HO-3, a contents loss not on the named-peril list is not covered even though the same cause would be covered for the structure.

Major Section I Exclusions

Homeowners Section I excludes a recurring set of perils the exam tests directly:

• Flood / surface water (requires NFIP or a private flood policy);
• Earth movement (earthquake, landslide, sinkhole) — added by endorsement;
• Water damage from sewer/drain backup unless endorsed (HO 04 95);
• Ordinance or law (cost to rebuild to current code) — limited, expandable by endorsement;
• Power failure, neglect, war, nuclear hazard, intentional loss;
• Wear and tear, deterioration, mold, vermin, and mechanical breakdown (maintenance items).

Worked example: a hurricane drives storm surge into a home. Wind damage is covered, but the flood/surface-water exclusion bars the surge damage — recoverable only under a separate flood policy. Trap: wind-driven rain through a wind-created opening is covered; rising water/surge is excluded flood.