4.3 Section I Perils Insured Against and Exclusions

Perils Insured Against

Which perils trigger coverage depends on the form and the coverage. On HO-3, the dwelling and other structures are open peril (any cause not excluded), while personal property is covered only for a list of named perils.

The Broad Named-Peril List (16 perils)

Used for contents on HO-3 and throughout HO-2:

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 or steam
13. Sudden tearing apart, cracking, or burning of a heating/air-conditioning system
14. Freezing of plumbing, heating, or air conditioning
15. Sudden and accidental damage from artificially generated electrical current
16. Volcanic eruption

Note: Perils 10-16 (the "broad" perils) are what separate the HO-2 broad list from the older, narrower basic list.

Why Exclusions Exist

Exclusions fall into three buckets:

• Catastrophic / correlated perils that could bankrupt an insurer (flood, earthquake, war, nuclear).
• Maintenance problems the owner controls (wear and tear, mold, vermin).
• Exposures belonging on another policy (auto, business).

Structure vs. Contents — Same Loss, Different Trigger

Because HO-3 covers the structure open peril but contents named peril, one event can produce a split result. Suppose an unexplained electrical surge of unknown origin damages the home's wiring and also fries a television.

The wiring (part of Coverage A, open peril) is paid unless the insurer proves an exclusion. The television (Coverage C, named peril) is paid only if the loss matches a listed peril — here, sudden and accidental damage from artificially generated electrical current is on the list, so the TV is covered too.

Change the contents loss to something not on the list, and only the structure would be paid. Reading the form's two peril bases together is the skill the exam rewards.

Catastrophic Exclusions

Exam alert: Flood is the #1 tested exclusion. When a hurricane brings both wind (covered) and storm-surge flood (excluded), only the wind damage is paid.

Maintenance and Gradual-Loss Exclusions

The policy is not a maintenance contract:

Water Damage — The Covered / Excluded Split

Rule of thumb: Sudden and accidental internal water is covered; surface, ground, backup, or gradual water is excluded. The Water Backup endorsement buys back sewer/drain backup.

Anti-Concurrent Causation

When an excluded peril and a covered peril combine to cause one loss, the anti-concurrent causation language excludes the loss even if the covered peril contributed. A hurricane delivers wind (covered) and flood (excluded); the adjuster must separate the wind loss (paid) from the flood loss (denied), and inseparable damage may be denied entirely.

Ensuing Loss — The Exception Inside Exclusions

Many exclusions contain an ensuing loss (or resulting loss) exception. Even though a peril is excluded, the policy may still pay for a covered peril that results from it. Classic example: earthquake damage is excluded, but if the quake ruptures a gas line and a fire follows, the fire damage is generally covered, because fire is a separate covered peril.

Vacancy

If the dwelling is vacant more than 60 consecutive days before a loss, vandalism and glass breakage are excluded and certain other losses may be limited. The distinction between vacant (empty of both people and contents) and merely unoccupied (furnished but no one present) matters: a furnished vacation home is unoccupied, not vacant, so the 60-day vandalism rule may not bite.

How Exclusions Drive Endorsement Sales

Producers translate exclusions into recommendations, and the exam tests the matching:

Knowing the exclusion is only half the job; matching it to the correct fix is what the licensing exam and the real client expect.

Intentional Loss and Neglect

Two further property conditions function like exclusions. Intentional loss caused by or at the direction of an insured is never covered — you cannot collect for damage you deliberately cause. Neglect to use all reasonable means to save and preserve property at and after a loss bars recovery for the additional damage that neglect produces. Both reflect the principle that insurance restores fortuitous (accidental) losses, not losses the insured chose or allowed to worsen, which is why an open-peril form still will not pay a deliberately set fire or a soaked floor the owner left to rot.