4.4 ISO Dwelling Policy Forms: DP-1, DP-2 and DP-3
Key Takeaways
- The ISO dwelling program is designed for non-owner-occupied rental dwellings, seasonal and vacation homes, and dwellings that do not qualify for a homeowners policy.
- The DP-1 basic form settles both building and personal property on an actual cash value basis and covers only fire, lightning and internal explosion unless extended coverage and vandalism endorsements are added.
- The DP-2 broad form and DP-3 special form provide replacement cost on buildings when the 80 percent insurance-to-value requirement is met; the DP-1 never provides replacement cost.
- The DP-3 insures the dwelling and other structures on an open-peril basis while leaving personal property on the broad named-peril list, mirroring the HO-3 structure.
Dwelling Property Policy Forms
Quick Answer: The ISO Dwelling Property program covers residential properties that do not qualify for a standard Homeowners policy, such as landlord-owned rental properties, seasonal vacation homes, or properties with non-standard ownership structures. Unlike Homeowners contracts, Dwelling policies provide no automatic personal liability and no automatic theft coverage for personal property. An adjuster handling a DP claim must examine the declarations to verify whether endorsement DL 24 01 (Personal Liability) or a theft endorsement was added.
While the Homeowners program requires owner-occupancy for its primary forms, the Dwelling Property program offers flexible property coverage across single-family, duplex, triplex, and four-unit residential structures. Florida claims adjusters frequently handle DP policies on tenant-occupied rental dwellings, short-term vacation properties, and older coastal properties.
Eligibility & Scope of the Dwelling Program
The Dwelling program is tailored for residences that cannot meet the underwriting or occupancy guidelines of the Homeowners package:
- Permitted Structures: Dwellings with up to four family units and up to five roomers or boarders.
- Occupancy Status: May be tenant-occupied (landlord rental property) or owner-occupied.
- Special Dwellings: Permanently situated manufactured mobile homes (eligible under the DP-1 form) and dwellings under active construction.
- Ineligible Properties: Commercial properties, business buildings, or farms. However, incidental service occupancies (such as a barber shop, music studio, or professional office with no more than two employees) are permitted if they provide services rather than primary product sales.
The Three ISO Dwelling Policy Forms
The Dwelling program consists of three distinct forms that progress in peril breadth and valuation generosity.
1. DP-1 (Basic Form — DP 00 01)
- Peril Scope: Named perils only. The base unendorsed policy covers only three perils:
- Fire
- Lightning
- Internal Explosion (an explosion occurring inside the dwelling or a structure containing covered personal property, such as a furnace explosion).
- Extended Coverage (EC) Endorsement: By paying an additional premium, the insured can add the WC SHAVVER perils:
- Windstorm
- Civil Commotion
- Smoke (sudden and accidental, excluding smoke from fireplaces or industrial operations)
- Hail
- Aircraft
- Vehicles (damage caused by running vehicles, excluding damage caused by vehicles owned or operated by the insured or a tenant)
- Volcanic Eruption
- Explosion (external explosions)
- Riot
- Vandalism & Malicious Mischief (V&MM): May be added if EC perils are purchased. V&MM coverage is suspended if the dwelling has been vacant for more than 60 consecutive days prior to the loss.
- Valuation Basis: Both dwelling (Coverage A) and contents (Coverage C) are strictly settled at Actual Cash Value (ACV) (replacement cost minus depreciation).
2. DP-2 (Broad Form — DP 00 02)
- Peril Scope: Named perils covering all DP-1 perils, the EC perils, V&MM, plus seven Broad Named Perils:
- Falling objects (exterior roof or walls must be damaged first before interior damage is covered).
- Weight of ice, snow, or sleet causing damage to the structure or contents inside.
- Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire sprinkler system (excludes sump pump overflow or sewer backup).
- Sudden and accidental tearing apart, cracking, burning, or bulging of steam or hot water heating systems or water heaters.
- Freezing of plumbing, heating, or AC systems (only if the insured used reasonable care to maintain heat or shut off and drained the water supply).
- Sudden and accidental damage from artificially generated electrical current (excluding tubes, transistors, and electronic components).
- Collapse: Additional coverage for direct physical loss involving collapse of a building or part of a building caused by specified perils, hidden decay, hidden insect/vermin damage, or weight of people/contents.
- Valuation Basis: Replacement Cost on Coverages A and B (if the 80% coinsurance requirement is satisfied); ACV on Coverage C.
3. DP-3 (Special Form — DP 00 03)
- Peril Scope:
- Coverage A (Dwelling) & Coverage B (Other Structures): Open perils ("all-risk"). Covers all direct physical damage except perils specifically excluded.
- Coverage C (Personal Property): Broad named perils identical to the perils listed in the DP-2 form.
- Valuation Basis: Replacement Cost on Coverages A and B (subject to the 80% coinsurance rule); ACV on Coverage C.
Comparison Table: ISO Dwelling Forms (DP-1, DP-2, DP-3)
| Feature | DP-1 Basic Form | DP-2 Broad Form | DP-3 Special Form |
|---|---|---|---|
| Dwelling (Coverage A) Perils | Fire, Lightning, Internal Explosion (+ EC & V&MM) | Broad Named Perils (16 perils + collapse) | Open Perils ("All-Risk") |
| Personal Property (Coverage C) | Fire, Lightning, Internal Explosion (+ EC & V&MM) | Broad Named Perils (16 perils) | Broad Named Perils (16 perils) |
| Building Loss Settlement | Actual Cash Value (ACV) | Replacement Cost (80% Coinsurance) | Replacement Cost (80% Coinsurance) |
| Coverage B (Other Structures) | 10% of A (reduces Coverage A limit) | 10% of A (additional amount of insurance) | 10% of A (additional amount of insurance) |
| Coverage D (Fair Rental Value) | 20% of A (reduces Coverage A limit) | 20% of A (additional amount of insurance) | 20% of A (additional amount of insurance) |
| Coverage E (Additional Living Expense) | Not included (available by endorsement) | 10% of A (additional amount of insurance) | 10% of A (additional amount of insurance) |
| Theft of Personal Property | Not covered (requires endorsement) | Not covered (requires endorsement) | Not covered (requires endorsement) |
| Personal Liability | Not covered (requires DL 24 01) | Not covered (requires DL 24 01) | Not covered (requires DL 24 01) |
A landlord insures a tenant-occupied single-family residential rental home under an unendorsed ISO DP-1 policy with a $150,000 Coverage A limit. A severe fire destroys the dwelling ($150,000 damage), a detached tool shed ($12,000 damage), and the landlord loses $6,000 in fair rental value. How much will the DP-1 policy pay in total for this occurrence?
An adjuster is assigned to investigate a bodily injury claim where a delivery courier slipped and suffered severe injuries on the icy front steps of a rental property insured under a standard, unendorsed DP-3 Special Form. What will the adjuster conclude regarding liability coverage under the policy?