1.4 Policy Structure: Declarations, Insuring Agreement, Conditions, Exclusions

The DICE Framework

Almost every standard P&C policy - ISO Homeowners (HO-3), Dwelling (DP-3), Personal Auto (PAP), Commercial Property, and CGL alike - is organized into four parts. Memorize the acronym DICE:

Declarations

The Declarations ("Dec") page is the personalized front page. It identifies the named insured, the property or risk, the policy period (effective and expiration dates and times), each coverage limit, the deductible, and the forms and endorsements attached. When the Dec page conflicts with the pre-printed form, the more specific Dec entry controls.

The Insuring Agreement and Coverage Triggers

The insuring agreement is the insurer's promise to pay and defines the scope of covered causes. Two trigger structures dominate:

• Named-peril (specified-peril) form - covers only the perils explicitly listed (for example, the DP-1 Basic Form covers fire, lightning, and internal explosion, plus optional Extended Coverage perils). The insured carries the burden of proving the loss arose from a listed peril.
• Open-peril (all-risk / special) form - covers all causes of loss except those specifically excluded (for example, HO-3 Coverage A dwelling and the Commercial Property Special Causes of Loss form, CP 10 30). The insurer carries the burden of proving an exclusion applies.

Exam key: open-peril coverage is broader and shifts the burden of proof to the insurer. "All-risk" never means "everything" - it means "everything not excluded."

Exclusions and Why They Exist

Exclusions narrow coverage to keep premiums affordable and to remove uninsurable or duplicated exposures. Standard property exclusions include:

• Flood and surface water - covered only by the NFIP or a separate policy
• Earth movement (earthquake, landslide) - requires an endorsement or separate policy
• War, nuclear hazard, and government/civil action
• Wear and tear, deterioration, inherent vice - these are expected, not fortuitous
• Intentional acts by the insured
• Ordinance or law (extra cost to rebuild to current code) - added back by endorsement

Trap: the anti-concurrent causation clause states that an excluded peril (such as flood) is excluded even when it combines with a covered peril (such as wind) - so a hurricane that brings both wind and storm surge can leave the surge portion uncovered.

Conditions, Endorsements, and Limits

The conditions spell out the duties and rules: the insured's duties after loss (prompt notice, protect property from further damage, submit a proof of loss, cooperate), cancellation and nonrenewal rights, the loss-settlement basis (ACV or replacement cost), the coinsurance clause, subrogation, and other-insurance sharing. The deductible is the insured's retained first dollars and also lives here or on the Dec page.

Endorsements (riders) amend the base policy to add, delete, or modify coverage - for example, a Scheduled Personal Property endorsement insuring a $30,000 engagement ring above the standard sublimit, or an Earthquake endorsement adding back an excluded peril. When an endorsement conflicts with the base form, the endorsement controls because it is the more specific, later-attached term.

Worked limit example: an HO-3 with Coverage A (dwelling) of $300,000 typically sets Coverage B (other structures) at 10% = $30,000, Coverage C (personal property) at 50% = $150,000, and Coverage D (loss of use) at 30% = $90,000 - all derived from the Coverage A limit on the Dec page.

How the Parts Interact in a Claim

Adjusters read the parts in a deliberate order, and the exam expects you to follow the same logic. First confirm the insuring agreement grants coverage for this type of loss; next check the Declarations for the applicable limit and deductible; then scan the exclusions to see whether the cause is removed; finally apply the conditions (coinsurance, loss settlement, duties after loss) to compute the payment. A loss that passes the insuring agreement but is caught by an exclusion is denied; a loss that survives the exclusions is then valued under the conditions.

Definitions and the Order of Precedence

Most policies include a definitions section that gives ordinary words special meaning - "insured," "occurrence," "actual cash value," "residence premises." These defined terms (often in quotation marks or bold) override their everyday meaning, and misreading a defined term is a classic claim dispute. When provisions conflict, courts apply an order of precedence: endorsements beat the form, the more specific beats the more general, and handwritten or typed entries beat pre-printed language. Knowing this hierarchy lets you resolve apparent contradictions between a Dec page entry and the base form.

Common Sublimits and Special Limits

Within Coverage C, homeowners forms impose special limits of liability on theft-prone or high-value categories - for example, modest sublimits on money, securities, jewelry/watches/furs theft, firearms theft, and silverware theft. Exceeding these sublimits requires a scheduled personal property endorsement, which not only raises the limit but typically converts the coverage to open-peril and removes the deductible. Recognizing that the base form covers these items only up to a small sublimit - and that the fix is scheduling - is one of the most frequently tested practical points in the structure chapter.