4.3 Section I Perils Insured Against and Exclusions
Key Takeaways
- Open-peril coverage (HO-3 dwelling, HO-5) covers all causes unless excluded; named-peril lists the covered causes.
- The broad-form named perils add falling objects, weight of ice/snow, freezing, and accidental discharge to the basic set.
- Section I excludes earth movement, flood (water damage), neglect, war, nuclear hazard, ordinance/law, and intentional loss.
- The anti-concurrent causation clause denies coverage when an excluded cause contributes to the loss in any sequence.
- Endorsements buy back some excluded perils: flood (NFIP/private), earthquake, water/sewer backup, and ordinance or law.
Open peril vs. named peril
The Perils Insured Against section defines what causes of loss are covered.
- Open peril (HO-3 dwelling/other structures, HO-5 throughout): covers direct physical loss from any cause unless excluded. The burden falls on the insurer to prove an exclusion.
- Named peril (HO-2, HO-4, HO-6, HO-3 contents): covers only the listed causes. The insured must show the loss arose from a named peril.
Because open peril shifts the burden of proof to the insurer and covers unanticipated causes, it is broader and costs more.
The named perils (basic and broad)
The Basic Form perils (the HO-8 / DP-1 set) are often remembered by the mnemonic WCSHAVVER:
- Windstorm/hail, Civil commotion/riot, Smoke, Hail (with W), Aircraft, Vehicles, Volcanic eruption, Explosion, Riot, plus Fire/Lightning.
The Broad Form (HO-2, HO-3 contents) adds:
- Falling objects;
- Weight of ice, snow, or sleet;
- Accidental discharge or overflow of water/steam;
- Sudden/accidental tearing apart of a heating/AC system;
- Freezing of plumbing;
- Sudden/accidental damage from artificially generated electrical current.
Section I exclusions
These exclusions apply even to open-peril forms. The classic list:
| Exclusion | Notes / buy-back |
|---|---|
| Ordinance or law | Cost to comply with building codes; add by endorsement |
| Earth movement | Earthquake, sinkhole, landslide; add earthquake endorsement |
| Water damage | Flood, surface water, sewer backup; NFIP flood + backup endorsement |
| Power failure (off premises) | Loss starting away from the premises |
| Neglect | Failure to protect property after a loss |
| War, Nuclear hazard | Uninsurable catastrophic causes |
| Intentional loss | Acts by an insured to cause damage |
| Governmental action | Seizure/destruction by authority |
Anti-concurrent causation
The exclusions are introduced by an anti-concurrent causation (ACC) clause: the insurer will not pay for an excluded loss "regardless of any other cause or event contributing concurrently or in any sequence to the loss."
This matters in catastrophes. Example: a hurricane brings both wind (covered) and storm surge / flood (excluded). Under ACC, if flooding contributed to the destruction of a wall, that flood-related damage is excluded even though wind also played a role. Adjusters must separate wind damage (paid) from flood damage (not paid, needs NFIP).
A homeowner with an HO-3 (no flood policy) suffers damage when a nearby river overflows and floods the basement during a rainstorm. The HO-3 policy will most likely:
Buying back excluded perils
Several excluded causes can be restored through endorsements or separate policies:
- Flood — National Flood Insurance Program (NFIP) or private flood; standalone, not an HO endorsement.
- Earthquake — earthquake endorsement, usually with a percentage deductible.
- Water/sewer backup — backup of sewers and drains endorsement (a common, low-limit add-on).
- Ordinance or law — increases the policy's small built-in percentage to cover code-upgrade costs.
Exam trap: candidates often assume open-peril forms "cover everything." Open peril still defers to the named exclusions; the breadth difference is only in unlisted causes, not excluded ones.
Theft peril and its conditions
Theft is a named peril on broad-form contents and is included under open-peril forms, but it carries specific limitations the exam probes.
Theft coverage does not apply to loss:
- Committed by an insured;
- In or from a dwelling under construction (no theft of materials before occupancy);
- From a part of the residence rented by the insured to someone other than another insured;
- Of property at any other residence owned, rented, or occupied by an insured, unless the insured is temporarily living there (covers a student at school).
This is why a building site burglary or a tool theft from a rented-out room is denied: the theft peril is written around occupancy and intent.
Earth movement vs. accidental water - drawing the line
Students confuse two excluded events with two covered ones. Keep these pairs straight:
| Event | Covered? | Why |
|---|---|---|
| Earthquake cracks foundation | No | Earth movement exclusion |
| Pipe bursts, floods kitchen | Yes (broad) | Accidental discharge peril |
| River overflows into basement | No | Flood/surface water exclusion |
| Sudden tearing apart of AC system | Yes (broad) | Named broad peril |
| Slow, constant seepage over weeks | No | Wear, neglect, and "continuous/repeated" exclusion |
| Weight of snow collapses roof | Yes (broad) | Weight of ice/snow peril |
The operative distinction is sudden and accidental (covered) versus gradual, earth-based, or surface-water causes (excluded). Adjusters anchor most disputes to this line.
Exclusions that surprise insureds
Beyond the catastrophic list, several maintenance-type exclusions routinely cause denied claims and appear on exams:
- Wear and tear, deterioration, inherent vice — the policy is not a maintenance contract; a worn-out water heater is not a covered cause.
- Mold, fungus, and wet rot — usually excluded except when it results directly from a covered water peril, and then sublimited.
- Birds, vermin, rodents, insects — termite and rodent damage is excluded as preventable infestation.
- Settling, cracking, shrinking, bulging of foundations, walls, or pavements.
- Pollution and smog/rust loss.
The theme is insurability: the program covers fortuitous (accidental, unexpected) loss, not the predictable cost of owning and maintaining a home. Linking each exclusion back to fortuity helps you answer scenario questions quickly.