4.3 Section I Perils Insured Against and Exclusions

Named Perils vs. Open Perils

Section I coverage is granted on one of two bases. A named-perils (specified-perils) form lists the covered causes of loss; the insured must prove the loss came from a listed peril. An open-perils (special/all-risk) form covers any cause of loss except those excluded; the insurer must prove an exclusion applies to deny a claim. This burden-of-proof flip is heavily tested: open perils is broader and shifts the proof burden to the company.

• HO-2: named (broad) perils on dwelling and contents.
• HO-3: open perils on the dwelling/other structures (Coverages A & B), named (broad) perils on personal property (Coverage C).
• HO-5: open perils on dwelling and personal property.
• HO-8: named (basic) perils only - a shorter list (~10-11 perils).

The Broad-Form Named Perils

The HO-2/HO-3 broad-form perils (which also govern Coverage C on the HO-3) are commonly listed as the "big 16," building on the basic-form perils:

Note that mysterious disappearance is covered only under open-perils contents (HO-5), not under broad-form Coverage C, and that vacancy beyond 60 days suspends vandalism, glass breakage, and water-overflow coverage.

Section I Exclusions

Even open-perils forms exclude certain causes. The standard Section I exclusions - tested as the things homeowners insurance never pays for - include:

• Ordinance or law (extra cost to rebuild to current codes, beyond the small Additional Coverage)
• Earth movement (earthquake, landslide, sinkhole) - needs a separate endorsement/policy
• Water damage - flood, surface water, sewer/drain backup, and below-ground seepage (flood requires the NFIP/private flood policy; sewer backup needs an endorsement)
• Power failure (off-premises)
• Neglect (failing to protect property after a loss)
• War
• Nuclear hazard
• Intentional loss (by an insured)
• Governmental action (seizure/destruction by order)

The anti-concurrent causation language means that if an excluded cause (e.g., flood) combines with a covered cause, the loss is still excluded. Flood and earthquake are the two most-tested 'always excluded - buy separate coverage' perils.

Worked Trap: Burden of Proof

A pipe inside the wall of an HO-3 home leaks slowly for months, rotting a wall (Coverage A). Because Coverage A is open perils, the insurer must find an exclusion. The policy excludes continuous or repeated seepage over weeks or months, so the gradual leak is denied - but a sudden burst pipe would be covered.

Now suppose the same water damages the homeowner's furniture (Coverage C). On the HO-3, Coverage C is named perils, and 'accidental discharge or overflow of water' is a listed broad-form peril - but it must be sudden and accidental, not gradual. The lesson: identify (1) which Coverage applies, (2) whether that Coverage is open or named, and (3) whether an exclusion or the sudden-vs-gradual line defeats the claim.

Theft, Vacancy, and Off-Premises Nuances

Several peril conditions narrow even a covered loss:

• Theft off the residence premises is restricted - property stolen from an unattended vehicle or a secondary residence may be limited or excluded under broad-form Coverage C, while open-perils HO-5 is broader.
• Vacancy: if a dwelling is vacant more than 60 consecutive days before a loss, vandalism, malicious mischief, glass breakage, and water/freezing losses are suspended (the insurer often reduces a remaining loss by an additional 15%).
• Freezing of plumbing is covered only if the insured used reasonable care to maintain heat or shut off and drain the system - a maintenance condition the exam tests as a coverage trap.

These conditions explain why a seemingly covered named peril can still be denied: the peril is on the list, but a policy condition (vacancy, neglect, lack of heat) defeats the claim. Distinguishing an excluded cause from a failed condition is a frequent question pattern.

Earthquake and Flood: The Two Big Gaps

Because earth movement and water/flood are excluded from every homeowners form, the producer must arrange separate coverage:

• Earthquake is added by an earthquake endorsement (or a standalone DIC policy). These typically use a percentage deductible (commonly 10-15% of the coverage limit) rather than a flat dollar deductible - a heavily tested distinction.
• Flood requires a National Flood Insurance Program (NFIP) policy or private flood policy. NFIP dwelling limits cap at $250,000 building / $100,000 contents for residential, and there is a standard 30-day waiting period before coverage takes effect (with limited exceptions).

The anti-concurrent causation clause means that when an excluded peril (flood, earth movement) acts together with a covered peril (e.g., wind) to cause one loss, the entire loss is excluded. This is why hurricane claims hinge on whether wind or storm-surge water caused the damage - the same dollar of loss is paid or denied based on causation, making it one of the most litigated and most-tested concepts in property insurance.