4.4 Perils Insured Against and Universal Exclusions
Key Takeaways
Under named perils coverage, the policyholder carries the affirmative burden of proving that an enumerated peril caused the direct physical loss, whereas under open perils coverage, direct physical loss is presumed covered unless the insurer proves an exclusion applies.
The standard 16 broad named perils protect against kinetic impacts, thermal damage, forced entry, and internal building mechanical failures such as accidental water discharge and freezing.
Universal exclusions across all standard property contracts encompass flood/surface water, earth movement, off-premises power interruption, ordinance or law, war, nuclear hazard, intentional loss, and neglect.
The Anti-Concurrent Causation (ACC) lead-in clause expressly bars coverage when an excluded peril (such as flood or earth movement) contributes concurrently or sequentially with a covered peril to cause damage.
Public adjusters critically dissect multi-peril loss sequences to distinguish independent, ensuing covered perils from excluded baseline mechanisms.
Named Perils vs. Open Perils and the Burden of Proof
In property insurance claims, the determination of whether coverage exists rests entirely on the interaction between the insuring agreement and the exclusions section. The legal framework governing this analysis hinges on whether the coverage is structured on a named-perils or an open-perils basis.
The Legal Burden of Proof
The distinction between named perils and open perils represents far more than contract terminology; it dictates which party bears the legal burden of proof in an insurance claim or coverage dispute:
- Named Perils Burden (Policyholder): Under a named-perils policy or coverage part (e.g., DP-1, DP-2, HO-2, HO-4, HO-6, and Coverage C of HO-3), the insured policyholder bears the initial affirmative burden of proof. The policyholder must establish by a preponderance of the evidence that the direct physical damage was caused directly by one of the specific perils explicitly enumerated in the policy. If the cause of damage cannot be conclusively identified, or if it falls outside the listed definitions, the claim fails as a matter of law.
- Open Perils Burden (Insurer): Under an open-perils policy or coverage part (e.g., DP-3 Coverages A & B, HO-3 Coverages A & B, and HO-5 Coverages A, B, & C), the burden of proof shifts decisively to the insurer. The policyholder's sole obligation is to demonstrate that direct physical loss occurred to covered property during the policy period. Once physical damage is shown, coverage is legally presumed. The insurer bears the strict burden of proving that the cause of loss is excluded by clear, unambiguous language in the policy's exclusions section. If the insurer cannot satisfy this evidentiary burden, the claim must be paid.
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| THE BURDEN OF PROOF DUALITY |
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| NAMED PERILS (HO-2, HO-4, HO-6, HO-3 Cov C): |
| Policyholder Must Prove: Direct Physical Loss WAS Caused by a Listed |
| Peril (1 of 16). Insurer Has No Initial Burden. |
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| OPEN PERILS (HO-3 Cov A & B, HO-5 All Covs, DP-3 Cov A & B): |
| Policyholder Proves: Direct Physical Loss Occurred During Policy Period. |
| Insurer Must Prove: A Specific Exclusion Bars the Loss. |
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Important
Burden of Proof Advantage: On an open-perils form such as the HO-3 (Coverages A and B) or HO-5, the policyholder does not need to identify the exact cause of loss to establish a compensable claim. Establishing fortuitous physical damage triggers the insurer's duty to indemnify unless the insurer satisfies its affirmative burden of proving that an explicit exclusionary clause applies.
The Standard 16 Broad Named Perils
The 16 broad named perils utilized across ISO forms (DP-2, DP-3 Coverage C, HO-2, HO-3 Coverage C, HO-4, and HO-6) represent the benchmark peril schedule in residential property adjustment. Each peril incorporates precise technical boundaries and coverage qualifiers.
1. Fire or Lightning
Fire requires combustion accompanied by a visible flame or glow. The fire must be hostile—meaning it escaped from its intended containment (such as embers escaping a fireplace) or originated where no fire was intended. Lightning represents atmospheric electrical discharge causing thermal scorching, structural shattering, or electrical disruption.
2. Windstorm or Hail
Covers direct damage caused by wind force, tornadic action, gales, or hail stones. Interior rain damage condition: Damage to the interior of a building or personal property inside is covered only if the direct force of wind or hail first creates an opening in the exterior roof or walls through which rain, snow, sleet, sand, or dust enters.
3. Explosion
Covers internal and external explosions, including furnace blowouts, natural gas ignition, and chemical ruptures. Explicitly excludes bursting of water pipes, pressure relief valves, or steam boilers owned/operated by the insured.
4. Riot or Civil Commotion
Covers violent kinetic or incendiary destruction caused by assemblies of three or more persons acting in a disorderly manner, including strikes and civil unrest.
5. Aircraft
Covers direct physical contact with manned aircraft, self-propelled missiles, spacecraft, drones, or objects falling directly from them.
6. Vehicles
Covers physical impact from automobiles, trucks, or trailers. Under homeowners broad forms, damage caused by vehicles owned or operated by a resident of the premises is covered to the dwelling, but damage to driveways, walks, and fences caused by a resident vehicle is excluded.
7. Smoke
Covers sudden and accidental smoke damage, including puff-backs from faulty oil burners. Explicitly excludes smoke produced by agricultural smudging or industrial manufacturing operations.
8. Vandalism or Malicious Mischief (VMM)
Covers willful and malicious physical defacement or destruction of property. Vacancy Limitation: Coverage is completely suspended if the dwelling has been vacant for more than 60 consecutive days immediately preceding the loss.
9. Theft
Covers attempted theft, loss of property from a known place when it is likely stolen, and physical damage caused during burglary. Exclusions: Theft committed by an insured; theft in or to a dwelling under construction; theft from a watercraft; and off-premises theft of trailers, campers, or watercraft.
10. Falling Objects
Covers impact from falling trees, limbs, meteors, or debris. Condition: The falling object must first penetrate and breach the exterior roof or wall before damage to interior property or contents is covered.
11. Weight of Ice, Snow, or Sleet
Covers structural collapse, deflection, or damage caused by the sheer downward load of accumulated winter precipitation. Excludes damage to outdoor awnings, fences, pavements, patios, swimming pools, retaining walls, piers, wharves, or docks.
12. Accidental Discharge or Overflow of Water or Steam
Covers damage caused by the sudden and accidental escape of water or steam from within a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or from within a household appliance (e.g., washing machine hose burst, water heater failure).
- Exclusions: Does not cover the cost to repair or replace the failed appliance or plumbing component itself (only the resulting property damage). Strictly excludes damage caused by continuous or repeated seepage or leakage over a period of weeks, months, or years.
13. Sudden and Accidental Tearing Apart, Cracking, Burning, or Bulging
Covers catastrophic ruptures of steam, hot water, air conditioning, or sprinkler systems, or water heaters. Does not cover damage caused by normal wear and tear or gradual deterioration.
14. Freezing
Covers bursting of plumbing, heating, air conditioning, or automatic fire sprinkler systems, and household appliances caused by frozen water. Mandatory Insured Duty: The insured must exercise reasonable care to maintain heat in the building, or must completely drain all systems and shut off the domestic water supply if the dwelling is unoccupied.
15. Sudden and Accidental Damage from Artificially Generated Electrical Current
Covers sudden burnout or arcing of electrical wiring caused by power surges. Excludes damage to delicate electronic components, semiconductor chips, transistors, computers, and home entertainment devices.
16. Volcanic Eruption
Covers direct physical damage resulting from eruption shockwaves, airborne ash, dust, particulate matter, and lava flows. Does not cover earthquake shocks, tremors, or ground settlement associated with volcanic events.
Universal Exclusions in Residential Property Policies
Standard ISO property policies contain an established schedule of universal exclusions that apply across all Section I coverages. Even under open-perils forms (HO-3 Coverage A, HO-5), these exclusions operate as absolute coverage bars unless modified by endorsement.
1. Water Damage (The Multi-Part Exclusion)
Standard property forms exclude water damage arising from three major sources:
- Flood and Surface Water: Flood, surface water, waves, tidal water, storm surge, tsunamis, overflow of any body of water, or spray from any of these, whether driven by wind or not.
- Water Backup: Water or water-borne material that backs up through sewers or drains, or that overflows or is discharged from a sump, sump pump, or related equipment.
- Subsurface Water: Water below the surface of the ground that exerts pressure on, seeps, or leaks through a building, sidewalk, driveway, foundation, basement floor, or retaining wall.
2. Earth Movement
Excludes earthquake, landslide, mudslide, mudflow, mine subsidence, sinkhole collapse, earth sinking, rising, or shifting. However, if earth movement results in fire or explosion, the ensuing fire or explosion damage is covered.
3. Ordinance or Law
Excludes loss or increased costs caused by the enforcement of any building ordinance or code regulating the construction, repair, renovation, or demolition of a building, or requiring the tearing down of undamaged portions of a structure. (Standard HO-3 includes an Additional Coverage granting a basic 10% allowance, which can be increased by endorsement).
4. Off-Premises Power Failure
Excludes loss caused by the failure of electric, gas, water, or steam utility services if the failure originates away from the residence premises. However, if power failure results in a covered peril occurring on the premises (e.g., power interruption leads to arcing and an ensuing house fire), the ensuing loss is covered.
5. Neglect
Excludes damage caused directly or indirectly by the failure of the insured to use all reasonable means to save, preserve, and protect covered property at and after the time of a loss.
6. War and Nuclear Hazard
Bars coverage for declared or undeclared war, civil war, insurrection, rebellion, revolution, or radioactive contamination and nuclear radiation.
7. Intentional Loss
Excludes any loss arising out of an act committed by or at the direction of an insured with the intent to cause damage. Under modern ISO forms, intentional loss committed by any insured bars coverage for all insureds, including innocent co-insured spouses (subject to specific state statutory exceptions such as domestic abuse protections).
8. Maintenance and Wear & Tear Exclusions
Excludes wear and tear, marring, gradual deterioration, mechanical breakdown, latent defect, inherent vice, rust, smog, wet or dry rot, and damage caused by birds, rodents, insects, or domestic pets.
The Concurrent Causation Doctrine and Anti-Concurrent Causation (ACC) Clauses
One of the most litigated arenas in property insurance adjustment involves concurrent causation—situations where two or more distinct perils combine to cause property damage, where one peril is covered and one peril is excluded.
The Historical Doctrine of Concurrent Causation
Under common-law insurance jurisprudence (notably established in California cases such as State Farm v. Partridge, 1973, and Garvey v. State Farm, 1989), if a covered peril and an excluded peril combined concurrently or sequentially to produce a loss, courts frequently held that coverage existed if the covered peril was an "efficient proximate cause" or substantial factor in initiating the loss chain.
The Insurer Response: Anti-Concurrent Causation (ACC) Lead-In Language
To dismantle common-law concurrent causation and eliminate coverage whenever an excluded peril is involved, the insurance industry drafted the Anti-Concurrent Causation (ACC) lead-in clause. In ISO forms, this clause introduces the primary exclusions:
"We do not insure for such loss regardless of: (1) the cause of the excluded event; or (2) other causes of the loss; or (3) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss."
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| ANTI-CONCURRENT CAUSATION (ACC) IMPACT |
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| Scenario: Severe Derecho / Hurricane Event |
| 1. High Winds (Covered Peril) tear shingles off roof. |
| 2. Storm Surge / Flood (Excluded Peril) inundates first floor. |
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| ACC Application: For damage where wind and water act concurrently, or |
| where flood follows wind in an unbroken sequence to destroy the slab, |
| the ACC clause bars coverage for all flood-related damage. |
| Public Adjuster Role: Segregate structural wind damage (tarping, roof, |
| upper walls) from flood inundation, establishing distinct scopes. |
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Public Adjuster Strategic Analysis of ACC Clauses
- Identify ACC-Subject Exclusions: In standard ISO policies, the ACC lead-in clause applies strictly to specific enumerated exclusions: Ordinance or Law, Earth Movement, Water Damage, Power Failure, War, Nuclear Hazard, Neglect, and Intentional Loss. It does not apply to all policy exclusions.
- The Ensuing Loss Exception: Most ACC exclusions contain an explicit ensuing loss exception. For example, while Earth Movement is excluded under the ACC clause, "any ensuing loss by fire or explosion is covered." If an earthquake ruptures a natural gas line, triggering a massive explosion and structural fire, the adjuster must establish that the fire and explosion damage is 100% compensable despite the originating earthquake.
- Independent Proximate Cause Segregation: In catastrophic windstorm, hurricane, or heavy storm events, adjusters must obtain meteorological data, engineering causation reports, and chronological timelines to prove that wind forces caused independent physical openings prior to any water entry, preserving coverage for interior damage.
A severe thunderstorm tears siding off a home insured under an HO-3 Special Form policy, and four hours later, surface runoff from overloaded street gutters flows into the basement. How does the Anti-Concurrent Causation (ACC) clause affect this claim?
The windstorm damage to the siding is covered, but the basement water damage caused by surface runoff is excluded under the ACC clause.
The entire claim is completely excluded because an excluded peril (surface runoff) occurred during the same meteorological event.
Both the siding and the basement water damage are covered because wind was the initiating proximate cause of the storm event.
The entire loss is covered under the ensuing loss exception of the HO-3 policy.
During a severe winter cold snap, an insured leaves their home for a two-week vacation without maintaining heat in the dwelling or draining the plumbing pipes. The domestic pipes freeze and burst, discharging hundreds of gallons of water. How will the insurer evaluate the resulting water damage under a standard ISO homeowners form?
The loss is covered because accidental discharge of water is an open peril that cannot be excluded.
The loss is excluded because the freezing peril specifically excludes freezing of plumbing systems if the insured failed to maintain heat or drain the systems.
The loss is covered up to $1,500 under the emergency mitigation additional coverage.
The loss is covered only if the insured purchased a separate cold-weather endorsement.
An insured holding an HO-2 Broad Form policy files a claim for water damage caused when an underground aquifer seeped through basement foundation floor cracks. Who bears the burden of proof, and is the loss covered?
The insurer bears the burden of proof, and the loss is covered because aquifers are unlisted perils.
The policyholder bears no burden of proof, and the loss is covered under the Reasonable Repairs coverage.
The insurer bears the burden of proof, and the loss is covered under the collapse extension.
The policyholder bears the burden of proof to show that underground seepage is a covered named peril, and the loss is excluded under both named-perils rules and the subsurface water exclusion.
Sections you finish are checked off in the contents.