2.1 Causes of Loss / Named-Peril vs. Open-Peril

What a "Cause of Loss" Means

In property insurance, a peril is the cause of a loss — fire, windstorm, theft, water damage, lightning. The structure of a policy is largely defined by which perils it covers and how it covers them. Exam questions constantly test whether you can distinguish the two coverage triggers used across ISO forms: named-peril (also called specified-peril) and open-peril (historically called "all-risk").

Understanding this split is the single most leveraged concept in the property portion. It determines who carries the burden of proof, how broad coverage is, and how exclusions operate.

Named-Peril Coverage

A named-peril form lists each covered cause of loss. If the peril is not listed, it is not covered. The classic ISO grouping uses the Basic, Broad, and Special Causes of Loss forms in commercial property (CP 10 10, CP 10 20, CP 10 30) and the parallel structure in the Dwelling and Homeowners programs.

Key burden-of-proof rule: under a named-peril form, the insured must prove the loss was caused by a covered peril. This is a frequently tested trap.

The Standard Peril Tiers

The Basic Form covers the foundational perils, the Broad Form adds several more, and the Special Form flips to open-peril. Memorize the progression — exams quiz the exact contents.

A mnemonic for the Basic perils helps: think of fire as the anchor and build outward. Note that theft is NOT a Basic or Broad peril — it is only picked up under the Special form (open-peril) or by endorsement. This is a classic miss.

Open-Peril ("All-Risk") Coverage

An open-peril form (the Special Form) covers all direct physical loss to covered property unless the cause is specifically excluded or limited. The word "all-risk" was retired by ISO because it overstated the breadth — there are always exclusions — but the term still appears on exams.

The burden of proof shifts to the insurer: once the insured shows direct physical loss occurred, the insurer must prove an exclusion applies to deny the claim. This reversed burden is the chief practical advantage of open-peril coverage and the reason it costs more.

Coverage Triggers and the "Direct Physical Loss" Requirement

Most property coverage requires direct physical loss or damage. Pure economic loss, loss of market value, or gradual deterioration without a sudden physical event generally is not a covered trigger. Watch for fact patterns where there is financial harm but no physical alteration to property — those are usually not covered.

Exclusions Shape Every Form

Exclusions exist on both named-peril and open-peril forms, but they do different work. On a named-peril form, exclusions are almost redundant — if a peril is not listed it is already uncovered. On an open-peril form, the exclusion list is the entire definition of scope: because everything is covered unless excluded, the exclusions are what the insurer relies on to deny a claim.

The standard property exclusions to memorize are flood and surface water, earth movement (earthquake), war, nuclear hazard, ordinance or law, and wear and tear / inherent vice. Several of these can be bought back by endorsement (earthquake, ordinance or law), and flood is written separately through the NFIP or a private flood policy.

Concurrent Causation and Anti-Concurrent Language

When a loss results from two perils acting together — one covered, one excluded — courts once forced coverage under the concurrent causation doctrine. Insurers responded with anti-concurrent causation language stating that an excluded peril is not covered even if a covered peril contributes to the loss in any sequence. This is heavily tested in flood/wind hurricane disputes, where wind (covered) and flood (excluded) combine.

Common Traps

• "All-risk" does not mean everything is covered — exclusions (flood, earth movement, wear and tear, war, nuclear) still apply.
• Burden of proof flips between named-peril (insured proves) and open-peril (insurer proves the exclusion).
• Theft sits only in open-peril coverage in the base commercial forms.
• Broad is not open. Broad Form is still named-peril; it merely adds perils to Basic.
• The Special Form excludes the same things even though it is open-peril — the exclusion list is what defines its scope.
• Anti-concurrent causation language denies coverage when an excluded peril combines with a covered one.

Basic, Broad, and Special — The ISO Causes-of-Loss Forms

Commercial property uses three named cause-of-loss forms whose hierarchy the exam tests. The Basic Form (CP 10 10) lists the fundamental perils: fire, lightning, explosion, windstorm/hail, smoke, aircraft/vehicles, riot/civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. The Broad Form (CP 10 20) adds falling objects, weight of ice/snow/sleet, water damage from plumbing, and a limited collapse grant. The Special Form (CP 10 30) flips to open-peril coverage — everything is covered except what is excluded — and is the broadest, shifting the burden of proof to the insurer.

A reliable item gives a peril (say, weight of snow) and asks the narrowest form that covers it; the answer is Broad, not Basic.