5.1 Dwelling Property Policy Forms (DP-1, DP-2, DP-3) & Core Coverages

Core Focus: While Homeowners (HO) package policies require owner-occupancy and bundle property and personal liability coverages together, the Insurance Services Office (ISO) Dwelling Property Program provides specialized, flexible property protection for residential structures that cannot qualify for or do not require an HO policy. For a Louisiana claims adjuster, mastering the eligibility boundaries, the five distinct coverage parts (Coverages A through E), and the progressive peril structures of the DP-1, DP-2, and DP-3 forms is essential for handling landlord, tenant, and secondary home property claims.

Dwelling Property Program Eligibility

The Dwelling Property program is primarily utilized for rental properties, landlord risks, vacation homes, camp houses, and residential structures that fail to meet standard homeowners underwriting requirements (due to age, architectural complexity, or low replacement value).

Eligible Risks

• 1-to-4 Family Dwellings: Buildings designed primarily for residential occupancy housing no more than four separate family units.
• Roomers or Boarders: No more than 5 roomers or boarders.
• Occupancy Flexibility: The dwelling may be owner-occupied or tenant-occupied. Unlike Homeowners policies, owner-occupancy is not a condition of eligibility.
• Seasonal or Vacation Dwellings: Second homes, camp houses, fishing camps, and seasonal retreats.
• Dwellings Under Construction: Homes actively being built (eligible for Coverage A with construction materials).
• Mobile Homes: A mobile or manufactured home that is permanently located and anchored may be eligible for dwelling coverage under the insurer's rules and endorsements; many insurers use separate mobile home programs instead.
• Incidental Business Occupancies: Incidental low-exposure service operations conducted on premises—such as a doctor's professional office, private tutoring studio, music studio, or beauty parlor—may be permitted when they are incidental to the residential occupancy, subject to the insurer's eligibility rules.

Ineligible Risks

• Farms or agricultural properties (must be written on Farm forms).
• Commercial or mercantile properties (must be written on Commercial Property forms).
• Residential buildings housing 5 or more family units (e.g., commercial apartment complexes).

The Five Property Coverages (Coverages A through E)

Dwelling policies divide property coverage into five standardized coverage parts. Depending on the insured's selections on the Declarations page, a policy may insure only the structure, only contents, or a combination of structure, contents, and loss of use.

Coverage A — Dwelling

• Scope: Covers the residential dwelling described on the Declarations, including all structures attached directly to it (such as an attached garage, breezeway, carport, or attached outdoor deck).
• Service Property: Includes building equipment and outdoor equipment used to service the described location (e.g., central heating and cooling equipment, water pumps) if located on premises.
• Construction Materials: Covers building materials and supplies located on or adjacent to the premises intended for use in building, altering, or repairing the dwelling or other structures.
• Exclusions: Land, including the land on which the dwelling is situated, is strictly excluded.

Coverage B — Other Structures

• Scope: Covers detached buildings and structures set apart from the dwelling by a clear space (or connected solely by a fence, utility line, or exterior walkway). Examples include detached garages, storage sheds, gazebos, swimming pool cabanas, fences, and driveways.
• Limit of Insurance: The standard default limit is 10% of Coverage A.
• CRITICAL FORM DIFFERENCE:
  • Under DP-1: The 10% Other Structures limit is included within the overall Coverage A limit. It does not provide an additional amount of insurance. If a dwelling insured for $100,000 under DP-1 suffers a total loss of both the dwelling and a detached garage, the maximum payout for both combined is $100,000.
  • Under DP-2 and DP-3: The 10% Other Structures limit is an additional amount of insurance. For a $100,000 Coverage A policy, the insured has up to an additional $10,000 to cover detached structures over and above the $100,000 dwelling limit.
• Exclusions: Structures used for commercial, manufacturing, or farming purposes are excluded. However, renting a detached garage to a non-tenant is covered provided it is used solely as a private vehicle garage.

Coverage C — Personal Property

• Scope: Covers household personal property usual or incidental to the occupancy of a dwelling, owned or used by the insured or resident family members. It is an optional coverage requiring a specific limit and premium on the Declarations.
• Guest / Servant Property: At the insured's request, Coverage C may be extended to cover personal property of guests or domestic servants while located on the described location.
• Worldwide Off-Premises Extension: The insured may apply up to 10% of the Coverage C limit to cover personal property anywhere in the world. (In all DP forms, this worldwide extension is included within the Coverage C limit, not an additional amount of insurance).
• Property NOT Covered: Money, bank notes, bullion, coins, medals, deeds, securities, personal records, animals/birds/fish, motor vehicles (other than lawnmowers and mobility assist devices), aircraft, and watercraft (other than rowboats and canoes on premises).

Coverage D — Fair Rental Value

• Scope: Provides indirect / consequential loss protection. If a covered peril damages that portion of the dwelling rented to others (or held for rental), Coverage D pays the fair rental value lost by the landlord while the premises are uninhabitable, minus any operational expenses that do not continue (such as utility bills paid by the landlord).
• Limit of Insurance: Up to 20% of Coverage A.
• Form Allocation: In DP-1, Coverage D is included within Coverage A and is payable at a maximum rate of 1/12th of the limit per month. In DP-2 and DP-3, Coverage D is an additional amount of insurance and pays for the shortest time required to repair or replace the damaged premises.

Coverage E — Additional Living Expense

• Scope: Reimburses the necessary increase in living expenses incurred by the insured household (e.g., temporary hotel rooms, restaurant meals, emergency laundry, pet boarding) so the family can maintain its normal standard of living while the dwelling is uninhabitable due to a covered loss.
• CRITICAL AVAILABILITY RULE: Coverage E is automatically included only in DP-2 and DP-3. It is NOT provided in the base DP-1 Basic Form (though it can be added to DP-1 by an explicit Additional Living Expense endorsement).
• Combined Limit in DP-2 & DP-3: Under DP-2 and DP-3, Coverages D and E share a combined limit of up to 20% of Coverage A as an additional amount of insurance.

Comprehensive Comparison of Dwelling Forms: DP-1, DP-2 & DP-3

The three ISO dwelling forms provide progressively broader protection against physical perils and differing loss settlement standards:

1. DP-1 Basic Form Perils

• Base Inherent Perils: Fire, Lightning, and Internal Explosion (an explosion occurring inside the dwelling or other structure; excludes steam boilers).
• Optional Extended Coverage (EC): Adds the WHARVES perils (Windstorm, Hail, Aircraft, Riot/civil commotion, Vehicles, Volcanic eruption, Explosion, Smoke).
• Optional VMM: Vandalism & Malicious Mischief may be purchased if EC is endorsed.
• Loss Valuation: All covered building and personal property losses are paid strictly on an Actual Cash Value (ACV) basis.

2. DP-2 Broad Form Perils

The DP-2 Broad Form covers the DP-1 perils, the Extended Coverage perils and Vandalism or Malicious Mischief, plus seven broad perils:

1. Damage by Burglars: Damage to covered property caused by burglars breaking in or out. The theft itself is not covered, and the peril does not apply if the dwelling has been vacant for more than 60 consecutive days.
2. Falling Objects: Damage to the building's interior or its contents is covered only if the falling object first damages the roof or an exterior wall. Damage to outdoor equipment, awnings and fences, and to the object that falls, is not covered.
3. Weight of Ice, Snow or Sleet: Covers damage to a building or property inside it; awnings, fences, patios, pavements, swimming pools, foundations, retaining walls, bulkheads, piers, wharves and docks are excluded.
4. Accidental Discharge or Overflow of Water or Steam: From within a plumbing, heating, air conditioning or automatic fire protective sprinkler system, or a household appliance. Covers tearing out and replacing part of the building to repair the system, but not the system or appliance itself, and does not apply if the dwelling has been vacant for more than 60 consecutive days.
5. Sudden and Accidental Tearing Apart, Cracking, Burning or Bulging: Of a steam or hot water heating system, an air conditioning or automatic fire protective sprinkler system, or an appliance for heating water.
6. Freezing: Of a plumbing, heating, air conditioning or automatic fire protective sprinkler system or a household appliance, covered only if the insured used reasonable care to maintain heat or shut off the water supply and drain the system.
7. Sudden and Accidental Damage from Artificially Generated Electrical Current: Tubes, transistors, electronic components and circuitry that are part of appliances, fixtures, computers and similar equipment are not covered.

Other coverages, not perils: DP-2 and DP-3 also include collapse from specified causes, such as hidden decay, hidden insect or vermin damage, or the weight of contents, equipment, people or rain on a roof, and breakage of glass or safety glazing material, as other coverages.

3. DP-3 Special Form (Open Perils)

The DP-3 Special Form represents the pinnacle of dwelling coverage:

• Coverages A & B are Open Perils: Every direct physical loss to the dwelling and other structures is covered unless specifically excluded in the policy. The burden of proof rests squarely on the insurer to prove that an excluded cause of loss caused the damage.
• Coverage C is Named Perils: Personal property is not covered on an open-perils basis. Instead, Coverage C is covered against the exact same named perils as the DP-2 Broad Form.
• Theft Distinction: Theft of personal property remains excluded under base DP-3; however, unlike DP-2, physical damage from theft of building components (such as copper piping ripped out of the walls) is covered on Coverages A and B under DP-3 open perils, subject to vacancy exclusions.