4.3 Section I Perils Insured Against and Exclusions

Perils Insured Against

The Perils Insured Against section defines the covered causes of loss. How it reads depends on the form:

• HO-2 applies a named-peril broad form list to both dwelling and contents.
• HO-3 applies open peril to the dwelling (Coverage A/B) and the same broad-form named-peril list to personal property (Coverage C).
• HO-5 applies open peril to all property.

The Broad-Form Named Perils

The broad-form list, tested heavily, includes:

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Aircraft and vehicles
• Smoke
• Vandalism or malicious mischief
• Theft
• Falling objects
• Weight of ice, snow, or sleet
• Volcanic eruption
• Accidental discharge or overflow of water/steam
• Sudden tearing/cracking/burning of a heating or AC system
• Freezing of plumbing
• Sudden artificial electrical-current damage

Note: gradual or repeated leakage (a slow plumbing drip) is not the sudden discharge peril and is excluded.

Section I Exclusions

Eight exclusions apply to all Section I coverage. Memorize them:

1. Ordinance or Law - extra cost to rebuild to current building codes.
2. Earth Movement - earthquake, landslide, sinkhole (but ensuing fire is covered).
3. Water Damage - flood, surface water, sewer/drain backup, subsurface water.
4. Power Failure occurring off the residence premises.
5. Neglect - failure to protect property after a loss.
6. War, including undeclared war and warlike acts.
7. Nuclear Hazard - reaction, radiation, contamination.
8. Intentional Loss by an insured.

Earthquake and Flood

The two most-tested exclusions are earthquake and flood:

• Earthquake (part of Earth Movement) is excluded but can be bought back with an Earthquake endorsement.
• Flood (rising surface water) is excluded entirely; it is covered only through a separate National Flood Insurance Program (NFIP) policy or a private flood policy.

A scenario where 'a storm caused water to rise and enter through the front door' is flood (excluded). Water entering through a wind-torn roof is wind (covered).

Sewer or drain backup is part of the water exclusion and is bought back with a Water Backup and Sump Overflow endorsement, typically with its own sublimit (for example $5,000). Sinkhole collapse falls under earth movement in many states and may require a separate add-back. Always match the exact mechanism in the fact pattern to the right exclusion and the right endorsement that restores it.

Anti-Concurrent Causation

The exclusions open with anti-concurrent causation language: a loss is excluded if an excluded peril contributes to it, regardless of any other cause or event contributing concurrently or in any sequence.

Example: a hurricane brings wind (covered) and storm surge flooding (excluded). If surge contributes to the loss, the anti-concurrent clause lets the insurer deny the flood-related portion even though wind also acted. This wording was central to post-hurricane coverage litigation.

Ensuing Loss

Many exclusions contain an ensuing loss (or 'ensuing fire') exception. If an excluded peril leads to a covered peril, the resulting damage may still be paid.

Classic example: an earthquake (excluded) ruptures a gas line and the resulting fire (covered) destroys the home. The shaking damage is excluded, but the fire damage is paid. Distinguish the excluded cause from the covered ensuing peril.

A related concept is doctrine of proximate cause in named-peril analysis: the policy responds when a covered peril is the efficient proximate cause that sets the chain of events in motion. Open-peril forms remove much of this debate for the dwelling because everything is covered unless an exclusion clearly applies, which is why HO-3 and HO-5 are easier for insureds to collect under than HO-2.

Form-Specific Peril Notes

Several peril rules vary by form and occupancy and are common exam fodder:

• Theft of property from a dwelling under construction is excluded until the insured moves in.
• Vandalism and malicious mischief are suspended once a dwelling has been vacant for more than 60 consecutive days; an ensuing covered loss may still apply.
• Freezing of plumbing is excluded if the insured failed to maintain heat or shut off and drain the system in an unoccupied home.
• Mold, fungus, and wet rot are limited (often to a small sublimit) and generally excluded as a maintenance issue rather than a sudden peril.

Reading the occupancy status and the maintenance facts in a scenario is often the key to the correct answer.

Open-peril versus named-peril burden of proof in homeowners

The HO-3 is the form to understand because it is split: the dwelling and other structures (A and B) are open-peril while personal property (C) is named-peril. That split decides who proves what. For a damaged roof (Coverage A), the insurer must prove an exclusion to deny; for damaged furniture (Coverage C), the insured must show the loss came from a listed peril. The HO-5 upgrades contents to open-peril as well. Reading which coverage a loss falls under tells you the burden of proof - a recurring multiple-choice hinge.

The big exclusions and the ensuing-loss exception

Homeowners forms exclude a consistent set of catastrophic and maintenance perils: flood, earthquake/earth movement, war, nuclear hazard, intentional loss, neglect, ordinance or law (beyond the built-in 10%), governmental action, and power failure originating off premises, plus wear-and-tear and gradual deterioration.

The tested nuance is the ensuing-loss exception: although faulty workmanship or a defect is excluded, if that defect causes a covered ensuing peril - say, defective wiring that starts a fire - the resulting fire damage is covered even though the defective wiring itself is not. Anti-concurrent-causation language still lets the insurer deny the flood/earthquake portion of a mixed loss.