4.3 Section I Perils Insured Against and Exclusions

Section I coverage is defined by Perils Insured Against and then narrowed by Exclusions. Whether a form lists perils (named) or covers everything but the exclusions (open) decides who carries the burden of proof - covered in 4.1 and tested constantly.

The 16-Peril Broad Named List

HO-2 (on everything) and HO-3 (on contents) use this broad named-peril list. The insured must show the loss came from one of these:

1. Fire or lightning
2. Windstorm or hail
3. Explosion
4. Riot or civil commotion
5. Aircraft
6. Vehicles
7. Smoke
8. Vandalism or malicious mischief
9. Theft
10. Falling objects
11. Weight of ice, snow, or sleet
12. Accidental discharge or overflow of water or steam
13. Sudden and accidental tearing, cracking, burning, or bulging of a heating/AC/water-heating system
14. Freezing of plumbing, heating, AC, or appliances
15. Sudden and accidental damage from artificially generated electrical current
16. Volcanic eruption

Exam Tip: Notice what is not on the list - flood, earthquake, surface water, and ordinary wear and tear. Those are never named perils and are separately excluded.

Open Perils on HO-3 Dwelling and HO-5

The HO-3 dwelling (Coverages A and B) and all of HO-5 are written on open perils: covered unless excluded. The practical effect is the burden of proof shifts to the insurer. A mysterious crack in a wall with no identifiable cause is generally paid under open perils because the insurer cannot point to an exclusion; under named perils the same crack is denied because the insured cannot point to a listed peril.

Standard Section I Exclusions

The HO form excludes the following regardless of peril basis. The first group is the classic 'anti-concurrent causation' set, excluded even if a covered peril also contributes:

A second group applies primarily to the open-peril dwelling: wear and tear, deterioration, mechanical breakdown, mold/fungus/rot, smog/rust/corrosion, settling/cracking, birds/vermin/insects, and damage from domestic animals. These are 'maintenance' losses the policy was never designed to fund.

Flood and Earthquake - Always Separate

No HO form covers flood or earthquake. Even though wind/hail and water are the most frequent loss causes, correlated catastrophes are excluded because they would bankrupt a single insurer in one event.

• Flood - buy a National Flood Insurance Program (NFIP) policy or a private flood policy. Note the NFIP 30-day waiting period before coverage takes effect.
• Earthquake - add an earthquake endorsement or buy a Difference in Conditions (DIC) policy; earthquake deductibles are typically a percentage of the dwelling limit, not a flat dollar amount.

Anti-Concurrent Causation - the Advanced Trap

The water and earth-movement exclusions begin with language stating the loss is excluded 'regardless of any other cause or event contributing concurrently or in any sequence.' This anti-concurrent causation clause means that if an excluded cause (flood, earthquake) combines with a covered cause (wind) to produce one loss, the entire loss is excluded. In a hurricane where wind tears the roof and storm surge floods the first floor, the flood portion is denied even though wind is covered - the classic 'wind versus water' litigation that the exam loves to test.

Exam Trap: 'The home was damaged by both wind (covered) and flood (excluded).' Anti-concurrent causation excludes the flood-caused damage even though wind also contributed. Only the clearly wind-caused damage is paid.

Theft Peril Limitations and Off-Premises Theft

The theft peril carries its own carve-outs the exam likes to probe. Theft is not covered when committed by an insured, theft from a dwelling under construction (materials/supplies), or theft from any part of the residence rented to others. Theft of property away from the residence premises has further limits, and theft from a watercraft or trailer away from premises is restricted. Combine these with the Coverage C special sublimits (jewelry $1,500 by theft, silverware $2,500 by theft) and you have a layered set of theft rules to keep straight.

Water Damage - Covered Sudden Discharge vs. Excluded Flood

Distinguish the two water situations the exam contrasts. A sudden and accidental discharge of water from a plumbing, heating, or appliance system inside the dwelling is a covered named peril (peril 12). Surface water, flood, sewer backup, and groundwater seepage are excluded and require separate coverage. The resulting damage from a covered discharge is paid, but the cost to tear out and repair the system that caused the leak is itself excluded - only the access work to reach the leak is covered, not the defective pipe.

Why These Exclusions Exist

The exclusions are not arbitrary. Catastrophic, correlated, or maintenance losses are excluded because they are either uninsurable on a single policy (flood, earthquake, war, nuclear), non-fortuitous (wear and tear, intentional loss, neglect), or better priced in a specialty market (NFIP flood, DIC earthquake). Recognizing the reason behind an exclusion helps you predict the right answer when an unfamiliar fact pattern appears on the exam - if a loss is gradual, expected, or catastrophic, the HO form almost certainly excludes it.