Section I Perils Insured Against and Exclusions

Named Peril vs. Open Peril

Section I coverage is triggered one of two ways. Named-peril coverage (HO-2; Coverage C on HO-3) pays only if the cause of loss appears on the policy's list; the burden of proof is on the insured to show the loss came from a listed peril.

Open-peril coverage (Coverages A/B on HO-3; everything on HO-5) pays for any cause not excluded, so the burden shifts to the insurer to prove an exclusion applies. This burden-of-proof shift is a favorite exam concept and explains why open-peril coverage is more expensive: the insurer assumes the unknown.

Industry shorthand calls open-peril "all-risk," but no policy is truly all-risk — every open-peril form has an exclusions list that defines the boundary of coverage. Reading the exclusions, not the insuring agreement, tells you what an open-peril form actually covers.

The Broad-Form Named Perils

The broad list (used by HO-2 and for Coverage C on HO-3) contains these perils. Many candidates memorize them; the table groups them logically.

The basic perils (the first eleven, roughly fire through volcanic eruption) appear on HO-8; the broad perils add the water-and-utility group. Trap: flood, earth movement, and earthquake are NOT on the list — they are excluded perils requiring separate coverage.

The Section I Exclusions

Even on an open-peril HO-3 or HO-5, the following are excluded and tested heavily. The mnemonic many use is that these are the "catastrophic or maintenance" causes:

• Ordinance or law (enforcement of building codes during rebuild) — buy-back via HO 04 77 Ordinance or Law endorsement
• Earth movement — earthquake, landslide, sinkhole, mudflow; earthquake bought back via HO 04 54
• Water damage — flood, surface water, sewer/drain backup (backup endorsed via HO 04 95), water below the surface seeping through foundations
• Power failure occurring off the residence premises
• Neglect — failure of the insured to protect property after a loss
• War, nuclear hazard, and intentional loss by the insured
• Governmental action (seizure, destruction by order)

These eight exclusions are concurrent-causation exclusions: the loss is excluded even if a covered peril contributes. Trap: a hurricane drives ocean water (flood) into a home and wind tears off the roof. The wind/rain damage is covered; the storm-surge flooding is excluded — adjusters must apportion the loss, which is why coastal homeowners need a separate NFIP flood policy.

Special Limitations and Anti-Concurrent-Causation

The HO-3/HO-5 open-peril building coverage also carries internal exclusions even though the building is open-peril: wear and tear, deterioration, mechanical breakdown, mold/fungus/rot (except as ensuing from a covered water loss, often sublimited to $10,000), smog/rust/corrosion, settling/cracking/bulging of foundations, birds/vermin/rodents/insects, and damage from domestic animals.

Most ISO forms include an anti-concurrent-causation (ACC) clause: when an excluded cause (e.g., flood) and a covered cause combine to produce a loss, the entire loss is excluded to the extent the excluded peril contributed — regardless of sequence. This is why the storm-surge versus wind apportionment matters and why "the flood would have happened anyway" arguments fail for the insured.

Be ready for the ensuing-loss exception, which softens these exclusions. If an excluded cause leads to a covered peril, the resulting damage is covered. Example: faulty wiring (an excluded workmanship defect) causes a fire — the fire damage is paid even though the defective wiring itself is not. Distinguish ensuing loss (covered downstream peril) from anti-concurrent causation (simultaneous excluded peril), because exam questions deliberately blur the two.

The Perils and the Standard Exclusions

Under named-peril coverage (HO-2 contents, and contents on HO-3), the insured perils are a specific list remembered as the broad-form group: fire and lightning, windstorm and hail, explosion, riot and civil commotion, aircraft, vehicles, smoke, vandalism and malicious mischief, theft, falling objects, weight of ice/snow/sleet, accidental discharge of water or steam, sudden tearing/cracking/bulging of a heating or AC system, freezing of plumbing, and sudden artificial electrical damage. Open-peril coverage (HO-3 dwelling, HO-5 both) instead covers everything not excluded.

The eight standard Homeowners exclusions apply to both Section I coverage approaches and are heavily tested: ordinance or law, earth movement (earthquake, sinkhole, landslide), water damage (flood, surface water, sewer backup unless endorsed), power failure occurring off the premises, neglect, war, nuclear hazard, and intentional loss. Several reflect the same logic as commercial property: catastrophic correlated perils (flood, quake, war, nuclear) are excluded because they defeat the Law of Large Numbers, and ordinance-or-law and intentional loss are excluded to control cost and moral hazard.

The interaction of exclusions with ensuing-loss and anti-concurrent-causation language decides close cases. The anti-concurrent-causation clause excludes a loss when an excluded peril contributes in any sequence, while the ensuing-loss exception restores coverage for a covered peril that an excluded cause sets in motion. Many forms also add limited give-backs, such as a sublimit for mold ensuing from covered water damage or for sewer backup when endorsed.

Worked scenario: a hurricane drives both wind and storm-surge flooding into a home. Wind damage is a covered peril, but the flood is excluded and the anti-concurrent-causation clause bars the portion of damage the flood contributed even though wind also struck. The homeowner recovers for clearly wind-caused damage but must look to a separate NFIP flood policy for the surge. Apportioning a combined wind-and-flood loss is the signature exclusions question.

Key Takeaways

Named-peril Homeowners coverage lists the broad-form perils (fire, wind/hail, theft, water discharge, freezing, and the rest), while open-peril coverage covers all but the excluded. The eight standard exclusions are ordinance or law, earth movement, water/flood, off-premises power failure, neglect, war, nuclear hazard, and intentional loss. Anti-concurrent causation bars losses an excluded peril contributes to in any sequence, while ensuing loss restores coverage for a covered peril that an excluded cause triggers, such as fire from faulty wiring.