4.3 Section I Perils Insured Against and Exclusions

Perils Insured Against

Section I describes which causes of loss are covered. The structure depends on the form: named-peril forms (HO-2, HO-4, HO-6, and the contents portion of HO-3) cover only the perils on a printed list, and the burden is on the insured to prove the loss came from a listed peril. Open-peril forms (the dwelling on HO-3/HO-5 and contents on HO-5) cover all direct physical loss unless the cause is excluded, shifting the burden to the insurer to prove an exclusion applies.

The Named-Peril Lists

The Basic perils (used in HO-8 and the DP-1) are the original named perils. The Broad perils (HO-2 and most named-peril HO coverage) add several more. Memorize what the Broad form adds beyond Basic:

A common exam trap: Theft and vandalism/malicious mischief are NOT in the basic-form perils list under the old DP-1, but they ARE included in homeowners broad coverage. Also note the vacancy rule: vandalism and glass breakage are excluded if the dwelling has been vacant for more than 60 consecutive days before the loss.

Section I Exclusions

Even the broadest open-peril form excludes a standard set of causes. These are tested verbatim—know that they apply regardless of form:

• Ordinance or law (enforcement of building codes) — limited buy-back at 10% of Cov A
• Earth movement (earthquake, landslide, sinkhole, mudflow) — needs separate endorsement/policy
• Water damage — flood, surface water, water backup through sewers/drains, water below the surface (groundwater)
• Power failure (off-premises)
• Neglect by the insured to protect property
• War
• Nuclear hazard
• Intentional loss by an insured
• Governmental action (seizure/destruction by order, except to stop a fire)

Flood vs. Sewer Backup — The Classic Trap

The water exclusion is the most heavily tested concept in P&C. Flood and surface water are always excluded from a homeowners policy; coverage comes only from the National Flood Insurance Program (NFIP) or a private flood policy. Water backup through sewers or drains is also excluded by default but can be added back by a relatively inexpensive Water Backup and Sump Overflow endorsement (commonly $5,000–$25,000 sublimit). Distinguish these on the exam:

• Rising river enters the home → flood, excluded, needs NFIP.
• Sewer line backs up into the basement → excluded by default, but endorsable.
• Wind blows rain through a roof the storm just opened → covered (windstorm peril).

Additionally, the policy contains anti-concurrent causation language: if an excluded cause (e.g., flood) contributes to a loss along with a covered cause, the loss is excluded even if a covered peril also contributed. This is why a storm that brings both wind (covered) and storm-surge flooding (excluded) often results in disputed claims.

The Earth Movement and Ordinance-or-Law Exclusions

Two other exclusions generate frequent exam questions. Earth movement bundles earthquake, landslide, mine subsidence, mudflow, and sinkhole collapse; it is excluded from all forms and added back only by an Earthquake endorsement or a separate difference-in-conditions policy. The ordinance or law exclusion bars the extra cost of rebuilding to current building codes—if a partially damaged house must be fully torn down and rebuilt to meet code, that incremental cost is excluded unless the insured buys back coverage, usually 10% of Coverage A.

Watch for a fact pattern where a 40% fire loss triggers a total demolition order: the fire damage is covered, but the code-upgrade and demolition costs need the ordinance-or-law buy-back.

Ensuing Loss and the Burden of Proof

Many exclusions carry an ensuing-loss exception: although the excluded cause itself is not covered, a resulting covered peril is. For example, faulty wiring (workmanship/maintenance is excluded) that causes a fire produces a covered fire loss—the fire is the ensuing covered peril. Tie this back to the proof rules: on a named-peril form the insured must affirmatively show the loss arose from a listed peril, so a basement-water claim fails unless the insured links it to a covered peril.

On an open-peril form the insurer must prove an exclusion such as flood or seepage applies, which is why slow leaks, wear-and-tear, and gradual seepage—excluded as maintenance—are denied even on the broad HO-3/HO-5 dwelling coverage.

Section I Perils and the Standard Exclusions

On HO-3, the dwelling and other structures (Coverage A and B) are insured on an open-peril basis, while personal property (Coverage C) is insured on a named-peril basis. HO-5 extends open-peril to contents as well. Named-peril contents coverage lists perils such as fire, windstorm, hail, explosion, riot, aircraft, vehicles, smoke, vandalism, theft, falling objects, weight of ice/snow, accidental discharge of water, freezing, and artificially generated electrical current.

The homeowners forms share standard exclusions:

Exam trap: The flood and earth-movement exclusions are concurrent-causation exclusions - if an excluded peril (flood) acts together with a covered peril, the loss is excluded. This "anti-concurrent-causation" wording is heavily litigated and frequently tested. Mold, wear and tear, settling, and infestation are also excluded as maintenance items. Theft is covered under homeowners (unlike the base dwelling form), subject to the special Coverage C sublimits.