Section I Perils Insured Against and Exclusions

Named-peril vs. open-peril

The single most tested Homeowners concept is the difference between named-peril and open-peril (all-risk) coverage, because it controls the burden of proof.

• Named-peril forms (HO-2 contents/dwelling; HO-3 and HO-5 contents) cover loss only if caused by a peril listed in the policy. The insured must prove the loss was caused by a listed peril.
• Open-peril / all-risk forms (HO-3 and HO-5 dwelling; HO-5 contents) cover all direct physical loss EXCEPT what is specifically excluded. The insurer must prove an exclusion applies to deny.

This shift in burden of proof is why open-peril is broader and costs more, and why exam questions phrase it as "who has to prove what."

The broad-form named perils

The HO-2 / Broad Form list (also the Coverage C list on HO-3) commonly includes these perils. A useful mnemonic groups them, but know the list:

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/steam from plumbing, HVAC, or appliance
13. Sudden and accidental tearing/cracking/burning/bulging of a heating or water system
14. Freezing of plumbing, HVAC, or appliance
15. Sudden and accidental damage from artificially generated electrical current
16. Volcanic eruption

Note that the first eight (fire through vandalism in some orderings) are the narrower Basic Form perils; HO-2 adds the rest.

Section I exclusions

Even open-peril HO-3/HO-5 forms exclude a standard set of causes. Memorize these - they are tested as "which is NOT covered":

Trap: the anti-concurrent causation language means if an excluded cause (flood) combines with a covered cause, the exclusion still applies to that loss. Also note mold, wear and tear, and pets/insects are excluded as gradual/maintenance losses, not sudden accidents.

Reading the perils basis off the form

A fast exam technique: once you know a form's name, you know its perils basis without memorizing each coverage line. The pattern repeats across the program. The Basic perils (HO-1, now historical) cover roughly the first 11 hazards; the Broad perils (HO-2, HO-4, HO-6) add water discharge, freezing, tearing/cracking of systems, and electrical surge; the Special / open-peril treatment (HO-3 dwelling, HO-5 throughout) covers everything not excluded.

Use this comparison to answer "which form covers this loss" questions:

Notice the open-peril advantage only shows up for unusual, unlisted accidental losses - that is exactly where the exam plants the distinction. A spilled-paint or dropped-item loss is denied on named-peril contents but paid on HO-5 because no exclusion removes it.

Section I Perils by Form

The peril basis varies by form and even within the HO-3:

The Section I Exclusions

The homeowners forms exclude a consistent catastrophe-and-maintenance set, and the exam expects them cold:

• Ordinance or law (code-upgrade costs - add endorsement)
• Earth movement (earthquake, landslide, sinkhole)
• Water damage (flood, surface water, sewer backup, subsurface water)
• Power failure (off-premises utility interruption)
• Neglect (failure to protect property after loss)
• War, nuclear hazard, intentional loss
• Governmental action (seizure, confiscation)

Anti-Concurrent Causation in HO Exclusions

Several exclusions carry the anti-concurrent-causation lead-in, defeating coverage even where a covered peril contributed. The water-damage exclusion is the most heavily tested: wind-driven rain entering through a wind-created opening is covered, but surface water/flood is excluded - and sewer or drain backup is excluded unless the Backup of Sewer and Drains endorsement is added.

Maintenance, Wear, and the "Open Peril" Carve-Outs

Even on the open-peril HO-3 dwelling coverage, the form excludes wear and tear, deterioration, mechanical breakdown, rust/mold, smog, settling, and damage by animals/insects/vermin - maintenance issues, not fortuitous losses. A frequent trap shows long-term hidden leak damage and asks whether the open-peril form responds; the answer is no, because the loss is gradual deterioration. The ensuing-loss exception still applies: if an excluded cause leads to a covered peril (a covered fire, water discharge, or glass breakage), the resulting damage is paid.