4.3 Section I Perils Insured Against and Exclusions

Named Perils vs. Open Perils — The Core Distinction

Whether a loss is paid turns first on whether the form is named-peril or open-peril for the property involved. On a named-peril form (HO-2 dwelling and contents; HO-3/HO-5 contents; HO-4/HO-6 contents), the loss must arise from a listed peril and the insured proves causation. On an open-peril form (HO-3/HO-5 dwelling; HO-5 contents), all direct physical loss is covered unless excluded, and the insurer must prove an exclusion. This burden-of-proof shift is the single most important practical difference and is heavily tested.

The Broad Named-Peril List (HO-2 / HO-3 Contents)

The broad form covers these 16 perils. Memorize them; HO-8 covers only a limited basic subset (roughly the first nine, with theft restricted and vandalism sometimes excluded).

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Aircraft
• Vehicles
• Smoke
• Vandalism or malicious mischief
• Theft
• Volcanic eruption
• Falling objects
• Weight of ice, snow, or sleet
• Accidental discharge or overflow of water/steam (plumbing, HVAC, appliances)
• Sudden/accidental tearing apart, cracking, burning, or bulging of a steam/water system
• Freezing of plumbing/HVAC/appliances
• Sudden/accidental damage from artificially generated electrical current

Section I Exclusions (Apply to ALL Forms)

Even open-peril HO-3/HO-5 dwellings do NOT cover everything. The Section I exclusions are paramount on the exam. The first group is preceded by an anti-concurrent causation lead-in — meaning if the excluded peril contributes in any sequence, the loss is excluded even if a covered peril also operated.

The Two Most-Tested Exclusions: Flood and Earthquake

Flood (rising surface water, tidal water, mudflow) is excluded from every standard HO form. It is covered only through the National Flood Insurance Program (NFIP) or a private flood policy. Sewer/drain backup is also excluded but can be added by a Water Backup endorsement.

Earthquake and other earth movement are excluded and must be added by the Earthquake endorsement (HO 04 54), which typically carries a percentage deductible (e.g., 10-15% of the dwelling limit) rather than a flat dollar deductible.

Exam trap — fire following: although earthquake is excluded, if an earthquake causes a fire, the resulting fire damage IS covered because fire is a covered peril and the policy excludes only the direct earth-movement damage. The same logic applies to an explosion following an otherwise excluded cause.

Theft, Vandalism, and Maintenance Limitations

Several peril limitations recur on exams beyond the headline exclusions, and they routinely decide claim-scenario questions:

• Theft from a dwelling under construction is excluded until the insured first occupies the residence; that gap is meant to be covered by a builders' risk policy instead.
• Vandalism and malicious mischief is excluded if the dwelling has been vacant for more than 60 consecutive days immediately before the loss.
• Freezing of plumbing, HVAC, or appliances is excluded unless the insured used reasonable care to maintain heat OR shut off the supply and drained the system.
• Continuous or repeated seepage/leakage over weeks or months (a slow, hidden leak) is excluded; only sudden and accidental water discharge is a covered peril.
• Wear and tear, deterioration, mechanical breakdown, rust, mold, smog, settling, and infestation by insects, birds, rodents, or vermin are all excluded as maintenance items rather than fortuitous, insurable losses.

Working a Peril Question on the Exam

When a stem describes a loss, attack it in two steps. First identify which property is involved: dwelling/other structures (open perils on HO-3 and HO-5) or contents (named perils on every form except HO-5). Second, screen the cause through the exclusions — even on an open-peril dwelling, flood, earth movement, neglect, ordinance/law, and intentional acts defeat coverage, while a covered peril resulting from an excluded one (fire after earthquake) is still paid.

Keep the anti-concurrent causation lead-in in mind for the first exclusion group: if an excluded cause and a covered cause combine, the loss is excluded regardless of sequence. This is why hurricane claims are litigated — wind damage is covered, but the concurrently caused flood (storm surge) portion is not, and the policy language resolves the overlap against the insured. Spotting the controlling exclusion before counting perils is the fastest path to the right answer.

Resulting Loss, Anti-Concurrent Causation, and the Maintenance Screen

Two doctrines decide the hardest peril questions. The anti-concurrent causation lead-in on the first exclusion group means that if an excluded peril contributes in any sequence, the entire loss is excluded even if a covered peril also operated; this is exactly why hurricane claims split into covered wind and excluded storm-surge flood. The countervailing rule is the ensuing/resulting loss exception: although earthquake is excluded, a fire that follows an earthquake is paid because fire is a covered peril and only the direct earth-movement damage is barred.

The same logic rescues an explosion that follows an otherwise excluded cause.

The second screen is maintenance. Wear and tear, deterioration, mechanical breakdown, rust, mold, smog, settling, and infestation by insects, birds, rodents, or vermin are excluded because they are not fortuitous. Continuous or repeated seepage over weeks is excluded; only sudden and accidental water discharge is covered. Freezing is excluded unless the insured maintained heat or drained the system, and vandalism is excluded after 60 days' vacancy. When a stem describes a slow leak, a rotted sill, or a vacant home, the maintenance or vacancy screen usually controls the answer before you ever reach the named-peril list.