3.3 Dwelling Perils, Conditions, and Endorsements

Perils by Form

The covered perils widen as you move up the series.

On the DP-3 the dwelling is open perils, so any direct physical loss is covered unless excluded; contents stay on the broad named-perils list shared with the DP-2.

Standard Exclusions

Every DP form, regardless of how broad, excludes the same core list. Remember them as the property exclusions common to dwelling and homeowners contracts:

• Flood and surface water (covered only under the National Flood Insurance Program)
• Earth movement (earthquake, landslide, sinkhole) absent endorsement
• War and nuclear hazard
• Ordinance or law (cost to rebuild to current code)
• Neglect, intentional loss, and government action
• Power failure off the premises

Key Policy Conditions

The conditions section governs how a claim is paid:

• Coinsurance: building coverage must be at least 80% of replacement cost or a penalty applies on partial losses.
• Standard (union) mortgage clause: protects the lender even if the insured's own act voids coverage, and entitles the mortgagee to notice of cancellation.
• Other insurance: losses are shared pro rata by limits.
• Subrogation: the insurer takes over the insured's recovery rights after paying.
• Duties after loss: prompt notice, protect from further damage, prepare an inventory, and cooperate.

Endorsements That Restore What Is Missing

Because a DP is monoline property, several gaps are commonly filled by endorsement:

• Dwelling Liability and Personal Liability Supplement: add Coverage L (Personal Liability) and Coverage M (Medical Payments to Others) for the landlord.
• Broad Theft Coverage (DP 04 72) or Limited Theft: adds theft of personal property, which the base forms never include.
• Automatic Increase in Insurance: raises Coverage A by a stated percentage each year to keep pace with inflation.
• Ordinance or Law: pays the extra cost to rebuild to current building codes, a peril the base form excludes.
• Dwelling Under Construction: adjusts the limit to the value at the time of loss during a build.

Worked Example: Standard Mortgage Clause

A tenant intentionally sets fire to a rental, and the insured landlord is found to have concealed a material fact, voiding the landlord's recovery. The mortgagee, First Bank, holds a $160,000 loan.

Under the standard mortgage clause, the insurer still pays First Bank up to the unpaid balance ($160,000) because the mortgagee's protection survives acts of the insured. The insurer then pursues subrogation against the landlord for the amount paid. This separation of mortgagee and insured rights is a frequent exam scenario.

Anti-Concurrent Causation and Ensuing Loss

Two wording concepts decide many close claims:

• Anti-concurrent causation: when an excluded peril (flood, earth movement) combines with a covered peril to cause one loss, the policy excludes the entire loss. A landslide that also causes a fire can be denied in full under this clause.
• Ensuing loss: if an excluded event leads to a separate covered peril, the resulting damage is still covered. For example, faulty wiring (often excluded) that causes a fire leaves the fire damage covered, because fire is an ensuing covered peril.

Expect a scenario asking which rule applies; the distinction is whether the perils act together (anti-concurrent) or in sequence (ensuing loss).

Coinsurance Condition in Detail

The building coinsurance clause requires the insured to carry at least 80% of replacement cost at the time of loss. The penalty formula is:

Recovery = (Carried limit / Required limit) x Loss, less deductible

Full replacement-cost settlement on a DP-2 or DP-3 is available only when this 80% threshold is met. Fall below it and partial losses are penalized; the dwelling drops to an ACV-style payment under some readings.

Endorsement Quick-Reference Table

Exam trap: candidates assume the open-perils DP-3 covers everything. It still carries every standard exclusion (flood, earth movement, ordinance or law), so a DP-3 flood loss is denied just like a DP-1 flood loss.

Dwelling Perils Tiering, Conditions, and Worked Traps

The Dwelling Policy program graduates its perils across three forms. DP-1 (Basic) covers fire, lightning, and internal explosion, with Extended Coverage (EC) perils (windstorm, hail, explosion, riot, aircraft, vehicles, smoke — "WHARVES") available by endorsement, plus optional Vandalism & Malicious Mischief. DP-2 (Broad) adds more named perils and is written on replacement cost. DP-3 (Special) insures the dwelling open-peril and contents named-peril.

A heavily tested limitation: DP-1 settles on ACV, and unlike homeowners forms, the basic Dwelling Policy contains no automatic theft coverage and no liability — those must be added by endorsement (e.g., Theft endorsement, Personal Liability Supplement). Vacancy beyond a stated period (commonly 60 days) can suspend certain perils such as vandalism.

Worked scenario: A landlord insures a rental on a DP-1 with EC. A tenant's belongings are stolen and a windstorm later tears off shingles. The stolen contents are not covered (no theft on DP-1 without endorsement, and the tenant's property is the tenant's responsibility anyway), but the wind damage is covered because EC includes windstorm. The roof loss is settled at ACV (depreciated), illustrating why landlords often prefer DP-3 with replacement cost on the structure.