4.3 Section I Perils Insured Against and Exclusions

Section I Perils Insured Against and Exclusions

Whether a loss is covered depends on the coverage trigger of the form. Open-peril forms (the dwelling on HO-3, everything on HO-5) cover all direct physical loss EXCEPT what is excluded — the burden is on the insurer to prove an exclusion applies. Named-peril forms (HO-2, contents on HO-3) cover only the perils listed — the burden is on the insured to prove the loss came from a listed peril. This burden-of-proof shift is heavily tested.

The broad named perils (HO-2 / HO-3 contents)

The broad form perils build on the basic list:

• 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
• Sudden/accidental tearing apart, cracking, burning, or bulging of a heating/AC/water system
• Freezing of plumbing/heating systems
• Sudden/accidental damage from artificially generated electrical current

The basic perils (used by HO-8) stop at the first eight or so and notably exclude theft and freezing in their broadest forms.

Standard Section I exclusions

These apply even on open-peril forms (the "core exclusions"):

• Ordinance or law (cost to comply with building codes) — buy-back via endorsement
• Earth movement (earthquake, landslide, sinkhole) — separate endorsement/policy
• Water damage — flood, surface water, sewer/drain backup, and below-ground seepage
• Power failure (off premises)
• Neglect to preserve property
• War, nuclear hazard
• Intentional loss by an insured
• Governmental action (seizure/destruction)

Many Section I exclusions are preceded by an anti-concurrent causation (ACC) clause, meaning if an excluded peril contributes to the loss in any sequence, the loss is excluded even if a covered peril also contributed.

Flood vs. covered water — a classic trap

The distinction is sudden and accidental (covered) vs. gradual or flood/surface (excluded). Sewer backup is commonly added back by a low-cost endorsement.

Mold, maintenance, and the gradual-loss trap

A second family of exclusions targets gradual deterioration: wear and tear, marring, deterioration, mold/fungus/wet rot (often given a small buy-back sublimit), inherent vice, smog, rust, settling/cracking/shrinking of foundations, and damage by birds, vermin, rodents, insects, or domestic animals. These are excluded because they reflect a failure of maintenance rather than a fortuitous (accidental) event, and insurance covers fortuitous loss only.

A frequent exam scenario: a slow plumbing leak that drips inside a wall for months and causes mold and rot. Even on an open-peril HO-3 dwelling, the loss is excluded because it is neither sudden nor accidental and triggers the seepage and mold exclusions. Contrast that with a pipe that bursts suddenly and floods the kitchen overnight - that water discharge is covered. Recognizing the sudden-vs-gradual line is worth several exam points.

Theft, vacancy, and named-peril precision

Theft is a covered broad peril, but with carve-outs: theft from a part of the residence rented to others, theft of property at a dwelling under construction (until completed and occupied), and theft of property away from the residence for items that have away-from-premises restrictions. HO-8 limits theft to on-premises loss with a low sublimit (often $1,000) because older-home risks are higher.

Vacancy can also restrict coverage: glass breakage and vandalism/malicious mischief are typically excluded after the dwelling has been vacant more than 60 consecutive days at the time of loss, because vacant buildings invite damage. Finally, remember the precision of named perils - windstorm or hail covers rain damage to the interior only if the wind first creates an opening (the wind-driven-rain rule). A producer who can recite these conditions answers a cluster of exam questions correctly.

How the HO-3 Splits Open and Named Perils

The HO-3 is deliberately asymmetric. Coverages A and B (dwelling/other structures) are written open-peril — covered for direct physical loss unless excluded. Coverage C (personal property) is written on a named-peril basis using the broad list of 16 perils (fire, lightning, windstorm/hail, explosion, riot, aircraft, vehicles, smoke, vandalism, theft, falling objects, weight of ice/snow/sleet, accidental water discharge, freezing, artificially generated electrical current, and volcanic eruption).

The trap: a question describes an unusual loss to contents (not on the named list) and asks whether it is covered. On an HO-3 the answer is no for contents, but the same cause would be covered if it struck the dwelling.

The Major Section I Exclusions

The homeowners forms exclude the catastrophic and non-fortuitous perils, often grouped under the ordinance or law, earth movement, water damage (flood/sewer backup), power failure, neglect, war, nuclear, and intentional loss headings, plus governmental action.

Water damage is the most tested: surface flood, sewer/drain backup, and below-ground seepage are excluded (flood goes to the NFIP; backup can be bought back by endorsement), while a sudden burst pipe inside the home is covered. Earth movement (earthquake, landslide, sinkhole) is excluded but can be added by an earthquake endorsement. Mold is limited, and the intentional loss exclusion blocks the insured who deliberately causes the damage — although an innocent co-insured may still recover under many forms.