4.3 Section I Perils Insured Against and Exclusions

Named-Peril vs. Open-Peril

Section I uses two coverage triggers depending on the form and the lettered coverage:

• Named-peril (specified peril) coverage pays only if the cause of loss appears on the policy's list. The burden of proof is on the insured to show the loss arose from a listed peril.
• Open-peril (special / all-risk) coverage pays for direct physical loss unless specifically excluded. The burden shifts to the insurer to prove an exclusion applies.

On HO-3 the dwelling is open-peril and contents are named-peril; on HO-5 both are open-peril; HO-2, HO-4, HO-6 are named-peril on covered property.

The Broad-Form Named Perils

The HO-2/HO-4/HO-6 broad list (also the contents perils under HO-3) is commonly memorized in two tiers. The basic perils and the additional broad perils together:

Mnemonic: "We F-VESSELS RAT" style lists vary by school; what the exam tests is whether a described loss (e.g., flood, earthquake, settling) is on the list. Flood and earthquake are never on it.

Section I Exclusions (Apply to Open-Peril Coverage)

The special-form (open-peril) coverage on the dwelling still excludes a core set of causes. The big tested exclusions:

• Ordinance or law (cost of meeting upgraded building codes) — buy back with HO 04 77
• Earth movement (earthquake, landslide, sinkhole) — buy back with HO 04 54 (earthquake)
• Water damage (flood, surface water, sewer/drain backup, sub-surface water) — flood is insured separately through the NFIP; sewer backup added by HO 04 95
• Power failure occurring off the residence premises
• Neglect (failure to protect property after a loss)
• War, nuclear hazard
• Intentional loss by an insured
• Governmental action

Anti-concurrent causation: the water and earth-movement exclusions are written so that if an excluded cause and a covered cause combine, the loss is excluded regardless of sequence — a heavily tested concept.

Special Limits Within Open-Peril

Even on open-peril dwelling coverage, certain losses are excluded unless an exception applies:

• Wear and tear, deterioration, latent defect, mechanical breakdown — never covered (maintenance, not insurance).
• Mold, fungus, rot — generally excluded with a small additional-coverage cap (commonly $10,000) when resulting from a covered water loss.
• Birds, vermin, rodents, insects — excluded.
• Freezing of plumbing — excluded if the insured did not maintain heat or shut off and drain the system in a vacant dwelling.
• Theft from a dwelling under construction — excluded until the insured moves in.

These "maintenance" exclusions explain why open-peril is broad but not unlimited.

The Two Exclusion Categories

ISO organizes the Section I exclusions into two groups, and the exam expects you to know which group an excluded cause falls in:

• Concurrent-causation (Group I) exclusions apply regardless of any other cause. These are ordinance or law, earth movement, water damage, power failure, neglect, war, nuclear hazard, intentional loss, and governmental action. The anti-concurrent causation lead-in means a covered cause in the chain cannot pull the loss back into coverage.
• Group II exclusions bar loss caused by weather conditions (only when they combine with a Group I cause), acts or decisions of any body, and faulty planning, design, workmanship, or materials — but coverage applies to any ensuing covered loss not otherwise excluded. So if defective wiring (excluded) causes a fire (covered peril), the resulting fire damage is paid.

Ensuing-Loss Carve-Backs and Mold

The ensuing-loss doctrine is a high-yield concept: an excluded cause that sets off a covered peril leaves the resulting loss payable. Classic examples — faulty construction (excluded) leading to a fire or water-discharge loss (covered), or a frozen pipe excluded for neglect but a sudden separate burst covered. Mold, fungus, and wet/dry rot are excluded except when they result from a covered water loss, and then only up to a small additional-coverage cap (commonly $10,000).

Earthquake and flood are never on any HO peril list and require the Earthquake endorsement (HO 04 54) and a separate NFIP flood policy, respectively. Watch for stems that bundle a maintenance cause (wear and tear, settling, vermin) with a sudden covered event — only the ensuing covered portion is paid.

Theft, Vandalism, and Vacancy Interactions

Three peril-specific rules generate exam questions. Theft coverage on the dwelling and contents excludes theft committed by an insured, theft from a part of the residence rented to others (other than to the insured), and theft of property away from a dwelling under construction until the insured moves in. Vandalism and malicious mischief coverage is suspended once the dwelling has been vacant for more than 60 consecutive days — a vacant-property trap that also reduces other perils.

Finally, glass breakage is a covered Section I loss, but breakage of glass while the dwelling is vacant beyond 60 days is excluded. These limitations explain why open-peril coverage is broad in scope yet riddled with conduct-and-occupancy conditions the exam expects you to spot in a fact pattern.