4.3 Section I Perils Insured Against and Exclusions

Named-Peril vs. Open-Peril

Section I coverage triggers on one of two bases:

• Named-peril (specified-peril): Coverage applies ONLY if the loss is caused by a peril listed in the policy. The burden is on the INSURED to show the cause is a covered peril. The HO-2 Broad Form and the contents portion of HO-3 are named-peril.
• Open-peril (special / "all-risk"): Coverage applies to ANY direct physical loss UNLESS the cause is specifically excluded. The burden shifts to the INSURER to prove an exclusion applies. The HO-3 dwelling (Coverages A and B) and all of HO-5 are open-peril.

This distinction is the single most-tested concept in homeowners. Open-peril is broader and harder for the insurer to deny.

The Broad-Form Named Perils

The HO-2 (and HO-3 contents) Broad Form covers these named perils. Memorize them — exams ask which perils are NOT covered.

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 (plumbing, HVAC, appliances)
13. Sudden/accidental tearing apart, cracking, burning, bulging of a heating/AC/water system
14. Freezing of plumbing/HVAC
15. Sudden/accidental damage from artificially generated electrical current
16. Volcanic eruption

Trap: flood and earthquake are NOT on this list and are NOT covered by any HO form — they require separate policies/endorsements.

Section I Exclusions (apply even to open-peril forms)

Eight exclusions remove coverage regardless of form. Several are tested as the "anti-concurrent causation" exclusions — if one of these contributes to a loss, the loss is excluded even if a covered peril also contributed.

Note that sewer/drain backup can be bought back by endorsement, and limited fungi/mold coverage is provided with a sublimit. Earthquake and flood require separate coverage (DIC, NFIP, or endorsements).

Special Section I Exclusions for Open-Peril Forms

Because HO-3 (dwelling) and HO-5 cover "all risks," they add exclusions that would otherwise be silent. These include wear and tear, deterioration, mechanical breakdown, smog/rust/corrosion, settling/cracking of foundations and walls, mold/wet rot (except limited coverage), birds/vermin/rodents/insects, and damage by domestic animals. These prevent the open-peril form from becoming a maintenance warranty.

Anti-Concurrent Causation and Ensuing Loss

The HO forms contain an anti-concurrent-causation (ACC) lead-in: if an excluded peril (flood, earth movement) combines with a covered peril to cause the loss, the entire loss is excluded - even the portion the covered peril caused. This reverses the older "efficient proximate cause" approach and is heavily litigated and tested.

A partial offset is the ensuing-loss provision: although faulty workmanship, defective materials, and similar causes are excluded, a separate ensuing covered peril is paid. If bad wiring (excluded) sparks a fire, the fire damage is covered because fire is a covered ensuing loss.

Trap: Under ACC wording, you cannot split a flood-plus-wind loss and collect the wind share - the exclusion swallows the entire loss when the excluded peril contributes.

Limited Fungi/Mold and Earth-Movement vs. Flood

Two coverage nuances generate questions. The HO forms provide limited "fungi, wet or dry rot, or bacteria" coverage with a separate sublimit (commonly $10,000), because broad mold coverage proved costly. Earth movement (earthquake, landslide, sinkhole) and flood are both excluded but cured by different products: earthquake by an endorsement or DIC policy, flood by the NFIP or private flood.

Trap: Earthquake and flood are separate exclusions with separate solutions - an earthquake endorsement does not pick up flood, and a flood policy does not pick up earthquake. Candidates who treat the two catastrophe perils as interchangeable miss the routing question.

Theft Limitations and the Off-Premises Reductions

Even on broad forms, theft carries special limitations the exam tests. Theft coverage is suspended or reduced for property at a dwelling under construction, for theft from a part of the residence rented to others, and for certain property away from the residence premises. Watercraft theft away from the premises is excluded, and theft of property in a dwelling not yet occupied is limited.

Trap: "Open peril" (HO-3 dwelling, HO-5) still excludes the standard catastrophe and maintenance group - earth movement, flood, war, nuclear, ordinance or law, wear and tear, and mold beyond the sublimit. The broad trigger does not resurrect any of these; they need separate coverage or an endorsement.