Section I Perils Insured Against and Exclusions

Named Perils vs. Open Perils

Section I describes which causes of loss are covered through two opposite drafting approaches:

• Named-peril (specified) coverage lists each covered cause. The burden of proof is on the insured to show the loss came from a listed peril. HO-2 uses named perils for both dwelling and contents; HO-3 and HO-5 use named perils for Coverage C contents.
• Open-peril (special/'all-risk') coverage covers any direct physical loss except those specifically excluded. The burden of proof shifts to the insurer to prove an exclusion applies. HO-3 and HO-5 use open perils on the dwelling and other structures; HO-5 extends open perils to contents.

This burden-of-proof distinction is a favorite exam question — open peril is broader and harder for the insurer to deny.

The Named Perils (Coverage C and HO-2)

The HO-2 / Coverage C named perils (often called the "basic + broad" group) are commonly memorized as 16 perils:

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

Trap: Flood, earthquake, and surface water are NOT on this list — they require separate policies or endorsements.

Section I Exclusions

The "big" Section I exclusions (which is why open peril is not truly "all risk") include:

These are sometimes called the 'concurrent causation' or anti-sequence exclusions: even if a covered peril contributes, loss caused by these excluded events is not covered. Sewer/drain backup can be added back by endorsement; flood requires the NFIP or a private flood policy.

Open-Peril Special Exclusions (Dwelling)

In addition to the general exclusions above, the open-peril dwelling coverage (HO-3/HO-5) adds specific exclusions for gradual or maintenance-type losses that are NOT sudden and accidental:

• Wear and tear, marring, deterioration
• Mechanical breakdown, latent defect, inherent vice
• Smog, rust, mold, wet/dry rot
• Settling, cracking, shrinking, bulging of foundations, walls, floors
• Birds, vermin, rodents, insects, or domestic animals
• Continuous or repeated seepage of water over weeks/months

Trap: A slow, hidden leak that rots a wall over six months is excluded; a sudden pipe burst that floods a room in minutes is covered. The exam tests this 'sudden and accidental' vs. 'gradual' line repeatedly.

Concurrent Causation and the Ensuing-Loss Exception

Homeowners forms use anti-concurrent-causation (ACC) language: if an excluded peril (flood, earth movement) combines with a covered peril, the entire loss is excluded regardless of sequence. This is why wind-vs-water hurricane disputes are litigated.

However, most exclusions carry an ensuing-loss (resulting-loss) exception: although the excluded cause itself is not covered, a covered peril that results is. Example: faulty workmanship (excluded) causes a pipe to leak and then a fire (covered) erupts — the fire damage is covered even though the faulty work is not.

Trap: "open peril" never means "all loss." The general exclusions — ordinance/law, earth movement, flood, war, nuclear, neglect, intentional loss, governmental action, power failure (off-premises) — survive under HO-3/HO-5 special coverage.

The Open-Peril Special Exclusions on the Dwelling

Under the HO-3/HO-5 open-peril dwelling coverage, additional special exclusions apply beyond the general exclusions — losses that look like covered open-peril events but are carved out:

• Wear and tear, marring, deterioration — maintenance, not insurance.
• Mechanical breakdown, latent defect, inherent vice, rust, mold, wet/dry rot.
• Smog, smoke from agricultural/industrial operations.
• Settling, cracking, shrinking, bulging, or expansion of foundations, walls, pavements.
• Birds, vermin, rodents, insects, domestic animals (but resulting covered loss may be paid).
• Seepage or leakage over a period of weeks/months (gradual water damage).

Many carry an ensuing-loss exception: if one of these excluded causes leads to a covered peril (a sudden pipe burst causing water damage), the ensuing covered loss is paid.

Exam tip: "sudden and accidental" water discharge is covered; gradual/continuous seepage over weeks is excluded — the time element is the deciding factor.