4.3 Section I Perils Insured Against and Exclusions
Key Takeaways
- HO-2 and the contents of HO-3 use the 16 broad named perils; the insured must tie a loss to one of them
- HO-3 dwelling and all of HO-5 are open-peril: covered unless excluded, with the burden on the insurer
- The 'Big Eight' exclusions (ordinance/law, earth movement, water/flood, power failure, neglect, war, nuclear, intentional loss) apply across forms
- Flood is never covered by homeowners — use the NFIP or private flood; earthquake requires an endorsement
- Sewer/drain back-up is excluded under the water exclusion and requires the separate Water Back-Up endorsement
Section I states what the policy covers through Perils Insured Against and then carves back coverage through Exclusions. On a named-peril form the insured must match the loss to a listed peril; on an open-peril (special) form the carrier must instead point to an exclusion. Memorize the peril lists and the standard exclusions — both are heavily tested.
The Broad Named-Peril List (16 Perils)
This list applies to HO-2 throughout and to the contents of HO-3:
- Fire or lightning
- Windstorm or hail
- Explosion
- Riot or civil commotion
- Aircraft
- Vehicles
- Smoke
- Vandalism or malicious mischief
- Theft
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or steam
- Sudden and accidental tearing apart, cracking, burning, or bulging of a heating/AC/water-heating system
- Freezing of plumbing, heating, or AC
- Sudden and accidental damage from artificially generated electrical current
- Volcanic eruption
The first 10 form the older basic group; perils 11-16 are the broad additions.
Open-Peril Coverage on the Dwelling
Under HO-3 (dwelling) and all of HO-5, the policy does not list covered perils — it covers direct physical loss to property except as excluded or limited. This is why a mysterious crack in a wall is generally paid on HO-5 but may be denied on the HO-3 contents portion if it cannot be tied to a listed peril.
Section I Exclusions (The 'Big Eight')
These apply regardless of peril basis and frequently cause an anti-concurrent causation denial — if an excluded cause contributes, the loss is excluded even if a covered peril also contributed:
| Exclusion | Key Point |
|---|---|
| Ordinance or law | Cost to comply with building codes (excluded beyond the small Additional Coverage) |
| Earth movement | Earthquake, landslide, sinkhole, mudflow (buy back by endorsement / DIC) |
| Water damage | Flood, surface water, sewer/drain backup, subsurface water |
| Power failure | Loss caused by off-premises power interruption |
| Neglect | Failure to use reasonable means to protect property |
| War | All warlike acts |
| Nuclear hazard | Reaction, radiation, contamination |
| Intentional loss | Loss caused intentionally by an insured |
Additional open-peril-only exclusions include wear and tear, mechanical breakdown, mold/fungus, rot, pollution, settling, and animal/insect/vermin damage.
Flood and Earthquake — Two Most-Tested Gaps
Flood is excluded on every standard homeowners form. Cover it through the National Flood Insurance Program (NFIP) or a private flood policy — never a homeowners endorsement.
Earthquake (earth movement) is excluded but can be added by endorsement in most states (often with a high percentage deductible such as 10%-15% of the dwelling limit).
Exam Trap: Water that backs up through sewers or drains is excluded under the base water exclusion; add it with the Water Back-Up and Sump Discharge endorsement, which is separate from flood coverage.
A homeowner's basement is damaged when a nearby river overflows and floods the property. Under a standard HO-3, this loss is:
Which list of perils applies to the personal property (Coverage C) of an HO-3?
Anti-Concurrent Causation and How to Win the Loss
The lead-in to the Section I exclusions states they apply regardless of any other cause or event contributing concurrently or in any sequence. This is the anti-concurrent causation (ACC) clause, and it is the single most-litigated phrase in property insurance. If a covered peril (wind) and an excluded peril (flood) combine to destroy a home, ACC lets the insurer deny the entire loss, not just the flood portion.
| Loss scenario | Covered? | Reason |
|---|---|---|
| Wind tears off roof, then rain enters | Yes | Wind is covered; rain follows a covered peril |
| Storm surge (flood) floods first floor | No | Flood excluded, even with concurrent wind |
| Frozen pipe bursts while home occupied | Yes | Sudden/accidental water from a plumbing system |
| Pipe bursts after insured shut off heat and left | No | Neglect exclusion / freezing of vacant dwelling |
A practical exam rule: water from above (rain, plumbing) is generally covered; water from below (flood, surface water, sewer backup) is excluded unless separately endorsed.
Burden of Proof - Open Peril vs. Named Peril
Who must prove what differs sharply between coverage bases, and it decides close claims on the exam.
| Basis | Who proves what |
|---|---|
| Named peril (HO-2, DP-1/2, contents) | The insured must prove the loss came from a listed peril |
| Open peril / 'all risk' (HO-3 dwelling, HO-5) | The insurer must prove an exclusion applies to deny |
This shift in burden is the practical reason open-peril coverage is broader and costs more - the insured wins any loss the insurer cannot tie to a stated exclusion.
Exam Trap: On an HO-3, the dwelling (A/B) is open peril but contents (C) remain named peril, so a mysterious-disappearance loss to a television is not covered (theft is listed, but unexplained loss is not), while the same disappearance of part of the house structure would be covered unless excluded.
Quick Recall - Exclusion Buy-Backs
Three commonly excluded perils can be restored, and the exam wants the correct vehicle for each:
- Flood - only through the NFIP or a private flood policy; never a homeowners endorsement.
- Earthquake (earth movement) - by endorsement, usually with a percentage deductible (10-15%).
- Sewer/drain backup - by the Water Back-Up and Sump Discharge endorsement, which is separate from and narrower than flood.
Keeping these three buy-backs straight resolves a large share of homeowners exclusion questions, because each excluded water or earth peril maps to a different solution rather than a single catch-all endorsement.