4.1 Dwelling Policy Forms (DP-1, DP-2, DP-3)

4.1 Dwelling Policy Forms (DP-1, DP-2, DP-3)

Dwelling property coverage forms are designed for residential structures that do not qualify for standard Homeowners package policies. Understanding the distinctions among the three primary ISO Dwelling forms—DP-1 (Basic Form), DP-2 (Broad Form), and DP-3 (Special Form)—is fundamental for property claims adjusters operating in South Carolina.

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Target Eligibility & Program Purpose

Unlike Homeowners insurance, which mandates owner-occupancy and bundles personal liability into the base policy, the Dwelling Policy Program focuses primarily on property coverages for residential structures.

Eligible Properties

• Non-owner occupied residential dwellings (e.g., tenant-occupied rental houses, duplexes, triplexes, and fourplexes)
• Single-family residential structures with up to four family units or up to five boarders
• Vacation and seasonal homes that remain unoccupied for extended portions of the year
• Dwellings under construction or undergoing major structural renovation
• Properties declined for Homeowners coverage due to building age, geographic risk factors, or claims history

Key Principle: Owner occupancy is not required under a Dwelling policy. However, personal liability (Coverage E) and medical payments (Coverage F) are not automatically included; they must be added by endorsement.

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Structure of Dwelling Policy Coverages

Every Dwelling policy contains five core coverage sections (designated Coverages A through E):

Coverage Interactions & Limitations

• Coverage B (Other Structures): Under the DP-1 form, applying Coverage B reduces the total available Coverage A limit for the same loss. Under DP-2 and DP-3, Coverage B operates as an additional amount of insurance beyond Coverage A.
• Coverage D (Fair Rental Value): Pays the net loss of rental income minus non-continuing expenses. Payment is limited to the shortest time required to repair or rebuild the damaged portion.
• Coverage E (Additional Living Expense): Applies only when an owner-occupant resides in the dwelling. It covers hotel bills, restaurant meals, and temporary transportation expenses incurred while the home is rendered unfit to live in.

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Form Comparison: Perils & Valuation Standards

The three Dwelling forms differ significantly in peril scope and loss settlement valuation.

1. DP-1 Basic Form (ISO DP 00 01)

• Peril Trigger: Named perils form. Standard mandatory perils include Fire, Lightning, and Internal Explosion.
• Extended Coverage (EC): For an additional premium, the policy can be endorsed to cover Extended Coverage perils, remembered by the acronym REV SH SHAV:
  • Riot
  • Explosion (external)
  • Vehicles
  • Smoke
  • Hail
  • Aircraft
  • Volcanic Eruption
• Vandalism & Malicious Mischief (V&MM): Can be added only if EC perils are purchased. V&MM coverage is suspended if the dwelling has been vacant for more than 60 consecutive days immediately preceding the loss.
• Valuation Basis: All property losses under DP-1—both the dwelling structure (Coverages A & B) and personal property (Coverage C)—are settled on an Actual Cash Value (ACV) basis (Replacement Cost minus depreciation).

2. DP-2 Broad Form (ISO DP 00 02)

• Peril Trigger: Named perils form. Covers all DP-1 basic perils, Extended Coverage perils, V&MM, plus eight additional broad perils (often recalled via the acronym BIG AFFECT):
  • Burglary damage (structural damage caused by burglars)
  • Ice, snow, and sleet weight
  • Glass breakage
  • Accidental discharge or overflow of water or steam
  • Falling objects
  • Freezing of plumbing, heating, or air conditioning systems
  • Electrical current damage (artificially generated)
  • Collapse of building or part of building
• Valuation Basis: Structures (Coverages A & B) are settled on a Replacement Cost (RC) basis without deduction for depreciation, provided the insured maintains coverage equal to at least 80% of the full replacement cost of the building at the time of loss. Personal property (Coverage C) remains on an ACV basis.

3. DP-3 Special Form (ISO DP 00 03)

• Peril Trigger: Combination form providing Open Perils ("All-Risk") coverage on structural property (Coverages A & B) and Named Broad Perils on personal property (Coverage C).
• Structural Coverage (Coverages A & B): Covers all direct physical losses to the dwelling and other structures except those specifically excluded in the policy text.
• Key Statutory & Standard Exclusions:
  • Ordinance or Law enforcement
  • Earth Movement (earthquake, landslide, mudslide)
  • Water Damage (flood, surface water, sewer backup, subsurface water)
  • Off-premises power failure
  • War, nuclear hazard, and governmental action
  • Continuous or repeated seepage of water (lasting 14+ days)
  • Wear, tear, deterioration, rust, mold, and dry rot
  • Vandalism or malicious mischief if vacant for more than 60 consecutive days
• Valuation Basis: Replacement Cost on Coverages A & B (subject to the 80% coinsurance clause); ACV on Coverage C personal property.