4.1 Dwelling Policy Forms (DP-1, DP-2, DP-3)
Key Takeaways
- Dwelling policies (DP-1, DP-2, DP-3) cover residential properties not eligible for Homeowners policies, such as non-owner occupied rental homes, vacant dwellings, or tenant-occupied structures.
- DP-1 Basic Form settles losses on an Actual Cash Value (ACV) basis for both dwelling structures and personal property under named perils.
- DP-2 Broad Form provides named perils coverage with Replacement Cost (RC) loss settlement on dwelling structures (if 80% coinsurance met) and ACV on personal property.
- DP-3 Special Form delivers open perils coverage on Coverages A and B (dwelling and other structures) and named broad perils on Coverage C (personal property).
- Coverage E (Additional Living Expense) is automatically included in DP-2 and DP-3 forms, but must be added by endorsement to the DP-1 form.
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.
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.
Structure of Dwelling Policy Coverages
Every Dwelling policy contains five core coverage sections (designated Coverages A through E):
| Coverage Section | Scope of Coverage | Default Valuation / Limit Basis |
|---|---|---|
| Coverage A (Dwelling) | Primary residential structure, attached structures (e.g., attached garage), and building equipment used to service the premises | Stated policy limit based on replacement value |
| Coverage B (Other Structures) | Detached structures (garages, sheds, fences, gazebos) separated by clear space | 10% of Coverage A limit |
| Coverage C (Personal Property) | Household goods, tenant/landlord contents owned by the insured on the premises | Optional declared limit; settled at ACV |
| Coverage D (Fair Rental Value) | Loss of rental income when a covered peril renders rented premises uninhabitable | 10% of Coverage A limit |
| Coverage E (Additional Living Expense) | Increased living costs for owner-occupants to maintain normal standard of living | Available by endorsement on DP-1; included automatically on DP-2/DP-3 |
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.
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.
An insured owns a rental property covered under an unendorsed DP-1 Basic Form dwelling policy. A fire causes severe structural damage to the kitchen. On what loss valuation basis will the insurer adjust the structural claim for Coverage A?
How does Coverage E (Additional Living Expense) differ between a DP-1 Basic Form and a DP-2 Broad Form dwelling policy?
An adjuster is evaluating a storm damage claim under a DP-3 Special Form policy. Tree limbs fell during a storm, damaging the roof shingles and crushing a detached garden shed. Indoor furniture inside the house suffered water damage from rainwater entering through the punctured roof. How do the peril triggers apply to these losses?