4.3 Section I Perils Insured Against and Exclusions

Section I tells you which causes of loss are covered through its Perils Insured Against language and which are removed through its Exclusions. The HO-3 splits its approach: the dwelling and other structures (Coverages A and B) are written on an open-peril basis described as 'risk of direct physical loss,' while personal property (Coverage C) is written on a named-peril basis. Understanding the burden of proof is essential — open-peril coverage covers everything except stated exclusions and forces the insurer to prove an exclusion, whereas named-peril coverage forces the insured to prove a listed cause.

The 16 Named Perils (Coverage C on HO-2 and HO-3)

Memorize this list; questions ask whether a specific cause is covered on contents:

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 or steam
13. Sudden and accidental tearing apart, cracking, burning, or bulging of a heating/air-conditioning/water system
14. Freezing of plumbing, heating, or air-conditioning
15. Sudden and accidental damage from artificially generated electrical current
16. Volcanic eruption

Edge case: Damage from an earthquake that causes a volcanic eruption is not the same as volcanic eruption itself; earthquake is excluded. Likewise, freezing is covered only if the insured used reasonable care to maintain heat or shut off and drain the system.

The Standard Section I Exclusions

Every homeowners form removes the same major catastrophic and uninsurable causes. The exam tests these repeatedly:

Anti-concurrent causation: The policy preamble states that excluded perils are excluded regardless of any other cause or event contributing concurrently or in any sequence. So if a flood and a covered wind both damage a home, the flood-caused portion stays excluded even though wind contributed.

Open-Peril Exclusions Specific to Coverages A and B

Because the dwelling is open-peril, the HO-3 adds a second list of exclusions that would otherwise be 'covered' under the broad 'risk of direct physical loss' grant. These remove ordinary maintenance and gradual problems, not sudden accidents:

• Wear and tear, deterioration, marring — owner upkeep, not insurable.
• Mechanical breakdown, latent defect, rust, mold, wet/dry rot — gradual.
• Smog, settling, cracking, shrinking, bulging of foundations/walls.
• Insects, vermin, rodents, birds, and domestic animals — infestation/pet damage.
• Discharge of pollutants (with limited exceptions).

The theme is that homeowners insurance pays for sudden and accidental events, not for gradual, expected, or maintenance problems. A roof that slowly degrades and leaks over years is excluded; a roof torn off in a single windstorm is covered.

Putting Burden of Proof to Work

A contents claim under HO-3 (named peril) and a dwelling claim under HO-3 (open peril) play out differently:

• Contents (named): A homeowner whose stereo is damaged must point to a listed peril (theft, fire, a falling object). 'Mysterious disappearance' with no listed peril is denied.
• Dwelling (open): If the structure is damaged by an unusual but unexcluded cause, coverage applies unless the insurer proves an exclusion. This is why open-peril coverage is broader and why HO-5 (which makes contents open-peril too) costs more.

Upgrading contents to open peril is precisely the difference between HO-3 and HO-5; the exclusions themselves are the same on both.

The 16 Named Perils (Coverage C)

On HO-3, contents are covered for these 16 named perils, which the exam may test individually:

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 or steam
13. Sudden tearing/cracking/bulging of a heating or AC system
14. Freezing of plumbing/heating systems
15. Sudden damage from artificially generated electrical current
16. Volcanic eruption

The dwelling and other structures (Coverages A and B), by contrast, are open-peril: covered for any direct physical loss not excluded. The excluded perils to memorize are flood, earth movement, ordinance or law, war, nuclear hazard, intentional loss, governmental action, neglect, and power failure away from the premises, several subject to anti-concurrent causation wording.

How Exclusions Are Read with Anti-Concurrent Causation

The major exclusions are not isolated; modern HO forms attach anti-concurrent causation language to several of them. This wording denies coverage when an excluded peril contributes to the loss in any sequence, even if a covered peril also played a part. The clearest example is water: storm surge, surface flooding, and sewer backup are excluded, so a coastal home destroyed by a hurricane's surge is treated as flood (requiring a separate NFIP policy) even though covered wind was present.

Earth movement (earthquake, landslide, sinkhole in many forms), ordinance or law (the extra cost to rebuild to current code), neglect (failure to protect property after a loss), intentional loss, governmental action, war, and nuclear hazard complete the core exclusion list. Several of these can be bought back: flood through the NFIP, earthquake by endorsement, and ordinance-or-law costs through the HO 04 77 endorsement, which is why an exam answer often pairs an excluded peril with the endorsement or separate policy that restores it.