4.3 Section I Perils Insured Against and Exclusions

Perils Insured Against

Which perils apply depends on the form. Named-peril forms (HO-2, HO-4, HO-6, and HO-8) list their covered causes of loss; open-peril forms (HO-3 dwelling/HO-5 everything) cover all direct physical loss except exclusions. Memorize the broad-form named perils — they appear verbatim on the exam.

Basic/Broad Form Named Perils (the "HO-2" list):

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. Volcanic eruption
11. Falling objects
12. Weight of ice, snow, or sleet
13. Accidental discharge or overflow of water/steam (plumbing, HVAC)
14. Sudden tearing apart/cracking/burning/bulging of a steam or water system
15. Freezing of plumbing/HVAC
16. Sudden accidental damage from artificially generated electrical current

Open-Peril Logic (HO-3 and HO-5)

Under open-peril coverage you do not look for the peril on a list — you look for an exclusion. If the cause of loss is not excluded and the loss is direct and physical, it is covered. This is why open-peril forms also cover oddities like a deer crashing through a window or a falling drone, which are not on the named-peril list.

Key traps within the open-peril forms:

• Theft of property in a dwelling under construction is excluded until the insured begins to occupy it.
• Vandalism if the dwelling has been vacant more than 60 consecutive days is excluded.
• Continuous or repeated seepage of water over weeks/months is excluded (it is maintenance, not sudden and accidental).
• Wear and tear, deterioration, mechanical breakdown, and inherent vice are excluded even under open-peril forms — open peril is not a maintenance warranty.
• Birds, vermin, rodents, insects, and domestic animals causing damage are excluded.

These open-peril exclusions matter because students often assume "open peril" means "everything is covered." It does not. Open peril simply reverses the burden of proof; the long list of property-specific exclusions still removes gradual, expected, and maintenance-type losses. The form is designed to insure fortuitous (sudden and accidental) events, not the predictable consequences of ownership and neglect.

Section I Exclusions

The homeowners forms exclude the same major categories regardless of form. Several carry the anti-concurrent causation lead-in: loss is excluded "regardless of any other cause or event contributing concurrently or in any sequence." The big exclusions:

• Ordinance or Law — increased cost to rebuild to current building codes (add back with the Ordinance or Law endorsement / 10% built-in).
• Earth Movement — earthquake, landslide, sinkhole, mudflow (buy back earthquake coverage by endorsement).
• Water Damage — flood, surface water, water backing up through sewers/drains, and water below the ground surface. (Sewer backup is added by endorsement; flood needs a separate NFIP/private flood policy.)
• Power Failure off the premises.
• Neglect — failure to use reasonable means to protect property.
• War, Nuclear Hazard, and Intentional Loss.
• Governmental Action (seizure/destruction by order, except to stop a fire).

The Flood vs. Water-Damage Trap

The most-missed exam item: a homeowners policy never covers flood. Surface water, overflow of a body of water, and storm surge are all excluded as flood and require a separate National Flood Insurance Program (NFIP) or private flood policy. By contrast, water that escapes a plumbing system inside the home (a burst pipe) is covered as a named peril.

Distinguish three look-alike causes:

The distinction turns on whether the water originates inside the dwelling's own systems and escapes suddenly, or whether it comes from outside (surface water, rising bodies of water, ground water). Inside-and-sudden is a covered named peril; outside-and-rising is flood, which homeowners never insures.

Sewer/drain backup sits in between: the water originates outside but enters through the home's drains, so the forms exclude it unless the Water Back-Up and Sump Overflow endorsement (HO 04 95) is purchased, usually with its own sublimit such as $5,000 or $10,000. Producers should proactively offer flood and backup coverage in flood-prone areas to avoid an errors-and-omissions claim after an uncovered basement loss.

Mold and Anti-Concurrent Causation

Mold, fungus, and wet/dry rot are excluded except as a limited additional coverage (often a $10,000 sublimit) when they result from a covered water peril. The anti-concurrent causation clause means that if an excluded peril (e.g., flood) combines with a covered peril (e.g., wind) to cause a single loss, the portion attributable to the excluded peril is still not covered — the insurer need not pay merely because a covered cause also contributed. This clause is what allowed insurers to deny storm-surge claims after major hurricanes even where wind was also present.

Contrast anti-concurrent causation with the older "ensuing loss" principle that still appears in the forms. If an excluded peril (e.g., faulty construction) leads to a covered peril (e.g., a fire), the resulting fire damage is covered even though the original cause was excluded. The exam tests this by asking whether the loss "ensued" from a covered peril (covered) or whether an excluded peril "concurrently" caused the damage (excluded). Read the fact pattern carefully: the direction and sequence of causation determine the outcome.