4.3 Section I Perils Insured Against and Exclusions

Perils Insured Against

Whether a homeowners loss is covered depends on the peril basis of the form (Section 4.1) and on the policy's exclusions. Named-peril forms list covered causes of loss; open-peril forms cover everything not excluded.

The Named Perils (Broad Form list)

HO-2 and the contents portion of HO-3/HO-6 cover this broad list of roughly 16 perils. A memory device is "FLAW VERSE WolFC", but learn the items:

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Aircraft
• Vehicles
• Smoke (sudden & accidental)
• Vandalism / malicious mischief
• Theft
• Volcanic eruption
• Falling objects
• Weight of ice, snow, or sleet
• Accidental discharge/overflow of water or steam
• Sudden & accidental tearing/cracking/bulging of a heating/AC/sprinkler system
• Freezing of plumbing/heating/AC
• Sudden & accidental damage from artificially generated electrical current

The HO-8 basic list is shorter (about 10-11 perils) — it drops the broad-form water, freezing, and electrical perils.

Section I Exclusions (apply even to open-peril HO-3/HO-5)

These are tested heavily because open-peril forms cover "everything except" them. The standard ISO Section I exclusions:

1. Ordinance or Law — extra cost to rebuild to current code (limited Additional Coverage, default 10% Cov A).
2. Earth Movement — earthquake, landslide, sinkhole (buy earthquake by endorsement).
3. Water Damage — flood, surface water, sewer/drain backup, and water below the surface (seepage). Flood needs the NFIP/private flood policy; sewer backup needs an endorsement.
4. Power Failure (off-premises).
5. Neglect to save/preserve property.
6. War.
7. Nuclear Hazard.
8. Intentional Loss by an insured.
9. Governmental Action (seizure).

Plus, on open-peril coverage only, additional exclusions for wear and tear, deterioration, mechanical breakdown, mold/fungus, smog/rust/corrosion, settling, birds/vermin/rodents/insects, and animals owned by an insured.

The Big Three Catastrophe Gaps

Most denied homeowners claims trace to one of these. Know which require a separate policy or endorsement:

Trap — water distinctions: A burst interior pipe (sudden accidental discharge) IS covered. Surface flood water entering the home is NOT. Sewer backup is NOT (without endorsement). Continuous/repeated seepage over weeks is NOT — the policy requires sudden and accidental discharge.

Anti-Concurrent Causation

The Section I exclusions are introduced by anti-concurrent causation language: if an excluded peril (e.g., flood) contributes to a loss in any sequence, the loss is excluded even if a covered peril (e.g., wind) also contributed. This is the legal basis for many hurricane wind-vs-water disputes, where carriers attribute damage to (excluded) storm surge rather than (covered) wind.

For the exam, distinguish anti-concurrent causation from the efficient proximate cause rule that some states impose by statute or case law. Under efficient proximate cause, coverage follows the predominant cause that set the chain in motion; under the policy's anti-concurrent language, the carrier needs only show an excluded peril contributed in any sequence. Insurers draft anti-concurrent wording precisely to override the more insured-friendly proximate-cause result.

Expect a question that asks which party benefits from anti-concurrent causation — the answer is the insurer, because it broadens the reach of the water and earth-movement exclusions.

Reading an Open-Peril Stem the Right Way

On HO-3 the dwelling is open-peril, so the exam answers a covered-or-not question by checking the exclusions list, not a list of covered perils — if it is not excluded and the loss is direct and physical, it is covered, and the insurer bears the burden of proving an exclusion applies. On personal property (HO-3 Coverage C) the trigger flips to named-peril, so the insured must prove the loss came from a listed peril. The same hailstorm can pay for roof damage (open-peril dwelling) while a contemporaneous mystery disappearance of contents is denied (named-peril, no listed peril).

This burden-of-proof flip is the single most tested homeowners idea.

The Section I Exclusions That Apply Even to HO-3/HO-5

Even open-peril forms exclude a fixed list: ordinance or law, earth movement, water damage (flood, surface water, sewer back-up unless endorsed), power failure (off-premises), neglect, war, nuclear hazard, intentional loss, and governmental action. Several carry anti-concurrent causation wording, so if flood or earth movement is anywhere in the chain the loss is excluded regardless of a contributing covered peril.

The Big Three Catastrophe Gaps and Their Fixes

The standard homeowners policy leaves flood, earthquake, and sewer/drain back-up uninsured. The fixes are external or endorsed:

• Flood — separate NFIP policy or private flood; never the HO form.
• Earthquake — HO earthquake endorsement (often with a percentage deductible).
• Water Back-Up of Sewers and Drains — a low-limit endorsement (e.g., $5,000–$25,000).

A stem describing basement flooding from a backed-up municipal sewer is not covered without that specific endorsement — surface water and back-up are both in the base exclusion.

Mold, Wear, and Maintenance

Gradual losses are excluded: wear and tear, deterioration, mechanical breakdown, mold/fungus/rot beyond a small sub-limit, settling, infestation by birds/vermin/insects, and pollution. The policy is not a maintenance contract; an exam loss caused by years of unrepaired roof leaks is denied as wear and tear, while a sudden pipe burst is covered.