4.3 Section I Perils Insured Against and Exclusions

Section I 'Perils Insured Against' sets the trigger for property coverage. On HO-3 the dwelling and other structures (A and B) are covered on an open-perils basis (risk of direct physical loss unless excluded), while personal property (C) is covered only for the 16 named perils. HO-5 extends open perils to personal property as well.

The Broad Named-Peril List (16 Perils)

These apply to HO-3 Coverage C and to all coverages on HO-2:

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/overflow of water or steam (plumbing/HVAC)
13. Sudden/accidental tearing apart, cracking, burning, or bulging of a steam/water heating system
14. Freezing of plumbing, heating, AC, or appliances
15. Sudden/accidental damage from artificially generated electrical current
16. Volcanic eruption

Section I Exclusions - Memorize These

Whether coverage is open or named perils, the policy will not pay for losses caused by:

• Ordinance or Law - increased cost to rebuild to current building codes (buy back with HO 04 77).
• Earth Movement - earthquake, landslide, sinkhole, mudflow (earthquake endorsement HO 04 54 buys back quake).
• Water Damage - flood, surface water, waves, sewer/drain backup, and water below the surface (flood = NFIP policy; backup = HO 04 95 endorsement).
• Power Failure - loss caused by power interruption off the residence premises.
• Neglect - failure of the insured to use reasonable means to save and preserve property.
• War, Nuclear Hazard, and Intentional Loss by an insured.
• Governmental Action - seizure or destruction by order of government (except to prevent the spread of fire).

The Concurrent Causation Rule (High-Yield Trap)

The Section I exclusions begin with anti-concurrent-causation language: the listed losses are excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. Practically:

• A hurricane drives both wind (covered) and storm-surge flood (excluded) into a home. The flood damage is excluded even though wind contributed, because flood is an anti-concurrent excluded peril.
• The insured must look to a separate flood policy (NFIP) for the surge damage; the HO policy pays only the clearly wind-caused portion (e.g., roof torn off before water entered).

Exam Tip: When a question pairs a covered weather peril with flood or earth movement, the excluded peril controls the related damage. Do not assume 'wind started it' brings the water damage back.

Special Limitations Inside Open Perils

Even on the open-perils dwelling, HO-3 carves out specific losses that are not covered or only covered if 'sudden and accidental':

The theme connecting these limitations is maintenance versus fortuity. Insurance pays for sudden, accidental, fortuitous events - not for the slow, expected consequences of failing to maintain property. A pipe that bursts is covered; a pipe that leaks slowly for months behind a wall is excluded as continuous seepage. This distinction is heavily tested.

Buying Back Excluded Perils

Because flood and earthquake are excluded from every HO form, agents must place separate coverage to close the gap:

• Flood - written through the National Flood Insurance Program (NFIP) or a private flood carrier. The NFIP Dwelling Form has a building limit of up to $250,000 and contents of $100,000, with a standard 30-day waiting period before coverage takes effect.
• Earthquake - added by the HO 04 54 earthquake endorsement (or a stand-alone quake policy in high-exposure states like California, where the CEA writes most residential quake cover). Earthquake deductibles are percentage-based (commonly 10-15% of Coverage A).
• Water/Sewer Backup - added by the HO 04 95 endorsement, which covers backup through sewers or drains and sump-pump overflow up to a selected sublimit.

Exam Tip: If a question shows flood or quake damage on an unendorsed HO policy, the answer is 'not covered - separate policy/endorsement required.'

HO-3 Peril Structure and the Open-Peril Burden

The HO-3 insures the dwelling and other structures on an open-peril (special) basis - all direct physical loss is covered except what is excluded - while personal property is named-peril (broad). The HO-5 extends open perils to contents as well. Under open-peril coverage the insurer bears the burden of proving an exclusion; under named-peril contents coverage the insured must show the loss matches a listed peril.

Section I Exclusions

The standard Section I exclusions (frequently tested) include:

The Anti-Concurrent Causation Clause

Section I begins its exclusions with an anti-concurrent causation (ACC) lead-in: excluded losses are not covered "regardless of any other cause or event contributing concurrently or in any sequence." This means if an excluded peril (flood) combines with a covered peril (wind) to cause damage, the ACC language can bar the entire loss to the extent the excluded peril contributed - a pivotal hurricane-litigation concept.

Worked example: a wind-driven rainstorm also produces storm-surge flooding that destroys a home. Wind damage to the roof and interior is covered under the HO-3 (open peril, wind not excluded), but damage from the storm surge / flood is excluded; the ACC clause prevents the insured from arguing the concurrent wind "pulls in" the flood loss. Flood damage requires a separate NFIP policy. Distinguishing wind from flood causation is one of the highest-value exam topics.