Section I Perils Insured Against and Exclusions

Named Peril vs. Open Peril

The single most important Section I concept is the difference in burden of proof between named-peril and open-peril coverage.

• Under named-peril coverage (HO-2, and Coverage C on HO-3/HO-4/HO-6), the loss is covered only if the cause appears on the list of perils insured against. The insured must prove the loss came from a listed peril.
• Under open-peril (also called "special" or "all-risk") coverage (HO-5, and Coverage A/B on HO-3), all direct physical loss is covered except what the policy excludes. The insurer must prove an exclusion applies to deny the claim.

This shift in burden is why open-peril coverage is broader and costs more. Exam questions often describe an unusual loss and ask whether the insured or insurer carries the burden.

A second reason open-peril matters: it picks up odd, unforeseen causes that no drafter would think to list, such as a falling satellite, a chemical spill that pits siding, or a contractor's tool puncturing a wall. Because those causes are not excluded, they are covered on an HO-5 (and on the HO-3 dwelling). Under named-peril contents coverage, the same odd loss is uncovered simply because it is not on the list, even though nothing excludes it. Memorize the phrasing: open peril covers "risk of direct physical loss" except as excluded; named peril covers loss "caused by" the perils listed.

The Broad-Form Named Perils (HO-2 and Coverage C)

The broad-form list (16 perils) is what HO-2 covers throughout and what HO-3 covers on personal property:

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

The HO-8 basic list is shorter (the first 10 or 11 perils through theft, with theft limited), omitting the water-discharge, freezing, and electrical perils.

Section I Exclusions

The following are excluded on all forms, including open-peril HO-5. These are the perils a homeowner must insure elsewhere or by endorsement:

• Ordinance or law (beyond the 10% additional coverage)
• Earth movement (earthquake, landslide, sinkhole) - covered by HO 04 54 quake endorsement or DIC
• Water damage - flood, surface water, sewer/drain backup, and groundwater seepage (flood requires NFIP or private flood; sewer backup is a separate endorsement HO 04 95)
• Power failure (off premises)
• Neglect to preserve property at and after a loss
• War, nuclear hazard, intentional loss by an insured
• Governmental action (seizure/destruction by authority, except to stop a fire)

Anti-Concurrent Causation

The Section I exclusions open with an anti-concurrent causation lead-in: the listed exclusions apply regardless of any other cause or event contributing concurrently or in any sequence to the loss. This is heavily tested.

Classic application: a hurricane causes both wind damage (covered peril) and storm-surge flooding (excluded water damage). Under anti-concurrent causation, the flood portion stays excluded even though a covered peril (wind) occurred at the same time. The insurer pays the wind damage but not the surge damage, and the insured needs separate flood coverage. Do not let a candidate assume that pairing an excluded cause with a covered one rescues the excluded loss.

Contrast this with ensuing-loss language, which works in the insured's favor. Some exclusions add: if an excluded peril causes a separate covered peril, the resulting (ensuing) loss is paid. Example: faulty workmanship (excluded) causes a pipe to leak, and the escaping water causes mold and ceiling damage. The faulty work is excluded, but the ensuing water damage may be covered. Distinguish anti-concurrent causation (keeps an exclusion intact despite a simultaneous covered cause) from the ensuing-loss exception (restores coverage for a covered peril that follows an excluded one).

The Structural Logic of HO-3 Perils

The HO-3 is built on an asymmetry that the exam tests relentlessly: open peril on the structure (Coverages A and B) but named peril on personal property (Coverage C). So a bizarre, unnamed cause of damage to the dwelling is covered unless excluded, while the same exotic cause striking contents is not covered because it is not on the named-peril list.

The HO-5 erases this asymmetry by extending open-peril to contents, which is its chief selling point. When a scenario describes an unusual cause harming personal property, check whether the form is HO-3 (deny on contents) or HO-5 (cover).

The Big Exclusions and Anti-Concurrent Causation

Section I excludes a consistent set of catastrophic or maintenance-type causes: flood/surface water, earthquake/earth movement, ordinance or law, war, nuclear hazard, neglect, intentional loss, governmental action, and power failure off premises, plus wear and tear, mold, and pest damage. Flood and earthquake are excluded because they are catastrophic and non-random across a book of business; each is insured separately (NFIP/private flood; earthquake endorsement or policy).

The anti-concurrent causation clause is the high-value concept: when an excluded peril (such as flood) combines with a covered peril (such as wind) to cause one loss, the policy language excludes the entire loss attributable to that excluded cause regardless of any other cause contributing in any sequence. Worked example: a hurricane brings $40,000 of wind damage and $60,000 of storm-surge flooding. Wind is covered; the surge is flood and excluded by anti-concurrent causation. The homeowners policy pays the $40,000 wind portion, and only a flood policy responds to the $60,000.