3.3 Dwelling Perils, Conditions, and Endorsements
Key Takeaways
- DP-1 core perils are fire, lightning, and internal explosion; Extended Coverage (EC) adds windstorm, hail, explosion, riot, aircraft, vehicles, smoke, and volcanic eruption; V&MM adds vandalism
- The dwelling form excludes flood, earth movement, war, nuclear hazard, ordinance or law, neglect, and intentional loss - the same standard exclusion family found across property forms
- Key conditions include the pro rata Other Insurance clause, Subrogation, Loss Settlement (ACV vs RC), the duties after loss, and the 80% coinsurance requirement on DP-2/DP-3
- Common endorsements add liability (Personal Liability Supplement), Broad Theft, Dwelling Under Construction, Automatic Increase in Insurance, and Ordinance or Law
- Vacancy beyond a stated period (commonly 60 days) suspends vandalism, glass breakage, and water-damage coverage and may reduce other recoveries
Perils in Layers
Dwelling perils are best understood as concentric layers that widen from DP-1 to DP-3.
| Layer | Perils Added |
|---|---|
| DP-1 core | Fire, lightning, internal explosion |
| + Extended Coverage (EC) | Windstorm, hail, explosion, riot/civil commotion, aircraft, vehicles, smoke, volcanic eruption |
| + Vandalism & Malicious Mischief (V&MM) | Vandalism, malicious mischief |
| DP-2 broad | All of the above plus burglar damage, falling objects, weight of ice/snow/sleet, accidental water discharge, freezing, electrical surge, building collapse |
| DP-3 special | Open peril (all-risk) on buildings; named peril (DP-2 list) on contents |
Exam memory aid: The Extended Coverage perils are often recalled with "WHARVES" - Windstorm, Hail, Aircraft, Riot, Vehicles, Explosion, Smoke (volcanic eruption rounds out the list).
Standard Exclusions
All three dwelling forms share a family of exclusions. Even the open-peril DP-3 will not pay for these causes of loss:
- Flood and surface water (covered only by a separate NFIP or private flood policy)
- Earth movement (earthquake, landslide, sinkhole) - addable by endorsement
- War and nuclear hazard
- Ordinance or law (extra cost to rebuild to current code) - addable by endorsement
- Neglect to protect property after a loss
- Intentional loss by an insured
- Power failure off the premises and wear and tear / inherent vice
Exam trap: Earthquake and flood are the two perils candidates most often wrongly assume DP-3 covers. Open peril means "covered unless excluded," and both are explicitly excluded.
A DP-3 (special form) insured suffers building damage from a nearby river overflowing into the home. Is the loss covered?
Anti-Concurrent Causation
The dwelling exclusions are reinforced by an anti-concurrent causation clause. It states that an excluded peril is not covered even when it combines with a covered peril to produce the loss - regardless of the sequence of events.
Classic exam scenario: a hurricane brings both wind (covered under EC) and storm surge / flood (excluded). If flooding contributes to the damage, the anti-concurrent causation language lets the insurer deny the flood-attributable portion even though wind also played a role. Adjusters then apportion the wind-only damage, which is why hurricane claims so often hinge on a wind vs. water dispute.
Exam trap: Do not assume that because wind is covered, the entire hurricane loss is covered. The water/flood portion stays excluded under anti-concurrent causation.
Coinsurance and the Conditions in Action
The Loss Settlement condition ties directly to the 80% coinsurance rule on DP-2 and DP-3. To collect full replacement cost, the insured must carry at least 80% of the dwelling's replacement cost at the time of loss - which is why the Automatic Increase in Insurance endorsement matters in an inflationary market.
Consider a home whose replacement cost rose to $500,000 while the policy limit stayed at $350,000. The 80% requirement is $400,000, but only $350,000 is carried. A $100,000 loss recovers (350,000 / 400,000) x 100,000 = $87,500 before deductible - a $12,500 penalty caused purely by failing to track inflation. The Automatic Increase endorsement is designed to prevent exactly this drift.
Key Policy Conditions
Conditions are the rules of the contract. The most heavily tested dwelling conditions are:
- Loss Settlement: ACV on DP-1; replacement cost on DP-2/DP-3 subject to the 80% coinsurance requirement.
- Other Insurance (pro rata): If more than one policy covers the loss, each pays its proportional share of the limit.
- Subrogation: After paying, the insurer assumes the insured's right to recover from a responsible third party.
- Duties After Loss: Give prompt notice, protect property from further damage, prepare an inventory, and submit a proof of loss (commonly within 60 days).
- Appraisal: Either party may demand appraisal when they disagree on the amount (not coverage) of a loss.
- Vacancy: If the dwelling is vacant beyond a stated period (commonly 60 days), vandalism, glass breakage, and certain water losses are suspended.
Common Endorsements
The base dwelling form is deliberately bare; endorsements fill the gaps.
| Endorsement | What It Adds |
|---|---|
| Personal Liability Supplement | Coverage L (liability) and Coverage M (medical payments), absent from the base form |
| Broad Theft Coverage | On-premises and off-premises theft for an owner-occupant |
| Dwelling Under Construction | Adjusts limits as a home is built; premium reflects average amount at risk |
| Automatic Increase in Insurance | Periodically raises Coverage A to track inflation |
| Ordinance or Law | Pays the added cost to rebuild to current building codes |
| Theft - Limited (named insured) | Adds the otherwise-excluded theft peril, especially on DP-1 |
Worked Scenario
A landlord wants the DP-3 plus protection if a tenant is injured. The agent adds the Personal Liability Supplement for Coverage L and M. Without it, a tenant's slip-and-fall claim would have no coverage, because the dwelling form is property-only.
Which endorsement must be added to a dwelling policy to cover bodily injury liability to a tenant?
Duties After Loss and the Appraisal vs. Suit Distinction
When a loss occurs, the Duties After Loss condition imposes a checklist the insured must follow or risk a reduced or denied claim:
- Give prompt notice to the insurer or agent.
- Protect the property from further damage and keep records of repair costs.
- Prepare an inventory of damaged personal property with quantities and values.
- Cooperate with the investigation, exhibit damaged property, and submit to examination under oath if asked.
- Submit a signed, sworn proof of loss within the required period (commonly 60 days).
If the insured and insurer agree coverage applies but disagree on the dollar amount, either side may invoke Appraisal - each picks a competent appraiser, the two select an umpire, and any two of the three set the amount. Appraisal resolves value disputes, not coverage disputes. A pure coverage denial is challenged through the suit against the insurer condition, which typically requires filing within two years of the loss.
Exam trap: Appraisal cannot decide whether a peril is covered - only how much a covered loss is worth.