The open perils coverages and exclusions that apply to coverages A and B of the HO 00 03 05 11 and coverages A, B, and C of the HO 00 05 05 11 also apply to forms HO 00 06 05 11, coverages A and C, and HO 00 04 05 11, coverage C, when these forms are endorsed. The following discussion incorporates changes made to the standard homeowners forms in the homeowners 2011 program.

Topics covered:

Introduction

Open perils exclusions

Coverage C open perils exclusions

Section I—general exclusions

Introduction

Only a few forms provide open perils coverage. Special form HO 00 03 provides open perils coverage for the dwelling and other structures. Form HO 00 05 provides open perils coverage for dwelling, other structures, and personal property. Form HO 00 06 (unit owners) normally provides named perils coverage, but can be endorsed by HO 17 32 05 11 to cover building items on an open perils basis, and by HO 17 31 05 11 to provide this coverage for personal property. New with the 2000 program was endorsement HO 05 24 05 11, which may be attached to the HO 00 04 05 11 to provide open perils coverage for a tenant homeowner's contents. The HO 05 24 was updated in 2011 for easier reading and added an exclusion for nesting, infestation, or discharge or release of any waste products or secretions by any animal.

The "perils insured against" provisions of section I contain the exclusions that specifically limit the open perils coverages of standard homeowners forms. Some of these have been discussed previously (see ISO Homeowners Section I, and see Homeowners Perils) since equivalent exclusionary language is incorporated into the provisions of individual named perils, such as smoke from agricultural smudging or industrial operations or theft from a building under construction or of building materials.

This discussion centers on the general exclusions applying to coverages A and B of the HO 00 03 and HO 00 05, and coverage C of the HO 00 05. The policy language quoted is taken from the HO 00 03, except with regard to the open perils exclusions that apply to personal property. This is found in the HO 00 05, HO 17 31, and HO 05 24.

Open Perils Exclusions

A Coverage A—Dwelling and Coverage B—Other Structures

1.We insure against risk of direct physical loss to property described in Coverages A and B. (form HO 00 05: We insure against risk of direct physical loss to property described in coverages A, B, and C.)

2.We do not insure, however, for loss:

a.Excluded under Section I – Exclusions;

b.Involving collapse, including any of the following conditions of property or any part of the property:

(1)An abrupt falling down or caving in;

(2)Loss of structural integrity, including separation of parts of the property or property in danger of falling down or caving in; or

(3)Any cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion as such condition relates to (1) or (2) above; except as provided in E.8. Collapse under Section I – Property Coverages; or (form HO 00 05: 2. Involving collapse, other than as provided in E.8. Collapse under Section I Property Coverages. However, any ensuing loss to property described in Coverages A and B not precluded by any other provision in this policy is covered.)

Analysis

In conjunction with the additional coverage of collapse, which applies only to collapse damage resulting from specific perils, a collapse exclusion applies to open perils coverage for buildings and other structures. The exclusion rules out coverage for collapse losses other than those listed in the additional coverage. Despite the collapse exclusion, ensuing loss is covered unless it too is the subject of a specific exclusion.

The section I exclusions will be addressed later in this discussion.

c.Caused by:

(1)Freezing of a plumbing, heating air conditioning or automatic fire protective sprinkler system or of a household appliance, or by discharge, leakage or overflow from within the system or appliance caused by freezing. This provision does not apply if you have used reasonable care to:

     (a) Maintain heat in the building; or

     (b) Shut off the water supply and drain all systems and appliances of water.

     However, if the building is protected by an automatic fire protective sprinkler system, you must use reasonable care to continue the water supply and maintain heat in the building for coverage to apply.

     For purposes of this provision a plumbing system or household appliance does not include a sump, sump pump or related equipment or a roof drain, gutter, downspout or similar fixtures or equipment;

Analysis

For a discussion of the peril of freezing, see Homeowners Perils. An item that comes up repeatedly is maintaining heat in the building; what temperature does that mean? The policy is silent, and the industry itself has no standard. Building experts recommend setting the thermostat no lower than fifty-five degrees to ensure that the pipes are safe. Setting it just above freezing is not enough to keep a dwelling warm enough to prevent frozen pipes, especially if a sudden drop in temperature occurs. Space heaters are also not sufficient heat to prevent freezing.

 (2) Freezing, thawing, pressure or weight of water or ice, whether driven by wind or not, to a:

 (a) Fence, pavement, patio, deck or swimming pool;

    (b) Footing, foundation, bulkhead, wall, or any other structure or device that supports all or part of a building, or other structure;

     (c) Retaining wall or bulkhead that does not support all or part of a building or other structure; or

     (d) Pier, wharf or dock;

Analysis

Although freezing and thawing are excluded with regard to several parts of a building, roofs are not one of the excluded parts. This leaves the way open for coverage for damage caused by ice damming, whereby snow compacts, freezes, and then thaws. The water backs up between shingles and enters a building, with the result that water damages the interior walls.

 (3)Theft in or to a dwelling under construction, or of materials and supplies for use in the construction until the dwelling is finished and occupied;

Analysis

This exclusion was discussed elsewhere—see Homeowners Perils. In the HO 00 03, it is found both in the exception to the theft peril for contents coverage, and in the exclusions of coverage for dwelling and other structures. In the HO 00 05, it appears only once, but is applicable to coverages A, B, and C. Basically, when a property is under construction materials are left at the site, and since the building is not finished theft of materials is very easy, and thus is excluded.

 (4) Vandalism and malicious mischief, and any ensuing loss caused by any intentional and wrongful act committed in the course of the vandalism or malicious mischief, if the dwelling has been vacant for more than 60 consecutive days immediately before the loss. A dwelling being constructed is not considered vacant;

Analysis

Form HO 00 05 applies this exclusion only to coverages A and B, as does the HO 00 03. In form HO 00 02, the peril of "vandalism or malicious mischief," with its exclusion of coverage if the dwelling is vacant, applies to coverages A, B, and C.

Ensuing losses arising from any act of vandalism after sixty consecutive days of vacancy have elapsed are excluded. Suppose someone enters a vacant dwelling with the intention of spray-painting the interior, and lights a match, using the spray paint propellant to start a fire. Even though fire is a covered cause of loss, since it is an ensuing loss in this case it will still be excluded.

(5) Mold, fungus or wet rot. However, we do insure for loss caused by mold, fungus or wet rot that is hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure if such loss results from the accidental discharge or overflow of water or steam from within:

    (a) A plumbing, heating, air conditioning or automatic fire protective sprinkler system or a household appliance on the "residence premises"; or

    (b) A storm drain or water, steam or sewer pipes off the "residence premises".

    For purposes of this provision, a plumbing system or household appliance does not include a sump, sump pump or related equipment or a roof drain, gutter, downspout or similar fixtures or equipment; or

Analysis

An undetected loss—wet rot that is within walls or floors and ceilings—caused by repeated seepage or leakage of a plumbing, heating, air conditioning, household appliance, or fire sprinkler system will be covered. This allows an innocent insured with no knowledge of a plumbing leak to be covered for the loss, but still disallows coverage for an insured who knows about a leak but who has chosen to take no action. Note also that loss resulting from accidental discharge of a storm drain or water, steam or sewer pipe located off the residence premises is covered.

(6) Any of the following:

     (a) Wear and tear, marring, deterioration;

     (b) Mechanical breakdown, latent defect, inherent vice, or any quality in property that causes it to damage or destroy itself;

     (c) Smog, rust or other corrosion, or dry rot;

     (d) Smoke from agricultural smudging or industrial operations;

     (e) Discharge, dispersal, seepage, migration, release or escape of pollutants unless the discharge, dispersal, seepage, migration, release or escape is itself caused by a Peril Insured Against under Coverage C of this policy. (Form HO 00 05: … caused by a Peril Insured Against in a. through o. as listed in E.10 Landlord's Furnishings under Section I—Property Coverages. These are the form HO 00 05 equivalents of the form HO 00 03 named perils for personal property.)

     Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed;

     (f) Settling, shrinking, bulging or expansion, including resultant cracking, of bulkheads, pavements, patios, foundations, walls, floors, roofs or ceilings;

     (g) Birds, vermin, rodents, or insects; or

    (h) Nesting or infestation, or discharge or release of waste products or secretions, by any animals; or

(i) Animals owned or kept by an "insured".

Analysis

These exclusions, applicable only to open perils homeowners coverage, are derived from older all risks policy language and are intended to rule out coverage for two kinds of losses. The first are nonfortuitous events—types of loss that are certain to happen over a period of time and therefore do not represent a risk of loss (the possibility that a loss will either occur or not occur) because they are certain to occur. For example, aluminum siding will, over time, show signs of wear. In the second group are losses that are so controllable with reasonable care that only gross disregard by the insured will lead to loss—leaving metal objects out in the rain, allowing pets to damage carpeting, drapes or furniture, etc.

The application of any of these exclusions should be governed by the intent behind the entire list—to reinforce the policy's function as a source of protection from accidental loss. Homeowners insurance is not intended to cover the wear and tear or gradual marring that wood furniture or a tile floor, for example, are subject to. But when an unexcluded, accidental cause of loss results in sudden damage to such property—a heavy object dropped on the floor that cracks the tiles, for instance—it is not appropriate to apply the wear and tear or marring exclusion to such damage.

The 2011 program, as did the 2000 forms, excludes coverage for loss caused by the "discharge, dispersal, seepage, migration, release or escape of pollutants unless the discharge, dispersal, seepage, migration, release or escape is itself caused by a Peril Insured Against under Coverage C…." In addition to providing coverage for pollution losses caused by a coverage C peril, there is a broad definition of pollutants: "Pollutant means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed…."

These exclusions are the latest development in the evolution of what began as the exclusion of coverage for losses caused by "contamination" (in the 1977 and 1982 forms editions). Contamination is a process that occurs over time, whereas the 1984 and current forms also exclude sudden and accidental events. The transformation of the contamination exclusion into the current pollution exclusion may result in the denial of coverage for losses that were not only covered in the past, but were used as reasons to purchase an HO-3 policy over an HO-2. For example, some may argue that paint spilled on a wall-to-wall carpet is a non-covered loss because the paint is a discharged or released pollutant. The current provision of coverage for pollution losses if they arise from a coverage C peril somewhat reduces the severity of the exclusion; however, it appears that losses an insured previously could reasonably expect to find covered are now excluded.

The policy excludes coverage for damage to pavements, patios, foundations, walls, floors, roofs, or ceilings caused by settling, shrinking, bulging or expansion. Again, these are things that will occur over time.

The absence of definitions for terms used in the open perils exclusions creates controversy. While some of the words, e.g., wear and tear, deterioration, and inherent vice, have a long history of legal interpretation, others such as "vermin" are still the subject of disagreement.

Two court decisions have dealt with the meaning of "vermin," both determining that particular creatures (carpet beetles and raccoons respectively) are not vermin, but leaving open the question of what other kinds of creatures are. In Sincoff v. Liberty Mut. Fire Insurance Co., 183 N.E.2d 899 (1961), a New York court of appeals found damage to antique fabrics by carpet beetles outside the vermin exclusion, while in Umanoff v. Nationwide Mutual Fire Ins. Co., 442 N.Y.S.2d 892 (New York 1981), damage in an attic by a family of raccoons was also found not to be vermin damage. In a third case, North British & Mercantile Ins. Co. v. Mercer, 84 S.E.2d 570 (1954), a Georgia court declared that squirrels are not vermin, but squirrel damage, under the current language, is excluded by the term "rodent." However Sincoff was reversed on appeal, and the court found that vermin as used in a property exclusion did not include damage by carpet beetles. Sincoff v. Liberty Mut. Fire Ins. Co. 11 N.Y.2d 386, 183 N.E.2d 899 (N.Y. 1962).

The policy now specifically excludes nesting or infestation, or discharge or release of waste products or secretions, by any animals; this helps deal with the confusion over what exactly is a varmint. Here damage from any animal that nests or infests a premises is excluded from coverage.

Loss caused by animals owned or kept by an insured is excluded. In other words, if a guest's disobedient dog digs up the insured's carpeting, the loss is covered since the animal is not "owned or kept" by the insured. The change in policy language fulfills the original intent of the exclusion, i.e., to exclude pet damage an insured's poorly trained animals cause over time. Since this was the intent of the exclusion from its introduction, invasion of a home and consequent sudden and accidental damage by someone else's animal is outside the spirit of the exclusion even under the previous policy language (which excluded coverage for loss caused by domestic animals). At least one dictionary definition of "domestic" supports the argument for coverage under the earlier language, defining the term as "of or relating to the household or family" (Webster's Ninth New Collegiate Dictionary). However, some insurers chose to apply the domestic animals exclusion to any kind of damage by any animal meeting the broad description of domesticated animal and did not limit it to animals of the insured's own household.

     Exception to c.(6)

     Unless the loss is otherwise excluded, we cover loss to property covered under Coverage A or B (form HO 00 05: A, B, or C) resulting from an accidental discharge or overflow or water or steam from within a:

    (i) Storm drain or water, steam or sewer pipe off the "residence premises"; or

     (ii) Plumbing, heating, air conditioning or automatic fire protective sprinkler system or household appliance on the "residence premises". This includes the cost to tear out and replace any part of a building, or other structure, on the "residence premises", but only when necessary to repair the system or appliance. However, such tear out and replacement coverage only applies to other structures if the water or steam causes actual damage to a building on the "residence premises".

     We do not cover loss to the system or appliance from which this water or steam escaped.

    For purposes of this provision, a plumbing system or household appliance does not include a sump, sump pump or related equipment or a roof drain, gutter, down spout or similar fixtures or equipment.

     Section I—Exclusion A.3 Water Damage, paragraphs a. and c. that apply to surface water and water below the surface of the ground do not apply to loss by water covered under c.(5) and (6) (Form HO 00 05: under d. and e.) above.

Under 2.b. and c. above, any ensuing loss to property described in Coverages A and B not precluded by any other provision in this policy is covered.

Analysis

There is coverage for ensuing water damage arising from all eight perils excluded under the "wear and tear, marring," etc. provisions (6)(a) through (6)(h), and from the escape of water from heating, air conditioning, and automatic fire protective sprinkler systems as well as from plumbing and household appliances. So, for example, over time a water pipe may simply wear out and begin to leak. Any ensuing water damage cannot be denied based on the "wear and tear" exclusion, although there is no coverage for the pipe.

Coverage for water damage, unless otherwise excluded, from accidental discharge or overflow of water from a storm, water, steam, or drain pipe off the residence premises is provided. The forms specifically state that exclusion A.3 water damage, for surface water or water below the surface of the ground, does not apply.

The language of the ensuing water damage provision specifies coverage for "the cost to tear out and replace any part of a building or other structure on the residence premises necessary to repair the system or appliance." Say an underground water pipe freezes and bursts, with the result that the water flows into the insured's residence. If the insured is forced to tear out a driveway to get to the pipe, the tear out and replacement of the driveway are covered. This leaves unaddressed the issue of coverage for the cost of getting at outdoor, underground plumbing when earth, but no building wall or floor is in the way. If covered property—in the above case, the water pipe—is damaged by a peril insured against, then the insured may look to the additional coverage for "reasonable repairs" to pay such costs. See "Homeowners Section I", Personal Lines Volume, Dwellings section, for information on reasonable repairs. However, the pipe must be damaged by a peril insured against.

If an underground water pipe on the premises began leaking due to wear and tear (excluded), and there was no damage to the dwelling itself, would there be coverage to tear up and repair the pipe? The 2011 homeowners lists "water" as property not covered. Each individual case should be reviewed carefully to determine coverage, since there is no coverage unless there is damage to covered property by a peril insured against.

Gutters, downspouts, roof drains, and sump pumps do not fall within the "accidental discharge" coverage provision. In the past, there have been attempts to designate these as part of the dwelling's plumbing system. "Plumbing," according to Webster's New Collegiate Dictionary, is the system of pipes and fixtures concerned with the use of water within a building, not with its removal from outside.

Although gutters, downspouts, drains, and sump pumps are not considered part of a building's plumbing system, it is important to remember that fixtures, such as toilets, sinks, tubs, and shower pans are a part of the system. Therefore, overflow from within a tub is covered as is overflow from within a pipe.

Under 2.b. and c. above [form HO 00 05: 2.a. through e.], any ensuing loss to property described in Coverages A and B [form HO 00 05: Coverages A, B and C] not precluded by any other provision in this policy is covered.

Analysis

Unfortunately, a casual reading of the exclusionary language of the policy can result in the impression that there is no coverage for accidental, ensuing damage caused by one of the wear and tear, marring, etc. exclusions. However, the intent is to cover unexcluded ensuing loss caused by any of the excluded perils. For example, damage caused by rodents is excluded. But if rodents cause a fire (by chewing into electrical wiring, for instance), there is coverage for the fire loss.

An example of an incomplete policy reading is evident in a New York case concerning exclusionary language similar to that found in ISO forms. The case is Rock v. Allstate, 500 N.Y.S.2d 460 (1985), where an underground boulder dislodged by the weight of delivery trucks in the insured's driveway crushed a cesspool pipe. The insurer called the boulder a "latent defect" and referred to policy terms excluding coverage for any damage caused by a latent defect. The court agreed, neglecting to take into account the policy provision allowing coverage for accidental, ensuing damage caused by latent defect. Of course, the cost of correcting the placement (removing) of the dislodged boulder—the latent defect itself—would not be covered by the policy, but coverage should have been found for loss to the cesspool pipe as accidental damage caused by the latent defect (and not otherwise excluded).

Coverage C Open Perils Exclusions

Endorsements can be added to forms HO 00 04 (tenant homeowners) and HO 00 06 (unit owners) to provide open perils coverage on contents. HO 05 24 (used with the HO 00 04) and HO 17 31 (used with HO 00 06) apply the exclusions discussed above to personal property. But they also contain certain different exclusions that apply to personal property. The HO 00 15, which was used with the 1991 HO 00 03, has been withdrawn with the introduction of the HO 00 05, which gives open perils coverage to personal property.

Form HO 00 05 and endorsements HO 17 31 and HO 05 24 delete the additional coverage of "collapse" with respect to personal property; damage to personal property resulting from collapse of a building or any part of a building is covered no matter what causes the collapse.

We do not insure, however, for loss:

C. Under Coverage C caused by:

1.Breakage of eyeglasses, glassware, statuary, marble, bric-a-brac, porcelains and similar fragile articles other than jewelry, watches, bronzes, cameras and photographic lenses.

     However, there is coverage for breakage of the property by or resulting from:

a.Fire, lightning, windstorm, hail;

b.Smoke, other than smoke from agricultural smudging or industrial operations;

c.Explosion, riot, civil commotion;

d.Aircraft, vehicles, vandalism and malicious mischief,

e.Collapse of a building or any part of a building;

f.Water not otherwise excluded;

g.Theft or attempted theft; or

h.Sudden and accidental tearing apart, cracking, burning or bulging of:

(1)A steam or hot water heating system;

(2)An air conditioning or automatic fire protective sprinkler system; or

(3)An appliance for heating water;

2.Dampness of atmosphere or extremes of temperature unless the direct cause of loss is rain, snow, sleet or hail;

3.Refinishing, renovating or repairing property other than watches, jewelry and furs;

4.Collision, other than collision with a land vehicle, sinking, swamping or stranding of watercraft, including their trailers, furnishings, equipment and outboard engines or motors;

5.Acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body. However, any ensuing loss to property described in Coverage C not excluded or excepted in this policy is covered.

Analysis

Breakage of certain fragile articles—eyeglasses, glassware, statuary, marble, bric-a-brac, porcelains, and similar articles (but not jewelry, watches, bronzes, cameras, or photographic lenses)—is covered only if caused by fire or lightning, windstorm, hail, non-excluded smoke, explosion, riot, civil commotion, aircraft, vehicles, vandalism or malicious mischief, unexcluded water damage, collapse, theft, or rupture or burning of a steam or hot water heating system, air conditioning or automatic sprinkler system, or appliance for heating water. Note that earthquake coverage is removed from this section in the 2011 form.

Dampness of atmosphere and extremes of temperature are covered only when the cause is rain, snow, sleet, or hail. Damage caused by refinishing, renovating, or repairing property is excluded except with respect to jewelry, watches, and furs. Note the use of the gerund (the verb expressed as an action in continuance) in this exclusion. Damage directly caused by refinishing, repairing, or renovating while the article is in the process of being refinished, renovated, or repaired is excluded; however, damage that is not related to these processes and not excluded elsewhere is covered. Say that a portrait is sent to an art restorer to be cleaned. In the process, the wrong chemical is used and the portrait is bleached. The damage is not covered; the restorer is responsible for this. But if the portrait is dropped and the frame breaks, the broken frame is covered since the damage arose out of dropping, not out of restoration. Or, a restorer might damage wooden furniture through application of the wrong varnish. This is excluded. There is coverage, however, for damage by fire that starts when a person lights a cigarette near some paint thinner while doing the refinishing work. This exclusion is akin to the section I exclusion for faulty repair or maintenance that applies to coverages A and B.

Collision, sinking, swamping, or stranding of watercraft (including their trailers, furnishings, equipment, and outboard motors) is excluded except for collision of a watercraft with a land vehicle. (Other property lost in a sunken boat may covered by way of the vehicles peril. See Homeowners Perils. A narrow reading of this peril—as applying to all coverage C property—would leave an insured in the unfortunate position of having less coverage than someone with named perils coverage. Think of personal belongings lost when a cruise ship sinks. The intent is to preclude coverage for watercraft, since frequent causes of loss of watercraft are swamping, sinking, or stranding, and not for the personal property contained therein.

Also removed from this section is destruction, confiscation, or seizure of personal property by any government or public authority; this is a change from prior forms. With these activities no longer being excluded, an insured could make a claim for any property destroyed, confiscated, or damaged by the police, even though the insured may be engaged in illegal activity. Acts or decisions of any person, group, organization, or governmental body are still excluded. The acts or decisions exclusion was one of the exclusions created to combat the doctrine of concurrent causation. See Concurrent Causation and Efficient Proximate Cause for a discussion of this doctrine. The exception to the "acts or decisions" exclusion is that ensuing unexcluded losses to personal property are covered. For example, the local fire department decides to test the fire hydrants in a neighborhood by shutting them off. When a fire breaks out, there is no water to fight it, and an insured's personal property (along with the dwelling) burns. The fire loss is covered.

Section I—General Exclusions

Another group of exclusions apply to homeowners section I coverages in general. They appear under the heading "Section I—Exclusions" in each homeowners form. All of the forms contain the same nine exclusions, forms HO 00 03 and HO 00 05 contain three additional exclusions (beginning with exclusion B.) under this heading. Likewise, special coverage endorsement HO 17 32 for coverage A of form HO 00 06 contains the three additional exclusions.

The nine general exclusions operate "regardless of any other cause or event contributing concurrently or in any sequence to the loss." The purpose of this restrictive language (added to the 1984 edition, and carried forward into each subsequent edition) is to rule out coverage for losses that would be payable under the doctrine of concurrent causation. This doctrine has been applied by some courts to find coverage under open perils policies for losses caused jointly by an excluded peril, such as flooding or earth movement, and some other peril not excluded by the policy. The doctrine of concurrent causation also prompted the addition of the three exclusions to the general section I exclusions. These exclusions only apply to coverages A and B (dwelling and other structures), and allow for coverage for ensuing losses not otherwise excluded. See below for more information.

Section I—Exclusions

A.We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.

1.Ordinance or Law

     Ordinance or Law means any ordinance or law:

a.Requiring or regulating the construction, demolition, remodeling, renovation or repair of property, including removal of any resulting debris. This exclusion A.1.a. does not apply to the amount of coverage that may be provided for in E.11. Ordinance or Law under Section I—Property Coverages;

b.The requirements of which result in a loss in value to property; or

c.Requiring any "insured" or others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, pollutants.

    Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed

     This exclusion 1. applies whether or not the property has been physically damaged.

Analysis

Damage arising out of the enforcement of any ordinance or law that governs repair or renovation, construction, or demolition of a covered building is excluded except as provided under the additional coverage for ordinance or law, or when additional ordinance or law coverage is obtained by adding endorsement HO 04 77 10 00. Losses excluded by this provision include reduction in value of the property due to changes in zoning or land use; and expenses incurred to test for, clean up, or remove pollutants.

The exclusion applies whether the covered property has been physically damaged. Say, for example, an earthquake damages many pieces of property, but the insured's residence is left unscathed. But as a result, all property in the area must be inspected and retrofitted, including the insured's. Since the exclusion applies whether or not the property has been physically damaged, the cost to retrofit is not covered.

2.Earth Movement

     Earth Movement means:

a.Earthquake, including land shock waves or tremors before, during or after a volcanic eruption;

b.Landslide, mudslide, or mudflow;

c.Subsidence or sinkhole; or

d.Any other earth movement including earth sinking, rising or shifting.

     This Exclusion A.2. applies regardless of whether any of the above, in A.2.a. through A.2.d., is caused by an act of nature or is otherwise caused. However, direct loss by fire, explosion or theft resulting from any of the above, in A.2.a.through A.2.d., is covered.

Analysis

Excluded as "earth movement" are: earthquake (including land shock waves or tremors preceding and after volcanic eruption); landslide; mine subsidence; mudflow; earth sinking, rising, or shifting. Ensuing loss by fire, explosion, or glass breakage is not reached by the exclusion.

Earth movement caused by nature or other forces are excluded. Think of the 1995 Oklahoma City bombing of the Murrah Federal Building. The force of the explosion sent out land shock waves. The nonconcurrent causation language would presumably preclude coverage even though the shock waves were caused by explosion. But in the past, some jurisdictions held that for earth movement to be excluded it must: a) occur naturally; and b) occur over a widespread area. In such jurisdictions, coverage would be found because the earth movement was of human origin, and occurred over a limited area. Now, however, these loopholes have been closed.

When coverage C is written to provide open perils coverage, the earth movement exclusion operates only with respect to coverage on the dwelling and other structures. Personal property damaged by earthquake, landslide, etc., is covered.

3.Water Damage

     Water Damage means:

a.Flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind;

b.Water or water-borne material which backs up through sewers or drains or which overflows or is discharged from a sump, sump pump or related equipment; or

c.Water or water-borne material below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure;

d.Waterborne material carried or otherwise moved by any of the water referred to in A.3.a. through A.3.c. of this exclusion. This Exclusion A.3. applies regardless of whether any of the above, in A.3.a. through A.3.d., is caused by an act of nature or is otherwise caused.

This Exclusion A.3. applies to, but is not limited to, escape, overflow or discharge, for any reason, of water or waterborne material from a dam, levee, seawall or any other boundary or containment system.

However, direct loss by fire, explosion or theft resulting from any of the above, in A.3.a. through A.3.d., is covered.

Analysis

Standard homeowners insurance is subject to the same water damage exclusions relating to flood and surface water, sewer back-up, and subsurface water that are characteristic of other standard property forms. The last two provisions apply when open perils coverage is written on personal property, as in the HO 00 05, or when the HO 17 31 is attached to the HO 00 06 or the HO 05 24 is attached to the HO 00 04. But note that the property cannot be on any location or premises that is occupied by or in any way controlled by an insured.

Note that "water-borne material" now forms part of the exclusion. In the case of Sterling v. City of West Palm Beach et al., 595 So. 2d 295 (Florida, 1992), the court of appeals said that there was no exclusion in the policy for raw, untreated sewage, and that if an ambiguity existed, the policy must be construed to provide coverage. The inclusion of "water-borne material" should eliminate any ambiguity.

Water damage resulting from the overflow or discharge of a sump is excluded. In the past, a portable sump pump was viewed as an appliance; therefore if the hose ruptured, there was a possibility of coverage. However, as discussed elsewhere (Homeowners Perils) the peril of accidental discharge specifically states that it does not include loss resulting from a sump pump.

The water damage exclusions do not affect coverage for fire, explosion, or theft loss that results from excluded water damage. Nor do they apply, when coverage C (personal property) is written on an open perils basis, to property away from a premises or location owned, rented, occupied, or controlled by an insured.

4.Power Failure

     Power failure means the failure of power or other utility service if the failure takes place off the "residence premises." But if the failure of power or other utility service results in a loss, from a Peril Insured Against on the "residence premises", we will pay for the loss caused by that peril.

Analysis

If the point of interruption in power or utility supply is away from the residence premises, and the failure results in a loss from an insured peril, that resulting loss is covered. For example, say there is storm damage to an electrical generating station so that the insured dwelling is without heat for a day. The insureds are uncomfortable, but since the temperature in the dwelling does not drop below 55 there is no damage. There is no insurable loss. But say the heat is out for a week, and the pipes burst. This ensuing loss is covered. Or, an off-premises power failure causes the insured's frozen food to thaw. This loss is indirect; cooling failure is not an ensuing peril insured against. Therefore, the loss is not covered. But under special perils coverage for personal property (as with form HO 00 05, or when form HO 00 06 is endorsed by HO 17 31 or form HO 00 04 by HO 05 24), the provision of coverage for loss caused by an ensuing covered (i.e., unexcluded) peril might be read to extend to losses such as food spoilage when power to a freezer is cut off. The food spoilage could be seen as resulting from an ensuing peril—"cooling failure," which is not the subject of any exclusion—occurring on the residence premises. The closest exclusion is for "extremes of temperature," which would not appear to apply to gradually thawing food.

Loss caused by a power failure that has its origins on the residence premises is covered, as when lightning strikes an electrical wire on the insured premises.

5.Neglect

     Neglect means neglect of an "insured" to use all reasonable means to save and preserve property at and after the time of a loss.

Analysis

There is no coverage for losses that would otherwise be covered if "an insured" fails to use "all reasonable means" to protect the property both "at and after the time of loss." The insured has an obligation to save and preserve the property when a loss is evident.

Note that the language does not ask the insured to save and preserve the property only if a loss is covered. An insured is under obligation to preserve property from flood, even though flood damage is not covered by a homeowners policy.

6.War

     War includes the following and any consequence of any of the following:

a.Undeclared war, civil war, insurrection, rebellion or revolution;

b.Warlike act by a military force or military personnel; or

c.Destruction, seizure or use for a military purpose.

    Discharge of a nuclear weapon will be deemed a warlike act even if accidental.

Analysis

Damage from war, undeclared wars, civil wars, insurrections, rebellions, revolutions, warlike acts by the military, or destruction, seizure, or use of property for military purposes is excluded. These are not predictable perils for which rates can be set. See War Exclusion Clause for a general discussion and court cases interpreting this exclusion.

7.Nuclear Hazard

     This Exclusion 7. pertains to Nuclear Hazard to the extent set forth in N. Nuclear Hazard Clause under Section I—Conditions.

Analysis

The terms of this exclusion are governed by the "nuclear hazard clause" in the conditions applicable to section I. The condition defines "nuclear hazard" as "any nuclear reaction, radiation, or radioactive contamination…or any consequence of any of these." Loss by nuclear hazard is specifically exempted from coverage under the perils of fire, explosion, or smoke, but coverage does apply to direct loss by fire that results from the nuclear hazard. For a review of the history of this exclusion, see Nuclear Exclusion Clauses.

8.Intentional Loss

     Intentional Loss means any loss arising out of any act an "insured" commits or conspires to commit with the intent to cause a loss.

     In the event of such loss, no "insured" is entitled to coverage, even "insureds" who did not commit or conspire to commit the act causing the loss.

Analysis

No coverage applies to any loss that arises out of any act committed with the intent to cause a loss, where an insured either commits or conspires to commit the act.

The forms add that no insured may claim coverage in the event of a loss. In the past, some courts have determined that an innocent coinsured could recover where another insured was intentionally responsible for a loss. But this provision is in line with the majority opinion, and that is that coinsureds are jointly responsible to abide by the policy's conditions. For a review of judicial thinking, see Arson—Recovery by Innocent Coinsureds.

9.Governmental Action

    Governmental Action means the destruction, confiscation or seizure of property described in Coverage A, B or C by order of any governmental or public authority.

     This exclusion does not apply to such acts ordered by any governmental or public authority that are taken at the time of a fire to prevent its spread, if the loss caused by fire would be covered under this policy.

Analysis

Note that the only exception is an action taken to prevent the spread of fire, and that only if the loss caused by fire would be covered under the policy—perhaps an insured intentionally sets a forest fire, and the fire threatens the community. If the insured's home is bulldozed to stop the spread of the fire, there is no coverage since the intentional act is not covered.

For any other action, an insured has no recourse other than to make a claim against the government or local authority ordering the action.

B.We do not insure for loss to property described in Coverages A and B caused by any of the following. However, any ensuing loss to property described in Coverages A and B not excluded or excepted in this policy is covered.

1.Weather conditions. However, this exclusion only applies if weather conditions contribute in any way with a cause or event excluded A. above to produce the loss;

2.Acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body;

3.Faulty, inadequate or defective:

a.Planning, zoning, development, surveying, siting;

b.Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction

c.Materials used in repair, construction, renovation or remodeling; or

d.Maintenance; of part or all of any property whether on or off the "residence premises."

Analysis

These three exclusions appear in forms HO 00 03 and HO 00 05. Likewise, special coverage endorsement HO 17 32 for coverage A of form HO 00 06 contains the three additional exclusions.

Weather conditions that contribute to a loss excluded under one of the nine section I general exclusions described above are likewise excluded. For example, if excessive rainfall causes a landslide that damages the residence premises, the loss is not covered. But hail damage to a roof is covered.

Note that despite the wording of parts (b) and (c) of this exclusion, homeowners additional coverage against collapse specifically applies to the use of defective construction, remodeling, or renovation materials or methods when a collapse occurs during the course of the work being done.)

Two court cases exemplify the types of loss that these exclusions were designed to eliminate from coverage. One is the case of Safeco Insurance Co. v. Guyton, 629 F.2d 551 (California, 1982), in which a federal appeals court found coverage under a homeowners policy for flood damage on the grounds that the operative cause of the loss was third-party negligence in maintaining flood control systems.

The other case, also involving a California homeowners claim, is Premier Insurance Co. v. Welch, 140 Cal. App. 3d 720 (1983). In this case, a California appeals court ruled that damage to the insured's house resulting from the giving way of the hillside on which the structure was built was covered despite the homeowners earth movement exclusion. The court's reasoning was founded on expert testimony that the cause of the landslide was a damaged subdrain's inability to carry off water from unusually heavy rains. The damage to the subdrain was determined to have been caused by human negligence, probably in the course of construction of the drainage system itself. The court ruled that the concurrence of an excluded peril (earth movement) with an unexcluded peril (third-party negligence in constructing the drainage system) brought the cause of the insured's loss within the scope of open perils (all risks) homeowners coverage.

The anti-concurrent causation exclusions in homeowners policies have not entirely eliminated the liability of insurers for losses that concurrently involve a covered and an excluded peril. Certain jurisdictions, notably California, have redeveloped the idea that coverage applies to the entire loss if the "efficient proximate cause" of the loss is the covered peril. Other states have declined to follow the efficient proximate cause rule, with results more favorable to insurers. For example, the Wyoming Supreme Court found for the insurer when the nonexcluded peril of "rain" led to damage caused by the excluded peril of "surface water" in State Farm Fire and Casualty Co. v. Paulson , 756 P.2d 764 (Wyoming, 1988).

Any unexcluded loss that ensues from any of these three excluded perils is covered. For example, faulty maintenance of a chimney may result in a chimney fire when a fire is lit in the fireplace. The fire damage is covered, but not the cost to re-do the maintenance.