The discussions on other sections of the form can be found here:

Part 1 – Agreement, Definitions

Part 2 – Coverage C, coverage D, Additional coverages

Part 3 – Perils Insured Against, Exclusions

Part 4 – Conditions Section I

Part 5 – Section II liability

SECTION I – PERILS INSURED AGAINST We insure against direct physical loss to property described in Coverage C. We do not insure, however, for loss:

1. Excluded under Section I – Exclusions; 2. Caused by:

a. 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:

(1) Maintain heat in the building; or (2) 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;

b. Theft:

(1) In or from a dwelling under construction, or of material and supplies for use in the construction until the dwelling is finished and occupied; or (2) Committed by an "insured".

c. Mold, fungus or wet rot. d. Breakage of eyeglasses, glassware, statuary, marble, bric-a-brac, porcelains and similar fragile articles other than jewelry, watches, bronzes, cameras and photographic lenses. There is coverage for breakage of the property by or resulting from:

(1) Fire, lightning, windstorm, hail; (2) Smoke, other than smoke from:

(a) Agricultural smudging; or (b) Industrial operations;

(3) Explosion, riot, civil commotion; (4) Aircraft, vehicles, vandalism and malicious mischief; (5) Collapse of a building or any part of a building; (6) Water not otherwise excluded; (7) Theft or attempted theft; or (8) Sudden and accidental tearing apart, cracking, burning or bulging of:

(a) A steam or hot water heating system; (b) An air conditioning or automatic fire protective sprinkler system; or (c) An appliance for heating water;

e. Dampness of atmosphere or extremes of temperature unless the direct cause of loss is:

(1) Rain or snow; or (2) Sleet or hail;

f. Refinishing, renovating or repairing property; g. Acts or decisions, including the failure to act or decide, of any:

(1) Person or group; or (2) Organization or governmental body; or

h. Any of the following:

(1) Wear and tear, marring, deterioration; (2) Mechanical breakdown, latent defect, inherent vice or any quality in property that causes it to damage or destroy itself; (3) Smog, rust or other corrosion, or dry rot; (4) Smoke, from:

(a) Agricultural smudging; or (b) Industrial operations;

(5) Discharge, dispersal, seepage, migration, release or escape of pollutants, unless the discharge, dispersal, seepage, migration, release or escape is itself caused by the peril of fire or lightning. 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; (6) Settling, shrinking, bulging or expansion, including resultant cracking, of:

(a) Pavements or patios; (b) Footings or foundations; (c) Walls or floors; (d) Roofs or ceilings; or (e) Bulkheads;

(7) Birds, rodents or insects; (8) Nesting or infestation, or discharge or release of waste products or secretions, by any animals; (9) Animals owned or kept by an "insured"; or (10) Misplacement Or Mysterious Unexplainable Disappearance. Exception To 2.h. Unless the loss is otherwise excluded, we cover loss to property covered under Coverage C resulting from an accidental discharge or overflow of water or steam from within a:

(a) Storm drain, or water, steam or sewer pipe, off the "residence premises"; or (b) Plumbing, heating, air conditioning or automatic fire protective sprinkler system or household appliance on the "residence premises". We do not cover loss to the system or appliance from which this water or steam escaped.

For the 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. Section I – Exclusion 3. Water, 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 Paragraph 2.h. above.

Under Paragraphs 2.a. through 2.h. above, any ensuing loss to property described in Coverage C not precluded by any other provision in this Policy is covered.

Analysis:

The Section I Perils Insured Against is in a way misnamed. Since this is an open perils policy, this section does not outline covered perils, but lists a series of excluded causes of loss. The language states that the carrier insures against direct physical loss to property described in Coverage C but that it does not insure for loss caused by the listed perils. Note that this is broader coverage for personal property than that found in the unendorsed HO 00 03, H0 00 04 and HO 00 06. This form provides open perils coverage instead of named perils coverage.

The first exclusion is freezing of a plumbing, heating, air conditioning or automatic fire protective system or household appliance, or by discharge, leakage or overflow from such an appliance caused by freezing if the insured failed to maintain heat in the building or did not shut off the water and drain the systems and appliances. If there is a sudden, extreme cold spell and the insured has the heat on at a reasonable temperature, then freezing will be covered. What is not covered is when the insured turns down the temperature so low in order to save on heating bills to the extent that the systems freeze, leak and damage the premises. This is a standard exclusion.

The policy gives no guidance however on what reasonable care to maintain heat in the premises actually is. The heat should be kept at a temperature sufficient to prevent freezing of pipes even if there is an unusual cold spell; 55 degrees has been recommended by the construction industry as a reasonable temperature to protect the dwelling. However, if the premises has an automatic fire protective sprinkler system, then the water and heat must be left on in the dwelling so that in event of a fire the sprinkler system will function as designed to protect the property.

If the dwelling is under construction, then theft in or from the dwelling, or of materials and supplies used in that construction will not be covered. It is too easy for thieves to access and take such property. Theft by the "insured" is not covered either.

Mold, fungus and wet rot are not covered. This policy is designed for coverage for personal property, and personal property damaged by mold, fungus and wet rot is generally not a fortuitous loss.

The next exclusion is for breakage of eyeglasses, glassware, statuary, marble, bric-a-brac, porcelains and similar fragile items other than jewelry, watches, bronzes, cameras and photographic lenses. Such items are particularly easy to break from normal everyday use.

There is coverage for breakage if it is caused by any of the following causes:

(1) Fire, lightning, windstorm, hail; (2) Smoke, other than smoke from:

(a) Agricultural smudging; or (b) Industrial operations;

(3) Explosion, riot, civil commotion; (4) Aircraft, vehicles, vandalism and malicious mischief; (5) Collapse of a building or any part of a building; (6) Water not otherwise excluded; (7) Theft or attempted theft; or (8) Sudden and accidental tearing apart, cracking, burning or bulging of:

(a) A steam or hot water heating system; (b) An air conditioning or automatic fire protective sprinkler system; or (c) An appliance for heating water;

These are not common events and are considered covered causes of loss. A riot is far less likely to happen than an insured dropping a piece of porcelain.

Dampness of atmosphere or extremes of temperature are excluded unless the direct cause of loss is rain, snow, sleet or hail. It is one thing for a basement to retain humidity and damage certain property; it is another for rain or snow to enter a dwelling and damage property. Humidity or other temperature extremes due to ambient conditions will not be covered; dampness due to weather events will be.

Refinishing, renovating or repairing property doesn't always go as planned and may result in damaging the furniture instead of restoring it. Such damage is not covered. Again, it is not a fortuitous cause of loss, even though the intent was different than the result.

Acts or decisions, including failing to act or decide of any person, group, organization or governmental body are excluded. If another person or group makes a decision or fails to make a decision that damages the insured's property then that individual or group should be responsible, and the insured's policy should not be involved.

The next series of exclusions are for things expected to happen over time, such as wear and tear, mechanical breakdown, inherent vice, deterioration, dry rot or corrosion and similar results of age and use. Smoke from agricultural smudging or industrial operations is excluded, as is the release of pollutants except when the release is caused by fire or lightning. If fire damages a tank that then discharges oil, that release of oil will be covered.

Pollutant is not listed in the definitions found earlier in the policy but it is defined here. Pollutants are "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". It is important to note the nature of what is defined as a pollutant; the list is items generated from industrial processes.

While wear and tear has already been listed, a separate exclusion is set aside for settling, shrinking, bulging, cracking of pavements, patios, footings, foundations, walls, floors, roofs or ceilings. This is to clarify that such deterioration of these elements is not covered as settling, shrinking, bulging, expansion are particular to these parts of property. Again, this policy is designed for personal property, not real property, but some exclusions designed for real property are included.

There is no coverage for loss caused by birds, rodents, or insects, or the nesting, infestation, or release of waste products or secretions by any animals. This excludes direct damage such as rats chewing on property in the attic, and also damage to property caused by raccoons nesting in the insured's property stored in the attic or skunks spraying an insured's property as well.

Damage caused by animals owned or kept by an insured is excluded as well. This is for damage that occurs over time, such as the damage from a cat that routinely scratches on the leather sofa or a dog that chews on table legs. If the dog gets ahold of a bottle of grape juice and punctures it, spilling grape juice on the carpet and staining it, that would be covered. Exclusions are to be read narrowly and in conjunction with surrounding language; since this section in large part deals with the deterioration of property over time, then a distinction can be made between regular wear caused by animals and a sudden accidental event.

The last exclusion in the list is for misplacement or mysterious unexplained disappearance. This is in effect if the insured loses his property. Insureds should be responsible with their property, and while no one intentionally loses valuable items, coverage for items the insured simply loses or misplaces is not the intent of the policy. Fraud is a significant issue for the insurance industry and quantifying where or when an insured misplaced something, or verifying that something mysteriously disappeared is too difficult to verify.

An exception exists for loss caused by the accidental discharge or overflow of water or steam from a storm drain, water, steam or sewer pipe if it is off the "residence premises". Also an exception is made by discharge or overflow from a plumbing, heating, air conditioning or fire protective sprinkler system or household appliance. Both exceptions apply to everything in 2.h., the exclusions beginning with wear and tear and apply as long as there is not another exclusion elsewhere in the policy. The system or appliance from which the water escaped is not covered, only the resultant loss.

A clarification is made that plumbing systems and household appliances do not include sumps, sump pumps or related equipment or roof drains, gutters, downspouts or similar equipment. The water exclusion paragraphs a. And c. that apply to surface water and water below the surface of the ground do not apply to water losses under 2.h.

Ensuing losses by any of these excluded causes of loss as listed under part 2. are covered as long as they are not otherwise excluded. It is important to pay attention to exclusions, exceptions and further exclusions in this section. A number of things are excluded but there is an exception for ensuing losses, but again if an exclusion exists that removes coverage for that ensuing loss, there is still no coverage.

SECTION I – EXCLUSIONS 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; 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.

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 2. applies regardless of whether any of the above, in 2.a. through 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 2.a. through 2.d., is covered.

3. Water – This means:

a. Flood, surface water, waves, including tidal wave and tsunami, tides, tidal water, overflow of any body of water, or spray from any of these, all whether or not driven by wind, including storm surge; b. Water which:

(1) Backs up through sewers or drains; or (2) Overflows or is otherwise discharged from a sump, sump pump or related equipment;

c. Water below the surface of the ground, including water which exerts pressure on, or seeps, leaks or flows through a building, sidewalk, driveway, patio, foundation, swimming pool or other structure; or d. Waterborne material carried or otherwise moved by any of the water referred to in 3.a. through 3.c. of this exclusion. This Exclusion 3.: e. Applies regardless of whether any of the above, in 3.a. through 3.d., is caused by an act of nature or is otherwise caused. f. 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. g. Applies to property described in Coverage C that is on a premises or location owned, rented, occupied or controlled by an "insured" even if weather conditions contribute in any way to produce the loss. h. Does not apply to property described in Coverage C that is away from a premises or location owned, rented, occupied or controlled by an "insured". However, direct loss by fire, explosion or theft resulting from any of the above, in 3.a. through 3.d., is covered.

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 results in a loss, from a Peril Insured Against on the "residence premises", we will pay for the loss caused by that peril. 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. 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.

7. Nuclear Hazard –This Exclusion 7. pertains to Nuclear Hazard to the extent set forth in Q. Nuclear Hazard Clause under Section I – Conditions. 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. 9. Governmental Action – Governmental Action means the destruction, confiscation or seizure of property described in Coverage 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:

The exclusions section begins with the standard anti-concurrent causation language, which ensures that even if a covered peril occurs with an excluded peril that there will still be no coverage provided for that excluded peril. A common example is if there is a storm where wind damages the roof but flooding damages the lower level; even though wind is a covered peril, there is still no coverage for the flooding that occurs on the lower level of the dwelling.

There are nine exclusions in this section and they are familiar as they appear in most standard policies. The first exclusion is for ordinance or law. There is no coverage for the required construction, demolition, remodeling, repair, renovation or removal of debris if that action is required by local ordinances or laws. Likewise, the required testing, monitoring, clean up, removal, remediation or response to or assessment of the release of any pollutants as required by law or ordinance is not covered.

Earth movement, including land shock waves, tremors related to volcanic eruptions, landslide, mudslides, mudflows, subsidence, sinkholes or other forms or earth movement are all excluded, whether caused by nature or some other cause. An exception exists for direct loss by fire, explosion or theft resulting from earth movement. For example, the insured's residence sustains an earthquake that destroys one wall, leaving the insured's belongings exposed and damaging a bookcase. Thieves come in and take a number of the insured's possessions. This theft is a covered loss, even though damage to the bookcase is not covered because that damage was caused by the earthquake.

The standard water exclusion for flood, surface water, waves, overflow of bodies of water, spray, water driven from wind and storm surge, or water that backs up through sewers or drains or overflows or is discharged from sumps, sump pumps or related equipment, or water below the surface of the ground that exerts pressure on a building, sidewalk, driveway, patio or foundation is included. Waterborne material carried through any of this water is excluded and this water is excluded whether caused by acts of nature or other sources, such as a dam, levee or seawall breaking. The exclusion applies to property described in Coverage C if it is on a premises owned, rented, occupied or controlled by an insured, even if caused by weather conditions. An exception is made for property described in Coverage C that is away from a premises owned, rented, occupied or controlled by an insured. If an insured is visiting relatives and his property is damaged by a flood, then his property will be covered.

Similar to the exception for earthquakes, an exception exists for damage by fire, explosion or theft that results from any excluded water loss. An insured's residence is flooded and he has various articles outside on the lawn to dry. Any items that are stolen while laid out to dry would be covered.

Failure of power or other utility services that takes place off the "residence premises" is excluded. However, if the power failure results in a peril insured against that damaged property, there is coverage for the loss by that covered peril. For example, if a power failure takes place off the premises but the sudden loss of power starts a fire, that fire is covered.

Insured's are to protect their property, particularly when a loss has occurred. If an insured fails to protect his property from further damage after a loss has occurred and the property is damaged further, that further damage will not be covered.

War whether or not declared, warlike acts, insurrection, rebellion, and similar acts are excluded, as is destruction, seizure or use of property for a military purpose. Discharge of a nuclear weapon, even if it is discharged accidentally, is still considered an act of war and excluded. "Nuclear hazard" includes nuclear reaction, radiation, radioactive contamination, whether controlled or uncontrolled, and all are excluded. Loss caused by nuclear hazards will not be considered loss caused by fire, explosion or smoke. Nuclear hazards and resultant damages are not covered.

Intentional losses, acts where an insured deliberately intended to cause a loss are not covered. Even if there are multiple insureds and an innocent insured had nothing to do with the one insured's deliberate causing of a loss, that innocent insured is not covered.

Government action, which is the destruction, confiscation or seizure of property under Coverage C by order of any governmental or public authority is excluded. This is when the police confiscate stolen goods or illegal exotic animals, for example or officials otherwise confiscate or destroy property that could be hazardous to the public at large. An exception exists if the action is taken to prevent the spread of fire if the loss caused by fire would be covered.

Includes copyrighted material of Insurance Services Office, Inc., with its permission.