There is no replacement cost option; coverage is limited to actual cash value. Contrary to a standard homeowners policy, there is also no liability coverage and no additional living expenses coverage. Commercial property coverage is also available with a maximum limit of $5 million.

This discussion is an analysis of the form used by the FAIR plan to write residential property coverage. Coverage is written on a modified ISO Dwelling Property Basic Form: CFP DP 00 01 01 25. This discussion is split into several sections. The sections are as follows:

Part 1 - Insuring Agreement, Definitions & Coverages A-D
Part 2 - Other Coverages & Perils Insured Against
Part 3 - Exclusions
Part 4 - Conditions

General Exclusions

Analysis

The CFP policy excludes loss caused directly or indirectly by ordinance or law, earth movement, water, power failure, neglect, war, nuclear hazard, intentional loss, government action, sprinkler leakage, and communicable disease. Many of these exclusions are identical to those found in the ISO homeowners forms. The exclusions apply regardless of whether another cause contributed concurrently or in any sequence to the loss. This effectively excludes concurrent causation losses.

The first exclusion excludes loss arising from any ordinance or law requiring or regulating the construction, demolition, remodeling, renovation, or repair of property, including the removal of any resulting debris, which results in a loss in value to the property. The exclusion applies regardless of whether the property is physically damaged. If an ordinance or law requires the insured or others to test for, clean up, monitor, remove, contain, or in any way respond to pollutants, the expense to do so is not covered by the policy. The ISO homeowners policies include an additional coverage for ordinance or law that pays up to 10 percent of the Coverage A limit for the increased costs incurred by an insured due to the enforcement of an ordinance or law; there is no such coverage in the CFP.

Earth movement is excluded, which includes earthquake, landslide, mudslide or mudflow, subsidence or sinkhole, or any other earth movement. The exclusion applies regardless of whether the loss is caused by an act of nature or is otherwise caused. This means that even if the earth movement was man-made, the exclusion would still apply. However, this exclusion does make the exception that any loss by fire or explosion that results from earth movement 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 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 or explosion resulting from any of the above, in A.3.a. through A.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 Described Location. But if the failure of power or other utility service results in a loss, from a Peril Insured Against on the Described Location, we will pay for the loss caused by that Peril Insured Against.
5. Neglect
Neglect means your neglect 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;
c. Destruction or 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 the Nuclear HazardClause of the Conditions.

Analysis

Water is excluded, and encompasses flood, surface water, waves, tides, tidal water, overflow of any body of water, water which backs up through sewers or drains, or overflows or is otherwise discharged from a sump, sump pump, or related equipment, water below the surface of the ground, and waterborne material carried or otherwise moved by water. Also excluded is water escaping, overflowing, or discharging from a dam, levee, seawall, or other containment system. This exclusion is identical to that of the homeowners forms. Following Hurricane Katrina and the damage caused by the levees overflowing, the exclusion was amended to exclude those losses. Like the earth movement exclusion, there is an exception for any loss by fire or explosion resulting from water.

Loss caused by the failure of power or other utility service is excluded if the failure occurred off the insured premises. For example, if the electricity provider has a blackout and that results in food spoilage, there is no coverage for that loss. However, if the blackout results in loss by a covered peril on the insured premises, the insurer will pay for that loss.

An insured’s neglect in not making reasonable attempts to save and preserve property at the time of loss and after is excluded. War is also excluded, including undeclared war, civil war, insurrection, rebellion or revolution, warlike acts by the military, destruction or seizure or use for a military purpose, and discharge of a nuclear weapon, even if accidental. Nuclear hazard is also excluded; the policy goes into more detail in the conditions section, discussed later.

8. Intentional Loss
Intentional Loss means:
a. any loss arising out of any act you or any person or organization named as an additional insured commits or conspires to commit with the intent to cause a loss. In the event of such loss, neither you nor any such person or organization is entitled to coverage, even those who did not commit or conspire to commit the act causing the loss.
b. This exclusion will not apply to an innocent co-insured who did not cooperate in or contribute to the creation of the loss if:
(1) Such loss arose out of a pattern of criminal domestic violence and abuse; and
(2) The perpetrator of the loss is criminally prosecuted for the act causing the loss.
c. If we pay a claim pursuant to Paragraph 8.b., our payment to the insured is limited to that insured’s insurable interest in the property less any payments we first made to a mortgagee or other party with a legal secured interest in the property. In no event will we pay more than the limit of liability.
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.
10. Sprinkler Leakage
Sprinkler leakage means leakage or discharge of any substance from an automatic sprinkler system, including collapse of a tank that is part of the system.
11. Communicable Disease
Communicable disease meaning a contagious disease, virus, bacterium, parasite, or other microorganism arising out of or in any manner related to an infectious or biological virus or agent or its toxic products which is transmitted or spread directly or indirectly, to a person from an infected person, plant, animal, or anthropoid, or through the agency of an intermediate animal, host, or vector of the inanimate environment or transmitted or spread by instrument or any other method of transmission.
This definition shall include but not be limited to Acquired Immune Deficiency Syndrome (AIDS) or Human Immunodeficiency Syndrome (HIV), Human papillomavirus (HPV), Severe Acute Respiratory Syndrome (SARS), West Nile Disease, chicken pox, any type of strain or influenza (including, but not limited to avian or bird flu), legionella, hepatitis, measles, meningitis, mononucleosis, whooping cough, cholera, bubonic plagues, anthrax, and any coronavirus or any mutant variation thereof (including but not limited to COVID-19).
B. We do not cover loss to lawns, plants, shrubs or trees outside of buildings.

Analysis

Intentional loss is excluded, meaning any loss arising out of an insured or any person or organization named as an insured commits or conspires to commit with the intent of causing a loss. If there is an intentional loss, even those insureds who did not commit or conspire to cause the loss are excluded from coverage.

This exclusion mirrors that found on the homeowners forms, which was developed to combat the issue of arson on their own property by insureds. The CFP policy does, however, make an exception to the exclusion for an innocent co-insured who did not contribute to the loss if the loss arose out of a pattern of criminal domestic violence and abuse, and if the perpetrator of the loss is criminally prosecuted for the act. In this instance, the CFP policy actually provides broader coverage than the homeowners forms since the exclusion is narrower, albeit in a very specific scenario.

Governmental action is excluded, meaning the destruction, confiscation, or seizure of insured property by order of a governmental or public authority. The exclusion does not apply to actions taken by the government to prevent the spread of a fire.

The CFP policy excludes sprinkler leakage, meaning leakage or discharge of any substance from an automatic sprinkler system, including the collapse of a tank that is part of the system. The HO 00 03 policy provides this coverage, with the condition that the insured maintains heat in the building so the system does not freeze.

Communicable disease is excluded, which means a contagious disease, virus, bacterium, parasite, or other microorganism. Included within the definition, but not limited to, are AIDS, HIV, HPV, SARS, chicken pox, influenza, hepatitis, measles, whooping cough, anthrax, and coronavirus. The ISO homeowners policies exclude communicable disease only under the Section II liability exclusions. However, the CFP policy does not provide liability coverage.

Finally, there is an exclusion for loss to lawns, plants, shrubs, or trees outside of buildings. The HO 00 03 provides this as an additional coverage for certain named perils for up to 5 percent of the dwelling limit, and up to $1,500 for any one tree.