A basic principle of insurance is that “open perils” (aka, “all risks,” “named exclusions,” “risks of direct loss,” “special causes of loss,” etc.) coverage provides better protection to the insured than does “named perils” coverage. In fact, in ISO’s 1991 countrywide Homeowners filing, one of the changes they made was explained by saying that an “open perils” policy should not provide lesser coverage than a “named perils” policy for the same loss. Sometimes a policy language quirk may result in coverage under a “named perils” form but not an “open perils” form. I’ve used that 1991 ISO filing memorandum many times to get initially denied claims paid. In addition, keep in mind that the burden of proof that an exclusion applies is on the insurer, while the burden of proof that a peril applies is on the insured.
The superiority of “open perils” over “named perils” holds true for both homeowners policies as well as commercial property policies. If a customer were to ask for specific examples of claims covered under the “open perils” form that would not be covered under the typical “named perils” form, would you have a list handy to show them? While some of the examples below pertain exclusively to homeowners risks, many apply to both personal and commercial property insurance policies. By the way, many of these examples are from actual claims.
Below is a list of things that might be covered by an open perils policy vs. a named perils policy. Whether it is or isn’t, of course, depends on the specific policies. For example, the 2000 edition of the ISO HO-3 most likely covers skunk discharges but the 2011 edition probably does not. Likewise, whether a lawn mower claim is covered depends on a number of factors and can be different under ISO’s 1991, 2000, and 2011 policy edition dates, not to mention the many proprietary company forms.
The point is, you must be wary when providing such lists to customers or prospects in that they might assume that THEIR policy covers all of these things while they are simply examples of what MIGHT be covered by an “open perils” vs. “named perils” form. This list is provided for example purposes only and should be excerpted only after revising specific examples to meet the actual coverage provided by your insured’s policy.
P.S. Purely for entertainment value, some of these examples have been “livened” up and like should not be shared with customers or prospects “as is.”
- Damage by third parties that falls short of being considered vandalism.
- Rain enters an open window causing damage to carpet, furniture, and your black velvet Elvis painting collection.
- Theft of personal property in a portion of the residence rented to others.
- Windstorm damage to watercraft not inside fully enclosed building (a MAJOR source of claims to boats at marinas) like Spielberg’s $200 million boat.
- Theft of watercraft away from premises.
- Mysterious disappearance of personal property (that you know your daughter’s worthless boyfriend stole, but you can’t prove it).
- Damage to the interior of a building by a falling object with no exterior damage.
- Theft of trailers away from premises (e.g., your camper converted UHaul trailer while at Dub’s Trailer Park, RV Camp, and Snake Emporium near Opp, Alabama).
- Damage to a falling object itself inside a building, such as a chandelier.
- Seepage of water around windows causing damage to furniture and/or carpet but, thank God, not the Elvis paintings.
- Power surge to tubes, transistors, and electronic components.
- Waterbed bursts…adjuster completes Loss Notice with a knowing smirk as you fabricate an explanation of how it happened.
- Theft of personal property at a secondary residence while the insured is not living there (e.g., your converted UHaul trailer “summer home” situated at Dub’s Trailer Park, RV Camp, and Snake Emporium near Opp, Alabama).
- Spillage, such as dropping tomato sauce on white carpet.
- Collapse of floor due to weight of objects, animals or people.
- Skunk discharges inside building (likely covered by older versions of the ISO HO-3, but not recent versions).
- Foreign objects dropped into and damaging plumbing systems. (We’ll leave specific examples to your imagination, especially if you have children.)
- Lawnmower throws rock through window.
- Non-malicious acts of children.
- Dropping items, such as a personal computer.
- Nail polish on couch and chair. Your wife doesn’t use nail polish, so….
- Murder in house, significant damage from blood.
- Shotgun damage to building and contents (at least one court case said it was covered as an “explosion” on named perils coverage).
- Damage from fighting (including fighting with shotguns).
- Neighbor’s stray goat enters house, eats carpet and couch. Shotgun not immediately available or there would be a question about number of occurrences and deductibles.
- Aquarium breaks, water floods room. Elvis paintings survive.
- Jewelry — stone disappears from setting.
- Luggage lost by airlines (if your last name is Foxworthy, it covers all those Piggly Wiggly bags and duct-taped coolers).
- Property sent through mail never arrives.
- Personal property dropped overboard from boat.
- Lawn sprinkler damage through open window. No problem with Elvis paintings as they are now safely stored in a bank vault.
Again, these examples are strictly for illustrative purposes and should know be used as examples for a specific policy unless the examples used are covered by that policy.
Special thanks to the “G5” for contributing to this article and to the legendary Bob Smith of the Florida Association of Insurance Agents who was the originator of many of these examples.
Photo by jetportal