4.3 Section I Perils Insured Against and Exclusions

Arkansas Property & Casualty Insurance State

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1 Standalone Coverage Map

Standalone Coverage Map

2 Introduction: Arkansas Property & Casualty Insurance Exam Overview

Arkansas Property & Casualty Exam Overview

3 National Portion: Insurance Fundamentals

1.1 Risk, Hazards, Perils, and the Law of Large Numbers 1.2 Insurable Interest, Indemnity, and Other Insurance Principles 1.3 Insurance Contract Law and Elements 1.4 Policy Structure: Declarations, Insuring Agreement, Conditions, Exclusions 1.5 Parties, Agents vs. Brokers, and Authority

4 National Portion: Property Insurance Concepts

2.1 Causes of Loss / Named-Peril vs. Open-Peril 2.2 Valuation: ACV, Replacement Cost, and Functional Value 2.3 Coinsurance and the Coinsurance Formula 2.4 Deductibles, Limits, and Loss Settlement 2.5 Common Property Policy Conditions and Clauses

5 National Portion: Dwelling Policies (DP)

3.1 Dwelling Policy Forms DP-1, DP-2, DP-3 3.2 Dwelling Coverages A-E and Other Coverages 3.3 Dwelling Perils, Conditions, and Endorsements 3.4 Mobile Home and Specialized Dwelling Coverage

6 National Portion: Homeowners Policies - Forms & Section I

4.1 Homeowners Forms HO-2 through HO-8 and Eligibility 4.2 Section I Coverages A-D and Additional Coverages 4.3 Section I Perils Insured Against and Exclusions 4.4 Replacement Cost vs. ACV and Loss Settlement in Homeowners

7 National Portion: Homeowners Policies - Section II & Endorsements

5.1 Section II Coverages E (Liability) and F (Medical Payments) 5.2 Homeowners Conditions and Duties After Loss 5.3 Common Homeowners Endorsements (scheduled property, water backup, ordinance or law)

8 National Portion: Personal Auto Policy - Liability & Injury

6.1 Personal Auto Policy Structure and Eligibility 6.2 Part A Liability and Supplementary Payments 6.3 Part B Medical Payments 6.4 Part C Uninsured/Underinsured Motorists

9 National Portion: Personal Auto Policy - Physical Damage & Duties

7.1 Part D: Coverage for Damage to Your Auto 7.2 Exclusions and Part E: Duties After an Accident 7.3 Part F: General Provisions, Endorsements, and No-Fault Concepts

10 National Portion: Liability Insurance Concepts

8.1 Negligence, Torts, and Legal Liability 8.2 Defenses, Damages, and Vicarious Liability 8.3 Occurrence vs. Claims-Made Triggers 8.4 Bodily Injury, Property Damage, and Personal/Advertising Injury

11 National Portion: Commercial Property Insurance

9.1 Commercial Package Policy Structure and Common Policy Conditions 9.2 Building and Personal Property Coverage Form (BPP) 9.3 Causes of Loss Forms (Basic, Broad, Special) 9.4 Business Income and Extra Expense 9.5 Commercial Property Endorsements and the BOP

12 National Portion: Commercial General Liability - Coverages

10.1 CGL Coverage A: Bodily Injury and Property Damage Liability 10.2 CGL Coverage B: Personal and Advertising Injury, Coverage C: Medical Payments 10.3 Who Is an Insured and Supplementary Payments

13 National Portion: Commercial General Liability - Limits, Triggers & Exclusions

11.1 CGL Limits of Insurance and Aggregates 11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates 11.3 Key CGL Exclusions and Endorsements

14 National Portion: Commercial Auto Insurance

12.1 Business Auto Coverage Form and Covered Auto Symbols 12.2 Commercial Auto Liability and Physical Damage 12.3 Motor Carrier / Trucking and MCS-90 12.4 Garage Coverage Form and Garagekeepers 12.5 Commercial Auto Endorsements

15 National Portion: Workers Compensation

13.1 Workers Compensation Statutory Background and Benefits 13.2 Part One (Workers Comp) and Part Two (Employers Liability) 13.3 Premium Basis, Experience Modification, and Classification 13.4 Other States, USL&H, and Federal Acts 13.5 Workers Comp Exclusions and Endorsements

16 National Portion: Other Commercial Lines - BOP, Crime & Marine

14.1 Businessowners Policy (BOP) in Depth 14.2 Crime and Fidelity Coverage 14.3 Inland Marine and Nationwide Marine Definition 14.4 Ocean Marine Coverages (Hull, Cargo, Freight, P&I)

17 National Portion: Other Commercial Lines - Specialty & Professional

15.1 Farm and Agricultural Coverage 15.2 Commercial Umbrella and Excess Liability 15.3 Professional Liability and Errors & Omissions 15.4 Directors & Officers and Employment Practices Liability

18 National Portion: Other Commercial Lines - Surety, Flood & Specialty

16.1 Surety and Fidelity Bonds 16.2 National Flood Insurance Program (NFIP) 16.3 Cyber, Aviation, and Other Specialty Lines

19 National Portion: Insurance Regulation & Market Conduct

17.1 State Regulation, Licensing, and the McCarran-Ferguson Act 17.2 Rates, Forms, Solvency, and Guaranty Associations 17.3 Producer Authority, Fiduciary Duty, and Company Operations

20 National Portion: Ethics & Unfair Trade Practices

18.1 Unfair Trade Practices and Unfair Claims Settlement 18.2 Producer Ethics, Errors & Omissions Exposure, and Fiduciary Conduct 18.3 Privacy, Fraud, and Consumer Protection

21 Chapter 1: Arkansas P&C Insurance Regulation & Licensing

1.1 Arkansas Insurance Department 1.2 Arkansas P&C Producer Licensing Requirements 1.3 Arkansas Producer Responsibilities

22 Chapter 2: Arkansas Property Insurance

2.1 Arkansas Homeowners Insurance 2.2 Arkansas Commercial Property Insurance

23 Chapter 3: Arkansas Casualty & Auto Insurance

3.1 Arkansas Auto Insurance Requirements 3.2 Arkansas Liability Insurance 3.3 Arkansas Workers' Compensation Insurance

24 Chapter 4: Arkansas Ethics & Professional Conduct

4.1 Ethical Practices and Consumer Protection

4.3 Section I Perils Insured Against and Exclusions

Key Takeaways Explain This Topic AI

HO-3 = open perils on A and B, named perils on C; HO-2/4/6 = named throughout; HO-5 = open throughout.

Memorize the named-perils list (fire, windstorm/hail, explosion, riot, aircraft, vehicles, smoke, VMM, theft, falling objects, ice/snow weight, water discharge, freezing, electrical, volcanic).

Open perils flips the burden of proof: the INSURER must prove an exclusion; under named perils the INSURED must prove a listed cause.

Excluded on every form: ordinance/law, earth movement, water (flood), power failure, neglect, war, nuclear, intentional loss.

Flood is never covered by an HO policy or endorsement — use NFIP; sewer/sump back-up is endorsable via HO 04 95.

Last updated: June 2026

4.3 Section I Perils Insured Against and Exclusions

Section I tells you what causes of loss are covered through the Perils Insured Against provision and what is removed through the Exclusions . The structure depends on the form: HO-3 is OPEN perils on Coverages A and B and NAMED perils on Coverage C; HO-2/4/6 are NAMED perils throughout; HO-5 is OPEN throughout.

The Named-Perils List (Coverage C, and all of HO-2)

These are the causes of loss that must be listed to be covered. Memorize them:

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Aircraft
• Vehicles
• Smoke
• Vandalism or malicious mischief (VMM)
• Theft
• Falling objects (broad-form only)
• Weight of ice, snow, or sleet (broad-form only)
• Accidental discharge or overflow of water/steam
• Sudden/accidental tearing apart, cracking, burning, bulging of a system
• Freezing of plumbing/heating/AC
• Sudden/accidental damage from artificially generated electrical current
• Volcanic eruption

How open perils changes the burden of proof

Under an OPEN-perils Coverage A (HO-3, HO-5), the loss is covered unless the policy excludes the cause. The insured only has to show a direct physical loss occurred; the insurer must prove an exclusion applies. Under NAMED perils, the insured must show the cause is one of the 16 listed perils. This burden-of-proof flip is a favorite exam distinction.

Named-peril nuances the exam tests

Several listed perils carry conditions. Theft does not cover property stolen from a dwelling under construction or from a part of the premises rented to others. Vehicles as a peril excludes damage caused by a vehicle owned or operated by a resident of the household when it strikes the dwelling. Vandalism is suspended if the dwelling has been vacant for more than the policy's stated period (commonly 60 days). Freezing of plumbing is covered only if the insured kept heat on or drained the system. These carve-outs convert a covered peril into a denied claim, so read the fact pattern for the condition.

Section I Exclusions (the "big eight" + others)

These causes are excluded on EVERY HO form regardless of peril basis:

• Exclusion Key Point
• Ordinance or law Cost to comply with building codes (partial buy-back 10% built in)
• Earth movement Earthquake, landslide, sinkhole — buy back with EQ endorsement
• Water damage FLOOD, surface water, sewer backup (sewer is endorsable)
• Power failure Off-premises power interruption
• Neglect Failure to protect property after a loss
• War All war and warlike acts
• Nuclear hazard Reaction, radiation, contamination
• Intentional loss Loss caused by an insured with intent

Also excluded: governmental action, weather conditions that worsen an excluded cause, and (under open perils) wear and tear, mold, settling, animals owned by the insured, and faulty construction/design.

Flood is the classic trap

Flood (rising surface water) is EXCLUDED on every homeowners form. Flood coverage comes only from a separate NFIP / National Flood Insurance Program policy or a private flood policy. By contrast, water that backs up through a drain or sump can be added by the HO 04 95 (Water Back-Up and Sump Overflow) endorsement — but a true flood from a swollen river is never covered by an HO endorsement.

Anti-concurrent causation

The Section I exclusions are introduced by a powerful lead-in: the listed causes are excluded whether or not another cause contributes concurrently or in any sequence to the loss. This anti-concurrent causation language means that if an excluded peril (such as flood or earth movement) joins a covered peril to produce damage, the entire loss may be excluded. The exam tests this with a hurricane fact pattern: wind damage (covered) and storm surge flooding (excluded) hit the same home; the wind portion is paid, but the surge-driven damage is denied because flood is excluded even when wind contributed.

Earth movement and the endorsable exclusions

Earth movement — earthquake, landslide, mudflow, and sinkhole collapse — is excluded but can be bought back with the Earthquake endorsement (HO 04 54) , which adds its own percentage deductible. Two exclusions can be partly restored: water back-up via HO 04 95, and ordinance or law beyond the built-in 10%. Power failure is excluded only when the interruption begins off the residence premises; if a covered peril on the premises knocks out power and food spoils, limited coverage may apply. Knowing which exclusions are absolute and which are endorsable separates passing from failing scores.