All Risk Policies Vs. Named Perils Policies

Insurance lawyers may know the difference between the two above types of policies but most people do not know the difference.

Property insurance may be issued on either:

An “all risk” basis, meaning that all risks of physical loss are covered except for excluded perils.

The 1998, San Antonio Court of Appeals in the opinion styled, Muniz v. State Farm Lloyds, defined a “named peril” policy as meaning that physical loss is covered from certain cause only, such as fire insurance.

An example of an all risk clause would read:  We cover all risks of physical loss of the insured property unless such loss is excluded in Section II (Exclusions).

An example of the wording used in a named perils policy is:  We insure against physical loss to the property described in Section I Property Coverage, Coverage B (Personal Property) caused by a peril listed below, unless the loss is specifically excluded.  The exclusions contained in this section do not apply to an ensuing loss caused by fire or explosion except as specifically provided:

(1)  fire and lightning …

(2)  sudden and accidental damage from smoke …

(3)  windstorm, hurricane, and hail …

In the context of a Texas homeowners insurance, “all risk” coverage is provided under the most popular policy, the Homeowners — Form HO-B promulgated by the Texas Department of Insurance.  In contrast, the Form HO-A is a “named peril” policy because it only covers specified causes of loss.  Homeowners insurance is discussed in more detail in other blogs.

Knowing what a policy covers is vital.  Assuming, like many people do, that you have certain coverages can result in a financial loss to the person who thinks they are insured, when they are not.

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