A cause of loss (or peril) is the actual means by which property is damaged or destroyed. Examples include fire, lighting, windstorm, hail and theft.
Named perils are listed and described in the policy. Only losses caused by those listed perils are covered.
Special form coverage (also called open perils) provides coverage for “risk of direct loss’ to property; In other words, coverage is provided for any direct loss to property unless the loss is caused by a peril specifically excluded by the policy.
Hazard is anything that increases the likelihood of a loss or the possible severity of a loss.
An important difference between named perils and special form (“all-risks”) coverage involves the burden of proof.
· With a named perils policy, for coverage to apply, the insured must prove that the loss was caused by a covered cause of loss.
· With a special form coverage policy, if a loss to covered property occurs, it is initially assumed that coverage applies. However, coverage may be denied if the insurer can prove that the loss was caused by an excluded cause of loss.
Property Loss Exposures
