A client's commercial property policy includes a Special Cause of Loss form. During a severe storm, rainwater enters the building through a window that was left open, causing significant damage to inventory. Which of the following statements is true regarding coverage for this damage?
- AThe damage is not covered because 'rain entering open windows' is an excluded peril in most Special forms.
- BThe damage is covered only if the policy includes a separate 'water damage' endorsement.
- CThe damage is covered under the Special form because it covers all perils unless specifically excluded.
- DThe damage is covered because windstorm is a covered peril, and the rain was part of the storm.
Show answer & explanationAnswer & explanation
Correct answer: A. The damage is not covered because 'rain entering open windows' is an excluded peril in most Special forms.
Special Cause of Loss forms provide 'open perils' coverage, meaning they cover all perils unless specifically excluded. However, a common exclusion in Special forms is for loss caused by rain, snow, sleet, sand, or dust if a building opening (like a window or door) was left open, or if the roof or walls were not first damaged by the covered peril. Since the window was left open, the damage would typically be excluded.
Why the other options are wrong
- B. Some water damage might be covered by endorsement, but this specific scenario (rain through an open opening) is typically excluded by the base form.
- C. While Special forms are 'open perils,' they do have specific exclusions, and this is a common one.
- D. Even if windstorm is covered, the specific mechanism of damage (rain through an open window) triggers an exclusion.
Special Cause of Loss Form (Open Perils)
A property insurance form that covers all direct physical losses to covered property, except those specifically excluded.
- Also known as 'all-risk' or 'all perils' coverage.
- Insured must prove loss, insurer must prove exclusion.
- Common exclusions: flood, earthquake, war, nuclear hazard, government action, wear and tear, inherent vice, faulty design, rain through open windows.
Memory trick: Special form is 'all-in' unless it's on the 'no-go' list, especially things you could've prevented.