“All Risk” Insurance Policies

Dallas insurance lawyers have to understand how the courts look at “all risk” insurance policies.
Property insurance may be issued on either:
A. An “all risk” basis, meaning that all risks of physical loss are covered except for excluded perils; or B. A “named peril” basis, meaning that physical loss is covered for certain causes only.
Here are some wording examples:
1. All Risk Clause – “We cover all risks of physical loss to the insured property unless such loss is excluded in (the exclusions section).”
2. Named Perils Clause – “We insure against physical loss to the property described in (property section), 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 fro smoke …
(3) windstorm, hurricane, and hail …”
Here is something that does not seem to make sense from a legal standpoint – The courts have been reluctant to accept claims that insurance companies were fraudulent in labeling policies as “all risk,” then having a bunch of listed exclusions.
In this regard, the San Antonio Court of Appeals has held that an insurer’s labeling a homeowners’ policy as an “all risk policy” did not violate the Texas Deceptive Trade Practices Act. The insured argued that by labeling the policy as such, the insurance company was representing that the policy contained benefits it did not have. Noteworthy is the testimony of the insured that he was aware that exclusions applied to his “all risk policy.”
The Houston Court of Appeals [1st Dist.] held that an insurance agent’s misrepresentation that it would secure a builder’s risk policy to insure a shipbuilder against “all risks” of loss or damage could not be considered a misrepresentation where the policy insured against “all risks of physical loss of or damage,” even though it did not provide coverage for faulty workmanship.
The Houston Court of Appeals [14th] however, contrasted with the above in a 2002, opinion wherein the court found the insured stated a claim based on the “all risk” designation coupled with a failure to disclose a coverage limitation.
What an experienced Insurance Law Attorney needs to know is that under an “all risk” policy, the limits of coverage are defined by the exclusions. And that under a ‘named perils” policy, the exclusions become relevant only if the cause of loss was a named peril under the policy.