In the world of property insurance, there are two main types of policies, “all-risks” and “named perils”. Which type an association or unit owner has can have a large effect not only on the coverages provided but also the burdens that must be met to prove your claim in subsequent litigation. Therefore, it is important for all policyholders to be familiar with their policy before a loss occurs.
Traditionally, insurance companies wrote “named perils” policies for all insureds. A traditional “named perils” policy provides coverage for only those perils that are specifically enumerated. Fisher v. Certain Interested Underwriters at Lloyds Subscribing to Contract # 242/99, 930 So.2d 756 (Fla. 4th DCA 2006). Generally, these perils cover the common causes of loss such as fire, theft and wind.
Due to the growth of society and the changing needs for insurance, insurers created and began to sell “all-risks” policies. Instead of only covering the perils specifically enumerated, “all-risk” policies provide coverage for all accidental losses except those that are specifically excluded elsewhere in the policy.
Today most homeowner and unit owner policies are a combination of “all-risks” and “named perils”. For damages to the structure or dwelling, most policies cover everything not specifically excluded. For damages to personal property or the contents of the home, most policies only cover for losses caused specifically enumerated.
While many commercial policies, such as those written for condominium associations, are written as “all risks” policies, it is not uncommon for an association to have a “named perils” policy covering specific risks. In California, for instance, many policyholders purchase specific policies to cover earthquake damages. It is also common for condominium associations in Florida to purchase specific policies to cover windstorm damages. By purchasing these “named perils” policies separately, many associations save money on premiums by reducing the amount of risk that each policy provides.
The type of policy that a policyholder purchases can play a large role in subsequent litigation over a disputed claim. Under an “all-risks” policy, the policyholder must generally prove three things: 1) that a loss occurred, 2) that the loss occurred during the policy period, and 3) that the loss caused physical damage to the property insured by the policy. Because an “all-risks” policy provides coverage for all losses not specifically excluded, once the policyholder has proven these things, the burden then shifts to the insurer to prove that the loss was caused by a peril specifically excluded. Phoenix Ins. Co. v. Branch, 234 So.2d 396, 398-399 (Fla. 4th DCA 1970).
The burden of proof under a “named perils” insurance policy is quite different. Like under an “all-risks” policy, the policyholder must initially prove that there was a loss, during the policy period, that caused damage to insured property. Once this has been shown, however, the burden does not generally shift to the insurer to prove that the loss was not covered. Instead, most jurisdictions require that the policyholder prove that the damages sustained were caused by a peril insured against.
While the type of policy may not seem like a major issue to most policyholders, the burden of proof can be a very important aspect of litigation over a disputed claim. Associations and unit owners alike should review their policies with their agent, broker, or attorney to determine what type of coverage has been written and whether a change would be beneficial under your specific circumstances.