Policy Exclusions: What's Not Covered

Every insurance policy covers some things and excludes others. Understanding what your policy does not cover is just as important as knowing what it does. Exclusions are specific provisions in your policy that remove coverage for certain causes of loss, types of property, or situations. If an exclusion applies, the insurer will not pay for that portion of the loss, even if the damage is real and significant.

Common Exclusions in Homeowner Policies

• Earth movement: Earthquakes, landslides, sinkholes, and earth settling are excluded from standard homeowner policies. Earthquake coverage requires a separate policy, often through the California Earthquake Authority (CEA).
• Flood: Water damage from flooding (rising water from external sources) is not covered by standard homeowner policies. Flood coverage is available through the National Flood Insurance Program (NFIP) or private flood insurers. This is distinct from water damage caused by burst pipes or appliance leaks, which is typically covered.
• Ordinance and law: Standard policies often exclude or limit coverage for the increased cost of repairs required to bring your home up to current building codes. An ordinance and law endorsement can fill this gap, and it is one of the most important endorsements to have on your policy.
• Mold (as a direct cause): Most policies exclude mold damage or impose severe sublimits. However, if mold develops as a result of a covered water loss, it may be covered as consequential damage. The distinction between mold as a direct cause and mold as a consequence of covered water damage is critical.
• Wear and tear: Insurance covers sudden and accidental losses, not gradual deterioration. A roof that fails due to age and lack of maintenance is not covered. However, if a windstorm damages an aging roof, the storm damage itself may still be covered.
• Neglect: If you fail to protect your property from further damage after a loss, the insurer can deny coverage for the additional damage. This is why it is important to make emergency repairs (tarping a roof, boarding up windows) immediately after a loss.

When Exclusions May Not Apply

Exclusions are not always the final word. There are important legal doctrines that can limit the reach of policy exclusions:

The Ensuing Loss Doctrine

Many policies contain an “ensuing loss” clause. This means that while the excluded peril itself is not covered, damage that results from a covered peril that follows may be. For example, if faulty construction (excluded) leads to a water leak that causes water damage (covered peril), the resulting water damage may be covered even though the underlying construction defect is not.

Concurrent Causation

When a loss is caused by two or more perils acting together, and at least one of those perils is covered, the question becomes whether the policy covers the loss. California historically followed the rule that if a covered peril was a contributing cause, the loss was covered. Many insurers responded by adding “anti-concurrent causation” clauses to their policies. These clauses attempt to deny coverage whenever an excluded peril is involved, regardless of whether a covered peril also contributed. The enforceability of these clauses continues to be litigated in California courts.

California-Specific Rules on Exclusions

California imposes additional requirements on how insurers apply exclusions:

• The insurer bears the burden of proving that an exclusion applies. It is not your job to prove the exclusion does not apply.
• Exclusions must be conspicuous, plain, and clear. Buried or ambiguous exclusion language may not be enforceable.
• The insurer must specifically identify which exclusion applies and explain how it relates to your loss. A blanket denial without citing specific policy language violates California’s Fair Claims Settlement Practices Act.

Exclusions vs. Limitations

There is an important difference between an exclusion and a limitation. An exclusion removes coverage entirely for a specific peril or situation. A limitation caps or restricts coverage but does not eliminate it. For example, your policy might have a $10,000 sublimit on mold remediation. That is a limitation, not an exclusion. Mold is still covered, but only up to the specified amount. Similarly, jewelry may be covered for theft but subject to a $1,500 or $2,500 sublimit per item unless separately scheduled.

If your insurer denies part of your claim based on an exclusion, do not accept the denial at face value. Request the denial in writing with the specific policy language cited. Review the exclusion carefully to determine whether it truly applies to your situation. When in doubt, consult with a licensed Public Adjuster or an attorney experienced in insurance coverage disputes.