All risk insurance is a property policy that covers any direct physical loss to your insured property unless the contract specifically excludes it. That flips the usual insurance question on its head: instead of asking whether your loss matches a listed peril, you’re covered by default, and the insurer has to point to exclusion language to deny the claim. Most modern policies now label this coverage “special form” or “open perils,” but the mechanics are the same.
How the “Covered Unless Excluded” Structure Works
The standard commercial version is ISO’s Causes of Loss — Special Form, which defines covered causes of loss as “direct physical loss unless the loss is excluded or limited in this policy.” Homeowners policies use similar language in their broadest forms. The name change from “all risk” to “special form” was mostly a clarification, because “all risk” never literally meant everything.
In practice, you don’t need to prove your loss matches a specific named peril. If a pipe bursts, a tree falls through your roof, or a vehicle crashes into your storefront, you’re covered as long as no exclusion applies. Coverage attaches to whatever the declarations page lists as insured: the building, business personal property, equipment, inventory, or personal belongings in a homeowners policy. Endorsements can extend coverage to business interruption, equipment breakdown, or property in transit, usually at additional cost. Every policy carries a coverage limit and a deductible.
The Burden of Proof Advantage
Under a named perils policy, you carry the full burden of proving your loss was caused by one of the listed perils. If the cause is ambiguous, the claim can stall or get denied because you can’t pin down which peril applies.
All risk coverage reverses that. You show three things: you have a valid policy, the property was insured under it, and you suffered a fortuitous loss during the policy period. Once you’ve established those basics, the insurer must prove that an exclusion applies to deny the claim. Courts have described this as a “heavy” burden on the insurer, and the policyholder is not required to disprove excluded causes.
This matters most when the cause is genuinely unclear. A warehouse suffers water damage but the source is disputed. Under a named perils policy, you’d need to prove it was a covered event like a burst pipe rather than groundwater seepage. Under all risk, the insurer has to prove groundwater, and if the evidence is ambiguous, the tie goes to you.
What All Risk Insurance Does Not Cover
All risk doesn’t mean all-inclusive. Every policy contains exclusions, and they fall into a few categories.
Wear, Tear, and Maintenance Failures
Insurers don’t cover losses caused by gradual deterioration, rust, corrosion, settling, cracking, or pest infestation. These are treated as maintenance responsibilities, not insurable events. A roof that collapses because years of water damage went unaddressed won’t trigger coverage. Neither will mechanical breakdown of equipment under standard policy language, though equipment breakdown endorsements are available for an additional premium.
Catastrophic Events
Floods, earthquakes, and earth movement are excluded from virtually all standard all risk policies. Property owners in flood-prone or seismically active areas need separate flood insurance (typically through the National Flood Insurance Program) and earthquake policies. War, military action, insurrection, and nuclear hazards are also universally excluded, and no endorsement can add them back.
Water Damage Distinctions
Water exclusions are more nuanced than most people expect. A sudden pipe burst is typically covered. But flood, surface water, groundwater, mudslide, and sewer backup are excluded under standard language. Continuous or repeated water seepage over 14 days or more is also excluded, on the theory that the policyholder should have noticed and addressed it. Sewer and drain backup coverage can usually be added by endorsement.
Government Action and Intentional Acts
Property seized, condemned, or demolished by government authority is excluded, as is any loss from enforcement of building codes or zoning ordinances. If a fire damages part of your building and the city then requires demolition of the undamaged portion for code reasons, the demolition cost isn’t covered unless you carry an ordinance or law endorsement. Losses from intentional acts by the policyholder are always excluded and can result in policy cancellation and fraud prosecution.
Cyber and Electronic Data Risks
Property policies increasingly exclude losses tied to cyber events. A cyberattack that causes physical damage, such as a hacked system that triggers a machinery fire, may not be covered even though fire is normally a covered peril. Some policies include limited write-back provisions for resulting fire or explosion; others impose absolute cyber exclusions regardless of the physical outcome. Because this language varies dramatically between insurers, checking your specific policy wording is essential. Businesses with significant cyber exposure typically need standalone cyber coverage alongside a property policy.
When Covered and Excluded Causes Overlap
Losses rarely have one clean cause. A windstorm drives rainwater through a damaged wall, and the insurer argues the real problem is the pre-existing wall defect. A tree falls because saturated soil gave way, but the tree impact itself would normally be covered. These mixed-cause scenarios produce some of the most contentious coverage disputes in property insurance.
Under the efficient proximate cause doctrine, followed in many jurisdictions, coverage depends on which peril was the dominant or most significant cause. If a covered peril set the chain of events in motion, the entire loss is typically covered even if an excluded peril contributed. If the dominant cause is excluded, the loss isn’t covered.
Insurers responded by adding anti-concurrent causation (ACC) clauses. Standard ISO policy language excludes losses “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.” In plain terms, if any contributing cause is excluded, the whole loss is denied, even if a covered peril played a larger role. Courts have split on whether to enforce these clauses as written or let efficient proximate cause override them. For coastal properties exposed to both wind and flood, how your state treats ACC language can decide the outcome of a hurricane claim.
Actual Cash Value vs. Replacement Cost
How your claim gets paid depends on whether the policy settles on actual cash value (ACV) or replacement cost value (RCV). The difference can be enormous, and many policyholders don’t find out which one they have until a loss happens.
Replacement cost pays what it actually costs to repair or replace damaged property with materials of similar kind and quality, without deducting for age or wear. A 15-year-old roof destroyed by a storm gets replaced with a new one. Actual cash value factors in depreciation, so that same 15-year-old roof is valued at what it’s worth today after years of wear, often a fraction of the replacement cost.1NAIC. What’s the Difference Between Actual Cash Value Coverage and Replacement Cost Coverage
ACV policies carry lower premiums, which makes them tempting. But a total loss on a building insured at ACV can leave you tens of thousands of dollars short of what rebuilding actually costs. Replacement cost policies often pay in two stages: an initial ACV payment, followed by the remaining depreciation once repairs are completed and documented. If you don’t complete the repairs, you may only receive the ACV amount.
The Coinsurance Trap
Many commercial all risk policies include a coinsurance clause that can slash your payment even when the loss itself is fully covered. Coinsurance requires you to insure your property for at least a specified percentage of its total value, usually 80% or 90%, shown on your declarations page. Fall short of that threshold and your payout gets reduced proportionally.
The math: divide the amount of insurance you actually carry by the amount the clause requires, then multiply by the loss. If your building is worth $1 million and the policy requires 80% coinsurance, you need at least $800,000 in coverage. Carry only $400,000 and you’ve met just 50% of the requirement. A $100,000 loss now pays only $50,000, before your deductible.
The penalty catches owners who underinsure to save on premiums, and it also catches those who never updated coverage as construction costs and property values climbed. Reviewing your coverage limit against current replacement cost at every renewal is the simplest fix. Some policies offer an agreed value option that waives coinsurance in exchange for the insurer and policyholder settling on the property’s value upfront.
What Drives the Premium
All risk premiums run higher than named perils policies because the insurer is accepting a broader range of potential losses. Property characteristics come first: construction type, age, condition, square footage, and occupancy. A warehouse storing flammable materials faces far tougher underwriting than an office building. Location matters significantly, with proximity to fire stations, flood zones, earthquake faults, coastal storm exposure, and local crime rates all affecting pricing. Insurers also factor in area construction costs, since those drive what claims cost to settle.
Claims history carries real weight. Frequent past claims signal higher risk and can lead to increased premiums, higher deductibles, or stricter policy terms. The most effective way to lower premiums is to reduce risk in ways the insurer can verify: fire suppression systems, up-to-date security, detailed maintenance logs, and upgraded electrical or plumbing in older buildings. Insurers use standardized ISO policy forms to keep coverage terms and pricing consistent across the industry.2Verisk. ISO Forms, Rules, and Loss Costs
Filing and Disputing a Claim
Most policies require “prompt” notification after a loss without defining a specific number of hours or days. Reporting within a day or two is the safest practice. After a loss, you’re also expected to take reasonable steps to prevent further damage: board up broken windows, tarp a damaged roof, shut off water to a burst pipe. Failing to mitigate can reduce your payout. Keep receipts for emergency repairs; those costs are typically reimbursable.
Under the NAIC’s model claims regulation, adopted in some form by most states, insurers must acknowledge your claim within 15 days of notice and respond to a completed proof of loss within 21 days, either accepting, denying, or explaining why more time is needed.3NAIC. NAIC Unfair Property/Casualty Claims Settlement Practices Model Regulation The adjuster assigned to your claim works for the insurance company. For large or disputed claims, hiring a public adjuster who represents you rather than the insurer is worth considering.
If the claim is denied or the settlement feels low, the policy itself dictates your next steps. Most require an internal appeal with additional documentation. Some mandate mediation before further escalation, and others require binding arbitration. Courts interpret ambiguous policy language in the policyholder’s favor: if exclusion wording could reasonably be read two ways, the reading that supports coverage wins. State insurance departments also accept complaints, which can trigger regulatory scrutiny even when they don’t directly overturn a denial. When an insurer unreasonably denies or delays a valid claim, a bad faith action may be available, with remedies that can go beyond the original policy benefits.