Introduction to Dwelling Property Forms
In the world of property insurance, specifically within the scope of the complete CAT Adjuster exam guide, understanding Dwelling Policy (DP) forms is essential. Unlike the standard Homeowners (HO) policies, Dwelling policies are designed for properties that do not necessarily serve as the owner's primary residence. This includes rental properties, seasonal dwellings, or even older homes that may not meet the strict underwriting requirements of a comprehensive HO-3 policy.
For a catastrophe adjuster, the ability to distinguish between DP-1, DP-2, and DP-3 is critical when assessing damage after a major event like a hurricane or tornado. The specific form dictates not only what is covered (the perils) but also how much the insurance company will pay (the valuation method). Misidentifying the form can lead to significant errors in claim settlement and liability assessment. This guide breaks down the nuances of the three primary dwelling forms to help you prepare for practice CAT Adjuster questions.
DP Form Comparison Matrix
| Feature | DP-1 (Basic) | DP-2 (Broad) | DP-3 (Special) |
|---|---|---|---|
| Peril Type | Named Peril | Named Peril | Open Peril (A & B) |
| Settlement (A & B) | Actual Cash Value (ACV) | Replacement Cost (RCV) | Replacement Cost (RCV) |
| Settlement (C) | ACV | ACV | ACV |
| Burden of Proof | Insured | Insured | Insurer |
DP-1: The Basic Form
The DP-1 (Basic Form) is the most restrictive of the three dwelling policies. It is a strictly "Named Peril" policy, meaning that if a peril is not explicitly listed in the policy contract, there is no coverage. By default, the DP-1 only covers three primary perils:
- Fire
- Lightning
- Internal Explosion
However, many policyholders opt to add Extended Coverage (EC) perils and Vandalism and Malicious Mischief (VMM) via endorsement. The EC perils include windstorm, hail, aircraft, riot, vehicles, volcanic eruption, and smoke. It is important for adjusters to remember that even with these additions, the DP-1 typically settles claims on an Actual Cash Value (ACV) basis for both the structure (Coverage A) and personal property (Coverage C). This means depreciation is always subtracted from the replacement cost, which can be a point of contention during catastrophe claims where building costs spike.
Standard Perils by Form
DP-2: The Broad Form
The DP-2 (Broad Form) is also a Named Peril policy, but it significantly expands the list of covered causes of loss compared to the DP-1. In addition to the Fire, Lightning, and EC perils, the DP-2 includes the "Broad Form" perils, which are often remembered by the acronym B.B. BICE-GOLF in insurance education:
- Bursting of heating systems
- Burglary damage
- Ice, snow, or sleet weight
- Collapse of buildings
- Electrical damage (artificially generated)
- Glass breakage
- Objects falling from the sky
- Leakage/Overflow of water or steam
- Freezing of plumbing
Crucially for the catastrophe adjuster, the DP-2 provides Replacement Cost Value (RCV) settlement for Coverages A (Dwelling) and B (Other Structures), provided the insured maintains insurance to at least 80% of the replacement value at the time of loss. Coverage C (Personal Property) remains at ACV.
The Burden of Proof Shift
In DP-1 and DP-2 (Named Peril) forms, the insured must prove that the damage was caused by a listed peril. In the DP-3 (Open Peril) form, the insurer must prove that the cause of loss is specifically excluded. This shift is a major advantage for policyholders in complex catastrophe scenarios.
DP-3: The Special Form
The DP-3 (Special Form) is the most comprehensive dwelling policy and is most similar to the HO-3 homeowners form. It utilizes an Open Peril approach for Coverages A and B. This means the policy covers all direct physical losses to the dwelling and other structures unless the peril is specifically excluded in the policy text (e.g., flood, earth movement, or wear and tear).
However, it is vital to note that Coverage C (Personal Property) under a DP-3 is still covered on a Named Peril basis (the same broad perils found in the DP-2). Like the DP-2, the DP-3 provides Replacement Cost settlement for the structures, assuming the 80% coinsurance requirement is met. For catastrophe adjusters, the DP-3 is the most frequent form encountered on high-value rental properties or well-maintained secondary homes.
Catastrophe Adjuster Considerations
When adjusting claims following a catastrophe, the differences between these forms dictate your inspection workflow. For a DP-1 claim, you must be extremely diligent in documenting that the damage was caused by a specific named peril, such as wind or hail. If the cause is ambiguous, the claim may be denied.
In contrast, for a DP-3 dwelling claim, your focus shifts toward identifying if any exclusions apply. For example, if a hurricane causes both wind damage and storm surge (flooding), you must clearly delineate which damage was caused by wind (covered) and which was caused by flood (typically excluded). Because DP-3 is open peril, the wind damage is presumed covered unless the carrier can prove otherwise, whereas on a DP-1, the burden remains on demonstrating the wind was the proximate cause.