Deconstructing the All-Risk Policy: In the Beginning…

My post last week touched on an ambiguity that arose out of an all-risk policy, and I realized that the all-risk policy is an interesting and important topic that has not yet been discussed in detail on this blog. Insurance has evolved over time, and the all-risk policy is, perhaps, the evolution that has most benefitted consumers.

Leonard E. Murphy, Andrew B. Downs, and Jay M. Levin edited the Property Insurance Litigator’s Handbook, which gives a great synopsis of the evolution of property insurance. They explained:

Property insurance finds its roots in fire insurance. The business of underwriting the risk of loss by fire originated in England in the late 1600s. After the great fire of London in 1666, a doctor and builder began insuring newly constructed buildings against loss by fire.

These early policies, first replicated in the United States in the mid-1700s, only covered damage to the building caused by fire. Personal property inside the building and other perils, such as windstorms and accidental discharge of water, were not covered. While consumer demand would lead to coverage for additional perils, both insurance companies and insureds were more immediately concerned about creating uniformity among insurance policies and making them easier to understand. Murphy, Downs and Levin wrote:

Beginning in the late 1800s, the industry, along with others including the National Association of Insurance Commissioners, began developing a standard fire insurance policy. After decades of various efforts including variations of a standard form, most states settled on the New York Standard Fire Policy. This standardized policy contains a mere 165 lines of text. In many states, this form still establishes the minimum coverage required to be provided by property insurers.

Soon thereafter, consumers demanded coverage for additional perils. Next week, I will write about how additional perils were added to the standard fire policy and, in subsequent weeks, discuss some of the most common exclusions from “all risk” policies. Stay tuned.