The Burden of Proof for an All-Risk Policy
“All-risk” insurance policies, also known as open-perils policies, are designed to provide broad protection for property owners. Instead of listing only covered events, they cover all risks unless specifically excluded in the policy. However, when it comes to filing a claim, the burden of proof—or responsibility to prove coverage—shifts between the policyholder and the insurer depending on the situation.
Initial Burden on the Policyholder
When making a claim under an all-risk policy, the policyholder must first show that:
- A loss occurred, and
- The loss affected the covered property during the policy period.
Unlike named-peril policies, the insured does not have to prove that the loss was caused by a specific covered event. Simply demonstrating that a physical loss or damage took place is usually enough to satisfy this first step.
Shift to the Insurer for Exclusions
Once the policyholder meets this initial burden, the responsibility shifts to the insurance company. The insurer must then prove that the loss falls under a policy exclusion. Common exclusions in all-risk policies include:
- Flooding
- Earthquakes
- War or terrorism
- Wear and tear or gradual deterioration
If the insurer cannot prove that an exclusion applies, the loss should be covered.
Disputes and Gray Areas
Disagreements often arise when losses involve both covered and excluded causes. For example, if a storm causes roof damage but poor maintenance worsens the loss, insurers may argue the claim falls under the “wear and tear” exclusion. In these cases, courts may apply doctrines like the efficient proximate cause rule, which looks at the primary cause of loss to determine coverage.
Why Burden of Proof Matters
The allocation of the burden of proof is important because it influences the outcome of disputes. Policyholders benefit from all-risk policies since they don’t have to identify a specific covered peril. However, insurers protect themselves through exclusions, and proving those exclusions apply becomes their responsibility.
Conclusion
Under an all-risk policy, the burden of proof starts with the policyholder, who must show that a loss occurred to insured property. Once established, the burden shifts to the insurer to prove the loss is excluded. This balance ensures broad protection for policyholders while allowing insurers to enforce legitimate exclusions.