The name of “all-risks” property insurance promises a lot, and that is exactly the problem with it: some company managers take it to mean “it pays for everything”. That is not the case. The difference from named-perils insurance is not that one covers everything and the other little, but where the logic starts from: a named-perils contract lists what it pays for, while all-risks lists what it does not pay for. This makes a real difference in the burden of proof and in how the exclusions are read – and that decides which one suits which company.
- A named-perils contract lists the insured perils (fire, storm, water damage, burglary…), and in a claim the company must prove that the loss arose from one of them.
- All-risks conditions are built the other way round: according to a published decision of the Kúria, they provide cover for every loss that the contract does not designate as an exclusion – the insurer proves the exclusion or the ground for exemption, the insured proves the sudden, unforeseen nature of the loss.
- All-risks is not “complete” either: gradual damage, wear and tear, simple theft and separately insurable risks are typically excluded, and the deductible, the limits and the security requirements apply just the same.
Named perils: the list of cover is the contract itself
Traditional corporate property insurance is built on named perils: fire, explosion, lightning, storm, hail, escape of water from pipes, burglary, robbery, glass breakage – and whatever is not on the list is not covered. For each peril the conditions also give a definition: “storm” is typically wind above a specified speed, “escape of water” is damage caused by water escaping from pipes, and burglary requires forcible entry. In a claim, the insured proves that the loss is the consequence of a named event – this is the basic map in the what property insurance covers article. The advantage of the named-perils structure is that it is transparent and easy to compare; its drawback is that everything that does not fit within the definitions – collapsing shelving, a production line knocked over by a forklift, a falling object, damage caused by operating error – stays outside, unless a separate clause or add-on brings it in.
All-risks: everything that is sudden, unforeseen and not excluded
All-risks conditions are built the other way round. Under the all-risks property and business interruption insurance conditions of one Hungarian insurer, an insured event is any loss that occurs suddenly and accidentally – from a chance, unexpected, unforeseeable external cause – at the insured location, is not subject to the exclusions, and makes repair necessary. In a published decision (Pfv.I.21.240/2021/4.), the Kúria (Hungary's Supreme Court) laid down the principle: all-risks property insurance provides cover for every loss that the contract does not designate as an exclusion. The same decision adds an important qualification: if the contract narrows the general cover to chance, unexpected, unforeseeable losses, the insured must prove not only the loss but also these conditions. In that case, a forklift in a warehouse pushed a pallet into the racking, which toppled over and destroyed a significant part of the stock – typically a loss that appears nowhere on a named-perils list, but falls within the scope of all-risks cover, provided that no exclusion or ground for the insurer's exemption applies. Incidentally, in that specific case the Kúria found that the forklift driver had acted with gross negligence – steering manually in a narrow aisle where this was prohibited, knowing both the prohibition and the reason for it – which released the insurer from paying: so all-risks does not protect against the grounds for exemption either.
The burden of proof: who has to prove what?
This is the essential difference. Under named perils, the insured proves that the loss arose from one of the listed events – if it cannot, there is no cover. Under all-risks, the insured proves that the loss occurred and that it was sudden and unforeseen; whereas it is for the insurer to prove that the loss falls under a named exclusion, or that a ground for exemption – intent, gross negligence – applies. The Kúria decision above divided it as follows: the insured proves the loss and its unforeseeable nature, the insurer the exclusion or the exemption. In practice this means that under all-risks, losses of the “we don't know exactly what happened, but by morning the machine was ruined” type are easier to handle than under named-perils cover – provided that the sudden, accidental nature can be proven. Anything that deteriorates gradually – wear and tear, corrosion, ageing, lack of maintenance – falls outside both structures, because it is not sudden, and the conditions typically exclude it expressly as well.
The exclusion list: this is where the value of “all” is decided
In an all-risks contract, the exclusions chapter is the centre of gravity of the contract, so it is the part to read most thoroughly – following the logic of the exclusions map article. Hungarian all-risks conditions typically exclude gradual damage, wear and tear and corrosion, design and material defects in themselves, theft other than burglary, fraud, embezzlement, inventory shortfalls and mysterious disappearance, war and nuclear events, and separately insurable risks – machinery breakdown, electronic equipment, business interruption – if these were not bought as add-ons. It is important that, according to the Kúria decision, the cover provisions must be interpreted in harmony with the whole contract: they cannot be read in a way that disapplies other provisions – such as the limits, the deductibles and the security requirements. All-risks therefore does not do away with the deductible, the security requirements, or the rules on the sum insured and underinsurance; these apply just as they do in a named-perils contract.
Which suits whom? Decision criteria without premium figures
As a broker, I base the decision not on the name but on the company's risk profile. Named-perils cover is typically a good choice if the risks at the site are classic ones – an office, a smaller shop, a warehouse with simple technology – and the company also regards the premium as an important factor. Things point towards all-risks if the risks are hard to list: valuable, sensitive machinery and instruments, frequent internal materials handling, project-based operations, a lot of third-party equipment at a leased site, or if the company simply does not want to argue over definitions when a claim arises. Two practical remarks. All-risks conditions differ significantly between insurers: behind the same name there may be a different list of exclusions and different definitions, so offers must be set side by side along the exclusions and the limits – the offer comparison criteria table can be used for this. And most importantly: all-risks does not cover everything either; the insurer pays only for what is an insured event under the contract, and not for what an exclusion or a ground for exemption removes from it. If you would like the comparison and a read-through of the conditions, I prepare the criteria table, and in the end you decide.
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Sources
- Kúria (Hungary's Supreme Court) Pfv.I.21.240/2021/4. – published decision: all-risks property insurance provides cover for every loss that the contract does not designate as an exclusion
- UNIQA All Risks property and business interruption insurance conditions (31 July 2024), point 2.1 (insured event), point 2.2.2 (exclusions)
- K&H all risks property insurance contract conditions (1 January 2016), point 2.2 – exclusions
- Hungarian Civil Code (Ptk.) – Act V of 2013, Section 6:439 (insurance contract), Sections 6:463–6:464 (loss prevention, exemption of the insurer)
