another insurance question - coverage exemptions?

It's a pretty common exclusion. A lot of companies have included them for some years now. I know for sure that both Progressive and National General have that same exclusion in their policies. A small caulking failure can completely total a trailer so I see why it exists. Normally these clauses say that water damage isn't covered unless it's caused by covered events. So if the roof failed due to a branch falling then it's covered. You're on the hook if you drive under a branch and don't discover the damage until months later.

As with most forms of insurance, negligence isn't covered. In this case not only did the operator cause the damage, but also failed find and report the damage in a reasonable time frame.