What is Building Ordinance or Law Coverage
Building Ordinance or Law insurance coverage is a common property insurance endorsement that reimburses property owners for cost associated with demolishing, repairing, rebuilding, or constructing a structure if a covered loss prompts additional changes due to laws or regulations. Usually these ordinances or laws are associated with local building codes, which require property to be up to current specifications. This can pose an issue for owners of partially damaged buildings that were constructed decades ago and built to a lesser standard, because they usually won’t pass today's building code regardless of the loss. Since property insurance is only meant to indemnify the policy, or directly compensate the policyholder for the loss, basic property coverage doesn’t provide for additional funds to upgrade aspects of the building that were not damaged. Imagine the dismay that ensues when building owners realize that there are laws in place which may require partial reconstruction or renovation without any help from their insurance company. However, the dismay can transform to delight if their insurance professional informs them that they previously purchased the Ordinance or Law coverage endorsement on their insurance policy.
Ordinance or Law coverage for commercial property consists of 3 main segments:
- Coverage A – Undamaged Portion of the Building
- Coverage B – Demolition
- Coverage C – Increased Costs of Construction
Ordinance or Law Coverage A
Coverage A provides coverage for the undamaged portion of the insured building when a partial loss occurs. For example, Florida’s Building Code states that if more than 25 percent of a roof is damaged, then the entire roof must be replaced. This legal requirement could potentially cause a policyholder to replace their entire roof while only being compensated for as little as 25 percent of the cost by their insurance carrier. For this reason, Ordinance or Law Coverage A could be applied, if endorsed on the policy, to provide compensation for the remaining 75% of the cost associated with the undamaged portion of the roof.
Ordinance or Law Coverage B
Coverage B is closely related to coverage A in that it correlates with the undamaged portion of the building, however in this case the coverage applies to the demolition of that undamaged portion of the building. If building code requires you to tear down the entire structure but only 60% of the structure was damaged due to the covered peril, then the remaining 40% of the demolition costs would not be covered under a basic policy. Ordinance or Law Coverage B pays for the cost to demolish and haul away debris from the undamaged portion of the building.
Ordinance or Law Coverage C
Coverage C provides coverage for mandatory building enhancements that are required if the building code has changed since the time your building was originally constructed. A common example of this would be fire sprinkler systems, or ADA compliance such as elevator installation. If Coverage C is not endorsed, policyholders would be required to update the features of their building out of pocket in order to meet the new building codes.
These three segments of the Ordinance or Law endorsement are all very important coverages that are applied to commercial buildings. Each of these coverages can generally be purchased individually and provide policy holders with a unique range of protection. Insurance professionals recommend that building owners elect to purchase all three Ordinance or Law Coverages to safeguard against additional costs that are required by ordinances or laws.
Moore Resources is an Independent Insurance Agency located in St. Petersburg, FL and offering Homeowners Insurance, Auto Insurance, Personal Insurance and Business Insurance. Our reach extends beyond the Tampa Bay area to the entire state of Florida. Moore Resources has regionally been dedicated to serving the local residents of Pinellas, Hillsborough, Polk, Pasco, Manatee and Sarasota counties; including St. Pete, Tampa, Clearwater, Bradenton, Brandon, Dunedin, Gulfport, Lakeland, Largo, Lutz, Palm Harbor, Pinellas Park, Riverview, Ruskin, Seffner, Seminole, Temple Terrace, Tierra Verde, Town n Country, and the Gulf Coast Beaches.
The purpose of this blog is to present general information only. It does not interpret specific policies or coverage. In order to obtain detailed information regarding your insurance, contact a licensed insurance agent.