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Ordinance and Law – What is it and why do I need it?

October 28, 2013
Adam Winters Commercial Lines Account Manager Founders Insurance Group

Adam Winters
Commercial Lines Account Manager
Founders Insurance Group

If you’ve ever built a new home or office, renovated an older structure and added a wing – you became good buddies with the building inspector and your local Planning & Zoning Board or Commission. They have rules, regulations and volumes of maps with different zones and areas.

Think of this scenario:

You own a building that is mixed use in the downtown of a quaint New England town. It is right on Main Street. Built in 1875, it has a great big porch, sits right near the side walk, has those beautiful big original windows, no sprinklers, narrow but quaint stair case going to the 2nd and 3rd floors.

A fire breaks out and damages about 50% of the building. You have good insurance with replacement cost, the contractors come out to start building and they tell you that the house is too close to the road to meet current building codes, the windows are too low to the ground and will need to be brought up to code and by the way the building will need to be sprinklered. All at the extra expense of $95,000 which is not included in your insurance policies replacement cost. OUCH!!!

To the rescue – Ordinance & Law Converage. The coverage will vary by carrier – some offer a precentage of the building coverage, some a flat amount, some unlimited. Like we always say – have a conversation with your agent!

The official lingo from IRMI (www.irmi.com) is as follows:

Coverage for loss caused by enforcement of ordinances or laws regulating construction and repair of damaged buildings. Older structures that are damaged may need upgraded electircal; heating, ventilation, and air-conditioning (HVAC); and plumbing units based on city codes. Many communities have a building ordinance(s) requiring that a building that has been damaged to a specified extent (typically 50%) must be demolished and rebuilt in accordance with current building codes rather than simply repaired. Unendorsed, standard commercial insurance property insurance forms DO NOT cover the loss of the undamaged portion of the building, the cost of demolishing that undamaged portion of the building, or the increased cost of rebuilding the entire structure in accordance with current building codes. However, coverage for these loss exposures is widely available by endorsement. Standard homeowners polices include a provision granting a limited amount of building ordinance coverage – this amount can be increased by endorsement.

Adam Winters

Commercial Lines Account Executive

awinters@foundersgrp.com

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