(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).
Complying with code upgrades often extends the period of time it takes to repair or replace the property after a loss. Depending on the type and nature of the code requirements, repairs could be extended for several months and depending on the type of policy this time delay may not be covered. Depending on the size of the business, this could translate into significant unrecoverable losses.
At its very basic form, the standard ISO CP 00 30 "Business Income (and Extra Expense) Coverage Form" states that:
"period of restoration" does not include any increased period due to the enforcement of any ordinance or law that regulates the construction, use or repair, or requires the tearing down of any property.
Most business policies also have a standard ISO CP 00 10 “Building and Property Coverage Form,” which will provide coverage for the increased costs incurred to comply with the enforcement of new building codes up to a cap or limit. However, the delay in repairs or replacement caused by complying with the required forms may still not be covered by this basic form.
Large-scale business owners, should speak with their brokers about company or manuscript forms that provide not only complete coverage for the increased costs, (i.e., not limited to a percentage), but will also provide coverage for the period of time required to adhere to the code upgrades. Typical wording is the following:
Increased Cost of Construction
This policy also covers any increase in the Business Interruption and extra expense loss arising out of the additional time required to comply with state law or ordinance.
All business owners should call their agents to give their policies a little spring check-up on code upgrade coverage.