In the wake of property damage, whether caused by wind, fire, or storm, policyholders rightly expect their insurance to cover the cost of restoring their home or business to its proper condition. For many, that includes paying extra premiums for “ordinance or law” coverage, an important benefit that ensures repairs are completed in full compliance with local building codes. But despite charging for this protection, some insurance companies are taking steps to undermine it when the coverage is needed most.

In several of my cases, insurance companies have presented arguments to local building officials attempting to convince them that the code upgrades identified by the building code are not necessary or cost-effective. Can you think of any reason why insurance companies would present such an argument? Is it better for the homeowner or local business? Does failing to update the building somehow prevent a future loss more effectively? Of course not, it is simply another example of insurers placing profits over policyholders.

This practice has become such a concern in Oklahoma that the Oklahoma Insurance Department (OID) issued a Special Notice on June 26, 2025, to all property and casualty insurers licensed in the state. 1 The message was clear: code upgrade coverage must be honored in full, even if local officials do not strictly enforce every aspect of the building code.

The Policy Language and the Misuse

Most property insurance policies include exclusions for increased costs due to compliance with ordinances or laws. However, when policyholders pay for “additional coverage” to override that exclusion, the policy expressly restores coverage for those additional costs, provided the upgrades are required to bring the structure into code compliance.

Unfortunately, insurers have been found to be engaging in a loophole strategy: attempting to avoid these obligations by arguing that a code is not “actively enforced” unless a building official specifically demands it. In some cases, they even pressure code officials to remain silent or seek informal interpretations to avoid applying costly but necessary repairs.

But the OID has stepped in to close that loophole.

What the Oklahoma Insurance Department Says

Referencing Bulletin PC2016-02, the OID reminded insurers that:

“For purposes of providing additional coverages, as an exception to the ordinance or law exclusion, you shall consider all building codes as being strictly enforced.”

In other words, if a policyholder has code upgrade coverage, the insurer must pay for any repair required to bring the property into code compliance, regardless of whether a city inspector directly demands it. The coverage applies to the code itself, not just the inspector’s discretion.

The Real-World Consequences

Failing to follow building codes doesn’t just affect the structural integrity of a home or business, it can also jeopardize safety, reduce market value, and violate future permitting rules. That is why code compliance is not optional, and why this type of coverage exists in the first place.

When insurers disregard these responsibilities, they benefit financially in two ways:

  1. They collect premiums for code coverage, increasing the cost of the policy.
  2. They avoid paying for code upgrades after a loss, reducing their claim expense.

This is a breach of the insurer’s contractual obligation, and in some cases, it may amount to bad faith.

Policyholders Should Take These Steps.

If your insurance claim involves structural repairs, remodeling, or rebuilding:

  • Review your policy carefully to confirm you have ordinance or law coverage.
  • Consult with an experienced contractor to determine which code upgrades apply.
  • Don’t rely solely on what the insurer says, or fails to ask, about local code enforcement.
  • Document communications with city officials and the insurer regarding code requirements.
  • Seek legal advice if you believe your insurer is ignoring code compliance obligations.

Final Thought: Coverage Should Match the Promise.

Code upgrade coverage exists to ensure that repairs meet modern safety and quality standards. Insurers should not be allowed to skirt this obligation by manipulating technicalities or local enforcement quirks. When policyholders pay for full coverage, they deserve a full and lawful repair, not a patchwork compromise.

If your insurer is minimizing or denying code-related repairs, know that you are not alone and that the law, in Oklahoma and elsewhere, is increasingly on your side.

1 Laws and Ordinances, Additional Coverage and Bulletin No. PC 2016-2, Oklahoma Insurance Department, June 26, 2025.