“Ordinance or law” property insurance coverage is typically triggered when, following a covered loss to a covered building, an insured incurs certain costs due to the enforcement of an ordinance or law1 requiring or regulating the demolition, construction, or repair of buildings.2 What does enforcement mean for purposes of triggering building ordinance or law coverage? Does enforcement require affirmative action of some sort by a building official, such as issuing or refusing to issue a building permit or issuing a citation for violating a building ordinance or law? Or, is enforcement simply voluntarily complying with building ordinances or laws?

The Fire Casualty and Surety ("FC&S") Bulletins3 addressed this issue in a 2011 Question and Answer. FC&S‘s position is as follows:

[Q] Quick question on Ordinance or Law coverage under a Homeowners policy: the policy says the carrier will respond for the increased costs incurred due to enforcement of any ordinance or law which requires or regulates…. In most cases a building inspector will not put into writing what is or isn’t required yet they will obviously make several inspections. A reputable general contractor will rebuild to code either IBC or IRC which most states comply to. I guess the question is MUST the code be enforced by the building inspector or will the current code be sufficient? Does the building inspector have to put this into writing to satisfy the carrier?

[A] The policy states that coverage is available when the ordinances or laws are enforced, but it doesn’t say what enforcement entails. Merriam Webster Online defines enforce as to carry out effectively, i.e., enforce laws. By inspecting the property the building inspector is doing that, enforcing the laws. If the property wasn’t inspected the property could not be up to code, and one would suppose that the inspector would fail the work and require it to be redone if it was not up to code. Also the fact that the contractor is forced to build to code or lose his license qualifies as enforcement.

FC&S’s position is consistent with case law interpreting the term “enforcement.” For example, in State Farm Fire and Casualty Company v. Metropolitan Dade County,4 a Florida appellate court stated:

Enforcement is ‘the act of enforcing: as a: compulsion especially by physical violence b: forcible urging or argument … c: the compelling of the fulfillment (as of a law or order).’ Webster’s Third New International Dictionary, Unabridged, 751 (1986). The ordinary meaning of the term ‘enforcement,’ the urging of compliance or fulfillment, makes the exclusion directly applicable to the scenarios at issue in this action. Whether the homeowners comply with codes and ordinances before or after the County takes action is irrelevant. The threat of enforcement is the driving force behind compliance with building and construction codes and ordinances. Permits are required before construction and repairs commence. Failure to comply results in failure to receive necessary permits for further construction or occupancy. The County discovers its code violations through inspections and punishes noncompliance by imposing sanctions. Thus, by any method it chooses, the County does enforce the upgrades and improvements it requires of homeowners.5

In Bischel v. Fire Insurance Exchange,6 a California appellate court rejected that enforcement of an ordinance or law must include affirmative action of some sort. Relying on the Black’s Law Dictionary definition of the term “enforcement”—the carrying out of a mandate or a command—the court stated that “[i]mplementing building standards and withholding permits for construction in violation of those standards is how the city carries out the mandate or command of the municipal code provisions.”7

In Windowizards, Inc. v. Charter Oak Fire Insurance Company,8 a Pennsylvania federal district court disagreed with the insurer’s contention that no ordinance or law enforcement occurred because no documentation was supplied by a government authority mandating any code-related work. The district court interpreted the term broadly, and concluded that enforcement begins with the passing of relevant ordinances and continues with either the granting or denial of a permit, or the issuance of a violation. There, the district court found that the enforcement process had sufficiently triggered ordinance or law enforcement coverage because the insured (1) recognized the need for plan approval because of various ordinances, (2) attempted to discuss the code enforcement coverage with the insurer on several occasions, and (3) began the interior demolition of the building as recommended by its engineers and as required by the ordinances.

And, in Brandywine Flowers, Inc. v. West American Insurance Company,9 a Delaware court reached a similar conclusion that building and zoning ordinances or laws are enforced, in part, through the permitting process. The court reasoned that the insured would have violated the law if it had commenced reconstruction without first obtaining a building permit; it had to obtain a variance in order to get the building permit; and the Building Inspector, whose responsibility is to “enforce” all laws, rules and regulations relating to the construction, use, and maintenance of buildings, is also the person responsible for the issuance of building permits.

In 2013, the Insurance Services Office (“ISO”) amended its commercial property “Ordinance or Law Coverage” Endorsement10 by removing the term “enforcement” for terminology referring to the requirement to comply with an ordinance or law. There was no change in coverage or intent, simply an acknowledgment of the required voluntary nature of complying with a jurisdiction’s current building ordinances or laws which, as explained above, is a requirement of the permitting process anyway.

Recognizing that “[c]onditioning insurance coverage on the vagaries, inconsistencies and uncertainties of enforcement, is tantamount to encouraging and facilitating repair of insured property in contravention of laws designed to ensure public safety,” the Oklahoma Insurance Department issued an Insurance Bulletin earlier this year in response to a number of policyholder complaints concerning coverage for the repair of storm damaged roofs. The Department instructed 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.”11 In other words, building ordinances or laws are self-executing, and no formal directive is required.

In sum, voluntarily complying with applicable building ordinances or laws is enough to trigger ordinance or law coverage according to the FC&S Bulletins, case law, ISO Endorsement CP 04 05 10 12, and the Oklahoma Insurance Department.

1 A “law” is defined as “[t]he aggregate of legislation, judicial precedents, and accepted legal principles.” Black’s Law Dictionary 900 (8th Ed. 2004). An “ordinance” means “[a]n authoritative law or decree; esp., a municipal regulation.” Black’s Law Dictionary 1132 (8th Ed. 2004).
2 The costs include (1) the increased cost of construction or repair and (2) the cost to demolish undamaged parts of a building. See generally ISO Endorsement CP 04 05 04 02 and ISO Form HO 00 03 05 11.
3 The National Underwriter Company publishes interpretations and analysis of insurance policy language through its FC&S Bulletins, an authoritative resource in the property and casualty insurance industry. See, e.g., Casetech Specialties, Inc. v. Selective Ins. Co., No. 13-11792, 2013 WL 6835098 (E.D. Mich. Dec. 23, 2013); Travco Ins. Co. v. Ward, 468 Fed.Appx. 195 (4th Cir. 2012).
4 State Farm Fire and Cas. Co. v. Metropolitan Dade County, 639 So.2d 63 (Fla. 3rd DCA 1994).
5 Id. at 66.
6 Bischel v. Fire Ins. Exch., 2 Cal.Rptr.2d 575 (Cal. App. 1991).
7 Id. at 580-581(internal quotation marks and citations omitted).
8 Windowizards, Inc. v. Charter Oak Fire Ins. Co., No. 13-7444, 2015 WL 1400726 (E.D. Pa. Mar. 27, 2015). See also Regents of Mercersburg College v. Republic Franklin Ins. Co., 458 F.3d 159 (3rd Cir. 2006) (insurer obligated to pay any post-fire renovations that were mandated by the Americans with Disabilities Act; the court did not require an official to enforce the law by issuing a citation – all that it required was evidence that renovation or modification was necessary under the law).
9 Brandywine Flowers, Inc. v. West American Ins. Co., No. CIV. A. 92C-04-196, 1993 WL 133176 (Del. Super. Apr. 19, 1993), aff’d 633 A.2d 368 (Del. 1993).
10 ISO Endorsement CP 04 05 10 12.
11 Oklahoma Bulletin No. PC 2016-2.