Ordinance and Law Coverage

Business Interruption coverage protects the potential earnings of the insured business while its operations are suspended as a result of damage caused by a covered peril. The period of restoration has a direct effect on the actual loss suffered. A typical definition in most ISO forms of the “period of restoration” is:
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Christopher Boggs

Ordinance and Law Coverage generates a lot of questions whenever I give a speech about the numerous building codes which impact construction. Christopher Boggs is a great insurance educator. Two chapters from his book, Wow! I Never Knew That!: 12 of the Most Misunderstood and Misused P&C Insurance Coverages, Concepts and Exclusions, provide some of the best explanations of this often misunderstood coverage. Insurance agents, property insurance adjusters, public insurance adjusters, and property insurance lawyers should have this book as a reference in their library.
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Section 708.1.1 of the Florida Building Code, often referred to as the “25% Rule,” implements guidelines for roof replacement requirements. The section states,

Not more than 25 percent of the total roof area or roof section of any existing building or structure shall be repaired, replaced or recovered in any 12-month period unless the entire roofing system or roof section conforms to requirements of this code.
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Initiated Ordinance 300 – better known as the Denver Green Roof Initiative – was passed in November 2017 with a total of 137,917 votes. The ordinance requires that all buildings within the City and County of Denver in excess of 25,000 square feet, must now dedicate a percentage of the building’s roofing area to a combination of vegetative space and solar. Unlike larger cities with similar requirements, such as San Francisco or Toronto, Denver’s Initiative applies both to new buildings as well as existing buildings at the time of roof replacement or major repair. While certain limited exemptions do exist,1 all exempted buildings are required to provide a cash-in-lieu payment to the Denver Office of Sustainability equal to the cost of constructing the green roof.
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Note: This guest blog post is by Brent Winans, Vice President of Clear Advantage Risk Management in Delray Beach, Florida (www.clearadvantagerisk.com). He provides fee-based (no insurance sales) risk management consulting services to larger clients and serves as an expert witness on both sides of agent errors and omissions cases across the country.

Even if your building is insured for replacement cost, if you do not have Ordinance or Law coverage, you probably do not have the protection you think you have.

A standard replacement cost policy will pay to replace “new for old,” but only if the building codes (ordinances or laws) do not require a better “new” than you had before. For instance, if your building does not have hurricane shutters or hurricane windows and the new code requires them, your replacement cost policy will pay the cost for replacing your original windows but will not pay the increased cost for new hurricane windows or hurricane shutters.
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“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?


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In our practice we are often called upon to represent clients where their claim for ordinance and law coverage has been denied. This is because ordinance and law coverage is one of the most misunderstood and incorrectly interpreted policy provisions there is. Although, one of our attorneys, Robert T. Trautmann, has previously written on the DEB case in his post, Ordinance and Law Coverage in New Jersey, I recently researched what triggers ordinance or law coverage.


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Slow, delayed and late replacement and repair is the usual normal state of affairs after major catastrophes. In New Jersey and New York, slow and bogged down restoration and repair is the worst I have ever seen. Most insurance companies pay and work with their customers during post loss construction. A few insurance companies deny coverage citing limitations in policies that seem to require construction to take place with a certain amount of days or years.


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Ordinance or law (“L&O”) coverage is “[c]overage for loss caused by enforcement of ordinances or laws regulating construction and repair of damaged buildings.”1 Additional living expense (“ALE”) coverage “reimburses the insured for the cost of maintaining a comparable standard of living following a covered loss that exceeds the insured’s normal expenses prior to the loss.”2

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As Steve Jakubowski, President of Impact Forecasting, recently noted, "Historically, May is the beginning of peak tornado season in the United States."1 Since that means tornado season remains in full swing at this point, this installment of my Oklahoma Coverage Series will address whether Oklahoma policyholders have enough coverage.


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