Ordinance & Law Coverage is available on both Commercial Property policies as well as via endorsement on Homeowners Policies. For the purpose of this post I’ll be focusing on the Commercial Property Form.
Ordinance & Law coverage is available via endorsement from most carriers and is broken down into three coverage segments:
Coverage A The “Undamaged Portion” – Should your building be partially damaged by a covered cause of loss (i.e. Fire or Tornado to name a couple causes of loss), the local Building Department or Fire Marshal might require that you demolish the undamaged portion of the structure and reconstruct an entire new building. Without Ordinance & Law coverage on your policy, the insurance company may not pay for the part of the building that wasn’t originally damaged. Coverage A can close that gap.
Coverage B The “Demolition” – Continuing from the loss scenario above, Coverage B pays for the cost to actually demolish the remaining portion of the building left standing after the original cause of loss. Again, without Ordinance & Law on your policy, you’d likely be left “self-insuring” this expense. For example: The cost of demolishing a home can vary significantly based upon multiple factors. An estimated range based on nationwide averages is $4,000 to $14,000. Some of the factors influencing the cost of a house demolition include location, size of the house, whether or not asbestos is present, and more. With those known numbers it could be reasonable to assume a commercial structure could be much more costly.
Coverage C The “Increased Cost of Construction” – If the building code has changed since the time your building was originally constructed Coverage C pays for these “mandatory” building enhancements, i.e. bringing it up to code. Without this coverage, the insurance company would only pay to rebuild what was originally there. Common examples which might apply include hurricane strapping, fire sprinkler systems, ADA-compliant hardware or elevators to name a few. Please note this is one of the most common issues when it comes to damaged property, bringing the structure up to code. Most are uninsured or are not adequately insured for these “mandatory mandates.
Because Ordinance & Law coverage can prove so valuable, it isn’t always cheap. Coverage A is usually written up to the building limit on the policy. Shared or separate sub-limits are typically chosen for Coverages B & C (i.e. $50,000 combined or $50,000 for B and $50,000 for C). With all that being said, every insured or uninsured client’s exposure is different so be sure to ask your agent to discuss your specific exposure and the cost associated with closing these gaps.
|The above is an article written by our Commercial Account Executive, Dave Turk, for our 2017 Spring Quarterly Newsletter. If you enjoyed this article, we would love to send you more like this! Visit the Newsletter Sign Up page and register today.
Dave Turk, brings 30 plus years of experience to Walton Insurance Group with a background in business insurance and group employee benefits. Dave has earned the designation of Chartered Benefits Consultant (CBC) whose primary focus is educating clients in consumer driven health plans, as well as the designations of Certified Professional Insurance Agent (CPIA) and Certified Authority on Workers Compensation (CAWC). Dave has been married 37 years to his lovely wife Becky, and are the proud parents of two beautiful daughters and with families. Dave enjoys spending time with family, his two grandsons and his pride and joy, Romeo, his Belgian Draft Horse.