Building Ordinance or Law Coverage

Ordinance or Law Coverage

Ordinance or Law coverage is an optional coverage endorsement that can help cover the cost of bringing a structure up to code in the event that it’s damaged by a covered peril. Even if your policy is settled on a Replacement Cost basis, the insurance company will only pay the cost to repair or replace a structure damaged by a covered peril with materials of “like kind and quality” – not “upgrades” or “enhancements”. When the situation arises, Ordinance or Law coverage will pay the increased costs of repairing or rebuilding a structure to comply with current building codes, laws, or ordinances, and can help in three crucial ways:

Coverage for loss to an undamaged portion of the building: If a structure incurs a partial loss (for example, a fire destroys one wing of your stable/arena, but the rest of the building is undamaged, safe and usable), a typical commercial property insurance policy would only pay for the damaged portion of the structure to be rebuilt. But if local building codes require the entire structure to be torn down and rebuilt, Ordinance or Law coverage would kick in to cover the value of the undamaged portion of the structure.

Demolition cost coverage: When demolition of an undamaged portion of a structure is required by code (as in the above example), Ordinance or Law coverage kicks in to cover the cost to demolish and clear the site of the undamaged parts of the structure (a typical commercial property insurance policy would only pay for the damaged portion).

Increased Cost of Construction: Ordinance or Law coverage can help cover extra and increased costs incurred to make upgrades to a structure in order to bring it into compliance with current building codes, even in situations when no loss has occurred. If new building codes or ordinances are passed that require you to make repairs or enhancements to a structure to continue its current occupancy, this endorsement can help cover the cost.