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Ordinance & Law Coverage-Often Overlooked

One of the most overlooked coverages that building owners don’t have is Ordianace and Law Coverage. Building codes are constantly being updated, but many business buildings may not be exempted from the newer codes simply because they were constructed prior to the enactment of the new statutes. The building laws exposure that this endorsement was originally designed to cover was the exposure created by many local building ordinances, requiring any building which is damaged to some specified extent (such as 50 percent) to be demolished and reconstructed in accordance with current building codes. Other ordinances that could affect rebuilding are zoning laws and ADA compliance.

 Ordinance and law coverage is not included as a standard part of a business policy as it actually improves a business’ pre-loss condition. If a business does not opt to add this useful coverage they could end up paying the difference between the covered loss and the cost of bringing the building up to code, or if necessary demolishing the undamaged portion of the old building and the costs to remove the debris. These costs could be much higher than you would anticipate.

 Coverage A – Coverage for Loss to the Undamaged Portion of the Building With respect to the building that has sustained covered physical damage; the policy will pay under coverage A for the loss in value of the undamaged portion of the building as a consequence of enforcement of an ordinance or law that requires demolition of undamaged parts of the same building. Coverage A is included within the limit of insurance shown in the Declarations as applicable to the covered building. Coverage A does not increase the limit of insurance.

 Coverage B – Demolition Cost Coverage With respect to the building that has sustained covered direct physical damage, the policy will pay the cost to demolish and clear the site of undamaged parts of the same building, as a consequence of enforcement of an ordinance or law that requires demolition of such undamaged property.

 Coverage C – Increased Cost of Construction Coverage With respect to the building that has sustained covered direct physical damage; the policy will pay the increased cost to: repair or reconstruct damaged portions of that building; and/or reconstruct or remodel undamaged portions of that building, whether or not demolition is required; when the increased cost is a consequence of enforcement of the minimum requirements of the ordinance or law. However, this coverage only applies if the restored or remodeled property is intended for similar occupancy as the current property, unless such occupancy is not permitted by zoning or land use ordinance or law. The policy will not pay for increase cost of construction if the building is not repaired, reconstructed, or remodeled. If you’d like more information, please contact Carl Zeutzius at UNICO Group. 402-434-7275 czeutzius@unicogroup.com