Don’t Overlook Ordinance and Law (Code) Coverage

By Kevin Lahey, CR | Published January 9, 2023

When disaster strikes, the goal is to process the claim, renovate the property, and keep the insured whole, all in an efficient, cost-effective fashion. However, delays or cost-overruns can occur due to multiple and unexpected roadblocks in the process. 

Some appear at random and seem uncontrollable; others, such as issues brought on by Ordinance and Law Coverage (or colloquially, Code Coverage), can be avoided with some advance preparation. 

Mandated provisions may not even relate to the damage claim filed. For example, if a fire destroys a building in an earthquake zone, the governing agency would require the rebuild to meet up-to-date earthquake-resistant building codes, regardless of how it was destroyed. 

Common Ordinance and Law Provisions

Ordinance and law provisions vary significantly between locales and governing bodies. The following list represents only a few of the more common items that could be mandated during the claims and restoration processes:

Building code changes — ingress and egress to the property, fire sprinkler systems, fastener requirements such as more tightly secured drywall, firewalls, fire lifts, and corridors

Title 24 energy — insulation, dual-glazed windows, water heaters, furnaces, and air conditioning mandates

Earthquake — tie-down straps, shear walls, bracing, moment frames, seismic panels, and diaphragm systems that transfer all the motion from the foundation all the way to the roof 

Wind — tie-downs and specific bolt-down provisions similar to earthquakes, but without a focus on the foundation

Wildfire — includes tempered glass, closed eaves, non-combustible siding materials, and fire-resistant roofing systems

The Americans with Disabilities Act — path-of-travel provisions, including parking lot striping, ramping, signage, and adequate hallway widths; workspace ergonomics; and restrooms with adequate space for wheelchair use

Flood — not as common outside of hurricane- and storm-surge-prone areas, but includes raising the home’s living area to the second story, and using materials at the ground level that will minimize loss caused by future storm surge.

Impact on Insurance Policies

Ordinance and law mandates demonstrate the need to perform regular insurance policy reviews. If an insured doesn’t carry a limit high enough to cover all ordinance and law requirements, they will need to bear those costs.

You can’t predict when disaster will strike, but you can help reduce insurance costs by recommending that fire and smoke detectors be installed, or fire-suppression systems added, for example. Still, ensuring building owners have adequate Ordinance and Law coverage remains the best way to protect them. 

Impact on Claims and Restoration Projects

Once a claim is filed and restoration plans are drawn, ordinance and law mandates can create tension between the parties involved if the proper steps are not followed. To avoid losing a critical control point, ensure that all stakeholders, engineers, and consultants review the blueprints prior to submission to the governing agency. 

Misinterpretation of codes can also occur, adding items to the plan that go too far above standard ordinance and law compliance. This overestimation drives up the cost and can result in these upgrades not being covered. 

On the flip side, mandated changes to the project do not grant the contractor or insured a blank check to upgrade. For example, if a facility is mandated to offer a certain amount of natural light sources, the insured and their representation don’t have carte blanche to install additional automated skylights and controls. Perhaps a series of opaque double-dome skylights will meet the minimum requirement. 

Plans must be fair and reasonable, or the carrier may decline to cover anything deemed an “upgrade,” leaving the insured to pay the difference. Many times, over-ambitious plans and scoping surrounding ordinance and law can actually place the insured in harm’s way by breaching their limits. A review of those plans prior to plan submission, review and approval can help mitigate that situation and save precious time in the end.

Proactively Review Policies

Thorough annual policy reviews should reveal where building costs have increased and potential underinsured conditions. This review should always include sub-coverage reviews such as ordinance and law.  

When ordinance and law coverage issues arise, stakeholders need to work together to present a correct scope and set of plans, and clearly identify the owner options (and costs) prior to submittal of plans for review and approval.

For help reinterpreting Ordinance and Law conditions on your claims, contact RMC Group’s expert building consultants today.

This information is intended for informational purposes only. Each restoration project has unique properties and must be evaluated individually by knowledgeable consultants. Additionally, cutting samples of roof assemblies should be performed by qualified professionals and in some instances approved by the roofing manufacturer. RMC Group is not liable for any loss or damage arising out of or in connection with the use of this information.