An important coverage available to both personal homeowners, dwelling and commercial buildings owners, is “Building Ordinance and Law Coverage”. This coverage is not normally included in commercial property policies, but can often be added by endorsement for an additional premium.
In some situations (as mandated by Florida Statutes) certain policies, usually homeowners, must include ordinance or law coverage unless the client rejects the coverage in writing.
Whether the coverage is statutory or not, it is a very valuable coverage and all building owners (residential or otherwise) should be encouraged to obtain the coverage in order to provide the best possible protection.
Ordinance and Law Coverage Explained
Property insurance policies are designed to pay for repairs to a building that will put it back in the same condition that it was prior to a loss. The policy is not designed to pay for items that were not present prior to the loss.
What Florida Law Says
The only state we know of that has statutes addressing O&L coverage is Florida. The state of Florida enacted a statute (statute 627.7011) shortly after Hurricane Andrew and revised the statute after both the 2004 and 2005 hurricane seasons
How Much Coverage is Included in Policies
The 2005 and 2006 Florida legislate sessions changed the Florida statute dealing with coverage found in homeowners’ policies. The statute mandates 25% or 50% of coverage be included for O&L losses, and this coverage is additional insurance.
For all other policies, besides homeowners policies, generally there is NO O&L coverage included automatically included. Considering that fact, it is important that the appropriate O&L be added by endorsement to the policy.
An insured may purchase one, all or any combination of these coverages which are summarized below:
Coverage A – Coverage For Loss To The Undamaged Portion Of Building
Coverage B – Demolition Cost Coverage will pay tear down and haul away the undamaged portion of the building.
Coverage C – Increased Cost of Construction responds when a building must be torn down and rebuilt according to the new code.
Building ordinance and law coverage pays to rebuild a structure to comply with current building codes. All insureds should be encouraged this have this valuable coverage to provide the best coverage at the time of loss.