What do changes in building codes have to do with your commercial insurance policy? Plenty. With the passage of time, building codes and ordinances change to meet the new standards in construction—requiring new and improved sprinkler systems, wiring, roofing materials, and more. These begin to be required for safety, energy efficiency, or structural integrity. Even though your commercial building was constructed at the time to meet or exceed building codes, it eventually becomes noncompliant with current codes. While this may not matter much in your day-to-day business, it will matter if your company sustains serious property damage and losses.
A fire, for example, could destroy your business complex, commercial warehouse, or other structure, creating a need to rebuild. When you attempt to rebuild the damaged construction, it may come as a surprise to you that your policy excluded “building ordinance or law” insurance coverage, which prevents you from making a full recovery.
When ordinance or law insurance is excluded in the policy, the insurance company will not pay to have your building meet the latest building codes. These costs could add up substantially, which is why it is important that you understand the ordinance or law insurance coverage before you decline it.
Many city ordinances require that when a building has sustained damages to 50 percent or more of the structure that is needs to be knocked down and rebuilt in accordance with current building codes. This is why costs can add up fast. Most standard commercial insurance policies do not cover the following:
- Cost of demolishing the undamaged portion of the building. However, if you have ordinance or law insurance, the cost of demolition for the undamaged portions of the building should be covered.
- Loss of the undamaged portion of the structure. With ordinance or law insurance, it will cover the cost to rebuild the undamaged portion of the structure.
- Increased cost of rebuilding the structure in accordance with current codes. With ordinance or law insurance, the increased expenses incurred in bringing the building up to code should be covered.
Without this type of insurance, a business may face huge costs to comply with new earthquake, hurricane, fire, or energy standards. This is why ordinance or law insurance is an important part of commercial insurance policies. For help determining if you have the right coverage or for help appealing a denied claim, call a qualified insurance claim litigation attorney at the Voss Law Firm for a free legal consultation at 888-614-7730 and also request a free copy of our book Disputes With Your Insurance Company: What All Consumers Need to Know.
