Ordinance or Law coverage for commercial property consists of 3 main segments:
Coverage A – Undamaged Portion of the Building
Coverage B – Demolition
Coverage C – Increased Costs of Construction
Ordinance or Law Coverage A
Coverage A provides coverage for the undamaged portion of the insured building when a partial loss occurs. For example, some cities require that if only a portion of the roof is damaged, the entire roof must be replaced. This legal requirement could potentially cause a policyholder to replace their entire roof while only being compensated for the portion that was damaged. For this reason, Ordinance or Law Coverage A could be applied, if endorsed on the policy, to provide compensation for the remaining out of pocket costs associated with the undamaged portion of the roof.
Ordinance or Law Coverage B
Coverage B correlates with Coverage A and applies to the demolition of that undamaged portion of the building. If building code requires you to tear down the entire structure but only 70% of the structure was damaged, then the remaining 30% of the demolition costs would covered through this endorsement. Without Ordinance or Law Coverage B that 30% would not be covered.
Ordinance or Law Coverage C
Coverage C provides coverage for building enhancements that are required if the building code has changed since the time your building was originally constructed. Such as a fire sprinkler system, ADA compliance, ice and water shield, double pane windows and the like. If Coverage C is not endorsed, policyholders would be required to update their building out of pocket in order to meet the new building codes.
We recommend that building owners elect to purchase all three Ordinance or Law Coverages to safeguard against additional costs that are required by ordinances or laws. Some carriers will limit the maximum they offer and the coverage may be included in the total building amount or in addition to. Discuss with your agent your options and how the coverage may apply based on the current policy.