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Law and Ordinance

Local building codes (ordinances and laws) control what can be built; where it can be built and how it must be built. These codes vary from township to
township and they change over time. As construction materials and practices improve, the tougher building codes and ordinances become. The purpose of the laws is to make our buildings safer and better able to withstand natural disasters. However, these local building ordinances and laws can leave you holding the bag after an insurance claim.

In order to illustrate the potential gaps in coverage please join me in reviewing an entirely fictional claim. My fictional school is Beth’s Child Care Academy; Beth and Steven are the owners of this school.

It was a Sunday night at about 2am when the hot water heater burst into flames and my school began to burn. My school is 10 years old but I have a great alarm system installed. The fire department was on the scene within 10 minutes and after an hour of battling the fire, put it out.

In the cold light of day, on Monday morning I was able to assess the damage and it appeared that about 70% of my school had been destroyed. I called my insurance agent and reported the claim. Once the claim adjuster met with me I was able to start interviewing contractors to get my school rebuilt.

During my meetings with prospective contractors I got some really bad news. My town: Anytown, Florida has a building code that requires me to tear downall of my building and start over if more than 55% of my building is destroyed. At first I thought this was bad news only because it would take me longerto rebuild. Then I found out it’s really bad news because insurance only pays for the damaged portion of the building.

Here’s how that works out for me: My building is valued at $500,000, 30% of it was undamaged. That 30% which isn't covered by my insurance company means I have to pay $150,000 to have this undamaged portion of my building rebuilt.

And the bad news doesn’t stop there. I also have to pay to have that undamaged portion of my building torn down and the debris hauled away. The insurance will pay for the debris removal on the damaged part of the building but not the undamaged part.

Some days you just have to sigh, and that's what I did when the contractor also told me that building codes have changed. Now instead of putting 2x4’s in the roof I have to put 2x6’s; instead of normal glass I have to have glass that will withstand up to 120 mile per hour winds; instead of normal roof joists I have to have roof joists that are strapped to my building… The total cost for all these legally mandated upgrades is going to be $65,000. Oh yeah, the cost of these upgrades is going to be on me because my insurance will replace the building I have but not necessarily the building the town says I have to build.

You can avoid finding yourself in this situation by being sure you have Ordinance or Law coverage. This coverage provides three things:

1. The cost to demolish the undamaged portion of your building if local ordinance requires it following a covered loss.

2. The cost to rebuild the undamaged portion of your building if local ordinance requires it following a covered loss.

3. The increased cost of construction to meet local ordinancse following a covered loss.

All the child care and school policies we sell provide varying amounts of built in ordinance or law coverage. These built in coverages may not be sufficient for your needs. We review all of our client's specific situations at renewal. If you would like to review yours sooner please call us.

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Please be advised that information contained in this site may be dated. No insurance coverage can be bound, deleted, modified or in any other manner effected through this website. Complete information regarding coverage and exclusions can be found in policy documents. The information contained in this website is summary in nature.