Ordinance or Law Coverage


Ordinance or Law coverage is an endorsement that you would find as part of a Commercial Property policy. In the event of a property loss, your insurance carrier is going to adjust the claim and give you a settlement based on what type of valuation you carried, Replacement Cost, Actual Cash Value or Functional Replacement Cost. They will only pay for the damages you have incurred, up to your policy limit.


However, in the event of a partial loss, it's possible that your city or county building inspector could come in and require you to update certain parts of your building to get in compliance with current code. Typically, these are things that are "grandfathered" into law. Examples include handicapped access ramps to doors, handicapped accessible bathrooms, water sprinkler systems, upgrades to electrical wiring and so on. Since these are improvements you must make to your property based on current ordinance or law, and not things that were necessarily damaged by a covered peril, you insurance would not pay for the extra cost to update them.


This is where Ordinance & Law coverage would kick in to provide additional payment. There are three aspects to a claim where this coverage could come into play:


  • Coverage for Loss to the Undamaged Portion of the Building - pays for the loss of value of an undamaged portion of the existing building which must be demolished and/or removed to conform with municipal ordinance, code, etc...

  • Demolition Cost - pays for the cost of undamaged portions of the building necessitated by the enforcement of building, zoning or land use ordinance or law.

  • Increased Cost of Construction - pays for increase expenses incurred to replace the building with one conforming to building laws or ordinances, or to repair the damaged building so that it meets the specifications of current building laws or ordinances.


Many of the Property and Package policies we sell automatically include this coverage at a default limit, most often $25,000. This amount can be raised to as much coverage as you think you may need. Review your policy to see if you have this coverage, or give us a call and we'll look it up for you.