Ordinance and Law


Ordinance or Law Increased Cost Coverage


Ordinance or Law is additional insurance within a HO3 policy and is often overlooked by the policyholder. State Statute requires O&L coverage to be offered under all homeowners policies in the State of Florida. This coverage amount can be increased, decreased, or declined by the policyholder. Many homeowners are not aware of the significance of Ordinance or Law coverage or how to recover its benefits. In order to take advantage of this additional coverage, the insured needs to comprehend the endorsement's scope of coverage. Understanding the meaning of the words in the Ordinance or Law policy and/or endorsement language is  paramount. Most homeowners read this language but do not have the slightest idea what the language means. At this point, a public adjuster that understands how to interpret and apply this additional coverage is worth his weight in gold. Because so many insurance policies have differing O&L language, coverage benefits may vary drastically. Nevertheless, policies usually provide this increased cost provision for 3 distinct aspects or categories of repair:

  •   First, the Repair, replacement, or reconstruction to the damaged portion of the building.
    • Second, the Demolition and reconstruction of the undamaged portion of the building when the building must be totally demolished.
    • Third, the Repair or replacement of the undamaged portion of the building in order to complete repairs, remodeling, or replacement to the damaged portion.

Let's look at O&L coverage under the first category above which reads: You may use up to 25% of the limit of liability that applies to Coverage A for the increased cost you incur due to the enforcement of any ordinance or law which requires or regulates: (1) The construction, demolition, remodeling, renovation or repair of that part of a covered building or other structure damaged by a Peril Insured Against:
This part of the endorsement language addressed the portion of the building which actually sustained damage. Let's see how this coverage might apply the example that follows. A fire damages the roof, soffit, fascia, flooring, stud walls and ceilings, drywall, fixtures, cabinets, electrical, trusses, plumbing, windows, AC, ducts, windows, hot-water heater of the dwelling. All these items were damaged and will need to be replaced; the claim is a total loss. Should the costs for these damages be claimed under Coverage A., and just forget about the additional benefits under Ordinance or Law? That's a very good question. If damages to your home do not exceed the policy limits of Coverage A, it does not really matter if the additional costs to replace some of the items in your home are paid for under Coverage A or under the Additional Coverage, Ordinance or Law. This coverage really matters when the Coverage A. policy limits are exhausted. For example, the Declaration page states the following limits:

Coverage A - Dwelling - $133,000.00
Coverage B - Other Structures - $13, 300.00
Coverage C - Personal Property - $66,500.00
Coverage D - Additional Living Expenses - $13,300.00
Additional/Other Coverages
Debris Removal - $6,650.00
Law or Ordinance - $33,250.00 (25% Coverage A. Limit)
Mold/Fungi - $10,000.00

Due to the severity of fire loss cited above, the homeowner should be paid the full amount of the policy limit for Coverage A- Dwelling, $133,000.00. The insured might be happy until he finds out it will take $165,000.00 to rebuild/replace his home. Does this mean, the policyholder will have to pay-out-of-pocket $32,000.00 or that his home was under-insured? Not necessarily. There may be code-compliant costs contained in the $165,000.00 which are now required that were not required when the home was first built. Let just consider one. The garage door has to be replaced, and the new door has to meet wind code standards; the cost is $2800.00. A garage door just like what the insured had but not wind code compliant may only cost $1750.00. There is a difference in cost of $1,050.00 between the two doors, and this difference could qualify to be claimed under Ordinance or Law coverage. You would be surprised how many additional items can be claimed under Ordinance or Law. Although breaking down an estimate to show how much it would cost to replace the original items at today's price and the amount to replace those items with one that is required by code is time consuming, the additional benefit may be well worth the insured's time. Why leave money on the table when you have paid premiums for this additional coverage?

Gary Laird Ahrens • PA License # A002288 • Firm License # G008507 • AA Florida Public Adjusting Agency, LLC • 34540 Appaloosa Trl., Zephyrhills, FL 33541 • 866-993-3760

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