Increased Cost of Construction Coverage

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The insureds contended that because the inspection was triggered by the fire and resulted in the enforcement of the building code, the fire was the cause of the enforcement of the building code. The court disagreed. In doing so, it stated that although the violations might have remained undiscovered if not for the fire, the violation in question existed independent of the fire, and therefore the fire could not be said to have caused the enforcement of a building code.

Finally, although the phrase reading “increased cost of repair or reconstruction of the damaged and undamaged facility” acknowledged some liability to portions of an undamaged facility, this liability, the court explained, was limited to repair or reconstruction; that is, not upgrading per se.

Currently, this kind of an issue is less likely to warrant the insured’s efforts to litigate. This is because insurers have clarified their increased cost of construction coverage provisions to spell out what they are and are not going to pay.

Rebuilding at Another Location

When an increased cost of construction coverage provision gives the insured the option to rebuild on another site, the following questions arise: How much can the insured obtain to implement code upgrades? Is the amount limited to what the insured would have received if it repaired or rebuilt the existing property — or some other amount...

“…insurers have clarified their increased cost of construction coverage provisions to spell out what they are and are not going to pay.”


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