4 ADJUSTINGTODAY.COM The Evolution of ISO Commercial Property Ordinance or Law Coverage LOSS TO UNDAMAGED PORTION OF BUILDING COST OF DEMOLISHING UNDAMAGED PORTION INCREASED COST OF CONSTRUCTION Separate endorsement for Contingent Liability for Operation of Building Laws; typically applied within building property limit Endorsements used prior to mid-80s simplified forms Separate endorsement for Demolition Cost; typically applied as additional insurance for costs of demolition and debris removal Separate endorsement for Increased Cost of Construction (Excess of Replacement Cost); typically applied as additional insurance ORDINANCE OR LAW COVERAGE ENDORSEMENTS (PROVISIONS PARAPHRASED) CP 04 05 07 88 (consolidated endorsement introduced) In the event of covered damage to an insured structure, the endorsement pays for additional loss caused by enforcement of a building or zoning ordinance or law… In the event of covered damage to an insured structure, the endorsement pays for costs to demolish and “clear the site” of undamaged parts as required by enforcement of a building, zoning or land use ordinance or law… In the event of covered damage to an insured structure, the endorsement pays the increased cost to repair or reconstruct the property for a similar occupancy as before the loss, unless prevented from doing so by an ordinance or law. • Applies only to enforcement of ordinances and laws in effect at time of loss. • Includes a provision excluding coverage for any cost to identify or clean up “pollutants.” • All coverage paid within the building property limit. CP 04 05 10 90 (current format introduced) Coverage A - Coverage for Loss to the Undamaged Portion of the Building • coverage provided under the building property limit • applies only to enforcement of ordinances/ laws in effect at time of loss Coverage B - Demolition Cost Coverage • covers costs to “clear the site” • coverage provided under an additional scheduled limit of insurance Coverage C - Increased Cost of Construction Coverage • applies only if restored property intended for same occupancy, unless prohibited by land use or zoning law • coverage provided under an additional scheduled limit of insurance • The terms of the endorsement to apply separately to each building indicated. CP 04 05 06 95 (expanded to apply to building property not covered) Cov. A essentially unchanged Cov. B essentially unchanged Cov. C expanded to apply to repair of excavations/grading/backfilling; building foundations and pilings; and underground pipes/flues/drains. • Schedule expanded to allow separate or combined Cov. B and Cov. C limits for separate insured locations. • Provision added stating that endorsement does not pay for any loss due to failure to comply with a previous requirement under a building or land use ordinance or law. CP 04 05 10 00 (allocating payment for covered and non-covered losses) Cov. C essentially unchanged Cov. A essentially unchanged Cov. B essentially unchanged • Provisions added that (1) the endorsement will pay only a proportional share of losses caused by both covered and non-covered damage; and (2) there is no coverage for losses caused by damage not covered under the policy if that damage is the subject of the ordinance or law being enforced; this limitation applies even if the building also suffers damage from a covered peril. CP 04 05 04 02 (fungus exclusion added) Cov. C essentially unchanged Cov. A essentially unchanged Cov. B essentially unchanged • Expands earlier exclusion for pollutants to exclude losses due to the presence of fungus, bacteria, and wet or dry rot. CP 04 05 10 12 (expansion of trigger) Cov. A essentially unchanged Cov. B essentially unchanged Cov. C essentially unchanged • Insuring agreement modified to include “the enforcement of or compliance with any ordinance or law.” • Additional limit provided in new endorsement CP 04 09—Increase in Rebuilding Expenses Following Disaster (i.e., “demand surge”* coverage) can be applied to ordinance or law coverage. . CP 04 05 09 17 (option added for covering post-loss code changes) Cov. A essentially unchanged Cov. B essentially unchanged Cov. C essentially unchanged • Option added to provide coverage if the ordinance or law is promulgated or revised after the loss but before work starts on reconstruction or repair, provided that compliance with the measure is required to obtain a building permit or certificate of occupancy. *Please see definition on p. 10
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