6 ADJUSTINGTODAY.COM We (the insurance company) do not insure for loss caused directly or indirectly by … any ordinance or law requiring or regulating the construction, demolition, remodeling, renovation or repair of property, including the removal of any resulting debris … or requiring any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize or in any way respond to, or assess the effects of, pollutants. Used in one form or another over decades, this exclusion seeks to protect insurers from having to pay for damage due to changes in legal requirements arising outside of the underwriting of property coverage. Giving it back While insurers resist “ordinance or law” exposure on a default basis, over time they developed the means to underwrite and price coverage for those costs and make it available by endorsement to individual policies. In its 1990 Commercial Property Program revision, ISO consolidated the provisions of three previously separate endorsements (see table on page 7) into its CP 04 05 — Ordinance or Law Coverage endorsement. The three-coverage format introduced at that time is still used today: • Coverage A - Coverage for Loss to the Undamaged Portion of the Building, which extends the basic building property limit to cover losses arising from the enforcement of building ordinances or laws to undamaged portions of an insured structure; • Coverage B - Demolition Cost Coverage, which provides an additional limit of insurance, indicated on a schedule in the endorsement, for the cost of demolishing undamaged property and “clear[ing] the site;” and • Coverage C - Increased Cost of Construction Coverage, which provides an additional scheduled limit for the increased cost to reconstruct undamaged property to conform to building ordinances and laws. While coverages A and B remain essentially unchanged from when they were introduced, Coverage C was significantly expanded in the mid-1900s to extend to components of building property not typically covered by property insurance. These components include excavations, grading, filling, and backfilling; foundations and pilings; and underground pipes, flues, and drains. These structural features are typically categorized as property not covered because repairing even a partial loss to them would often require replacing the building entirely. For its part, ordinance or law
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