If your home, which may even have been in the family for generations, incurs significant damage in a hurricane, you have reason to take solace in the fact that you have homeowners insurance. When you file your insurance claim on your long-time family residence, however, you might find that changes in building codes and other regulations require significant additional costs to bring the home into compliance with existing legal standards. To add insult to injury, areas of the property that were not damaged might also need to be brought into compliance with existing building codes and regulations when post disaster repairs are performed. Unlike many states, Florida law requires homeowners insurance companies to offer law-and-ordinance coverage, but homeowners have the right to opt out. If you are considering opting out of this important form of coverage, you might want to reconsider.
Law and ordinance insurance is a special type of coverage that provides financial protection from increased repair and replacement costs attributable to changes in building codes and regulations. While a standard homeowners insurance policy covers the expense of restoring your home to its pre-loss condition, this does not account for improvements or modifications that are necessitated by changes in building code standards and other changes in applicable law. Supplemental law and ordinance coverage can offer financial relief from such unanticipated out-of-pocket expenses. Depending on the nature of the changed building codes, these costs can be tens of thousands or even hundreds of thousands of dollars.
Homeowners are well advised to carefully review their insurance policies because law and ordinance provisions often contain fine print that might mean that the homeowner has to bear some of the cost of these additional expenses. The amount of money necessary to bring a building into compliance with flood, hurricane or earthquake code standards can take a large portion of a property owner’s savings. If the homeowner does not have money saved or the ability to borrow funds to cover such expenses, the financial impact can be ruinous. Relevant examples of particular exclusions in this context include:
Covered Peril Exclusions: When a property is damaged by a force or event other than a covered peril, a policy’s law and ordinance coverage will not be triggered. This form of coverage also typically does not extend to undamaged portions of the building. This type of exclusion is particularly important because local ordinances frequently provide that exemptions to code requirements which are grandfathered in become inapplicable when a certain percentage of the building must be repaired or rebuilt. In other words, you might have to repair parts of your home that were not affected by the disaster if other parts of the home are significantly damaged. While undamaged areas might need to be brought into compliance, these costs will not be covered by your law and ordinance coverage.
Timeline Exclusions: This exclusion presents special challenges because of the way governmental entities often respond following a major disaster. When a massive earthquake causes significant widespread damage, public entities often act in a reactive way by updating building code standards to reduce damage suffered during similar events in the future. Because many law and ordinance provisions only apply to changes in laws and regulations at the time of the event causing a loss, these post-incident changes in the law do not fall within the auspices of law and ordinance coverage.
When property owners purchase homeowners policies in Florida, they will include law and ordinance coverage unless the insured opts out. Insurance carriers are required to provide a warning of the risk associated with not obtaining this type of coverage. The Office of Insurance Regulation reports that policies issued after 2005 must provide: “Law and ordinance coverage is an important coverage that you may wish to purchase . . . . Without this coverage, you may have uncovered losses. Please discuss this coverage with your insurance agent.”
If you have questions about law and ordinance coverage or your insurer refuses to pay your claim in a timely manner, you might want to speak to an experienced insurance claims attorney in Miami, Florida. My law firm represents policyholders in claims disputes in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.