What is Law and Ordinance Insurance Coverage?

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

Imagine that a hurricane has just swept through South Florida. Your roof has been destroyed, but fortunately your family is safe and you have homeowner’s insurance. However, your local county has updated its building codes. Although your homeowner’s insurance will cover the replacement of your roof up to the policy limits, your insurance carrier may deny you coverage for any added expenses that are attributable to the new ordinance codes. By way of example, let’s assume that the replacement cost of your roof is $50,000. Luckily your policy limit is $300,000, which after your deductible is plenty to replace your roof. However, let’s further assume that your county requires you to incorporate a new roof sheathing technique before they will allow you to repair your roof. The new roof sheathing technique adds another $25,000 to your bill. Without law and ordinance coverage you are left to foot the bill for that added cost of $25,000. As always, whether you have this type of coverage will depend on your specific policy.

Are there any Florida Statutes relating to this type of coverage?

The Florida Legislature enacted §627.7011 with the intent of ensuring that all policyholders in Florida have adequate protection in the event that they are subject to added costs of this nature. Building codes change all the time, and compliance with these ordinances can be very expensive. With this in mind, the statute requires that all insurance companies in Florida must offer law and ordinance insurance coverage when issuing an insurance policy. Specifically, the statute requires that whenever a homeowner’s insurance policy is issued, the insurer has a statutory duty to offer this type of coverage. Of course, this doesn’t mean that all insurance policies will provide for law and ordinance coverage, and the parties may agree to any type of coverage they desire. The only thing required by the statute is that the insurance company must offer this type of coverage. At a minimum, the insured must have an option of selecting coverage in the amount of either 25% or 50% of the dwelling limit. Back to our example, if the insured had selected the 25% coverage option, the insurer would be required to cover $75,000 (equivalent to 25% of the policy limit) in law and ordinance coverage which would be sufficient to cover the added expenses.

How can your policy exclude law and ordinance coverage?

As mentioned, this statute does not mean that this type of coverage cannot be excluded in your specific policy, and in fact most policies will contain some exclusionary language to that effect. Unless you have specifically bargained for this type of coverage, then you probably do not have it. However, for the insured to properly reject this type of coverage, the insurance contract not only has to state the importance of such coverage in bold typeface and in font no smaller than 18 points, but the insurer must also obtain a written refusal from the insured on a form that is approved by the Office of the Insurance Commissioner. These requirements are there to ensure proper notice is relayed to the insured, and a failure on the part of the insurer to follow these requirements results in automatic law and ordinance coverage to the extent of 25% of the dwelling limits.

Must the insured actually “incur” the expense before it is paid?

Before the insured will be able to recover law and ordinance benefits, Florida courts that have interpreted the statute hold that the insured must have actually incurred these expenses before claiming them. In arriving at this conclusion, the Florida Supreme court has held that to “incur” an expense does not necessarily mean that the insured must have actually borne the cost before recovering, but rather the insured must have at least become liable for the expense. Presumably, this language requires that the insured be able to demonstrate how much law and ordinance damages have been incurred separate and distinct from the actual dwelling coverage. Thus, if the insured cannot demonstrate the added expense, then the insurer can properly deny the claim because the insured has not actually “incurred” that expense.

Conclusion

It is easy to understand the importance of law and ordinance coverage. Living in South Florida, there is a constant risk that you will undergo a hurricane or other natural disaster, and the possibility of suffering extensive property damage is very real. Fortunately, the Florida legislature wised up and provided certain safeguards to ensure that at the very least the homeowners who purchase insurance have reasonable notice of what is and what is not covered by their policies. Much of the litigation in this area involves the notice provisions in the statute, as well as causation and whether the insured has demonstrated sufficient proof entitling her to receive these benefits. Unfortunately, insurance companies are only concerned with their bottom line, which often results in many claims being improperly denied. Even worse, law and ordinance law claims necessarily involve a loss to real estate which can be a very emotional event. If you are struggling with your insurance company, and you feel you are being treated unfairly, you should not hesitate to contact a professional to help you through the claims process.

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].

Sources

Fla. Stat. § 627.7011 

Pedersen v. Citizens Property Ins. Corp., 157 So. 3d 431 (Fla. 4th DCA 2015).

Ceballo v. Citizens Property Ins. Corp., 967 So. 2d 811 (Fla. 2007).