What it does
The Causes of Loss forms exclude ordinance or law, and CP 00 10 gives only a small Increased Cost of Construction additional coverage. CP 04 05 adds three coverages for each building listed in the Schedule. Each applies only when chosen in the Schedule:
- Coverage A – Loss to the Undamaged Portion of the Building: the value of undamaged parts that must be torn down because of a building law. This is within the building limit, not in addition to it.
- Coverage B – Demolition Cost: the cost to demolish and clear the site of undamaged parts.
- Coverage C – Increased Cost of Construction: the extra cost to repair, rebuild or remodel to meet the minimum requirements of the law. It also covers excavation, foundations, pilings and underground pipes when Coverage C applies.
Coverages B and C can have separate limits or a combined limit. Coinsurance does not apply to B or C.
Key provisions
- The law must be in force at the time of loss. If the Post-Loss Ordinance or Law Option is selected, laws adopted after the loss but before rebuilding also count, if compliance is required for a permit or certificate of occupancy.
- If a building has both covered and uncovered damage, payment is proportional to the covered damage.
- There is no coverage for laws about pollutants or fungus, or for laws the insured had to meet before the loss and did not.
- Increased Cost of Construction is paid only if the building is actually repaired or rebuilt, generally for the same occupancy.
Quoting and selling notes
- Ask about the building's age, local rules that force full demolition when damage exceeds a percentage of value (the "50% rule"), sprinkler or ADA retrofits, and flood-plain elevation rules.
- Pair it with CP 15 31 (Ordinance or Law – Increased Period of Restoration) so business income also covers the extra time a code upgrade adds to rebuilding.
- Tenants with improvements and betterments use CP 04 26 instead.
