The City of Huntington Beach ordered that the Reichart's newly remodeled home be destroyed when it discovered that the remodeling did not comply with the plans that were submitted to and approved by the City. The Reichart's filed a claim for their loss with their homeowners' carrier.

The carrier denied coverage for two reasons:

The loss did not arise from an accident

Application of the law or ordinance exclusion

Click here to see if the courts agreed.

Communities have the right to establish building codes and regulations. However, many ease the pain for building owners by applying new regulations to existing construction only after that building sustains a significant loss or because of any major remodeling. Complying with these regulations can significantly increase the amount of loss, and most insurance policies exclude those costs unless they are endorsed to provide coverage for the upgrades.

This problem applies to both personal risks and commercial risks.

Click here to review the PF&M analysis of the ISO Homeowners exclusion and additional coverage.

Click here to review the PF&M analysis of the ISO Special Causes of Loss form for the exclusion and the Building and Personal Property Coverage Form for the additional coverage.

Identifying a problem for your client before a loss occurs is important but solving that problem cements your relationship with the client. HO 04 07-Ordinance or Law Increased Amount of Coverage can be added to the ISO Homeowners policy and CP 04 05-Ordinance or Law Coverage can be added to the Commercial Property Building and Personal Property Coverage Form to provide both higher limits and broader coverage.

Click here to review the PF&M analysis of CP 04 05. Much of this also applies to the personal lines exclusion.

Most of your clients plan to rebuild their homes or businesses after a loss. Unfortunately, some will not be able to do so because an ordinance or law requires significant upgrades that insurance does not cover and the clients cannot afford to pay on their own.

Click here to review an emarketing article you could blog, email, or add to your newsletter to alert your clients to this potential gap in coverage.