Rebuilding after a natural disaster is a long and complicated process. For Hurricane Harvey victims, numerous issues are slowing down the rebuilding process and forcing them to pay out of pocket for certain expenses. For example, many Texas property owners are suddenly facing nuances in their insurance policies regarding Ordinance and Law coverage.

What Is Ordinance and Law Coverage?

Ordinance and Law coverage is a type of insurance that reimburses property owners for the loss incurred by the enforcement of local building codes that regulate the reconstruction of damaged buildings. There are several types of ordinance and law coverage and each protects against certain types of damages.

Ordinance and Law Coverage A

Your insurance policy covers the damaged portions of your property, but you actually need protection for the undamaged portions too because insurance companies will only pay the replacement costs for the portion of the property that was damaged. For example, many properties sustained significant damage during and after Hurricane Harvey. If a covered peril such as wind damaged 50% of building, the insurance companies will cover the cost of replacing that 50%. But property owners can’t just replace part of a building. Even though half of the building was not damaged, the entire building must be rebuilt, and only the damaged half is covered by insurance. With Ordinance and Law Coverage A, policyholders are also insuring the undamaged parts of their property. This prevents policyholders from paying out of pocket for repair and replacement costs.

Ordinance and Law Coverage B

Under some local buildings codes and ordinances, demolition of the undamaged portions of a property may be required. If 75% of your property was damaged, the City of Houston may require you to demolish the remaining 25%. While demolition may not seem like much, older buildings that contain pollutants or building materials that require special clean up. Ordinance and Law Coverage B will cover the cost of demolition of undamaged parts of a building if required by local building ordinances.

Ordinance and Law Coverage C

The city of Houston and most other municipalities have strict building codes to which all new buildings must adhere. These building codes are regularly updated to reflect changes in materials, engineering, and manufacturing. The codes serve to ensure all buildings are built safely for property owners; however, they are not retroactively applied to buildings already built.

In the aftermath of Hurricane Harvey, property owners of older buildings not only have to rebuild, they have to rebuild in adherence to updated building codes. While this might not seem like a big deal, the reality is that for buildings ten years old or older, a lot has changed. Property owners will be required to use more expensive materials and supplies and might need to update components like the HVAC, insulation, electrical wiring, ventilation, heating, or plumbing systems. For nearly all property owners, rebuilding under updated building codes will be more expensive. Property owners will end up paying out of pocket unless they have Ordinance and Law coverage.

Sublimits In Your Policy

Always remember that insurance companies are foremost a business trying to make as much profit as possible. To help avoid large payouts, many insurance companies make sublimits, or a maximum amount they will pay for certain coverage. Therefore, while you may have Ordinance and Law coverage, you may also have a sublimit that would only compensate you for a portion of what you would really need to rebuild. Typically, an insurance policy that provides for ordinance and law coverage also contains a submlimit that may be substantially less than the overall policy limits. It is therefore critical that policyholders and their consultants are aware of what repairs should be covered under the standard building limits, and which repairs relate strictly to ordinance and law requirements.

Don’t Wait To Get Help

Commercial insurance is incredibly complicated and sadly many insurance companies use this to their advantage. Insurance companies will use a variety of bad faith tactics to avoid making large payouts. If you are struggling with your insurance company regarding rebuilding after Hurricane Harvey, immediately contact Raizner Slania LLP. Our experienced insurance lawyers have helped victims of bad faith practices across the country. Call us today for a free consultation to review your case. We can answer all of your questions and help you get what you are rightfully owed under your policy.