ADJUSTERSINTERNATIONAL.COM 9 In 2017, ISO added an option to the endorsement to allow coverage for costs due to an ordinance or law that is issued or revised after the loss but before work starts on reconstruction or repair. To be eligible for coverage, compliance with the measure must be required to obtain a building permit or certificate of occupancy. This post-loss code coverage option is a reaction to the rapid promulgation of new building standards in some areas following disasters where numerous buildings were damaged. Covered and non-covered losses In 2000, the ISO ordinance or law endorsement was revised to specify that there would be no coverage for losses resulting from damage not covered under the policy if that type of loss was the subject of the ordinance or law being enforced. Thus, under a standard property policy with no coverage for flood or earthquake damage, the ordinance or law endorsement would not pay for losses due to enforcement of flood or earthquake standards, even if the insured property had suffered flood or earthquake damage. In the case of losses by both covered and non-covered causes, the endorsement was revised to indicate it would pay only the portion of covered losses attributable to the covered cause. Insuring agreement In 2012, the ordinance or law insuring agreement was expanded from responding to “the enforcement of any ordinance or law” to responding to “the enforcement of or compliance with any ordinance or law.”This modification clarifies that an insured does not need to wait for an enforcement action (notice of a violation) in order to commence work and recover covered costs. Income coverage and demand surge Building code and zoning enforcement doesn’t just increase the cost of replacing property, it also usually increases the time needed to complete reconstruction work. That, in turn, can increase the amount of “down time” and lost revenue an enterprise incurs when it suffers damage. To cover the loss of revenue (plus any extra expenses needed to resume operations), commercial accounts can purchase business income (or business interruption) insurance in conjunction with its commercial property policy. Business income coverage applies only to suspensions of operations due to damage by causes covered under the property policy. The amount of income coverage is typically limited to (at most) the normally expected time and cost needed to resume operations, without consideration of an extended period to upgrade a structure to meet current building codes. Building code and zoning enforcement doesn’t just increase the cost of replacing property, it also usually increases the time needed to complete reconstruction work.
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