The additional dollar amount of the loss due to code enforcement at the loss location was agreed upon ($65K).  The Ordinance or Law coverage limit was agreed upon ($27K).

 The Insured rebuilt at another location nearby.  The carrier paid the ACV loss and the RCV dollars when the Insureds provided documentation of the costs incurred.  The adjuster has balked, however, about paying the covered Ordinance loss.  He wrote:  “We will be unable to extend the Ordinance or Law additional coverage since the code upgrades were not incurred on the building covered by our policy (emphasis mine). 

 While we agree that it is the loss location that determines the amount of the ACV/RCV and Ordinance or Law loss, we disagree that the Ordinance or Law coverage is only available if the Insured rebuilds the same building at the same location. 

 The Ordinance Or Law Additional Coverage is an amendment – a modification  – of the underlying coverage, which excludes loss caused directly or indirectly by “Ordinance (sic) Or Law”.

 So if the Insured can rebuild anywhere and make claim for the RCV dollars, and if the Ordinance or Law Additional Coverage is a modification of the RCV coverage, why are the “Additional Coverage”  loss dollars suddenly only available at the original loss location and not wherever the Insured is rebuilding?

Washington Subscriber

A

You are correct in that the additional coverage for ordinance or law is available to the insured. The coverage is not a “modification” of the exclusion; it is an additional coverage, limited to 10% of the coverage A amount. Additional coverage (11.a) states that the insured “may use up to 10% of the limit of liability that applies to Coverage A for the increased costs [the insured] incur[s] due to the enforcement of any ordinance or law which requires or regulates….” Then follows the situations which such an ordinance or law might regulate: construction of the part of a covered  building, demolition, remodeling of the undamaged part of the building, etc. Nowhere does the policy state that this coverage is only available should the insured dwelling be rebuilt on the insured premises.

I believe that the adjuster has mistaken this language to indicate that coverage is only available under these circumstances when, indeed, there is no such limitation. Had the insurer intended to limit the coverage, it would have been easy to include a limitation in the policy.

And, in fact, under 3. Loss Settlement, b.1(c) states that the insured can receive “the necessary amount actually spent to repair or replace the damaged building.” Just as this language allows the insured to replace the damaged building with another at a different premises, so is the additional coverage available to allow for this replacement.