Sinkhole Collapse — Demolition Expense

Q

Our insured is the owner of a large commercial office building insured under commercial property form CP 00 10 04 02, with the special causes of loss form attached. A natural sinkhole created a buckling of the building, damaging it extensively, such that it cannot be repaired, but must be demolished entirely. Would the demolition cost be considered part of the covered loss and included within the total building limit or would a separate endorsement be necessary to cover demolition? What is the situation regarding debris removal coverage? Additionally, would increased costs of construction caused by ordinance or law be covered? Finally, would the cost to refill the hole be covered within the claim?

Pennsylvania Subscriber

A

The situation is not unlike the situation where a fire damages a building such that it cannot be repaired, but must be demolished and rebuilt.

The cost of demolition is a cost of repair, and will be part of and included within the building limit. A separate endorsement is not necessary. Additional coverage will be available under the policy for hauling away the demolished debris, under the policy's debris removal coverage.

Increased costs due to ordinance or law are specifically not covered by the CP 00 10 policy, but may be covered by endorsement CP 04 05 04 02.

Finally, the cost of filling the sinkhole is specifically not covered under the basic and broad causes of loss forms, nor would this expense be covered by the special form either, as land itself is not an insurable item.

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