If the appraiser is correct, how can the replacement cost definition or actual cash value have any relevancy? If I have to replace the shingles on a twenty-five-year old roof due to a covered claim, does the carrier normally deduct depreciation and the upgrade necessary to meet the new code standards of those shingles?

South Carolina Subscriber

We are basing the answer on the ISO CP 04 05, Ordinance or Law Coverage. Under this coverage, with respect to the building that has sustained covered direct physical damage, the form will pay the increased cost to repair or reconstruct damaged portions of that building and/or reconstruct or remodel undamaged portions of that building, whether demolition is required, when the increased cost is a consequence of enforcement of the minimum requirements of the ordinance or law.

 So, yes, the coverage is for items needed to bring the building up to code that the insured did not have before, but the form pays only the difference between what the insured already had and what is needed. If the electric that was not up to code is to be replaced up to code, then only the amount necessary to bring it up to code is addressed by this coverage; the rest is under the building and personal property coverage.

According to ISO's rules, when the increased cost of construction coverage is selected on CP 04 05, the replacement cost coverage option of the underlying policy must be activated, so ACV would not come into play for this coverage because the coverage applies only to RCV.