Law and Ordinance Coverage


Insurance, what you don’t know or understand can and will cause you great financial harm should the winds of fate blow against you. Webster’s New World Dictionary defines insurance “as being insured against a loss….under stipulated conditions a contract guaranteeing such protection.” Black’s Law Dictionary says it is a “contract whereby one undertakes to indemnify another against loss, damage or liability from an unknown or contingent event and is applicable only to some contingency or act to occur in the future.”

Do you know what’s in your first-party property insurance contract? Do you know what the stipulated conditions are? Consider the effects of hurricanes on peoples’ lives and properties as well as their expectations of their insurance coverage. In the insurance adjusting profession a hurricane event is called a CAT loss. With this back drop we will explore an area of insurance coverage that is doubtful you know or understand.

CAT (Catastrophic) losses by their very term and description are very destructive and often occur to wide geographical areas. Given this level of destruction, communities take a long time to recover and rebuild. One needs only to recall the recent 24-hour news coverage of the two- year anniversary of Hurricane Katrina, which demonstrated the difficulty the Gulf Coast communities affected have encountered in recovery rebuilding efforts. Certainly this is not limited to Katrina as there is ample evidence of this problem looking back only as far as 15 years.

The likelihood of large CAT events occurring in the future is as certain as the expected clamor following future disasters from officials, in both the public and private sector, berating the lack of strict and up-to-date building codes and espousing the need for reconstruction to be completed in a manner that will prevent or mitigate future CAT events. Remember that following Hurricane Andrew the State of Florida passed legislation requiring code or law and ordinance coverage in all homeowners’ policies issued in Florida. The initial legislation required that carriers offer an additional amount of Coverage A of 25% to apply to the increased cost of more stringent building codes. This coverage was automatic with some companies while others offered it and required a signed statement if rejected by the policyholder. Subsequent CAT events in our state caused the legislature to revisit this and now for the homeowners’ lines you can purchase up to 50% of Coverage A for law and ordinance coverage.

Clearly state officials recognize the need for this coverage to be a matter of great public policy. In January 2006 Florida’s Office of Insurance Regulation published a paper titled, “Law and Ordinance Coverage.” This paper provides a history of Florida building code legislation, explains the statutory requirements, and most importantly, gives demographic statistics of why the issue of law and ordinance and compliance with strict building codes is so important to the residents of the state of Florida given our housing stock and their location.