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Ordinance or Law Coverage in Your Home Insurance Policy: A Personal Story

The article by John Romano in Tampa Bay Times on February 12, 2017, “Romano: Even when you have flood insurance, sometimes you will still lose“, illustrates the importance of ordinance or law coverage. Property insurance policies generally have an “ordinance or law” exclusion, which means that the policy covers the building as it exists, but it does not cover the cost to upgrade the building to current building codes and ordinances after a loss. This means that if the current building code or local ordinances require you to upgrade the property – the cost to do so may not be covered under your insurance policy without the added coverage for ordinance or law.

As some of our readers may know, my family suffered a total loss to our house due to a fire in February 2015. The damage was so severe we had to demolish what remained of the house. As a consequence, the cost to rebuild greatly exceeded 50% of the estimated value of the house (which is calculated excluding the land value). So we had to build a house meeting the current building code and local ordinances for a house located in a flood zone. That resulted in raising the foundation to 13 feet above the base flood elevation. Thus, our new house is raised a total of 5 feet off the ground whereas before the house was built on a typical slab on grade.

homeowners insurance

This stuff gets a bit technical. Our house is in what FEMA defines as a Coastal A Zone (or AE 12 zone) which requires a house to elevate the lowest floors to or above the base flood elevation of 12 feet, if it is a new building or if above the substantial improvement or damage limit (which is when the construction cost is above 50% of the property’s value excluding the land value). In addition, the City of St. Petersburg has a 1′ “free-board” requirement according to Ordinance 98-H. This is apparently hard to find as my insurance company’s engineer even missed it. But the requirement is incorporated in the City of St. Petersburg and located in Florida Building Code R.322.2.1 – Elevation requirements. This requirement is referenced in General elevation requirement and Elevation requirement for certain existing manufactured home parks and subdivisions. So we had to raise the foundation to 13 feet (12 + 1) above the base flood elevation.

Luckily, at least we thought, our insurance policy had ordinance or law coverage intended to pay for the additional cost to raise the foundation (10% of coverage A). Unluckily, as many of my clients understand, our insurance company refused to pay the ordinance or law coverage, and yes, this refusal to pay continues after we signed a contract to rebuild our house and began construction. Now two years after the fire, we are still engaged in a legal battle with our insurance company to pay the coverage for ordinance or law.

Don’t let big business insurance companies bully you

I can only say this experience has provided a new level of understanding for what our clients go through emotionally when the insurance company turns out not to be “the good neighbor” and is not “there for you” when you need it the most. I urge my clients and readers to not let these big business insurance companies bully you to accept a denial or low ball offer when coverage and payment should have been made. Just because these insurance companies have the financial strength to deny legitimate insurance claims or pay preferred vendors to underestimate repair cost, please don’t let them. If you are unsure about your rights, call for a free review.

Please also take your time to review your home insurance policy to determine if you have ordinance or law coverage or call your insurance agent to ask if you have this coverage in your policy. This is an extremely important coverage to have in Florida where homes are often located in a flood zone or upgrades are required due to building codes based on risk of severe windstorms such as hurricanes and tornados.