In many jurisdictions, once a building or structure has been substantially damaged or destroyed, even if the cause of loss is covered by a property insurance policy, significant additional expenses may be incurred by the insured as a result of local ordinances or laws. An unendorsed property policy does not protect the insured for those additional costs required by law and for which the insured has no option but to comply with if he/she wishes to remain in operation at that location. Coverage may be obtained for losses that result from the enforcement of laws or ordinances which do not permit restoring property to the same condition as existed prior to damage. The endorsement available is titled: Ordinance or Law Coverage. These types of losses may result from:
- Loss of value of an undamaged portion of the existing property that must be destroyed (not directly from a covered cause of loss) from the operation of building or zoning laws.
- Costs of demolition of the undamaged portion of the property; AND
- Increased expenses to:
- Replace the property so as to comply with current building, zoning or land use laws or ordinances.
- Repair the undamaged property so that it complies with current building, zoning or land use laws or ordinances.