ALWAYS endorse the Business Income Form with Building Ordinance Coverage

04 Aug
Building code?

Image by JarkkoS via Flickr

It’s a “separate” endorsement.

Building Ordinance Insurance is a type of coverage we are customarily providing for our business clients who own buildings that they may occupy or rent to others. The coverage has been available for decades now and sometimes is included automatically on property forms or added by endorsement. Most of us have a clear understanding of the intent of the coverage which is to primarily to provide any additional costs associated with repairing or reconstructing a building following a loss to building codes in effect at the time the insured sustains a loss.

Now is where the “dis-connect” begins which relates to Building Ordinance and Business Income. We are now referring to the additional income loss due to the “time” it takes to bring a building up to code. For example, the insured’s electrical system is not up to code and following a partial loss they are informed they have to bring the entire building up to the new electrical code requirements. What might have taken three weeks to fix “like, kind and quality” now will take six weeks. The insured is potentially losing income or incurring extra expenses for an additional three weeks.

Business Income is a coverage part that most often written on the same policy that is providing the commercial property insurance for the business client. The assumption is made that if the Building Ordinance Endorsement is added to the Commercial Property Form that includes Business Income Coverage that the building ordinance coverage would apply to the business income loss. This is, in fact, not the case unless it is a specialty company form that specifically provides for the cross over. There is a separate endorsement to allow the business income to apply during the additional time it takes to comply with building ordinances. That endorsement is the Ordinance or Law – Increased Period of Restoration (CP 15 31). The endorsement amends the “Period of Restoration” to include increased time necessary to comply with existing building laws and codes regulating construction or repair of damaged buildings. Without the endorsement, there will be no reimbursement for lost income or extra expense for the additional time frame to bring a building up to code.



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