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Building Codes, Insurance Policy Exclusionary Language, and Coverage Endorsements

By Diane Richardson, CPCU

FC&S Legal editors acknowledge the contribution of Donald L. Schmidt, ARM, CEO of Preparedness, LLC, a Sharon, Massachusetts, firm that provides consulting services in the areas of Risk Assessment, Mitigation, Response, and Recovery ( www.Preparednessllc.com). Mr. Schmidt provided information on the process by which building codes are developed, adopted, and enforced.

Summary: Various types of political jurisdictions often adopt and then enforce ordinances or laws that regulate the construction, operation, and occupancy of different types of buildings. These ordinances and laws fall within the broad category usually referred to as building codes. Many building-related ordinances and laws are based on uniform codes and standards promulgated by the National Fire Protection Association (NFPA) or the International Code Council (ICC). Ordinances and laws may differ depending upon the type or occupancy of structures. For example, states may adopt and enforce separate residential and commercial building codes. Likewise, the building codes that govern public buildings may differ from those for private buildings. Healthcare facilities, including hospitals and assisted living homes, may need to conform to even more stringent codes. This article provides an overview of various types of ordinances and laws that affect building construction and repair. It then reviews how various insurance policies treat the additional costs of conforming to building codes when settling a claim that arises from a covered cause of loss. In conclusion, we discuss various courts’ take on the exclusion for coverage related to ordinance or law.

Topics covered:

Overview of building codes

Commercial property exclusions

Commercial property coverage

Businessowners treatment

Homeowners exclusions

Homeowners coverage

Endorsements to cover the exposure

Court interpretation of policy language

Overview of Building Codes

Professional organizations that specialize in safety develop best practices, which then are promulgated as written standards that may be adopted by political jurisdictions such as municipal, state, and federal governments. These ordinances and laws then become mandatory requirements that then are enforced by the applicable jurisdictions.

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