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Please correct me if I am wrong but this is my understanding of the "Ordinace or Law" endorsement not exclusion.

Endorsement to a property policy, including homeowners, that pays for the extra expense of rebuilding to comply with ordinances or laws, often building codes, that did not exist when the building was originally built. This endorsement would cover part of the additional cost.

The increased cost might be capped or limited.

I would think that a DP policy would need few exclusions as it is usually very limiting on its own.

GENERAL EXCLUSIONS 1. We do not insure for loss caused directly or indirectly by any of the following....Ordinance or Law....Earth Movement...Water Damage.....Power Failure....Neglect...War ...Nuclear ...Intentional loss..

The policy (CP 0099 7/98) also does not cover damage from bursting water pipes. (This is sometimes a big surprise for insureds).

Also if the tenant or owner hits the building with a car they own or operate there is no coverage. If the tenant was evicted by court order prior to the vehicle damage it is possible to claim that the driver was not technically a tenant at the time of loss and therefore coverage can be extended. It depends on the definition of "tenant".

Also, unless "extended coverage" is paid for, smoke is not covered. Smoke without an actual flame would be excluded.

Please allow me to restate the question to get this topic back on track:

Is it a correct policy interpretation to deny payment of building permit fees when the DP policy has a "law or ordinance" exclusion? Yes or No? Why or why not? Any case law? Differences from one state to another?

Thank you

Building permit is related directly to the cost of repairs, unless all repairs are related to law or ordinence should be covered. Some insurers do not like cat adjusters to put this on their estimate.

>>>>Building permit is related directly to the cost of repairs<<<<<

What your saying makes absolutely perfect common sense. It's just not what the policy says and I would be careful using the word "directly". The words "direct" and "indirect" have very specific meanings.

Permits are NOT direct physical loss. It is an indirect loss.

The carriers that deny payment of building permits and fees do so on the basis that the fee is neccesary only because of laws that say they are necessary, and therefore the ordinance or law exclusion applies.

Remember I'm talking about a DP Policy.

....We insure for direct physical loss to the property covered caused by:...

More to the point the policy says"GENERAL EXCLUSIONS A) We do not insure for loss caused directly or indirectly by any of the following.... 1.) Ordinance or Law..."

The more I think about this the more I think the carriers might be right to deny coverage for permits on DP policies.

Now I'm curious why some DO cover it.

Someone please give me an answer based on a careful policy interpretation. Is it right or wrong to deny permits/fees on a DP policy? Please back up your opinion with reference to the policy and/or case law.

Woud the carrier you work for recognize the valued policy laws of the state in which a total loss or substantial damage occured? Take for instance that you had a dwelling insured for $200,000 and it had a fire that destroyed it, but then a valuation shows it was only worth $175,000 on an acv basis and the state is Louisiana or Tx with a VPL law that reads that in the case of fire that substantially damages the building the carrier pays the policy limits? What kind of payment would your carrier make for that "law"?

The stated value laws are laws that regulate insurance companies, specifically regulating how claims are settled. Basically its a public policy issue: Mr. Goverment is basically telling Mr. Insurance Company "If you want to sell insurance in this state, don't charge higher premiums for a higher liability limit and then walk away later claiming the house was over-insured. You determined or help determine the policy limit anyway, and you've collected payments for that amount of coverage, so pay the policy limit and next time be more careful how you determine coverage"

In other states the idea is that if the house is overinsured it creates an incentive for homeowners to be careless or even commit arson to get the policy limit. In those states the insurance company can pay less than the policy limit.

What makes it fair (theoretically) is that the carrier, agent, and hopefully homeowner all go into the deal with their eyes open, understanding the trade-offs for their particular state. If I bought a house in California and my agent recommended a policy limit equal to the purchase price I'd be pissed later on if I realized how much I overpaid in useless premiums.

If I lived in Louisiana and my house was insured for more than it was worth of course I would want the full settlement I was legally entitled to especially since I paid higher premiums for it. If I was an adjuster in LA I would recommend payment for what the law requires. Of course if the insured had a home that looked like it was worth $80,000, insured for $500,000 and it had a mysterious fire one week after the policy started, I would refer it to SIU.

Is the Valued Policy idea good or bad public policy? I see good and bad in both ideas. But deciding that is not my paid adjuster job- maybe I'll worry about that the next time it comes up for a vote.

Back to the building permit issue: building permits are required by law and they are laws or ordinances which regulate construction, therefore it seems to fit the exclusion. The VPL issue is just a red herring- apples and oranges.*

My original gut instinct was that it was petty for the carriers to deny permits, but the more I read the policy it seems correct. We're supposed to work from the policy, not our feelings.

Is it any different from telling a homeowner that his flood damage is not covered under his HO3?

One of the hardest things I had to adjust to is rethinking coverage for DP policies- the things I learned adjusting HO policies don't apply- there just isn't the same coverage!

I'm still curious why one carrier would cover it and another one doesn't.

(* VPL is a law regulating insurance companies. The DP exclusion refers to laws that regulate construction. Apples vs. Oranges)

We may find out what the courts think in Florida. Hurricane law group is suing Alstate, Citizens, and State Farm in a class action suit for not paying building permits. 

From ISO DP 00 01 07 88: 

 In General Exclusions, " We do not insure for loss caused directly or indirectly by................ enforcement of any ordinance or law regulating the use, construction, repair, or demolition of a building or other structure, unless specifically provided under this policy.   Is the permit fee "specifically provided under this policy"?

Under Loss Settlement, Covered property losses are settled at actual cash value at the time of loss but not more than the amount required to repair or replace the damaged property.


If  permit  is required, does the law and ordinance exlusion make it sufficiently clear that permits required are excluded from the "amount required" that no other meaning would be reasonably inferred?

If we settle and pay ACV how will we determine that?  ACV =RCV less depreciation or will it be RCV- permit fees - depreciation?

The answer, I suspect, will be whatever the carrier says.