When Can Ordinance or Law Coverage Be Appraised?

On August 10, 2020, Merlin Law Group hosted Hurricane Irma Public Adjuster Seminar: One Month Before Claim Submission Deadlines for public adjusters to earn 4 CE credits on hot topics for discussion related to Hurricane Irma. Don’t forget the deadline to submit claims for property damage from Hurricane Irma is September 10, 2020.

I presented with my two very knowledgeable colleagues, Larry Bache and Corey Harris, on the topic of appraisal. Appraisal is always a hot topic of discussion in first-party property insurance. I discussed a subtopic on whether Ordinance or Law is included in the scope of appraisal. This is an important issue to understand when appraising the value of a loss. It is equally important to know how to properly protect the insured’s right to appraise Ordinance or Law Coverage at a later date if the right has not yet vested at the time of the original appraisal.

Ordinance and Law Coverage is an important coverage under any insurance policy. I discussed this in a previous blog, Ordinance or Law Coverage: Do I Need It?

Under a property insurance policy, Ordinance or Law is the cost of bringing a structure into compliance with an applicable ordinance or code. Ordinance or Law Coverage is generally not recoverable until it is incurred and, therefore, cannot be appraised until incurred. Under most homeowners policies, the insurer will pay for the amounts a policyholder incurs as a result of the enforcement of an ordinance or law. The key words here are “incurred” and “enforcement.” To “incur” triggers the insurer’s obligation for payment under the policy. But when is Ordinance or Law incurred?

You might think costs are incurred once they are paid or the property is actually repaired or replaced. But that’s not necessarily the case. A policyholder “incurs” the amounts necessary for Ordinance or Law Coverage when the applicable ordinance or law is enforced. The Supreme Court notes that “to incur” means to become liable for the expense, but not necessarily to have actually expended it.¹

If a policyholder suffers damage to property and goes to appraisal, be sure to know whether code compliance issues will come into play when determining the amount necessary to return the property to its pre-loss condition. For example, does more than 25% of the roof require repair or replacement? If so, the insured’s contractor might need to apply to the city for a roofing repair permit before Ordinance or Law Coverage can be appraised. Ordinance or Law is incurred when the city rejects the permit because the repair will exceed the area allowed by Florida Building Code §706.1.1.² If the insured’s contractor has not yet applied for the roof permit at the time of the original appraisal then it is important to preserve the insured’s right to appraise the issue of Ordinance or Law at a later date by notating this on the face of the appraisal award.

If you have questions about this very important issue in appraisal, then contact a qualified property insurance professional.
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¹ Ceballo v. Citizens Prop. Ins. Corp., 967 So.2d 811 (Fla. 2007).
² See Jossfolk v. United Prop. & Ca. Ins. Co., 110 So.3d 110 (Fla. 4th DCA 2013).