Keeping Up With Building Codes
I recently learned that the city building code requires automatic fire sprinklers for a building like mine. Will my property insurance pay for installation of a sprinkler system?
Your commercial property insurance policy responds only when your building is damaged by a covered cause of loss, so it won’t help you pay the cost to install sprinklers or comply with other building code requirements right now.
Fortunately, however, the city building code probably includes a “grandfather” provision that says you don’t have to retrofit your building to comply with current codes unless and until your building is damaged by some catastrophe. If that happens, your property insurance may help pay the additional costs you incur to rebuild or repair your building to meet current codes.
Local building codes are updated periodically and may have changed significantly since your building was constructed. If your building is badly damaged, the building officials in your community may require you to rebuild it to meet new building codes. Some communities require you to demolish undamaged parts of the building if they determine the damage exceeds a certain percentage of its value, usually 50 percent.
Most commercial insurance policies will only pay enough to replace your building as it existed at the time of the loss. Some policies cover the extra expense of rebuilding to code, but only up to a certain dollar amount like $10,000 or a certain percentage of the limit like 5 percent. Most insurance companies offer an additional limit for building code coverage for an additional premium.
To fully cover the additional costs related to required building code enforcement, you must add the necessary amount to the limit of insurance and purchase additional coverage – commonly called “ordinance and law” coverage – if offered by the insurance company.
How much additional insurance do you need?
The only way to begin the process of determining that is to consult with a local architect or general contractor, or meet with the fire marshal and/or the building code official in the city where your building is located.
Many city governments follow the “universal” building code established by the International Code Council (ICC). The ICC code was implemented in 2000, so some cities may instead be following an older set of code established by the Building Officials and Code Administrators (BOCA), the International Conference of Building Officials (ICBO), the Southern Building Code Congress International (SBCCI), or the Council of American Building Officials (CABO). And that’s just the building code. There are separate codes for electrical, plumbing and mechanical (heating and air conditioning).
Codes are not necessarily consistent throughout a city. The code for one neighborhood may be different from the code applicable to a neighborhood eight blocks away!
To make matters more complicated, growing cities and towns can annex new territories into their city limits at any time. Buildings within those annexed areas that were constructed years ago can be forced to comply with the city building codes.
Whose job is it to determine the proper amount of insurance needed to cover current building codes? Ultimately it is your responsibility to establish the value of your property and select the amount of insurance for your policy. We can help with that decision and explain what you can do to avoid an unpleasant surprise after a loss.
Contact your agent or account manager for additional information on building code coverage.
Swingle, Collins & Associates specializes in commercial property insurance coverage The descriptions of coverages listed on this website are brief and subject to the provisions, limitations, and exclusions that can only be expressed in your policy and related endorsements. For additional information of how Swingle, Collins & Associates can assist in meeting your coverage needs for commercial property insurance please contact your dedicated risk manager to discuss the benefits and services of insurance coverage.
The information contained on this page is provided for informational and educational purposes only. It contains general information on insurance issues and may not reflect the most current developments in insurance coverage and is unlikely to apply in all factual scenarios. The information does not include all the terms, coverages, exclusions, limitations or conditions that may be contained in the actual insurance contract language. The policies themselves must be read for those details. Sample policy forms will be made available upon reasonable request.