Question

An insured, covered under an ISO standardized Businessowners Policy, has sustained a fire loss to his building. Due to changes in the building codes it's going to cost $20,000 more to make the repairs. How much, if any, will the BOP pay for these extra costs?

a. $5,000.
b. Nothing.
c. $10,000.
d. $20,000.

Answer 1

The answer is USD 10,000/-

Step-by-step explanation:

The amount is limited to USD 10,000 for the increased cost of construction (COC) due to compliance with legal. But, this coverage imply only to those buildings which are insured on a replacement cost basis.

However, the USD 10,000 limited coverage cannot be utilized to pay any costs/expenses after a loss for an law or ordnance, which insured what it was required to comply before the loss incurred, but was unable to do so.

Here it is important to view that the ordinance or law exclusion is still valid, ensuring the insured from presuming that the whole policy limit is at hand to pay these costs/expenses to bring the asset (building) up to code after a claim. This type of policy will then ensure law or ordnance to cover through an "added coverage", but these costs are bounded to a limit of USD 10,000/-.