Ordinance or Law Insurance
Requirements
If the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is non-conforming under any current land use law or ordinance, you must ensure the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has ordinance or law insurance:
- for all perils, even if insured on a standalone policy; and
- that includes the Increased Period of Restoration (Coverage D) endorsement if any buildings are 5 stories or more.
| Coverages | If ordinance or law insurance is required, you must ensure the Property has all of the following... |
|---|---|
| Coverage A |
Loss of Undamaged Portion, in an amount equal to
|
| Coverage B | Demolition/Debris Removal Cost equal to at least 10% of the Insurable ValueInsurable ValueFor any Property, the estimate of the maximum dollar amount needed to replace, repair, or reproduce the Property, but excluding any land value. . |
| Coverage C | Increased Cost of Construction equal to at least 10% of the Insurable ValueInsurable ValueFor any Property, the estimate of the maximum dollar amount needed to replace, repair, or reproduce the Property, but excluding any land value. . |
Guidance
Examples of ordinance or laws include
- bulk restrictions,
- building,
- zoning,
- energy management,
- green, or
- Fair Housing Act accessibility.
Some municipalities have no zoning districts. This primarily refers to use. Usually, buildings are still subject to building and safety codes; therefore, coverage is required.
| Required Limits Example | |
|---|---|
| If... | Then the required coverage is... |
|
the Insurable Value equals
|
100% of the Insurable ValueInsurable ValueFor any Property, the estimate of the maximum dollar amount needed to replace, repair, or reproduce the Property, but excluding any land value. , minus the damage threshold specified by the local building ordinance (e.g., $10 million - $7.5 million = $2.5 million for Coverage A). |
| Coverages A, B, and C are combined | the Coverage A amount plus 10% of the Insurable ValueInsurable ValueFor any Property, the estimate of the maximum dollar amount needed to replace, repair, or reproduce the Property, but excluding any land value. for Coverage B plus 10% of the Insurable ValueInsurable ValueFor any Property, the estimate of the maximum dollar amount needed to replace, repair, or reproduce the Property, but excluding any land value. for Coverage C (e.g., $2.5 million + $1 million + $1 million = $4.5 million). |
| Coverages B and C are combined | 10% of the Insurable ValueInsurable ValueFor any Property, the estimate of the maximum dollar amount needed to replace, repair, or reproduce the Property, but excluding any land value. for Coverage B plus 10% of the Insurable ValueInsurable ValueFor any Property, the estimate of the maximum dollar amount needed to replace, repair, or reproduce the Property, but excluding any land value. for Coverage C (e.g., $1 million + $1 million = $2 million). |
Coverage D for law and ordinance insurance:
- extends the business:
- income and extra expense coverage; and
- additional time to restore operations when delayed due to enforcement of building or zoning laws; and
- is paid from the Property’sProperty’sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). business income/rent loss coverage.
Without this Increased Period of Restoration endorsement, business income coverage does not include any “increased period” that may be necessary due to enforcement of an ordinance or law.
When evaluating this coverage you should ensure the business income/rent loss limit is adequate to reflect the increased period of restoration.