Ordinance or Law Coverage in California: Paying for Code Upgrades After a Fire

Here is a sentence heard more than once from California homeowners after a fire: I had replacement cost, so why is there a gap? The policy paid to rebuild the house that stood there, but the city would not let them rebuild that house. The code says you must build to today's standards: fire resistant siding, ember resistant vents, new electrical, maybe solar, maybe a sprinkler system. That difference has a name. It is called ordinance or law coverage.

Aaron Bollinger of Bollinsure Insurance Services explains how building code upgrades are paid for after a loss, why they matter so much in California wildfire country, what a standard policy gives you, how to buy more, what is excluded, and a claim example with numbers.

What we cover:

• Why building codes change, Title 24, and the wildland urban interface (WUI) rules in Chapter 7A of the California Building Code
• Grandfathering, and why it ends once a house is destroyed or badly damaged
• What high fire hazard areas can require: Class A roofs, ember resistant vents, tempered or multi-pane glass, defensible space
• The ordinance or law exclusion and the 10% additional coverage on the ISO HO 00 03 form
• Why extended replacement cost is a different thing from code upgrade coverage
• The three pieces on commercial forms (CP 04 05 Coverage A, B and C)
• Why wildfires make the code layer large, and California's 36 month post-disaster replacement cost window
• Closing the gap: HO 04 77, premium tiers, the FAIR Plan with a DIC policy, and commercial limits
• What ordinance or law does not do: upgrades with no loss, excluded perils like earthquake, prior violations, pollutants, and cash settlements
• Example: Daniel's Ventura County rebuild with 10% versus 50% ordinance or law
• Four questions to ask about your own policy

Resources:

• All Speaking of Insurance episodes
• Home insurance in California
• Read the guide: Ordinance or law coverage in California

Clarifications

• Around 2:28, "five sprinklers" means fire sprinklers. Some jurisdictions require fire sprinkler systems in new single family homes.
• Around 2:15, the glass requirement is tempered or multi-pane glass.
• Around 3:05, the ISO homeowners form is the HO 00 03 (often called the HO-3).
• Around 9:37, "read the law settlement" means read the loss settlement and ordinance or law wording together.
• In Daniel's example, 10% ordinance or law leaves a $65,000 gap on $140,000 of code items. With HO 04 77 at 50%, the $375,000 limit covers the full $140,000.
• CEA earthquake policies include a separate building code upgrade limit; check the amount on your policy.

Get quoted: Compare coverage options with Bollinsure Insurance Services at www.bollinsure.com/quote , or call 562-268-9355 .

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This episode is for general education only and is not legal, tax, or coverage advice. Coverage, eligibility, and pricing depend on the carrier, underwriting, and your policy terms.

Chapters

• 00:00 Cold open: replacement cost, but still a gap
• 00:32 Welcome and what this episode covers
• 01:05 Disclaimer
• 01:19 Why building codes change
• 01:51 Grandfathering and what high fire areas require
• 02:37 What a standard policy gives you
• 03:37 Extended replacement cost is a different thing
• 04:09 The three pieces of ordinance or law
• 05:41 Why wildfires make the code layer large
• 06:33 California's post-disaster rules
• 07:09 How to close the gap
• 08:23 What ordinance or law does not do
• 09:41 Example: Daniel's rebuild
• 11:25 What to do this week: four questions
• 12:14 Getting help and sign-off

Transcript excerpt

Here is a sentence I have heard more than once from a California homeowner after a fire. I had replacement cost. Why is there a gap? The house burned. The policy paid to rebuild the house that stood there, but the city would not let them rebuild that house. The code says you must build today.… Full episode on bollinsure.com