Colorado Draft Regulation Addresses Unintended Consequences of Good Deeds

The Marshall Fire that burned through Boulder County, Colorado in December 2021 destroyed more than 1,000 residential and commercial buildings. The main cities affected by the fire, Louisville and Superior, have waived certain provisions of their respective building codes in order to ease cost concerns for homeowners trying to rebuild their lives. However, waiving the building codes, while well-intentioned, may do more harm than good.

Homeowners often have ordinance and law coverage within or added to their homeowner policies. This coverage provides payment for increased construction costs for repairs that must comply with building codes that weren’t in effect at the time of original construction. In order for this coverage to be effective, there has to be an ordinance or law to comply with that creates the increased costs. For example, an insured’s dwelling is totally destroyed and the policy limit is $250,000. The cost to rebuild the property and bring it up to current building codes is $270,000. This increased cost is covered under the ordinance or law coverage, which is ten percent of coverage A in the ISO HO 00 03. Increased coverage can be added by endorsement HO 04 77 that allows the insured to increase the percentage available for the coverage. Without the ordinance or law coverage, the insured would have a $20,000 bill for the difference between the policy limits and the amount to bring the building up to code. With ordinance or law coverage that $20,000 is covered as well. However, if the ordinances are waived, then that coverage does not apply.