After a fire, a city building code requires the entire damaged structure to be torn down and rebuilt to current standards even though only 40% was burned. A standard property policy WITHOUT an ordinance-or-law endorsement generally responds how to the extra demolition and code-upgrade costs?
a.Pays them subject only to the deductible, with no other limit on demolition or code-upgrade costs
b.Excludes them; an ordinance-or-law endorsement is needed to cover demolition of undamaged portions and the increased cost of construction to meet current codes
c.Pays them in full like any other repair cost, treating code upgrades as part of the fire damage itself
d.Pays them only if the city is named as an additional insured on the policy, in which case the demolition and code-upgrade costs are handled as a claim presented by the municipality itself rather than by the building owner
Explanation
Building ordinance or law costs - the increased cost to comply with newer codes, the cost to demolish undamaged portions of the structure, and the loss in value of the undamaged portion - are excluded from standard property forms. An ordinance-or-law endorsement is required to add this coverage.
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