The Costs of Code Upgrades

When a property is physically damaged by some insurable event &mdash; such as a flood or fire &mdash; laws or ordinances that were not in place when the original property was first constructed must be considered in the repairing or rebuilding of that property. After Hurricane Andrew in 1992, for example, Dade County Florida required that ruined houses be rebuilt in compliance with stricter severe-weather standards than the damaged houses had previously exhibited. These upgrade requirements must be reconciled with replacement-cost insurance for property owners, which puts the insured in the <i>same</i> position, with the same quality of property, as existed before the insured event &mdash; not in a <i>better</i> position, with a higher quality of property (<i>eg,</i> a stronger roof, better ventilation, wider egresses, and the like). Consequently, courts, insurers and insureds need to resolve the question of which party pays the costs of compliance with changed construction codes.

19 minute read January 01, 2004 at 10:00 AM

By

Kenneth W. Erickson and Bryan Diederich