Suppose an incident occurred — a fire broke out in the attic of a private home. The homeowner filed a property fire damage claim, and what happens next? You expect that a representative of the insurance company will arrive, assess the damage, and pay the amount required to restore everything “as it was” before the fire.
The plan sounds good, but there is one “but.” Building codes are constantly changing. If your home was built ten years ago, its systems may no longer meet current safety standards.
Ordinance and Law Coverage exists precisely to pay for the mandatory upgrades of undamaged parts of a building when required by law.
In this article, we will explain why insurers try to manipulate terminology and how to protect your right to full compensation for code upgrades.
What Ordinance and Law Coverage Is Designed to Do
Ordinance and Law Coverage covers additional expenses that are not directly related to physical damage. Its primary purpose is to cover costs that arise from the need to comply with government standards during repairs.
A standard insurance policy pays for replacement on a like-for-like basis. But if the law prohibits reinstalling outdated systems, Ordinance and Law Coverage pays the price difference.
This may appear to be a homeowner’s preference, but in reality, it is the practical application of the concept of increased costs due to legal compliance. Without this provision in your policy, you could find yourself in a situation where the insurance company pays for repairs, but the city refuses to issue a permit because the materials or systems are outdated.
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The Core Misinterpretation: Physical Damage as a False Requirement
A common tactic used by insurance companies is based on the claim that an item was not damaged by water, fire, or another covered peril.
For example, a pipe burst under foundation and inside the walls. During repairs, it becomes clear that under current city codes, you cannot simply patch the drywall — you are first required to upgrade the electrical wiring throughout the entire room.
The insurer may attempt to deny coverage by arguing: “The electrical lines were not damaged by the covered loss, so upgrading them is not our responsibility.” This logic is flawed for two related reasons.
First, it completely undermines the purpose of the coverage. If the wiring had been damaged by water, it would have been paid for under the standard property coverage section. Second, it distorts the terms of the contract. Ordinance and Law Coverage is specifically intended to protect the policyholder from indirect expenses.
How Code Compliance Actually Works After a Loss
Recovery after a serious incident always involves interaction with local authorities. The transition from ordinary repairs to mandatory upgrades typically follows this process:
| Stage | What Happens | Impact on the Homeowner and the Insurance Claim |
|---|---|---|
| Legal entry (permit) | To obtain a permit for repairs after fire and water damage, you are required to submit plans to the municipality. | Your property officially comes under municipal oversight. The insurance company confirms that repairs are being performed legally. |
| On-site inspection | Issuance of the permit automatically schedules a visit from a city inspector. | The insurer can no longer ignore the condition of undamaged parts of the building because they are now being reviewed by the authorities. |
| Compliance audit | The inspector compares the condition of your systems (wiring, ventilation) with safety codes in effect as of 2026. | Hidden code deficiencies are identified that must legally be upgraded during reconstruction. |
| Notice of correction | The city issues an official notice: you will not receive a certificate of completion until the system is upgraded. | The costs become mandatory. Without them, you cannot legally occupy the home. |
Compliance with the law becomes a direct consequence of the insured loss. If the damage had not occurred, the inspection would not have taken place, and you would not have been required to incur these expenses.
Real-World Example: Electrical Panel Upgrade After a Water Loss
One case from our practice clearly illustrates how Ordinance and Law Coverage works.
Situation Overview
In a private home, a bathroom toilet overflow occurred on the second floor. Water seeped through the floor, damaging the ceiling and walls of the first floor. During the removal of drywall for drying, access to the electrical wiring and panel was exposed.
A claims loss adjuster inspected the damage and approved only drywall replacement and painting.
However, when the homeowner applied for a repair permit, the city inspector determined that the existing electrical panel was outdated. The authorities issued a stop order on further restoration until the panel was replaced.
Our Actions
Since the insurer denied payment for the panel, stating that it was not damaged by water, our independent adjusters changed the course of the negotiations:
- Proved that replacing the panel is a loss-triggered expense. Without the post-flood repairs, the panel would not have been inspected.
- Provided the insurance company with a copy of the official inspector’s correction notice and a reference to the specific Ordinance and Law section in the client’s policy.
- Engaged a licensed electrician to confirm that the old system cannot be “closed back up” inside the walls under current law.
Result
The homeowner received a new system worth several thousand dollars, paying only the deductible (the amount the insurer subtracts from the claim payment under the policy). Without the involvement of a public adjuster, the client would have paid out of pocket or been left with an unfinished home due to the city’s refusal.
Why Ordinance and Law Coverage Applies Even Without Direct Damage
The answer is simple: this section of the policy insures not the condition of materials, but your legal obligations to the government. The logic of coverage is based on three principles.
Principle #1. The trigger is the repair process, not water contact
In the standard section of the policy, payment depends on whether a wall got wet. But under Ordinance and Law, the trigger is the inability to complete a legal repair without complying with the inspector’s requirements. The obligation to upgrade a system arises at the moment the building components are opened up, even if the system itself remained dry.
Principle #2. Code enforcement is a legal consequence of the covered loss
Insurance companies often confuse cause and effect. You upgrade a system not because it is “old,” but because the covered loss forced you to begin repairs that, by law, cannot be performed under outdated standards. Without the loss, there would have been no inspection and no correction order.
Principle #3. Ordinance and Law pays for what the law requires, not what the water touched
You already know that the essence of Ordinance and Law Coverage is to pay for what authorities require in order to make a building legally occupiable. If physical damage were required for payment, this section of the policy would be illusory. Damaged items are already paid for under the primary coverage.
Common Carrier Denial Language — and Why It Fails
Of course, insurance companies try to avoid paying claims. They often rely on boilerplate language. Nevertheless, professional insurance claim negotiation makes these arguments easy to refute. Let’s look at a few examples.
| Insurer’s Argument | Private Adjuster’s Counterargument |
|---|---|
| “No direct physical loss.” | Ordinance and Law is specifically designed for situations where the trigger is the law, not physical damage. |
| “Item not damaged by the peril.” | The coverage exists for parts of the building that survived but became illegal for continued use. |
| “Upgrade is betterment.” | In reality, this is mandatory safety. You receive a “better” system not by choice, but because otherwise you are legally prohibited from using your own property. |
Do not treat these or similar insurer statements as a final “no.” Ultimately, they are merely excuses that directly contradict the purpose of the coverage. In such situations, the best solution is to find a public adjuster who will force the company to comply with the contract and pay for the legally required upgrade.
What Documentation Makes or Breaks an Ordinance and Law Claim
Verbal comments from an inspector are never sufficient for a claims examiner. For a successful claim, a well-documented evidentiary record is required:
- inspector reports;
- written mandates and correction notices;
- code citations (local and state);
- justification linking the mandate directly to the loss-related repair scope.
Without a written order from an authority having jurisdiction, the insurer will assume that you are upgrading the building voluntarily rather than due to code requirements. In that case, the work may be classified as a “voluntary upgrade,” with a risk of denial.
The Role of Local Public Adjusters in Ordinance and Law Disputes
Insurance companies use legal loopholes to avoid paying for upgrades. So why not involve an independent public adjuster who knows how to make them honor their own policy?
In Ordinance and Law disputes, we handle:
- Translating construction and code requirements into claim language.
- Forcing alignment between policy intent and claim handling.
- Preventing improper narrowing of coverage.
- Protecting the insured’s right to the benefit they purchased.
Our team works with complex residential and commercial property claims in California, Illinois, and Wisconsin. We will do everything necessary to leave the insurer with no option but to include the upgrade in coverage.
Want to understand what your Ordinance and Law Coverage actually pays for? Contact the On-Site Adjusting team for a free claim review.
Call (866) 861-4992 or (866) 933-0404, or fill out our contact form.
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