FUNCTIONAL REPLACEMENT COST VALUATION BUILDINGS

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Daniela Hall
5 years ago
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1 This endorsement changes the Property Coverages provided by this policy Page 1 of 5 -- PLEASE READ THIS CAREFULLY -- FUNCTIONAL REPLACEMENT COST VALUATION BUILDINGS (Entries required to complete the Schedule will be shown below or on the "declarations".) SCHEDULE The "limit" shown in the Schedule is the only "limit" that applies to that building. Prem. Bldg. No. No. Limit Loss Of Income Increased Restoration Period Option Number Of Hours Waiting Period for Restoration Period This policy is amended to include the following "terms". All other "terms" of the policy apply, except as amended by this endorsement. VALUATION OF PROPERTY LOSSES ADDITIONAL DEFINITIONS The following definition is added with respect to the coverage provided by this endorsement. "Market value" means the price which the covered property should bring in a competitive and open market under all conditions required for a fair sale. However, "market value" does not include the value of land. Items 1. and 2. are deleted and replaced by the following, but only with respect to buildings described in the Schedule above. Functional Replacement Cost -- a. If "you" enter into a contract to repair or replace the damaged building with a new or restored building that is to be used for the same purpose within 180 days of the loss, the value of covered property is based on the least of the following, subject to item 4. under Valuation Of Property Losses: 1) (Applies only in the event of a total loss.) The cost to repair or replace the damaged building on the same site (or on a different site, if required by a code, ordinance, law, or decree as described under Additional Coverage 3. in this endorsement) with a lower cost building that functions in the same manner as the damaged building;

2 Page 2 of 5 2) (Applies only in the event of a partial loss.) The cost to repair or replace the damaged portion of the building with lower cost materials, if available, consistent with the style of the building prior to the damage, plus the amount that "you" actually spend for the demolition of the building, including the removal of its debris, as described under Additional Coverage 2. in this endorsement; or 3) The amount that "you" actually spend: (a) that is necessary to repair or replace the building with lower cost materials, if available; and (b) for the demolition of the building, including the removal of its debris, as described under Additional Coverage 2. in this endorsement. The time frame required for entering into a contract for the repair or replacement of the damaged building may be changed from 180 days to a greater number of days if "you" and "we" so agree. b. If "you" do not make a claim under item a. above, the value of covered property is based on the lesser of: 1) the "market value" at the time of loss; or 2) the cost to repair or replace the damaged property with lower cost materials, if available, consistent with the style of the building prior to the damage, less a deduction for physical deterioration or depreciation. HOW MUCH WE PAY 1. Item 3. Loss Settlement Terms is deleted and replaced by the following, but only with respect to buildings described in the Schedule above. Loss Settlement Terms -- Subject to items 1., 2., 4., and 5. under How Much We Pay, "we" pay the lesser of: a. the amount determined under Valuation Of Property Losses; or b. the "limit" that applies to covered property. 2. Item 5. Insurance Under More Than One Policy is deleted and replaced by the following, but only with respect to buildings described in the Schedule above. Insurance Under More Than One Policy -- "You" may have another policy subject to the same plan, "terms", conditions, and provisions, including the Functional Replacement Cost valuation "terms" as set forth by this endorsement. If "you" do, "we" pay "our" share of the covered loss. "Our" share is the proportion that the applicable "limit" under this endorsement bears to the "limit" of all policies covering on the same basis. If there is another policy covering the same loss, other than that described above, "we" pay only for the amount of covered loss in excess of the amount due from that other policy, whether "you" can collect on it or not. But "we" do not pay more than the applicable "limit".

3 Page 3 of 5 ADDITIONAL COVERAGES Under Additional Coverages, Increased Costs - Ordinance Or Law is deleted, but only with respect to buildings described in the Schedule above. The following coverages apply to the buildings shown in the Schedule above, subject to all provisions of this endorsement. This is not additional insurance. Covered losses under each additional coverage are included within the applicable "limit" for each building. Increased Costs -- Ordinance Or Law 1. Increased Building Loss - Value Of Undamaged Portions "we" pay for the loss in value of the undamaged portion of that building resulting from the enforcement of any code, ordinance, law, or decree that regulates or requires the demolition of any undamaged portion of that building. 2. Increased Debris Removal - Demolition Of Undamaged Portions "we" pay the cost to demolish and remove the debris of undamaged portions of that building resulting from the enforcement of any code, ordinance, law, or decree that regulates or requires the demolition of such undamaged property. 3. Increased Cost Of Construction and if that loss or damage is repaired or replaced for similar occupancy, "we" pay the increased cost to: 1) repair, rebuild, or replace the damaged portions of that building; and 2) reconstruct or remodel undamaged portions of that building, whether or not demolition is required; resulting from the enforcement of any code, ordinance, law, or decree. If the building is repaired or replaced at the same site, or if "you" elect to rebuild at a different site, "we" pay the increased costs of construction at the same site. If the code, ordinance, law, or decree requires relocation to another site, "we" pay the increased costs of construction at the new site. Additional Conditions -- Ordinance Or Law The Ordinance Or Law coverage provided by this endorsement is subject to the following additional conditions: 1. Coverage applies only if the code, ordinance, law, or decree regulates the demolition, construction, or repair of the buildings, or establishes requirements for zoning or land use at the described premises, and such code, ordinance, law, or decree is in force at the time of loss. 2. Coverage is provided only to the extent of the minimum requirements of the applicable code, ordinance, law, or decree. 3. No ordinance or law coverage is provided by this endorsement when loss or damage to a building is caused both by a peril that is covered by this policy and by a peril that is not covered by this policy, and the loss in value or the increased costs resulting from the enforcement of a code, ordinance, law, or decree is attributed, in whole, to the loss or damage caused by the peril that is not covered.

4 Page 4 of 5 4. When loss or damage to a building is caused both by a peril that is covered by this policy and by a peril that is not covered by this policy, and the loss in value or the increased costs resulting from the enforcement of a code, ordinance, law, or decree is attributed, in part, to the loss or damage caused by the peril that is not covered, "we" will pay only a part of the resulting loss in value or the increased costs. The part of the loss in value or increased cost that "we" pay is determined using the following steps: a. divide the direct physical loss caused by the covered peril by the total amount of direct physical loss; and b. multiply the loss in value or the increased costs resulting from the enforcement of the code, ordinance, law, or decree by the figure determined in 4.a. above. The most "we" pay is the amount determined in 4.b. above or the "limit", whichever is less. "We" do not pay any remaining part of the loss in value or the increased costs resulting from the enforcement of the code, ordinance, law, or decree. However, if the loss or damage to a building caused by a covered peril alone would have resulted in enforcement of the code, ordinance, law, or decree, then "we" pay the full amount of loss payable under Additional Coverages 1., 2., and 3. in this endorsement. Additional Exclusions -- Ordinance Or Law The following exclusions are added with respect to the Ordinance Or Law coverage provided by this endorsement: 1. "We" do not pay for: b. any costs associated with the or decree that requires "you" or anyone else to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effects of "pollutants" or "fungus or related perils". 2. "We" do not pay for any increased costs that are the result of any code, ordinance, law or decree requirement "you" failed to comply with prior to the covered loss. OPTIONAL COVERAGE Loss Of Income If the Loss Of Income Increased Restoration Period Option is shown as applicable in the Schedule above, the following applies: 1. When a covered peril causes loss or damage to property at the premises described in the "declarations", "we" extend "your" coverage to include "your" actual loss of net income and necessary extra expenses that "you" incur during the "restoration period" caused by the enforcement of any code, ordinance, law, or decree in force at the time of the loss that regulates or requires: a the construction, use, or repair of any property; or b. the demolition of any property, in part or in whole, not damaged by a covered peril. a. loss or increased cost caused by the or decree that regulates or requires the repair, replacement, remodeling, rehabilitation, or razing of property due to the existence of or any activity of "pollutants" or "fungus or related perils"; or

5 Page 5 of 5 2. Additional Definition 7., "restoration period" is replaced by the following, but only with respect to the premises shown in the Schedule above: 7. "Restoration period" means the time it should reasonably take to resume "your" normal business activities at the described premises. Time Limitations And Restrictions -- a. The "restoration period" begins: 1) with respect to Earnings, 72 hours after the time of direct physical loss or damage caused by a covered peril at the described premises, unless a lesser number of hours is shown in the Schedule above; and 2) with respect to Extra Expense, immediately after the time of direct physical loss or damage caused by a covered peril at the described premises. b. The "restoration period" ends on the earlier of: 1) the date that the property should be rebuilt, repaired, or replaced with reasonable speed and similar quality; or 2) the date when the business is resumed at a new permanent location. c. The "restoration period" includes any increase in the time required to rebuild, repair, or replace the property to meet the minimum requirements of any code, ordinance, law or decree in force at the time of loss that regulates or requires the construction, use, repair, or demolition of any property. d. The "restoration period" does not include any increase in time due to the or decree that regulates or requires: 1) the repair, replacement, remodeling, rehabilitation, or razing of property due to the existence of or any activity of "pollutants" or "fungus or related perils"; or 2) that "you" or anyone else test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effects of "pollutants" or "fungus or related perils". The length of the "restoration period" is not limited by the expiration date of the policy.

Building Codes are BAD for Your Insureds: Why Ordinance or Law Coverage is Necessary!

Building Codes are BAD for Your Insureds: Why Ordinance or Law Coverage is Necessary! Main Idea: The application and enforcement of Building Codes can turn a partial loss into a total loss. Section I Gaps in Coverage Create Need for Ordinance of Law Coverage I. Commercial Property Policy