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2. CP
3. CP-15-32

Form CP 15 32: Ordinance Or Law – Increased Period Of Restoration

1. What the form is

The CP 15 32, "Ordinance Or Law – Increased Period Of Restoration," is an endorsement to a commercial property policy. Its primary purpose is to extend the "period of restoration" for Business Income and/or Extra Expense coverage when the enforcement of an ordinance or law causes delays in repairing or rebuilding damaged property. Standard Business Income (CP 00 30) and Extra Expense (CP 00 50) forms typically limit the period of restoration to the time it should reasonably take to repair or rebuild, without accounting for delays caused by mandatory compliance with building codes or other laws. This endorsement helps bridge that potential coverage gap. It modifies the definition of "period of restoration" within the time element coverage forms (CP 00 30, CP 00 32, CP 00 50) to include the additional time required to meet these legal or regulatory requirements.

2. Classes of business it applies to

This endorsement is particularly relevant for businesses that:

• Occupy older buildings: Older structures are more likely to require significant upgrades to meet current building codes if substantially damaged. For example, a 90-year-old building housing a medical group that suffers a fire might be required to widen hallways and update bathrooms to current ADA guidelines during reconstruction. Without this endorsement, the business income lost during the extra time taken for these mandatory upgrades might not be covered.
• Are located in areas with strict or frequently updated building codes: Municipalities that regularly revise their building ordinances can create situations where even newer buildings might need modifications after a loss.
• Operate in industries with specific regulatory requirements for their facilities: Examples could include manufacturing plants with specialized safety or environmental codes, or healthcare facilities with stringent building standards.
• Have a high dependency on their physical location and cannot easily operate from a temporary site: For these businesses, any extension to the rebuilding period directly translates to a longer period of lost income. For instance, a specialized manufacturing facility that requires custom-built infrastructure would find it difficult to relocate temporarily.

Essentially, any business whose income is susceptible to interruption due to prolonged repairs mandated by ordinances or laws should consider this endorsement. This is especially true if they are insured under forms like CP 00 30 (Business Income and Extra Expense) or CP 00 50 (Extra Expense).

3. Special considerations

• Triggering Coverage: The endorsement typically applies when an ordinance or law in force at the time of loss regulates construction or repair, or requires tearing down undamaged portions of the property. It's important to note that the underlying cause of loss must be a covered peril under the policy.
• Minimum Standards: Coverage under this endorsement is generally limited to the increased time needed to comply with the minimum standards of the ordinance or law. If an insured decides to upgrade beyond what the code minimally requires, the additional time and cost for those elective upgrades may not be covered. For example, if a business is required to upgrade to masonry noncombustible construction but chooses fire-resistive material which takes longer, the extra time for the superior construction may not be covered.
• Pre-existing Non-compliance: Costs to meet codes that the insured was required to comply with before the loss, but had not, are generally not covered. The policy is not intended to pay for deferred maintenance or existing violations.
• Interaction with CP 04 05: The CP 04 05, Ordinance or Law Coverage, addresses the direct property damage aspects, such as the cost to demolish undamaged portions of the building or the increased cost of construction to comply with codes. The CP 15 32 specifically addresses the time element loss (Business Income/Extra Expense) resulting from those ordinance or law delays. Both endorsements may be necessary for comprehensive coverage.
• Pollutants and "Fungus": The endorsement may contain exclusions related to delays caused by the enforcement of laws concerning pollutants, "fungus" (which includes mold or mildew), wet or dry rot, or bacteria.

4. Key information for agents and underwriters

• Risk Assessment: Underwriters should carefully assess the age and condition of the insured property, the local building code environment, and the nature of the insured's operations. Older buildings in areas with aggressive code enforcement present a higher risk for prolonged restoration periods.
• Pricing: The premium for this endorsement should reflect the increased exposure to longer periods of business interruption. Factors influencing pricing include the building's age, construction type, occupancy, and the stringency of local codes.
• Coverage Gaps: Agents should explain that standard Business Income forms (CP 00 30, CP 00 32) may not cover the full period of income loss if ordinances or laws extend the rebuilding time. This endorsement specifically addresses that gap.
• Adequacy of Limits: It's crucial to ensure that the Business Income and/or Extra Expense limits are sufficient to cover a potentially longer period of restoration when this endorsement is added. Agents should work with clients to accurately calculate their potential business income exposure. The Business Income Report/Worksheet (CP 15 15) is a tool that can be used for this purpose.
• Coinsurance: If the underlying Business Income coverage is subject to a coinsurance provision, the increased period of restoration could impact the adequacy of the limit of insurance and potentially lead to a coinsurance penalty if not properly accounted for.
• Documentation: In the event of a claim, clear documentation of the requirements imposed by the ordinance or law and the resulting delays will be essential.
• Related Endorsements: Besides CP 04 05, consider if other endorsements like CP 15 32 (Civil Authority Changes) might be relevant if access to the premises is prohibited by a civil authority due to damage to nearby property, potentially compounded by ordinance or law issues at the damaged off-premises location.