1. Forms
2. DP
3. DP-04-71

What the form is

The DP 04 71, titled "Ordinance or Law Coverage - Increased Amount Of Coverage - Forms DP 00 02 and DP 00 03 Only," is an endorsement to ISO Dwelling Property policies. Its primary function is to increase the coverage limit for 'Ordinance or Law' expenses beyond the basic amount automatically included in the DP 00 02 (Broad Form) and DP 00 03 (Special Form) policies. This coverage addresses the additional costs an insured might face to repair, rebuild, or upgrade their property to comply with current building codes, zoning laws, or land use ordinances that have come into effect or changed since the dwelling was originally built or last renovated. The standard dwelling forms typically provide a base level of this coverage, often 10% of the Coverage A (Dwelling) limit; this endorsement allows the insured to purchase a higher percentage limit as specified in the schedule.

Classes of business it applies to

This endorsement is specifically designed for residential dwellings insured under the ISO Dwelling Program, particularly those covered by:

• DP 00 02 (Broad Form)
• DP 00 03 (Special Form)

It is most relevant for:

• Owners of older homes: These properties are more likely to be significantly affected by changes in building codes. For instance, if an older home suffers a partial fire loss, current codes might mandate upgrades to the entire electrical system, plumbing, or foundation, even in undamaged sections, to bring the structure up to current standards.
• Properties in areas with stringent or frequently updated building codes: Municipalities that regularly update their building ordinances can impose substantial additional costs on homeowners during repairs or reconstruction.
• Landlords insuring rental properties: Ensuring compliance with current safety and building codes is crucial for rental dwellings.

Real-world example: Imagine a 50-year-old house insured with a DP 00 03 policy suffers significant roof damage in a storm. The local building code, updated 10 years ago, now requires different roofing materials and structural supports for hurricane resistance. The standard 10% Ordinance or Law coverage might not be enough to cover these mandated upgrades. The DP 04 71 endorsement would provide the additional funds, up to the increased percentage selected, to meet these code requirements.

Special considerations

• Applicable Forms: This endorsement is exclusively for use with forms DP 00 02 and DP 00 03. For Ordinance or Law coverage on a DP 00 01 (Basic Form), a different endorsement, DP 04 74, is used.
• Increased Limit: The insured must specify the new total percentage amount of coverage desired, which replaces the automatic percentage provided in the base policy.
• Valuation: Ordinance or Law coverage typically applies to the increased cost of construction, the cost to demolish and clear the site of undamaged portions of the building if required by ordinance, and any restrictions on reconstruction.
• Withdrawal: Some industry resources indicate that the DP 04 71 was withdrawn by ISO with the 07 14 edition of the Dwelling Program. This means that for policies written on later ISO editions, this specific endorsement number might no longer be available, and insurers may use different proprietary forms or updated ISO forms to provide this coverage. Always verify the current forms and editions used by the specific insurer.

Real-world example: If a town passes a new ordinance requiring all rebuilt structures in a floodplain to be elevated, and an insured home is substantially damaged, the cost of elevating the home during reconstruction would fall under Ordinance or Law coverage. If the insured only had the standard 10% and the cost to elevate exceeded this, they would be underinsured without an endorsement like the DP 04 71 (or its successor).

Key information for agents and underwriters

• Agents: It is crucial for agents to identify clients whose properties (especially older homes or those in areas with evolving building codes) may be exposed to significant Ordinance or Law expenses. Agents should explain the limitation of the base policy and the benefit of purchasing increased limits via this endorsement. They should also be aware of the potential withdrawal of this specific form number and know what alternatives the carriers they represent offer.
• Underwriters: When evaluating risk and pricing this endorsement, underwriters should consider the age of the dwelling, the specific building codes in the property's jurisdiction, the likelihood of such codes being enforced after a loss, and the increased percentage limit requested by the insured. A higher percentage limit signifies a higher potential payout. The historical loss data for Ordinance or Law claims in the specific region can also be a factor. Given the withdrawal information, underwriters must ensure they are referencing the correct and current forms applicable to the policy period.
• Coverage Gaps: Without adequate Ordinance or Law coverage, insureds could face substantial out-of-pocket expenses to bring their property up to code after a loss, potentially making it financially unfeasible to rebuild.