1. Forms
2. DP
3. DP-04-74

What the form is

The DP 04 74 Ordinance or Law Coverage endorsement is designed to be added to the Dwelling Property 1 - Basic Form (DP 00 01). Its primary purpose is to provide a specified amount of coverage for the increased costs an insured might face to repair or rebuild a damaged dwelling when local building codes or ordinances require upgrades or changes to the property that were not part of the original structure. Standard dwelling policies often exclude or limit coverage for these additional expenses. This endorsement helps to mitigate that gap for those with a DP 00 01 policy.

Classes of business it applies to

This endorsement applies to residential dwellings insured under the DP 00 01 Basic Form. This can include owner-occupied dwellings, tenant-occupied dwellings, or dwellings not eligible for a homeowners policy due to age, condition, or occupancy. It is available to both dwelling owners and tenants who may be responsible for such increased costs under their lease agreement or as a result of improvements they made.

Real-world example: An older home insured under a DP 00 01 policy sustains significant fire damage. Current building codes require upgraded electrical wiring and plumbing during the repair. The DP 04 74 endorsement would help cover the additional cost of these mandated upgrades, up to the limit specified in the endorsement.

Special considerations

• Specifically for DP 00 01: This endorsement is exclusively for use with the DP 00 01 Basic Form. For broader dwelling forms like the DP 00 02 (Broad Form) or DP 00 03 (Special Form), a different ordinance or law endorsement (DP 04 71) would typically be used.
• Limited Coverage: The coverage provided is for a limited amount, which must be specified in the policy declarations or the endorsement schedule.
• Exclusions: The endorsement explicitly excludes coverage for any loss in value of the property that results from the enforcement of an ordinance or law. It also excludes costs associated with monitoring, testing, or assessing the property's compliance with any ordinance or law.
• Trigger: Coverage is triggered only when there is a covered loss to the dwelling that then necessitates compliance with an ordinance or law for repair or reconstruction.

Key information for agents and underwriters

• Risk Assessment: Agents should identify clients with older homes or properties in areas known for stringent or frequently updated building codes, as they are more likely to face significant increased costs due to ordinance or law enforcement after a loss. The DP 00 01 is a basic policy, and this endorsement offers crucial, albeit limited, protection.
• Client Education: It's important for agents to explain the limitations of the base DP 00 01 policy regarding ordinance or law and how this endorsement can provide some financial relief. The difference between this endorsement and broader ordinance or law coverages available for other dwelling forms should also be clarified if applicable.
• Underwriting: Underwriters should consider the age and condition of the property, the specific building codes in the jurisdiction, and the limit of coverage requested. The premium for this endorsement should reflect the potential for increased repair or reconstruction costs due to local ordinances.
• Coverage Gaps: While this endorsement provides some coverage, it's important to note it is limited. For properties requiring more comprehensive ordinance or law coverage (e.g., Coverage B for demolition costs or Coverage C for increased cost of construction for the undamaged portion of the building), a different policy form or more comprehensive endorsements might be necessary if available and if the risk qualifies. This endorsement primarily addresses the increased cost to repair the *damaged* portion of the property to comply with ordinances or laws.