1. Forms
2. FP
3. FP-05-26

What the form is

The FP 05 26, titled "Expenses Consequential to Enforcement of Ordinances or Laws Affecting Building, Zoning or Land Use (Coverages A and B only)", is an endorsement to a farm property insurance policy. Its primary function is to provide coverage for the additional expenses incurred by the insured to meet current building codes, zoning laws, or land use ordinances when repairing or reconstructing a covered dwelling or other private structure after a loss. Often, older structures were built to codes that are now outdated. If such a structure is damaged and requires repair, local laws may mandate that the repaired or rebuilt portion (or even the entire structure) be brought up to current standards. This endorsement helps cover those increased costs, which are typically excluded under standard property coverage.

Classes of business it applies to

This endorsement is specifically designed for farmowners and applies to farm dwellings (Coverage A) and other private structures appurtenant to dwellings (Coverage B) insured under the Farm Property–Farm Dwellings, Appurtenant Structures and Household Personal Property Coverage Form (FP 00 12). It is particularly relevant for:

• Older farm dwellings and structures that may not conform to current building codes.
• Properties located in areas with frequently updated or stringent building, zoning, or land use regulations.

Real-world example: A farmhouse built 50 years ago suffers significant fire damage. The local building code now requires upgraded electrical wiring, specific roofing materials, and foundation enhancements for any major reconstruction. The standard property coverage would pay for repairing the fire damage to its previous state. The FP 05 26 endorsement would help cover the additional costs associated with meeting these new, mandatory code requirements for the dwelling.

Special considerations

• Limited to Coverages A and B: This endorsement's coverage applies only to dwellings and their appurtenant private structures; it does not extend to barns, outbuildings, or other farm structures unless they are specifically scheduled under Coverage A or B.
• Exclusion if FP 04 04 is present: The FP 05 26 endorsement cannot be attached to a policy if the Dwelling and Farm Building Replacement Cost Protection (Including Ordinance or Law Coverage) Endorsement (FP 04 04) is already included, as FP 04 04 provides a broader form of ordinance or law coverage.
• Coverage Trigger: The coverage is triggered only when the enforcement of an ordinance or law results in increased costs following a loss covered by the policy.
• Not for Undamaged Portions (Typically): Standard ordinance or law coverage often has limitations regarding undamaged portions of a structure. The specifics of how this endorsement interacts with undamaged portions would be detailed in the form language itself, but generally, the focus is on the increased cost to repair or rebuild the damaged portion to comply with codes.

Real-world example: A windstorm damages the roof of an insured's older farmhouse (Coverage A). The local ordinance requires that if more than 25% of a roof is replaced, the entire roof structure must be brought up to current hurricane-strapping codes. The FP 05 26 would help cover the increased cost of retrofitting the entire roof, not just repairing the damaged section to its previous condition.

Key information for agents and underwriters

• Risk Assessment: Underwriters should consider the age of the insured farm dwellings and appurtenant structures, the local building code environment, and the likelihood of significant code changes. Older buildings in areas with aggressive code enforcement represent higher risk.
• Coverage Adequacy: Agents should discuss the importance of ordinance or law coverage with clients, especially those with older properties. Without this endorsement or a similar one like FP 04 04, the insured could face substantial out-of-pocket expenses to comply with modern codes after a loss.
• Avoiding Duplication: It is crucial to ensure that this endorsement is not added if FP 04 04 is already on the policy, as this would be redundant and potentially confusing.
• Pricing: The premium for this endorsement would typically reflect the increased exposure associated with older buildings and stricter code environments.
• Client Education: Agents should clearly explain what triggers the coverage and what types of expenses are covered (e.g., increased cost of construction, demolition of undamaged portions if required by law).