Our insured had converted an old warehouse into a 200-unit condominium complex. Fire in the building caused the sprinklers to go off, and the building was evacuated. The fire and sprinkler damage losses were covered by the policy we wrote. The city is requiring that the owner install a dry sprinkler system when repairing the storage room because of a code change.

Would the cost of this upgrade be paid under the ordinance and law coverage provision that is on the policy?

Illinois Subscriber

This type of loss qualifies under the standard ISO building ordinance coverage wording. There must be direct covered loss to the property in question before building ordinance coverage is triggered. The ordinance responds if the enforcement of any building, zoning, or land use law increases the cost of repair or replacement in areas that are not covered as direct loss. In this case, a direct covered claim occurred and the sprinklers have to be upgraded because the city has changed a building ordinance.