Q

Our homeowners insured has a special endorsement to his policy that provides some coverage for restoration of land after a covered loss. He also has purchased “ordinance and law” coverage. He recently suffered a severe fire. As a result of the heavy amount of water used to put out the fire, some of the land around the house washed away.

When the contractor was restoring the land, he put in several additions: drains, keyways, and other upgrades. The insurer has agreed to pay for the restoration of the land, but not for the other items added by the contractor.

We believe the whole loss is covered, up to the limit of liability for land. What do you think?

Ohio Subscriber

A

The principle of indemnity says that all the insurer owes is the cost to put the land back in the same way it was prior to the loss. In the repair, it looks like your client and his contractor did much more than put the land back. As you said, they installed drains, keyways, and other upgrades to the land. These items do nothing to restore the land itself; at the least they may stabilize it, but at most they enhance the removal of water from the insured premises.

However, because your client also purchased “law and ordinance” coverage, he may have some coverage for those upgrades. If they are required by the current building code, they would be covered.