Q. I have a friend that lives in a retirement condominium community. They have a condo policy that covers all 8 buildings in the community. The insurance has paid to replace between 98-160 shingles per roof due to hail damage. The HOA by-laws state that the roof color must be the same on all roofs. After 17 years it will not be possible to match that many shingles on each roof. They have ordinance and law coverage in their policy for replacement cost. Would this apply in this situation? Should the insurance have to pay for a full replacement of the shingle roofs?

A. You have raised an interesting question, but first a little background on law and ordinance coverage. When the insurance industry started selling enhanced property insurance policies that said the policy would pay for the “replacement cost” of the damaged or destroyed insured property (in lieu of a depreciated amount, known as the actual cash value) this created an issue because building codes often changed from what was originally permitted and which the insurance underwriters priced their coverage forms.

Thus when a loss happened with “replacement cost coverage” the insurance companies said it only applied to the replacement cost of what was there at the time of the loss, not what the building officials would require to bring the property up to current code. This can significantly add the cost of the repair. Not surprisingly, a lot of litigation resulted so insurance policy language was changed to make it clear that replacement cost did not mean repair to current building code requirements.

Then the insurance industry started to offer endorsements that would pay to repair or replace to current code provided the policyholder actually did the work (incurred the expense) and submitted the paid bills and receipts. Most of these endorsements have caps on the dollar amount that is available for law and ordinance and they should have specific language explaining how the coverage is to be applied including the trigger of who makes the call.

Our public insurance claim adjusters have found in prior loss adjustments that there are always questions about the building code and how it is applied to a particular loss. Reading building code manuals and trying to interpret the code is a challenge at best and should be left to the building department official, architect or engineer. In fact, we have discovered that the building officials will not in many cases pre-approve or tell you what the code is, or will require, but instead require you to submit your plans and specifications and then go through and make notes on what needs to be done to comply with the current building code to get a permit and a certificate of occupancy. Believe me, this is often a complicated and confusing process as there is a great degree of subjectivity in interrupting building codes to a particular loss.

Now, back to your question as to whose rules the insurance company has to follow regarding this roof shingle replacement issue.  Do the condo documents or officials with the local building department have priority? Having not read the policy, my guess is that the insurance company will opine that the coverage is based on the law and ordinance of the official community building department, not the rules and regulations of the condo association. But you should check with the building officials, as you may have an ordinance like we have in Florida that says if 25% or more of the roof is damaged the “entire” roof needs to be brought up to code.

Finally, if the code issue is not to your favor you have a “matching” issue which is a hotly debated issue in the property insurance loss adjusting world. Your argument is that the company needs to put you back in the same position you were before the loss. This means all the roof shingles matched. Some states have rules related to matching that affect policy adjustments.  So you may want to look at the administrative rules put out and enforced by your state department of insurance. One common rule is called the “line of sight rule” which means that all things should match in a line of sight. So one side of a building must match in color etc. Insurance companies sometimes compromise on this and only pay for one slope or half of the roof. Hope this helps and good luck.

If you have questions regarding any property insurance related issues, please call 800.321.4488 or contact us to submit a question to one of our public adjuster or loss assessor experts.