A Letter to Your Homeowner Clients - Ordinance or Law Exposure
Christopher J. Boggs, CPCU, ARM, ALCM
October 15, 2008
Following this introduction is a sample letter agents can send their homeowner clients to warn or, if you prefer, notify the insured about the potential coverage limit gap caused by the enforcement of any ordinances or laws. Agents should feel free to copy and paste this letter to their letterhead; making any necessary modifications.
Several parts of the letter are in parenthesis, underlined and italicized; these areas are to be filled in with specific information about the client; such as the Coverage "A" limit or the amount extended for Ordinance or Law coverage (usually 10 percent of Coverage "A"). This information will personalize the letter to the specific insured.
This letter is to convey several points and accomplish specific goals: 1) notifying the insured that there is a potential gap in available coverage; 2) notify the insured what, externally, creates this gap; 3) notify the insured that there is a fix; 4) get you in front of the insured giving you the opportunity to cement the relationship and protect the insured; and 5) give an errors and omissions defense.
Following is the letter.
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Dear (Homeowner),
Building codes are constantly changed and updated. Houses in total compliance just a few years ago may no longer meet our community's current building code requirements. In fact, homes built more than 10 years ago (maybe even as new as five or six years) may not comply with today's laws and ordinances.
Any lack of compliance, although unintentional, could be personally costly following a major loss to your home. Standard, unendorsed homeowners' policies provide only a limited amount of coverage to pay for any additional cost caused by the building inspector's insistence that your entire home be brought into full compliance with local building codes following a loss.
Your homeowners' policy provides (replace with the amount of coverage) coverage on your home; an additional (actual amount) is available to cover the add-on expense necessary to comply with local building code. That (Ordinance or Law amount) is all that is available to pay:
• The cost to tear down the undamaged portion of the house (so the entire house can be rebuilt to code); and
• The cost to rebuild the entire house to current building code (the damaged AND undamaged parts).
By itself, (Ordinance or Law amount) may not give you enough coverage to accomplish these requirements. Any amount above (Ord & Law amount) will have to be paid by YOU.
You do have the option to increase your protection and save yourself from this out-of-pocket expense. The Ordinance or Law Increased Amount of Coverage endorsement (HO 04 77 (or whatever state specific endorsement is used)) can be attached to fill this gaping hole. Several levels of protection are available to meet your needs.
We feel you need to be aware of your policy's current limits and coverage limitations. You also need to know that there is a way to fill the gap and protect yourself from a potentially devastating out-of-pocket expense. Please call us to explore your options.
Sincerely,
Agent's Name
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This letter is solely intended to assist the agent in introducing this exposure to clients and in no way guarantees that the agent will be protected from any charges related to the conduct of his/her business or operation as an agent or agency. The duty to identify and manage a client's, prospect's or any other party's risk lies fully with the agent. Neither Insurance Journal, MyNewMarkets.com or Wells Publishing assume any liability associated with the use or non-use of this letter.
Ordinance or Law for Homeowners Series Series
- Local Governments Increase Homeowners' Loss - Personal Lines Ordinance or Law
- Local Governments Increase Homeowners' Losses - Part II
- Local Governments Increase Homeowners' Loss - Part III
- A Letter to Your Homeowner Clients - Ordinance or Law Exposure
