The New York Court in St. George Tower v. Insurance Co. of Greater New York, 139 A.D.3d 200, 30 N.Y.S.3d 60 (N.Y.A.D. 1st Dept. 2016), was called upon to consider whether an insurance policy’s ordinance or law endorsement provided coverage where a water loss claim resulted in the discovery that the concrete slabs at the insured property were structurally compromised. The structurally compromised concrete slabs were discovered during an inspection that was conducted by an architect retained on behalf of the insured who was assessing what needed to be done following a flood loss and flood insurance claim. Once the structurally compromised concrete slabs were discovered, the insured made the replacement of the concrete slabs part of the flood claim. The parties agreed that the condition of the concrete slabs was unrelated to the flooding event. Nevertheless, the insured argued that the policy’s Ordinance or Law Coverage Endorsement provided coverage for the discovery of the problem slabs. The insured argued that the increased cost of construction coverage portion of the endorsement applied to cover the cost to reconstruct or remodel an “undamaged” portion of the structure, the endorsement, therefore, extended coverage to any increased costs that were due to the enforcement of a law or ordinance.
The insurer argued that the endorsement did not extend coverage to the slabs because the endorsement only provided coverage in the event that the structure sustained direct physical damage that was covered under the policy and the damage needed to result in the enforcement of the ordinance or law. Additionally, the insurer argued that coverage for increased costs of construction (as provided for in the endorsement) only applied when the building sustained direct physical damage and when the increased cost of construction was a consequence of the enforcement of the minimum requirements of the ordinance or law. In this case, because the loss did not result in the enforcement of the ordinance or law, the insurer argued there was no coverage for the slabs.
The New York Court held that the concrete damage pre-dated the water damage and was due to faulty construction and renovation and, therefore, the flooding damage could not have resulted in the concrete damage.
Steven Plitt is an accomplished author and expert witness, and has been a licensed attorney for 33 years. During his career, he has reviewed and analyzed more than 6,000 claim files from 100 different insurance companies. Based in Phoenix, Arizona, he serves as counselor and expert for insurance coverage and bad faith claims nationwide. For more information or to set up an appointment, please visit his website at insuranceexpertplitt.com