Hey guys, David here. If you manage buildings in New York like I do, you already know that city inspections can be brutal. Between Local Law 11, fire safety requirements, and constant DOB updates, there’s always something new that can trigger costly upgrades. One question I asked my broker early on was: if my building fails an inspection and I’m required to make upgrades, does my insurance cover that?
Here’s the short answer — usually not, at least not under a standard property insurance policy.
Property insurance is designed to cover sudden and accidental damage — things like fires, burst pipes, or wind damage. It’s not built to cover maintenance issues or compliance upgrades required by the city. So if your building fails an inspection because of outdated wiring, missing sprinklers, or a noncompliant façade, those repair and upgrade costs are considered part of ownership responsibility, not an insurable loss.
That said, there’s one key type of coverage that can help: Ordinance or Law coverage. This is an endorsement you can add to your property policy that helps pay for certain upgrades or code compliance costs after a covered loss.
Here’s how it works:
Coverage A pays for the undamaged portion of a building that must be demolished because of local code.
Coverage B pays for the cost to demolish that part.
Coverage C pays for the increased cost to rebuild to current code.
So, if a fire damages half your building and the city says you have to bring the entire structure up to the latest code, Ordinance or Law coverage steps in. But — and this is important — it only applies after a covered loss, not because of a failed inspection on its own.
In other words, if the city inspects your property and says you need to replace your old elevator system or upgrade your electrical wiring, that’s on you. But if the building is damaged by fire and new codes require more expensive wiring or sprinklers, Ordinance or Law coverage can save you from a major financial hit.
Managing property in New York means dealing with constant compliance changes. The best move is to review your policy and make sure you have Ordinance or Law coverage — it’s one of those things you don’t think about until you really need it.
If you want to make sure your property policy includes the right coverage for code-related upgrades, give us a call at 516-277-0812 or request a review online: Request a Quote Here.