Ordinance and Law (O&L) coverage is one of the least understood — and most frequently underpaid — components of a homeowner’s insurance policy. For Michigan homeowners with older homes, it can mean the difference between a full restoration and a five-figure out-of-pocket surprise. Here’s what it is and why it matters.

What Is Ordinance and Law Coverage?

When a home is significantly damaged by fire (or another covered peril), local municipalities require that any rebuilding meet current building codes — not the codes that were in place when the home was originally built. These code upgrades can be substantial, especially in homes built in the 1950s, 60s, 70s, and 80s that are common throughout Wayne, Oakland, and Washtenaw Counties.

Ordinance and Law coverage pays for the increased cost of these code-required upgrades. Without it, your insurance pays to restore your home to how it was — and you pay the difference to bring it up to current code.

What O&L Coverage Typically Pays For

Ordinance and Law coverage usually breaks down into three components:

• Coverage A — Undamaged Portion: Pays to demolish and remove undamaged portions of the structure if code requires it. If 60% of a home burns and code requires the entire structure be brought up to standard, this pays to tear down the remaining 40%.
• Coverage B — Demolition Cost: Pays the actual cost of demolition and debris removal.
• Coverage C — Increased Cost of Construction: This is the big one — it pays the additional cost of rebuilding to current code. Electrical panel upgrades, arc-fault circuit interrupters (AFCIs), egress windows, updated insulation, fire-stopping, and structural sheathing requirements all fall here.

Why Adjusters Often Try to Deny It

O&L coverage is frequently contested because it requires insurers to pay for work beyond restoring the home to its pre-loss condition. Some adjusters will try to argue that code upgrades weren’t strictly required, or that the work can be done in a way that avoids triggering certain code requirements.

This is where having a licensed general contractor in your corner matters. We know what permits trigger what inspections, what inspectors look for in SE Michigan municipalities, and what code language requires. When an adjuster says a code upgrade isn’t necessary, we push back — with documentation and code citations.

Check Your Policy Before You File

Look at your declarations page. O&L coverage is often listed with a separate limit — commonly 10% to 50% of your dwelling coverage. If you have a $300,000 dwelling limit with 25% O&L, you have up to $75,000 available for code-upgrade costs. That can be significant.

If your policy doesn’t include O&L coverage or has a low limit, speak with your agent about increasing it before your next renewal. It’s typically inexpensive to add — and invaluable after a major loss.

Phase III Handles O&L Claims Every Day

We work alongside Michigan homeowners to identify all applicable O&L coverage and make sure it’s included in the restoration scope. We document code requirements, pull permits, work with inspectors, and pursue every dollar your policy allows. If your insurer pushes back on O&L items, we push back harder.