In the aftermath of a covered loss to a residential dwelling in Georgia, the property being repaired and/or rebuilt may need to be "upgraded" to comply with current local building codes. For example, a homeowner may be told (by the their contractor or engineer, typically) that a new item required by code that did not exist pre-loss will need to be installed, or that an item that is not code compliant will need to be replaced with an item that is code compliant. They may be told that such items need to be installed in areas damaged by the loss, undamaged areas, or both.
While standard insurance policies usually do not provide coverage for the increased costs associated with such "upgrades", a homeowner may seek indemnification under a Building Code Upgrade (a/k/a Law or Ordinance) endorsement if one is written in their policy. The application of such an endorsement will depend on which building codes have been adopted and are enforced in the municipally or county where the dwelling is located. The purpose of this article is to serve as a crash course in how to identify what building codes and standards apply to an insured property so the application of "code upgrade" coverage to be properly evaluated.
To begin, one must determine what building codes have been adopted in the county and municipality where the property is located, then identify which of those codes are non-permissive or permissive (i.e., enforced or not enforced). The State of Georgia has adopted state minimum standard building codes, including the International Building Code and the International Residential Code for One- and Two-Family Dwellings ("IRC"), which have state-wide applicability regardless of whether they are expressly adopted by a Georgia municipality or county. Generally speaking, the IRC, which applies to the construction, alternation, replacement, and repair of existing detached one- and two-family dwellings and townhouses, will apply to most homeowner claims and is enforced universally in Georgia on a local level.
In addition to enforcing the state minimum standard codes, however, any municipality or county in Georgia may also adopt and enforce building codes that do not have automatic state-wide application, such as the International Existing Building Code. Local governments may also amend the state minimum standard codes (e.g., the IRC) provided that such amendments are not less stringent than those specified in the standard codes and are based on local climatic, geologic, topographic, or public safety factors. In other words, local governments can amend, and make more stringent, the standard codes (such as the IRC) to meet their specifically needs.
For an insurer evaluating whether "code upgrade" coverage exists, it is therefore crucial to determine at the onset not only what standard building code(s) are enforced by the local government where the property is located, but also whether the codes have been amended by the local government. In a homeowner claim for damage to a dwelling, this will likely entail a determination of whether the county or municipally has amended the International Residential Code. Georgia law requires that the Department of Community Affairs maintain a file of all amendment to the state minimum standard codes adopted by the various municipalities and counties in the state, which information must be made available to the public upon request.
Once the applicable building code has been identified, one must then determine what portion of the code applies to the loss. For example, Appendix J, "Existing Buildings and Structures", of the Residential Building Code regulates the repair, renovation, alternation, and reconstruction of existing detached one- and two-family dwellings and townhouses, and should apply to most claims for dwellings within counties or municipalities that have not amended the minimum standard codes or adopted and enforce any building codes that do not have automatic state-wide application.
Once the applicable section of the building code determined, one must then evaluate how the code section classifies the work being performed at the dwelling, as each classification may have different code requirements. For example, for the purposes of Appendix J of the IRC, work in existing buildings is classified into the categories of "repair", "renovation", "alteration", and "reconstruction". The specific code requirements for each category or work are established in Appendix J of the IRC, with repairs being the least stringent category and reconstruction being the most stringent category.
Pretty straight forward, right? But what happens when only a portion of the existing dwelling is damaged? Does the International Residential Code compel that any nondamaged portions of the dwelling or structure requiring code upgrades be brought up to code? For example, would the IRC require that an entire outdated deck be brought up to code if only a portion of deck was damaged during a covered loss (possibly triggering code upgrade coverage)?
The "User note" of the Appendix J of the IRC provides some guidance on this question, which states that Appendix J "is intended to encourage the continued safe use of existing buildings and ensure that new work conforms to the intent of the code and that existing conditions remain at their current level of compliance or are improved." (emphasis supplied). The Appendix goes on further to state that the "purpose of these provisions is to encourage the continued use or reuse of legally existing buildings and structures" (i.e., buildings in compliance with codes in effect at the time the structure was originally built).
The intent of the IRC's provisions related to existing structures is buttressed by Georgia law, specifically Georgia's Uniform Act for the Application of Building and Fire Related Codes to Existing Buildings ("Uniform Act on Existing Buildings"). The Uniform Act on Existing Buildings provides that a local building code enforcement authority may permit the repair of existing buildings without total compliance with state or local rules, regulations, or codes for new construction under the following conditions: (1) all conditions hazardous to life are corrected to a reasonable and realistic degree; (2) the existing building becomes the minimum performance standard; and (3) the degree of compliance of the building after changes must not be below that existing before the changes.
Thus, an existing structure may be repaired without bringing the entire structure into compliance with the code requirements for new construction so long as the existing structure (i.e., the portion of the structure not being repaired) complies with the code requirements in existence at the time the structure was originally built. Additionally, the Uniform Act on Existing Buildings provides "alterations or repairs to an existing building or structure which do not adversely affect the performance of the building may be made with like materials."
A final thought on the evaluating code upgrade coverage is to consult with the local building inspectors or other experts early and often in the claims process to determine what code upgrades are necessary to repair only the damaged portion of property. A homeowner or public adjustor may seek coverage for code upgrades that were required before a covered loss and/or unrelated to the resulting damage, and consulting with an expert will be helpful in distinguishing any noncovered upgrades from covered upgrades.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.