First, the good news.

If you’re self-employed or an independent contractor without an office, then you’ll be able to take advantage of this deduction. Even if you have an office somewhere but you regularly use part of your home exclusively for conducting business, you can take the deduction. If you use your home as your principal place of business, then you’ll qualify. If you conduct business at a location outside of your home (your main office), but you still use your home substantially and regularly to conduct business, then you’ll qualify.

To take the home office deduction, you can use either the simplified option or the standard method. If you use the simplified option, you multiply $5 per square foot for the size of your home office space up to 300 square feet for a maximum of $1,500. If you choose the standard method, you can take a percentage of the actual expenses of your house (rent or mortgage interest, homeowners or renters’ insurance, utilities such as your electric, water and gas bills and even a portion of property taxes and depreciation) based on the square footage of your home office as it relates to your home’s total square footage. In either case, you take this deduction on your Schedule C of your personal tax return. If you select the standard option, you’ll have to fill out Form 8829, which provides the details of your calculation.

Now the bad news.

It’s unlikely – unless you meet the criteria above – that you can take this deduction if you, like your employees, have been forced to work from home due to the pandemic. The IRS specifically addressed this issue in this memorandum for Federal employees, which really applies to everyone. According to Topic No. 509: “Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home.”

There are two things, however, that could be considered.

One is that if you or your employees are incurring additional, unreimbursed expenses in your home in order to do your work, then those necessary expenses could be deducted on your personal returns. To receive the deduction, you must complete Form 2106, which then flows up to your Schedule A – Itemized Deduction form. Unreimbursed business expenses are considered to be an itemized deduction, which means they’re subject to a limitation. That’s because you can only take advantage of all itemized deductions once they exceed 2% of your adjusted gross income on your tax return. Also, be aware that these expenses are mostly intended to be related to your vehicle and travel for work. However, other out-of-pocket expenses for supplies, publications and items that are specifically needed to work from home may be eligible.

The other consideration is that if you (or your employees) have a side gig or other business that’s independent of your job, and you’re running that side business out of your home, then any home office expenses incurred as part of that may qualify for the home office deduction.

Frankly, there’s not much of a tax advantage for yourself and your employees because you’ve been forced to work from home. Kind of makes you want to get back to the office, doesn’t it?

Moving can come with a lot of stress. Not only do you have to figure out moving costs, pack and orchestrate the movers, but you also have to update your address across all relevant forms. Two important things to pay special attention to during this time are your auto insurance and home insurance.

No one wants to spend hours getting new insurance quotes or transferring over insurance information, but doing so will protect you, your home, and your vehicle during and after your move. Here, we’ve answered the most common auto and home insurance questions to help cover your bases during your upcoming move.

How Moving Affects Your Auto Insurance

Will my auto insurance rate change when I move? Even if you’re a great driver, you still could have an uptick in your insurance premium when you move. This has nothing to do with you as a driver, and everything to do with your vehicle being in a new environment with a new set of risks. Your car insurance company will consider changes in traffic patterns, weather patterns, and assess the risks of where the car is parked/kept. And if your new home leads to a longer commute, that could also increase your rate.

For example, if you move from Winston-Salem, North Carolina to Los Angeles, you can expect a higher rate, since you’ll be driving in higher-traffic areas and parked in higher-risk areas. But, if you move from a large city to a small town with reasonable weather, you can expect your rates to drop.

Even if you are moving within your current state, your rate could be different. It all depends on the risk factors for your new location.

How Do I Change My Car Insurance When I Move to a Different City Within My State?

If you only have an auto policy with your insurance company, you’ll just need to update your address. You can give your insurance company a call, or depending on your insurer, make the change online. Make sure you know your new zip code and your place of employment’s zip code, if it is different.

Will My Insurance Coverage Change If I Move to a New State?

Yes, and it is important to know what your new insurance policy will cover. Even if you stay with the same insurance company, do not assume that your coverage will stay the same. Different states have different auto insurance laws and minimums.

For example, personal injury protection (a.k.a. no-fault insurance) is required in 12 states and Puerto Rico, optional in five states plus District of Columbia, and not available in others. If you move from California, a fault or tort state, to Kentucky, a no-fault state, you’ll have to pay more for personal injury protection coverage.

How Do I Change My Car Insurance When I Move to a New State?

First things first, prevent gaps in your auto insurance. Do not cancel your current car insurance policy until you have a new one in place.

A gap in car insurance can result in costly issues. Not only might you have to pay for all damage if an accident occurs, but you might also incur fines or jail time for driving without insurance.

You can avoid gaps by not canceling your current policy until your new one is in place.

Once you’ve officially moved, it’s crucial that you register your vehicle in your new state and update your insurance within the state’s time frame. You may be able to stay with the same insurance company if the company offers coverage in your new location. However, you will need to go through a full re-write of your policy.

When and How Do I Register My Vehicle in My New State?

Each state has different requirements, but it’s best to change your registration and insurance within the first 30 days of moving. Note that if you are moving to California, you must register your vehicle within 20 days of established residency.

Some states even allow you to pre-register plates, which can save a lot of time and headache at the DMV. You can check online to find out what’s required of you before you can register your vehicle. Most likely, you will need:

1. The title of your car in your name
2. Proof of insurance at your new address
3. Proof that the vehicle has passed an emissions test or smog check.
4. Proof that the vehicle has passed a vehicle safety inspection.

When Can I Cancel My Old Auto Insurance Policy?

Each state operates differently, so familiarize yourself with the different laws. For example, In New York, you cannot cancel your policy until you turn in your plates. In other states, your old policy may be canceled immediately once you register your car in a new state. Don’t hesitate to call and ask your insurance company when it will be safe to cancel your old policy.

I’m a Snowbird. Do I Need to Change My Insurance?

Like to travel to warmer weather for several months out of the year? We don’t blame you. Before leaving for your extended vacation, however, make sure you have the necessary insurance coverage. Your coverage needs will vary depending on your answers to several questions, including:

• Will you take your vehicle with you?
• How long will you be staying in a different state?
• Which state will be your second home?

Explain your situation to your current agent or carrier to determine whether extra coverage is needed. You might be able to purchase temporary coverage, or you might not need any additional coverage at all. It all depends on each state’s requirements.

How Moving Affects Your Home Insurance

Will my home insurance rate change when I move? Home insurance premiums vary by state and the characteristics of your actual dwelling. Depending on the area and the cost of your home, your new home insurance rate might be more or less than what you are currently paying. Don’t automatically assume that moving to a safer neighborhood qualifies you for a better home insurance rate. Rates are determined by zip code, not neighborhood.

Will My Coverage Be the Same If I Move to a Different State?

Check with your current insurer to determine whether you can transfer policies or will need to find a new insurance company. Standard home insurance is similar across most states, although pricing varies widely. Some states are more prone to natural disasters, and if you’re moving to such a state, additional coverage should be purchased. For example, Oregon is considered an earthquake state, and additional coverage is recommended.

What Do I Need to Tell My Insurance Company?

When you call for a new quote, the agent will walk you through a detailed questionnaire to determine an accurate rate. Here are a few questions the insurance company will likely ask.

• What is your new zip code?
• Is your home inside or outside city limits?​
• How far is your home from the nearest fire hydrant?
• How far is your home from​ the nearest fire station?
• What is the name of the fire protection provider?
• Is your home located within 2,000 feet of a shoreline?​
• Does the home have dead bolts? Smoke detectors? A sprinkler system? An active security system monitored by an alarm company?
• Does your new home have a pool? A trampoline?​
• Do you need to change your personal property coverage?
• What is the closing date and move-in date?
• You may also have to provide details of the home’s construction and features.

Are Your Possessions Covered While Moving?

This depends on your coverage. Many policies will cover your possessions in your home, a moving truck, or the back of your minivan. Call your current provider to determine what and how much is covered.

If your possessions are not covered, you might be able to purchase coverage through your moving company. Pay attention to how much will be covered and purchase additional protection if necessary.

How Do I Prevent Gaps in My Home Insurance?

You don’t want any gaps in your home insurance, especially if you are relying on that insurance to cover your personal belongings when you move. Your insurance agent can help you time the cancellation of your old policy to make sure there are no gaps. Plan for delays in the home buying and selling processes, and speak to your insurer about what you should do if your old house ends up sitting on the market.

Do I Still Need Home Insurance If I Am Not Moving Into a Home?

Moving Into a Condo/Rental Home/Apartment/Assisted Living Facility? You will not need home insurance, but you will need condo insurance, renters insurance, or assisted living resident insurance. Remember that even if you no longer need to protect your dwelling itself (as is the case when you move into a rental or assisted living facility), you do still need to protect your personal property from damage and yourself from liability.

If you move into a condo, be sure you understand the details of your agreement with the condo association so that you can discuss your insurance needs and purchase the right coverage from your insurance company.

Although your moving to-do list might be a mile long, don’t put off insurance changes until the last minute.

Final tip: Start thinking about your auto and home insurance policies at least a couple months prior to moving. The last thing you want is to have a gap in your coverage or miss a major registration deadline.

Happy Thanksgiving!
Great for anyone hosting Thanksgiving – Here are some tips to avoid common Thanksgiving disasters.

Thanksgiving is one of America’s favorite holidays. Every year, millions of people across the nation take to the roads, rails, and skies to make it home in time for this special day. And yet, for many, Thanksgiving Day often ends in tears—or a visit from the fire department.

Your Thanksgiving doesn’t have to be ruined by brawling relatives or kitchen emergencies. Here are some tips to help you avoid common Thanksgiving disasters.

Cooking Calamities

Imagine that it’s Thanksgiving and everyone is gathered around your table, hungry and waiting for the main course…which is still in the oven, partly frozen. The only situation more awkward and heartbreaking for hosts is the reverse of this scenario: You proudly remove the turkey from the oven, ready to serve it, only to find it’s been transformed into a charred lump.

Here are a few tips to help you prevent such setbacks and if they do occur, to gracefully deal with them.

• Give yourself extra time to defrost anything frozen.
• Cook or bake everything you can well in advance of the Thanksgiving meal, especially bread and pies.
• Buy or make simple appetizers ahead of time in case the meal takes longer than anticipated to prepare. These don’t have to be complicated, just tasty.
• Measure the inside of your oven to ensure that your turkey will fit. If you need to feed a big group, remember that there’s no law stating that you have to cook the turkey whole. Buy a large assortment of turkey breasts, drumsticks and so on, or cook a smaller bird and make up for it with more side dishes.

Food Poisoning

Food poisoning is one of the worst imaginable outcomes of any group meal. No one wants to cook what they think is a beautiful feast, only to find out that it made their guests sick.

To protect yourself and your family from food-borne illnesses, follow these precautions:

• Wash hands and surfaces well, and follow the basic rules of food safety.
• If you’re not an expert in the kitchen, don’t feel you have to go all out with complex, fancy dishes or exotic ingredients. Everyone appreciates a simple, familiar meal, and no one will expect you to produce a turducken.
• Read and follow recipes carefully. If the cooking time or measurements look odd to you, check other similar recipes to make sure you’re not cooking unsafely because of a typo.
• Food allergies can be as bad as food poisoning, if not worse. Keep track of every ingredient you use so that you can provide correct, and maybe life-saving, information if guests ask.

Malfunctioning Appliances

Have you ever had your oven suddenly die on you with your pie half-baked, or your freezer stop freezing just in time to melt the ice cream you were going to serve with that pie?

Though you can’t always ensure that your appliances will behave, you can take preventative steps to stave off last-minute menu catastrophes.

• If an appliance has been acting up, get a professional to inspect it. If need be, get it repaired or replaced before the holiday.
• When planning your menu, don’t neglect the delicious (and healthy!) dishes that don’t need to be cooked. Various salads, fruit plates and dips can satisfy your guests while you work on fixing that broken appliance.
• Keep alternate menu plans or cooking ideas in the back of your mind, just in case. You might be surprised at how well you can cook in a toaster oven.

If all else fails, keep calm and try to remember what Thanksgiving is actually all about: spending time with those you love and reflecting on the things in life that mean the most to you. Besides, there’s nothing wrong with eating pizza on the fourth Thursday in November.

Exploding Deep Fryers

You might have seen videos of Thanksgiving deep-frying gone wrong. It may be amusing when it’s on YouTube, but it’s definitely not funny when it’s your own meal exploding, potentially damaging your property.

If you choose to cook your turkey in a deep fryer, here’s how to go about it:

• Before you place your turkey anywhere near your fryer, read up on the dangers specific to this cooking method (e.g., “deep fryers can easily tip over”), the precautions you should take and the tips for how to fry safely.
• Follow a proven recipe. The National Turkey Federation provides several, along with additional safety tips.

Fire Preparedness and Safety

A fire is one of the worst catastrophes that can occur when your family and friends are gathered together in your home, and it can happen easily—a stove-top grease fire or a blaze caused by a curtain or decoration coming in contact with fireplace or candle flames, for example.

Holiday cooking fire safety
Fortunately, house fires can be prevented, as long as you follow safety rules and make sure any fire is immediately and appropriately-tended.

• Always pay attention to what’s happening in the kitchen. According to the American Red Cross, almost 90 percent of kitchen fires are caused by unattended cooking.
• Know how to douse a grease fire—don’t make the understandable but dangerous mistake of using water.
• Have working smoke detectors and fire extinguishers. They can mean the difference between a minor incident and a tragedy.
• Keep decorations far away from fireplaces, heaters, and candles.

Shattered Dishes

Your Thanksgiving has gone smoothly so far, and you’re finally cleaning up and putting everything away when a guest accidentally drops your great-grandmother’s one-of-a-kind serving dish.

If this thought horrifies you, here’s how to avoid it and similar incidents:

• When in doubt, save pieces of great value—financial or sentimental—for display purposes and serve food on platters you wouldn’t be devastated to see in pieces on the floor.
• If your group is particularly boisterous (or just clumsy) consider using disposable cups and plates. These days, you can find attractive and seasonally appropriate paper plates, as well as plastic cups and even serving dishes at party supply stores.
• Assign specific cooking, serving- and washing-related tasks to responsible individuals. It’s nice when everyone wants to help, but giving certain chores to certain people will cut down on chaos in the kitchen.

Family Fights

This is one of the most dreaded Thanksgiving scenarios. Two siblings on opposite sides of a political issue or a parent who disagrees with their child’s choice of job or tattoo get into a fight that makes everyone in the room either angry, uncomfortable or miserable.

Thanksgiving Day fights are such a common occurrence that advice columnists weigh in on the dilemma every year. Here are some ways to prevent these family feuds:

• Limit the size of your gathering. Dear Amy advises hosts to ban the worst offenders. That might cause others close to them to stay away too, but it’s your home and you and your other guests should feel comfortable in it.
• Be assertive and set boundaries. Dear Prudence advises two letter-writers to plan what they’ll say or do around pushy family members before they have the chance to push too far.
• Assign understanding family members to take on certain roles, like distracting squabbling children or leading your uncle into talking about his high school memories instead of his views on politics.
• Separate relatives who are likely to quarrel during dinner by carefully arranging your seating chart in advance. Pretty place cards on a beautifully-set table can hide the fact that it’s all a secret strategy to keep the peace.
• If there’s no way to avoid spending the day with certain offensive or depressing people, try to regularly remind yourself that their behavior is not about you and that you don’t have to take the bait.

Injuries

No one wants a guest getting hurt in their home, but accidents do happen. In the crowded and festive atmosphere of Thanksgiving, it’s easy for a cook to get burned or cut in the kitchen, or for a child—or even an adult—to trip and fall down the stairs.

Before you host a holiday meal, take the time to prepare your home to prevent injuries; and have emergency supplies on hand just in case.

• Child-proof your house if kids will be coming over.
• Check the condition of the lesser-used features of your home, like your tire swing or back deck, before inviting people—who may not realize they haven’t actually been sat or stepped on since the Carter Administration—to use them.
• Have basic first-aid supplies on hand, so that no one has to rush out in search of bandages on a night when many stores are closed.

Although it can be difficult, especially if you encounter problems on the day, it always helps to remember the obvious: Thanksgiving is supposed to be about giving thanks. As you get ready for the holiday, take the time to prepare for the worst but don’t forget to appreciate the best aspects of family, friends, food, and fall.

There are multiple insurance products in the marketplace that are construction-oriented, but very few focus on the third party financial consequences resulting from non-compliance by the owner or operator. Therefore, in collaboration with other insurance markets, we are offering the Tax Recapture Policy to trigger based on the material non-compliance factors specific to each project/
credit. This is a manuscript policy form that takes language from property, casualty, professional and management liability-oriented contracts to create a unique solution to this very specific issue.

The product targets best in class owners, operators, and managers who are characterized by:
• A management team experienced in the tax credit developments/investments field
• A strong balance sheet and a willingness to ESCROW funds for longer-term compliance/IRS defense
• The proactive use of industry experts in the engineering, valuation, legal, accounting and tax world
• A project approach that is robust and easily repeatable

POLICY DETAILS

Who is the Insured?

The limited liability company created specifically for the development project is listed as the Named Insured, as well as the managing member (or tax matter partner). AmWINS can also add a loss payee endorsement listing the institution that is purchasing the tax credits, allowing a paid claim on the policy to be sent directly to that institution.

How long is the policy period?

In general, the policy would incept at the “placed in service” date and the expiration date would mirror the end of the IRS recapture and compliance period for the tax credits (up to an initial period of six years).

What limit can be purchased?

The limits purchased reflect the tax credits generated by the project and can be grossed up to include coverage for the estimated fines and penalties associated with the recapture of the tax credits in instances of a full recapture.

What type of policy will be received?

The policy is a claims-made and reported policy, with any claims payment based on a final (non-appealable) adjudication/ determination in tax court. It is not an All Risk policy – the policy will only respond to specific insurable events (“insurable triggers”) and claims payment will be influenced by the exclusions listed in the policy.

LEGAL DISCLAIMER
Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.

According to Adjuster’s International Disaster Recovery Consulting, compliance with ordinances and laws after a loss can add 50% or more to the cost of the claim*.

Insureds should take a proactive approach to their insurance program and the coverage provided by the program. Learning about important exclusions and limitations after a catastrophe strike will cause the Insured to experience frustration and anxiety. Insureds should always read their policies, and in some states, may be required by law to do so.

Ordinance or Law Exclusion

Most property insurance policies will have an Ordinance or Law exclusion. The exclusion applies to both physical damage and time element coverage.

This exclusion will preclude coverage when an enforcement of any ordinance or law (1) regulates the construction, use, repair or removal of any property, including debris removal; or (2) requires the tearing down of such property, including the cost of removing its debris; or (3) results in increased costs of complying with any ordinance or law.

Coverage begins with the Insuring Agreement

An Insuring Agreement will usually stipulate what causal connection must exist between the covered cause of loss, damage, and ordinance or law in order for coverage to apply.

An Ordinance or Law insuring agreement might include:

• Coverage if the insured building or structure sustains direct physical damage by a covered cause of loss and as a result, the Insured is required to comply with an ordinance or law in force at the time of the loss.
• Coverage, when the direct physical loss to an insured building or structure is caused by both a covered cause of loss and an uncovered cause of loss and the resulting damage, requires the Insured to comply with an ordinance or law in force at the time of the loss.

Ordinance or Law forms traditionally trigger coverage based on ordinances or laws at the time of the loss. But what if an ordinance or law is changed after a loss occurs but before the repair or reconstruction begins? Providing coverage for post-loss ordinances and laws is less common in the marketplace, but it is available.

The Causal Connection – One Size Does Not Fit All!

How an Insurer links the cause of loss to the ordinance or law that was triggered depends on the wording the Insurer drafted in its coverage form. Courts will interpret coverage based on the words in the form.

City of Elmira v. Selective Ins. Co. of N.Y.**

• On March 10, 2006, the City of Elmira (N.Y.) suffered windstorm damage to the southern wall of its historic three-story brick building known as the Armory Building, causing the wall to collapse.
• Engineers determined the collapse of the wall was caused by hidden deterioration of mortar, which weakened the wall and left it unable to withstand gusting winds.
• It was determined such deterioration was not exclusive to the southern wall, and as a result, the building was found to be unsafe. The Code Enforcement Officer found the Armory to be in violation of the New York State Property Maintenance Code. The building was evacuated, and the City was told to either repair or demolish the structure.
• The City had Ordinance or Law Coverage with Selective.

* The coverage did not require that the covered cause of loss (wind) be the reason why the ordinance or law was invoked.

* Instead, the policy’s causal link requirement was that a covered cause of loss occurs and the City incur costs to demolish and clear the site of the undamaged parts of the property as a result of the endorsement of an ordinance or law.

• The court ruled that “if [Selective Insurance Company] wanted to limit its coverage to only those situations where the enforcement of an ordinance or law is caused by a covered cause of loss, it could have easily done so through the language of the contract. It did not.”

This case, and others make it clear – words matter.

Ordinance or Law Coverage

Ordinance or Law coverage consists of several parts. Unless an Insurer automatically includes coverage, each part must be negotiated for and purchased.

I. Coverage A – Undamaged Portion of the Building. When an Ordinance or Law requires an Insured to tear down the undamaged portion of a building, this coverage provides protection for the value of the undamaged portion of the building.

II. Coverage B – Demolition. When an Ordinance or Law requires an Insured to tear down the undamaged portion of a building, this coverage pays for the cost to demolish and haul away debris from the undamaged portion of the building.

III. Coverage C – Increased Costs of Construction. When an Ordinance or Law requires modifications in how a building must be repaired or reconstructed, this coverage provides protection for the increased costs of construction associated with repairing or rebuilding the structure to the code existing at the time of the loss. Coverage usually applies to both the damaged and undamaged portions of the building.

Coverage will not apply until the property is repaired or replaced. In addition, there is often a time limit (e.g. 2 years) to have the repairs or reconstruction finished. Insurers may offer to extend the period required for repairs or reconstruction, but the Insured must request this extension of time in writing.

Orleans Parish School Board v. Lexington Insurance Company, ET AL.**

• When Hurricane Katrina struck the New Orleans area on August 29, 2005, the Orleans Parish School Board (“OPSB”) was managing 126 public schools in the area. The storm significantly damaged the properties.
• The damage to the properties triggered the Ordinance or Law provision in OPSB’s property program, and specifically, the Increased Costs of Construction coverage.
• The policy provision for Increased Costs of Construction included a requirement that code upgrades would need to be performed by August 29, 2007 (2 years after the initial damage) in order for OPSB to be indemnified for the increased costs of construction. Failure to satisfy this condition precedent would result in payment not being made to OPSB for the upgrade costs.
• The provision included wording which stated that the two-year requirement could be increased if Lexington agreed to do so in writing.
• It was determined that OPSB never made a request to increase the period of time to have the upgrades performed on its properties.
• Instead, OPSB argued:

* Lexington had agreed to extend other dates during the claim adjustment process.

* Lexington’s own adjusters did not complete their inspections and estimates until May 2006, and then re-priced their estimates in 2007, yet Lexington wanted the repairs and upgrades completed by 8/29/07.

* OPSB had only received a portion of its insurance funds, which complicated its ability to make timely repairs.

• The court ruled there was no reason for the delay by OPSB to request in writing to Lexington that the two-year period be extended. Lexington was not obligated to remind OPSB of the two-year requirement in the policy.

IV. Increased Period of Restoration (sometimes referred to as Coverage D). When an Ordinance or Law requires the undamaged portion of the building to be demolished and/or results in increased costs of construction, the Business Interruption Period of Restoration increases because the length of time required for the Insured’s business to reopen increases.

Ordinance or Law coverage does not usually provide any coverage when the ordinance or law is triggered due to contamination by pollutants, decontamination costs or the loss in value or costs due to an ordinance or law the Insured was required to comply with before the loss. However, decontamination coverage is available.

Loss Payment

While each Ordinance or Law endorsement may differ, the following is a common approach to determine the amount of loss paid under Ordinance or Law coverage:

I. Coverage A – Lesser of the amount spent at the same location for the same height, floor area, style, quality or limit of insurance. If the Insured does not have replacement cost coverage, then actual cash value for the undamaged portion of the building will apply.

II. Coverage B – Lesser of the amount spent or the limit of insurance.

III. Coverage C – The amount paid depends on where the building is constructed. The valuation method of replacement cost is usually required to have Coverage C and the repairs and/or replacement must be completed before Coverage C costs are reimbursed.

1. If the building is repaired or reconstructed at the same location, then the lesser of:

a. The Increased Cost of Construction that would have been paid at the existing location; OR

b. Limit of Insurance.

2. If the Ordinance or Law requires relocation of the building, then the lesser of:

a. The Increased Cost of Construction at the new location; OR

b. Limit of Insurance.

Payment for costs to comply with ordinances or laws often means complying with the minimum standards required.

These loss payments may be subject to a Proportionate Payment provision.

Allocation of Payment Provision – Multiple Causes of Loss

An Allocation of Payment Provision is not found in all Ordinance or Law coverage forms, and wording will not be standard between forms.

It is not uncommon for physical damage to a building to be caused by both a covered cause of loss and a cause of loss excluded by the policy. When this happens, and there is Ordinance or Law coverage with an Allocation of Payment Provision, the policy will pay a portion of the Ordinance or Law coverage based on the amount of loss applicable to the Covered Cause of Loss and the amount of loss applicable to the excluded cause of loss.

This Allocation of Payment Provision may apply to Coverages A, B, and C.

Example:

A hurricane strikes the Gulf region of the United States.

• The Insured’s building valued at $1,500,000 sustains a physical loss to their building in the amount of $800,000. There were varying degrees of loss over 65% of their building.

* It was determined that wind (covered cause of loss) caused 45% of the damage and flood (excluded cause of loss) caused 55% of the damage.

• The Insured sustains an Increased Cost of Construction loss in the amount of $175,000.
• The direct damage to the property was the result of both a covered cause of loss (wind) and an excluded cause of loss (flood).
• The Insured has an Increased Cost of Construction Limit of $250,000.
• An ordinance or law requires the Insured to repair all of its property to the current codes if the property damage is to more than 55% of the square footage of the building.

Assuming there are no exclusions or limitations to the contrary, what allocation of the Increased Cost of Construction loss will be paid?

$250,000 limit x 45% (covered cause of loss allocation) = $112,500.

Even though the Insured had a limit of $250,000 (enough to pay the $175,000 Increased Cost of Construction loss), only the portion the covered cause of loss bears to the total loss is insured (45%).

Determination of a Limit of Insurance

Coverage A, the undamaged portion of the building, should be equal to the value of the building.

Coverage B, demolition  and debris removal requires the Insured to evaluate potential costs associated with demolishing the undamaged portion of the building and hauling the debris away. The following questions can help determine what those costs could be.

• How will the debris have to be hauled away? By truck? Barge? Ferry?
• How far must the debris be transported?
• What are the projected costs to dispose of the debris?
• What is the projected length of time to accomplish demolition and debris removal?
• What might additional costs be incurred? (e.g. increased wages, equipment rental, cost for disposal at the landfill(s), etc.)
• Are there any local codes that will dictate who must haul away debris? Private company? Army Corps of Engineers?
• Is the building located in a densely populated area? Rural area?
• Are permits required?
• Are additional or special personnel required during demolition? (e.g. police officers)
• Will the demolition require explosives?
• Will debris need to be retrieved from water? (e.g. coastline, lake, bay)
• What additional cost and time for removal and/or remediation of pollutants and contaminants might be required? Note: Unless coverage for this cost is negotiated into the policy, this cost is often excluded. Covered or not covered, it is still a cost to be analyzed.

Coverage C, increased costs of construction, is often said to be the most difficult to calculate. Unfortunately, some Insureds believe that “replacement cost” will pay for increased costs of construction at the time of loss. A replacement cost provision in conjunction with other provisions of the policy must be reviewed to determine if this is true. It likely is not the case.

In order to have an adequate limit for Coverage C, an Insured must do the work. How have ordinances, laws and codes changed since the building was last updated? What would be the cost to get the building up to code? This process requires knowledge of the ordinances and codes that affect an Insured’s building.

Conclusion

Ordinance or Law coverage is readily available in the market. The limits and nuances of coverage available will vary by Insurer and the risk profile of the property requiring the coverage. The coverage wording should be parsed and studied carefully to determine if the coverage offered meets the needs of the Insured. Always remember, these provisions may contain condition precedents that the Insured must oblige in order for coverage to apply. Coverage wording is not standardized between insurers. Therefore, it would be dangerous to assume such a premise.

* Paul O. Dudey CPCU and Donald S. Malecki, Adjusting Today Issue #3009, “Ordinance or Law Coverage – Code for Recovery!”

**Supreme Court, Appellate Division, Third Department, New York, April 2011

***Court of Appeals 4th Circuit, Louisiana, June 2013

[framed_box]ABOUT THE AUTHOR: This article was authored by Jennifer Walker, CPCU, CRM, CIC, CEBS, CIT, GBA, ARM, AIM, AIC, ALCM, associate broker with AmWINS Brokerage of Georgia in Atlanta and member of AmWINS’ national Property practice. This article was originally published by AmWINS Group, Inc., and edited and adopted by Paperless Insurance Services.

Legal Disclaimer: Views expressed here do not constitute legal advice. The information contained herein is for the general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.[/framed_box]

Clean Or Change Furnace Filters Regularly. Replace disposable filters. Wash, brush or vacuum permanent filters.

[framed_box width=”” borderColor=”#0324df” borderThickness=”2″ textColor=”#0138b1″ rounded=”true” align=”center”]If you smell gas, get everyone out. Use your neighbor’s phone to call a qualified repair person or the gas company immediately. If possible, shut off the gas main from outside the home.[/framed_box]

[framed_box width=”” borderColor=”#990000″ borderThickness=”2″ textColor=”#990000″ rounded=”true” align=”center”]Caution: Never attempt to repair gas lines yourself.[/framed_box]

What actions should property owners in the predicted path of the storm take to prepare?

The Federal Emergency Management Agency (FEMA) provides invaluable advice on what you should do when you receive a hurricane watch or hurricane warning alert from the National Weather Service for your area.

As the hurricane approaches, here’s a checklist of what to do as the storm approaches, broken down by hours:

1. What to do when a hurricane is 48 hours from arriving

– Review your evacuation route(s) & listen to local officials.
– Review the items in your disaster supply kit; and add items to meet the household needs of children, parents, individuals with disabilities or other access and functional needs or pets.

2. What to do when a hurricane is 36 hours from arriving

– Follow evacuation orders from local officials, if given.
– Check-in with family and friends by texting or using social media.
– Follow this hurricane timeline preparedness checklist, depending on when the storm is anticipated to hit and the impact that is projected for your location.
– Turn on your TV or radio in order to get the latest weather updates and emergency instructions.
– Build or restock your emergency preparedness kit. Include food and water sufficient for at least three days, medications, a flashlight, batteries, cash, and first aid supplies.
– Plan how to communicate with family members if you lose power. For example, you can call, text, email or use social media. Remember that during disasters, sending text messages is usually reliable and faster than making phone calls because phone lines are often overloaded.
– Review your evacuation plan with your family. You may have to leave quickly so plan ahead.
– Keep your car in good working condition, and keep the gas tank full; stock your vehicle with emergency supplies and a change of clothes.

What to do when a hurricane is 18-36 hours from arriving

– Bookmark your city or county website for quick access to storm updates and emergency instructions.
– Bring loose, lightweight objects inside that could become projectiles in high winds (e.g., patio furniture, garbage cans); anchor objects that would be unsafe to bring inside (e.g., propane tanks); and trim or remove trees close enough to fall on the building.
– Cover all of your home’s windows. Permanent storm shutters offer the best protection for windows. A second option is to board up windows with 5/8” exterior grade or marine plywood, cut to fit and ready to install.

What to do when a hurricane is 6-18 hours from arriving

– Turn on your TV/radio, or check your city/county website every 30 minutes in order to get the latest weather updates and emergency instructions.
– Charge your cell phone now so you will have a full battery in case you lose power.

What to do when a hurricane is 6 hours from arriving

– If you’re not in an area that is recommended for evacuation, plan to stay at home or where you are and let friends and family know where you are.
– Close storm shutters, and stay away from windows. Flying glass from broken windows could injure you.
– Turn your refrigerator or freezer to the coldest setting and open only when necessary. If you lose power, food will last longer. Keep a thermometer in the refrigerator to be able to check the food temperature when the power is restored.
– Turn on your TV/radio, or check your city/county website every 30 minutes in order to get the latest weather updates and emergency instructions.

After a hurricane

– Listen to local officials for updates and instructions.
– Check-in with family and friends by texting or using social media.
– Return home only when authorities indicate it is safe.
– Watch out for debris and downed power lines.
– Avoid walking or driving through flood waters. Just 6 inches of moving water can knock you down, and one foot of fast-moving water can sweep your vehicle away.
– Avoid flood water as it may be electrically charged from underground or downed power lines and may hide dangerous debris or places where the ground is washed away.
– Photograph the damage to your property in order to assist in filing an insurance claim.
– Do what you can to prevent further damage to your property, (e.g., putting a tarp on a damaged roof), as insurance may not cover additional damage that occurs after the storm.

Here’s the answer, in a nutshell: The home office deduction is perfectly legitimate and you should absolutely consider it. Here are some important facts about this deduction—all sourced from the IRS’ summary, Publication 587 (Business Use of Your Home) and Form 8829 (Expenses for Business Use of Your Home). Of course, you should also check with your accountant.

Number 1: To even consider getting the deduction, a part of your home has to be your principal place of business. 

Your bedroom doesn’t count and neither does your kitchen. It must be an area that is exclusively and regularly used for business—seeing customers/clients or storing stuff. Your work-from-home employees may qualify too, particularly if they’re working from home at your behest. There are different rules for rental properties. Publication 587 goes into more detail and provides specific case studies which may match your situation. If for example, you’re operating a day care facility from your home, Form 587 has specific instructions for you too. Sorry, Xanax is not deductible.

Number 2: You must be filing either a Schedule C or a Schedule A with your personal tax return.

Schedule C is the form for an unincorporated business or proprietorship. This is the form where you list all revenues and expenses related to your business, including the home office deduction. Schedule A is the itemized deduction form and will include other items such as medical expenses, taxes paid and charitable contributions. You will only use Schedule A if your itemized deductions exceed the standard deduction on your personal return ($6,300 for single filers, $12,600 for married filing jointly).

Number 3: You can be complicated. 

If you desire, you can submit a full detail of expenses related to your home office on Form 8829. You can calculate depreciation. You can list out your costs for insurance, repairs, telephone and internet services, rentals?, taxes, interest—as long as they’re all related to your business activities in your home. Some of these expenses are directly related, others you’ll need to allocate based on the percentage of space your office takes up in your home. Your deduction is limited based on the income your home office is generating.

Number 4: Or you can be simple. 

In 2013, the IRS recognized that many people are operating businesses from their home and don’t want to be bothered with the complexities of the detailed calculations above. So the agency is now allowing you to simplify the process. You can just take the square footage of the business use of your home and multiply it by a standard $5. The square footage is limited to 300 feet. Again, Form 587 offers examples.

Number 5: Having a home office doesn’t increase your chances of an audit. 

The IRS doesn’t disclose how it determines who they pick for an audit. But relax. For starters, a small, small, small percentage of people and small businesses are picked by the IRS for an audit every year. Most of their efforts go towards following the big money from big companies or high-wealth individuals. That’s not to say that you won’t win (or lose) the audit lottery and be chosen. But it won’t be because of your home office unless you’re claiming something so outrageous and so large that it causes the IRS computers to spit out their floppy disks and stop their reel-to-reel tape drives. Having said that, you still want to play by the rules because if you are unlucky enough to be chosen — even for a cursory review you want to make sure your numbers add up.

The home office deduction may be a thing for you. Talk to your accountant. Don’t ignore this potential tax-saver.

When risk management department is assigned to focus on the major project, including construction, with particular attention to the insurance requirements to be imposed on the general contractor and any subcontractors, it’s very important not to make the insurance requirements so onerous that contractors are discouraged from bidding on the project.For those of us, who has not been involved in such projects before, let’s review insurance requirements from different projects and how those may affect our company (let’s call it ABC company – the one who impose insurance requirements).

• $1 million Each Occurrence
• $1 million Personal and Advertising Injury
• $2 million General Aggregate – per Project using ISO’s CG 25 03 or its substantial equivalent
• $2 million Products-Completed Operations Limit

Contractor must disclose to ABC any endorsements that limit or exclude coverage customarily provided by ISO’s CG 00 01. ABC reserves the right, prior to acceptance of the contractor’s bid, to either require additional types of liability coverage or require greater limits based on the nature of the operations being performed by the contractor.

The contractor’s insurers will provide insurance to ABC on a primary basis and agree not to seek contribution from ABC’s insurance by using ISO’s CG 20 01 or its substantial equivalent. Contractor’s insurers also agree to waive rights of subrogation against ABC using ISO’s CG 24 04 or its substantial equivalent.

Contractor’s Commercial General Liability insurance will remain in force with annual policy periods for the period of the statute of repose applicable to this project. Alternatively, if a “project-specific” General Liability policy is used to satisfy these requirements, it must be endorsed to provide extended completed operations for the period of the statute of repose applicable to this project.

Automobile Liability
Business Auto Coverage Form using ISO’s CA 00 01 or its substantial equivalent including liability coverage for all autos owned, rented, hired or borrowed by the contractors as well as liability coverage for mobile equipment subject to compulsory insurance or financial responsibility laws or other motor vehicle insurance laws with the following minimum limit:

• $1 million – Any One Accident – Combined Single Limit

ABC reserves the right, prior to acceptance of the contractor’s bid, to require greater limits based on the nature of the operations being performed by the contractor.

Workers’ Compensation and Employers’ Liability
Workers’ compensation and employers’ liability insurance using NCCI’s WC 00 00 00 B including coverage for all persons subject to the Workers’ Compensation Act as well as coverage for sole proprietors, partners of a partnership, members of a limited liability company or officers of a corporation whether or not such coverage is optional under the Workers’ Compensation Act, unless workers’ compensation coverage for such sole proprietors, partners, members or officers is prohibited by the Workers’ Compensation Act.

Contractor’s workers’ compensation insurance shall pay all benefits required to be paid under the Workers’ Compensation Act and employers’ liability insurance will be written with the following minimum limits:

• Bodily Injury by Accident – $500,000 Each Accident
• Bodily Injury by Disease – $500,000 Policy Limit
• Bodily Injury by Disease – $500,000 Each Employee

• $5 million – Each Occurrence
• $5 million – Annual Aggregate (where applicable in the underlying)

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About the Author – Craig F. Stanovich, CPCU, CIC, CRM, AU is co-founder and principal of Austin & Stanovich Risk Managers, LLC, a risk management and insurance advisory consulting firm specializing in all aspects of commercial insurance and risk management, providing risk management and insurance solutions, not insurance sales. Services include fee based risk management, expert witness and litigation support and technical/educational support to insurance companies, agents and brokers. Email at cstanovich@austinstanovich.com. Website: www.austinstanovich.com.
This article was originally published by AmWINS Group, Inc., a leading wholesale distributor of specialty insurance products and services. AmWINS publishes The Edge, a monthly email with informative and timely articles for P&C and benefits insurance agents and brokers. To sign up to receive The Edge or for more information about AmWINS, visit amwins.com.
Legal Disclaimer: Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.
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