Codes and the Elusive Perfect Sheet

As Jacks of All Trades, and Masters of Few, we are always searching for that perfect sheet, that perfect property damage estimate. An estimate which captures all the damage so precisely, with just the right pricing, that we can hold it up and say to all “here it is, an estimate that’s so perfect, it will not be subject to supplements nor challenged by change orders”. But just when we’ve received the authority to settle such a perfect matter and the boss has congratulated us on such a “splendid” settlement, we get the phone call, the “supplement call”…

Believe it or not, it’s usually just as hard for your contractors to make those calls as it is for you to take them. As a contractor who prides ourselves on reputation and expertise, requesting a change order is a moral blow to our contractor well being. While there are countless issues that drive supplements and construction change orders, code and law requirements are one of the primary drivers of surprise reconstruction costs and delay.

Codes and the Elusive Perfect Sheet

The costs of complying with building codes increase around safety, energy-efficiency, and sustainability. The International Code Council is a thinktank of building officials and engineers who contemplate, write, and adopt increasingly costly building codes. By adopting newly written ICC standards, local and state governments limit their liability and aim to better protect their communities. Building departments and field inspectors have little concern for cost, common sense, or our construction schedules and many take adversarial positions with building owners, contractors, engineers, developers, and even insurers.

Construction defect claims and litigation are also playing a significant role in developing building codes and the costs associated with settling them. Building code costs are borne by insurers primarily, but also your insureds in the absence of code and ordinance coverage. While many insurance contracts allow for building code upgrade coverage, others do not. Many building code upgrades become so common, they’re not easily recognized by Property Claim Adjusters, or the original material isn’t available. Property claims experience increased severity through direct costs, project delays, additional living expenses, and increased business interruption. While, some codes can and do prevent future damage, its little consolation as it’s causing today’s pain.

Consider this: The International Code Council Code Manuals doubled in thickness from 2003 to 2009 and while building codes govern every aspect of commercial and residential construction, here are the areas we see most affected by evolving building codes; foundations and concrete, framing systems and snow loads, electrical components and systems, heating, venting & cooling systems, plumbing systems, energy-efficiency requirements and IECC, stucco and EIFS applications, glass and glazing, guardrail systems, and roofing codes with wind and climate protection.

In addition to building codes, The National Fire Protection Association and the International Fire Code Council are ever developing and adopting safer codes to protect building occupants and firefighters. The insurer of these structures will most likely bear a significant part of the fire code costs in the event of property damage. The areas we see most affected by new fire codes are; smoke, fire and carbon monoxide detection, fire sprinkler requirements and central monitoring, egress, material flammability, fire separation and assemblies, emergency lighting, and occupant protection and loading.

Big surprises can also arise when building damage raises access concerns. The Americans with Disabilities Act was passed by Congress in 1990, and has undergone many revisions and additions since. In terms of building costs and unforeseen scope increases, if a structure is even partially damaged, the building or business owner could be required to make multiple improvements including the installation of accessible ramps, railings, restroom facilities, workspaces, doorway sizing, parking, signage and more.

What was once seen as a moral obligation towards sustainable building practices, is becoming increasingly statutory. Many buildings today are designed and built LEED certified. Developed by the U.S. Green Building Council in March 2000, LEED Certification provides building owners and operators with a framework for identifying and implementing measurable green building design, construction, operations and maintenance solutions. LEED utilizes a suite of rating systems recognizing projects that implement strategies for better environmental performance. You may have heard the terms Platinum, Gold, Silver, and Bronze, which distinguish just how green a building is. We are now seeing municipalities enacting minimum green building standards and a shift from optional to required. Today, many insurers have policy riders for green building expense coverage, which seems to be offered at reasonable rates. You might consider checking out Vale Training Solutions’ Green Risk I & II educational courses designed to help you understand the connection between green buildings and insurance coverage, LEED criteria and green rating systems.

Variables are abound in restoration and reconstruction, and code compliance is just one of them. The conundrum, so to speak, is where to draw the line as a contractor and as an adjuster when preparing the perfect estimate. Should the perfect estimate include every probable code requirement up front, or should the perfect estimate be written with common sense and a knowledge of the codes most likely required by the applicable jurisdiction? With 20 years as an adjuster, claim manager, and contractor, I’ll suggest there’s a middle ground, but it might make that perfect estimate, free from supplement, a little more elusive.

By Terry Shadwick