Insurance Claim on 4-Plex Rental - Up to Code?

[Wes S.]

We had a fire on a 4-Plex this winter, nothing major thank God, nobody hurt, tenant was home, smelled smoke and saw light fixture glowing so called 911, FD got it out and it was electrical issue. Didn't burn through roof, replaced some living rafters, carpet, sheetrock and unit wiring. Now, we had replacement cost on the entire building, premium of $175/Mo. 1st Claim ever, owned property for 4 yrs.

Now, insurance adjuster is being an A$$, as expected and here is where we run into our problem: The building was grandfathered in as far as wiring, we ended up rewiring the entire unit, other 3 units still have older wiring. City Inspector said we have to bring up exterior disconnects and interior burned unit up to code. Insurance company doesn't want to pay for any wiring outside of the damaged goods and is stonewalling on ext disconnects and further costs. We've paid our premiums based on Replacement Cost and feel now the story is changing = BULLSH*T. This is boiling down to roughly $5,000 - $8,000 that the insurance company says they are not covering which we think they should but may have to eat.

Has anyone had this experience? Suggestions?

*Things I learned: If you own an older property, I would suggest adding an 'Up to Code' Rider and 'Loss of Rents' rider to cover your ASSets.

[Jon Holdman]

As Steve mentions, the "code upgrade" rider is going to be important. Even with replacement value coverage, without the code upgrade rider the insurance will only pay to restore it back to want it was and you'll be out of pocket for the additional cost to bring it up to current codes.

What you also might consider is hiring a public adjuster or lawyer or both to defend your interests.