Building Code Upgrades: When Does Covered Damage Give Rise to Covered Upgrades?

As property owners see an uptick in losses from damaging events like storms, floods, and fires, policyholders increasingly need to tap into and understand their first-party coverage. But when clearly covered perils give rise to the discovery of or need for further upgrades, how are those treated? Insurance coverage for code upgrades commonly leads to disputes under first-party insurance policies.  Some common disagreements involve whether code upgrades are mandatory or discretionary, whether insureds can obtain coverage for repairs to undamaged portions of property, and whether code upgrade coverage covers the costs of complying with the Americans with Disabilities Act and similar laws. This article provides an overview of issues that may arise, common policy interpretations, and relevant case law.