The “Grandfather Clause” Myth: Getting Paid for Code Upgrades

“That’s grandfathered in. We don’t owe for it.”

Every contractor has heard this from an adjuster. It sounds official, but in many cases, it is completely wrong.

When “grandfathered” ends

Building codes generally allow existing non-compliant structures to remain until you touch them. Once you tear out a wall to repair water damage, you often lose that grandfather status. You are now legally required to rebuild to the current code. (See: The “Year Built” Trap)

Common missed items

If the policy has “Ordinance and Law” coverage (which most do), you should be looking for these upgrades:

  • Electrical: You can’t put a non-GFCI outlet back near a water source. You often have to upgrade the entire circuit to Arc-Fault (AFCI) breakers.
  • Insulation: Old R-11 fiberglass doesn’t meet modern energy codes. You must install R-13, R-19, or higher.
  • Roofing: The original roof had no drip edge. Per 2021 IRC Section R905.2.8.5, a drip edge is required at eaves and rake edges when shingles are replaced.

Each of these should be a separate line item with an F9 note explaining why the upgrade is required. (See: Why Your Xactimate Estimate Failed)

Code citations win arguments

Adjusters won’t pay based on your word. You need to provide the specific code citation from the local municipality.

Don’t just say “Code requires it.” Say, “Per 2021 IRC Table N1102.1.3, wood frame walls in Climate Zone 3 require minimum R-13 cavity insulation. Existing R-11 insulation does not meet current code. See attached code table.”

Document the code, attach the reference, and tie it to the covered repair. (See: The Golden Rule of Claims)

The bottom line

Don’t let them pay you to build a 1980s house in 2026. If the building code requires an upgrade and the policyholder has “Ordinance and Law” coverage, the insurance company will typically pay for the upgrade.