The local authority clause in property insurance covers the unexpected losses which occur due to additional cost of reinstatement of the destroyed or damaged property to comply the local bylaws but subject to sum insured. This clause provides coverage against the damage incurred to fulfill the necessity to comply with the building or other regulations under any act of parliament or bye-laws of any municipal or local authority. If the damage occurred to your building has the tendency to harm neighbors or surroundings or by the virtue of a direct consequence of compliance with a mandatory requirement in pursuance of a statutory requirement or authority following a loss, then this clause comes for rescue to mitigate the risk of bearing additional cost. It is crucial to check whether your insurer is providing this clause in property insurance.

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The Local Authorities Clause is also known as the Public Authorities clause. Having this clause in your policy provides a sense of relief even if your building is facing any damage due to government regulations or bye-laws. Insurance company is liable to pay the additional fund for such emergencies. Get protection against the financial blow of unexpected occurrences.

The amount recoverable under the local authorities clause in the property insurance does not include the following:

  • Cost incurred in complying to any regulations or byelaws
  • Any damage or destruction that has happened prior to the granting of the extension
  • Any destruction or damage not insured by the property insurance policy
  • The additional cost required to make the property as good as it was when new
  • Any rate, tax, duty, development or other charge or assessment arising out of capital appreciation. These charges may be payable with respect to the compliance required as per regulations or bye-laws.

The insured has to get his work of reinstatement done within a period of twelve months after the destruction or damage to the premises or property. The work of reinstatement may be carried out partially or wholly at another site if the laws says so. Also, the total amount recoverable in the property insurance does not exceed the sum insured

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The local authorities clause does not apply to liability for claims arising due to:

  • Breach of professional duty by the Insured or any employee of the Insured.
  • In connection with land charges
  • Publication or utterance in violation of any individual’s right of privacy
  • The development of any landfill site
  • Any tip by the Insured following sale or transfer of such property
  • In case of discharge or dispersal of contaminants or pollutants into or upon the land

Case Study:

A manufacturing unit is partially damaged because of the event of fire which later resulted in high risk of damage or harm to the surrounding area. Government regulations regulated under the industry norms make the firm comply to rebuild the whole manufacturing unit again because of high risk of loss to the surrounding if the undamaged area is not rebuild.
The manufacturing unit had availed a property insurance policy. The policy has local authorities clause included which promised to cover the additional cost of such emergencies. Thus the firm will get coverage to rebuild the manufacturing unit.
This clause plays important role so before buying property insurance, make sure that the policy includes this clause as it saves your property from unexpected interruptions and it provides protection against the financial blow of unexpected occurrences.


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