NEW YORK CITY-Lexington Insurance Co. launched an insurance policy to protect commercial and residential real estate developers and lenders from losses due to changing zoning ordinances. The new policy, called Zoning Restriction Protector Insurance, is designed for commercial and multi-tenant residential real estate owners and lenders who may suffer significant damage to their property and can't rebuild the same size building due to zoning issues.

"Zoning ordinances are constantly changing, leaving non-conforming commercial and residential properties vulnerable," says Edward Mazman, vice president of property real estate, Lexington Insurance, a member of the American International Group. "If a property suffers enough damage that it must be rebuilt to comply with current code, it may result in less rentable square footage or lower density, which can cause a significant financial impact."

The new Zoning Restriction Protector Insurance will provide the following coverage:

• It will insure lenders against a loss between the loan balance on the date of a property damage loss from an insured peril and the total insurance proceeds received due to property damage, if the same size building cannot be rebuilt due to zoning ordinances on the date of the property damage.
• It will insure, in conjunction with Lexington's standard building insurance policies, the owner for the loss of the net equity in whole or part as determined by appraisal after taking into consideration all debt and insurance recoveries, if the same size building cannot be rebuilt due to zoning ordinances on the date of the property damage.