While a burst pipe in your garage can mean a new door and ceiling, an undetected slow leak in an office or condo tower can cost millions of dollars. If the high-rise is under construction—and therefore unoccupied—the risk of water damage, delays and expensive repairs skyrockets.
It was a Friday night. On the 17th floor of a high-rise project, one month before the scheduled completion date, a small water hammer in a dishwasher on the top floor failed. By Monday morning, the undetected leak had reached the ground-floor lobby. The result: millwork, ceilings, walls and floors had to be replaced throughout the building. Delay: three months Total cost: more than $10 million.
Nothing can replace your lost time, but presumably insurance covers the costs of water damage, right? Maybe.
Water damage is a leading cause of insurance claims across North America. In Canada, 48 per cent of home insurance claims cite water damage—far more than fire and theft claims combined (22 per cent). In the U.S., water damage accounts for 31 per cent of claims, followed by exterior wind damage at 25 per cent. Not surprisingly, then, most insurance policies for both homes and commercial buildings limit your coverage for water damage.
A guiding principle in insurance policies is to cover damage from sudden, accidental failures, not neglect and lack of maintenance over time. So, if you fail to repair a leaky roof or allow your pipes to degrade over time, your insurer will argue that damage from a slow, undetected leak is not covered.
Insurance policies commonly exclude damage from freezing pipes that burst. However, the exclusion has three exceptions:
- Fire protection systems
- Properly heating and pipe insulation
- Plumbing drained and water supply turned off, if the building is unoccupied and unheated.
“Dirty water” from sewer or drain systems is specifically excluded under most insurance policies. Thus, if a heavy storm overwhelms the city’s sewers or your sump pump, and the contents flood your building, you’re not covered.
Most insurance policies also specifically exclude damage from flooding. Whether it is surface or sub-surface, from the ocean or a river, floodwater is not a covered hazard.
If your building’s water damage comes from more than one cause and one of the causes is not covered, the resulting damage will not be covered. For example, if a windstorm breaks your glass door, allowing floodwaters to enter your building, the flood damage would not be covered even though the door itself likely would be.
What to Do
1. Buy the right policy. Most insurers offer specific policies for flood, sewer back-up and other water damage which may be otherwise excluded. Review your coverage carefully and clarify with your agent or broker up front about what is or is not covered by your policy.
2. Be responsible. Keep your roof, building envelope and plumbing systems in good repair.
3. Invest in leak detection systems. Especially if your building is under construction or unoccupied on weekends. Early detection is the key to limiting water damage.
Radius can monitor leaks from your basement washer while you’re out of town and from the dishwasher in your staffroom on weekends. And now, we also monitor leaks at high-rises under construction.
The developer in the case study cited at the beginning of this blog asked us to design a system to prevent another such disaster at a high-rise construction project. The result: Noah. It alerts our central monitoring station to any suspected leaks. Using our Redhanded remote guarding cameras, our operators visually verify the leaks and remotely shut off the water supply. The best way to avoid an expensive insurance claim is to limit the damage in the first place.For more information about protecting your high-rise construction project from water damage, visit https://canada.radiussecurity.com/noah
Top homeowners insurance claims. Insurance Journal, April 6, 2016.
Damage caused by water leaks. Bonner, Marianne. The Balance, October 27, 2016.
Water damage has become top cause of home insurance claims. Insurance Hunter, March 3, 2017.
When can you claim for water damage coverages on home insurance. Araujo, Mila. The Balance, September 1, 2017.
Water surpasses fire as the leading cuase of home insurance payouts: IBC. Insurance Business Canada, May 10, 2017.
Water damage by the numbers. Water Damage Defense,
Business water damage insurance. Enhanced Insurance,
What's covered? Water damage and insurance. Broker Link Insurance