Water Damage: A Common and Expensive Claim
Water intrusion and property damage are some of the most frequent and expensive property loss claims filed each year for the following real estate asset classes:
- Oficina
- Industrial
- Al por menor
- Complejo de viviendas
- Mixed Use
- Hotel
Over the past few years, water damage claims have increased in both frequency and severity. They cause billions of dollars in financial losses across the real estate industry. These claims can get extremely costly for businesses because of:
- Direct costs for cleanup, repairs, replacements and mold remediation
- Indirect costs, such as legal fees, delayed projects or business interruptions
“The number of stories your building has is a major factor in how severe water damage can get,” said Rob Sullivan, Middle & Large Commercial underwriting officer and industry lead for The Hartford’s Real Estate Practice. “That’s because a water leak from a top floor can flow down several stories undetected and cause extensive damage. We’re seeing this happen with increased frequency and severity. What’s more, older and less-cared-for buildings can be subject to sudden and accidental water leaks due to exposed conditions going unnoticed.”
In a recent loss, a fire sprinkler line burst in the ceiling cavity on the 28th floor of a high rise office building. Water flowed down six floors, getting into three elevator shafts, plus corridors and hallways. This resulted in more than $1.5 million of building and personal property damage for our insured.
“Although water damage can be costly, there are things you can do to help prevent and mitigate it,” said Sullivan. “We’ve identified a number of strategies, such as creating a water damage prevention plan and using technology, which can be implemented to help reduce water damage risks and costs.”
Proactively Preventing Water Damage
Despite how common water damage is in the real estate industry, only a small percentage of our clients actually have a written plan.
Real estate building owners and managers should create a plan. It's critical to both preventing and mitigating water damage losses. Keep these things in mind when designing a Water Damage Prevention Plan:
- Establish your team and provide training.
- Outline pre- and post-event job responsibilities.
- Identify the location and properly label shut-off valves.
- Enhance site inspection activities to include high-risk areas of potential water intrusion.
- Identify water intrusion prevention and control measures.
- Establish post-event restoration and recovery strategies.
- Identify and establish pre-event contracts with repair and remediation contractors
- Transfer risk contractually to responsible parties.
High-Risk Areas for Water Damage in Property
Finding areas at a high risk of water intrusion is one way to protect a business, according to Sullivan. Our experience tells us that approximately 75% of all real estate industry property losses are due to accidental discharge related to plumbing, HVAC systems and appliances.1
Some areas that can be more prone to water intrusion include:
- Interior systems such as piping, sprinklers, equipment and appliances
- The building envelope, or the roof, walls and floors
- Exterior exposures like landscaping, gutters and downspouts
If you’re doing building maintenance, pay attention to any pipes that are frozen or have erosion. If your building is newly constructed, leaks and intrusions can happen because of a poor-quality plumbing installation.
Don't forget to regularly check the outside of your building. Make sure there isn’t damage or deterioration that could lead to water entering the building.
Using Technology to Help Prevent Water Damage
Technology can watch and alert business owners to water leaks or intrusions. You can install these detection systems in a part of your facility that has had a history of water damage. If your system senses a leak, it can send an alert to your phone or computer. This gives you the chance to make necessary changes before they turn into a costly claim.
Water detection systems can also connect to control valves. So, if there’s a leak, the system can automatically shut off water to prevent any further damage.
How The Hartford Can Help Protect Your Buildings From Water Damage
As an experienced insurance company, we know how devastating water damage claims can be.
“We’ve seen and responded to many water damage claims. That’s why we’re sharing what we’ve learned to help business owners protect their property,” Sullivan said. “Our real estate industry team includes experts from across underwriting, risk engineering and claims who really understand the industry. When it comes to water damage, our risk engineering consultants are specially trained to identify the risks and work with clients to help address them.”
We also have The Hartford’s IoT Innovation Lab. This team uses IoT technology to help reduce potential losses at commercial properties. IoT stands for the Internet of Things. It refers to devices connected to a network that collect, share and act on information. Some examples of these devices that can help prevent water damage are:
- Water sensors to detect the presence of water and send an email or text alert.
- Flow monitoring systems placed near a water meter to detect unexpected or unusual flows.
- Automatic shut-off switches, which get triggered by a water sensor or flow monitor.
- Temperature and humidity monitoring to detect potential mold conditions or to identify potential freeze conditions before a pipe bursts.
Let’s say your business installed water sensors and automatic shut-off valves. A pipe begins to leak, which activates your water sensor. The water sensor can then trigger the automatic valve to shut off to prevent more water from leaking. At the same time, you can receive an alert through email or your phone to let you know about the leak.
With IoT devices, the technology is always on the job to help protect business owners from water damage and intrusion.
The Hartford’s IoT Innovation Lab Can Help
Our IoT Innovation Lab can work with you to identify your unique problems and create a solution to help reduce the risk and minimize disruption and loss.
To find more information about how we can help prevent water damage, reach out to our IoT Team or your Hartford Representative.
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1 Data from Middle & Large Commercial Segments, Marine and Programs on policies written from 01/01/2014 thru 12/31/2018 with losses.
La información proporcionada en estos materiales brinda información general y de asesoría. It shall not be considered legal advice. The Hartford does not warrant that the implementation of any view or recommendation contained herein will: (i) result in the elimination of any unsafe conditions at your business locations or with respect to your business operations; or (ii) be an appropriate legal or business practice. The Hartford assumes no responsibility for the control or correction of hazards or legal compliance with respect to your business practices, and the views and recommendations contained herein shall not constitute our undertaking, on your behalf or for the benefit of others, to determine or warrant that your business premises, locations or operations are safe or healthful, or are in compliance with any law, rule or regulation. Readers seeking to resolve specific safety, legal or business issues or concerns related to the information provided in these materials should consult their safety consultant, attorney or business advisors. All information and representations herein are as of October 2020.
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