5 commercial water damage claims and their impact on business

Commercial water damage can occur from a number of sources. Corroded pipes can burst, defective or improperly installed fittings can leak, and heating systems can fail - and all l of these can result in major non-weather-related water disasters.

While any business can suffer from a burst pipe, those with increased risk and the most to lose are typically in commercial real estate (especially high-rises), and in the hospitality and health services industries. It’s critical to understand the risks and safeguard your interests with mitigation measures and the appropriate business insurance to cover you against water damage.

A new technology project was scheduled to be developed, manufactured, and launched when a frozen pipe burst and destroyed key hardware and a critical development lab. Restoration of the lab took almost a year, and alternative lab space had to be outsourced to reduce schedule delays. In total, the business interruption resulted in a loss of $4 million AUD.

Commercial water damage risks aren’t always visible
Interior corrosion can be an underlying cause of the pipe defects that make them more susceptible to bursts.

The failure of a pressure relief valve coupling in a multi-tenanted high-rise caused water to flow from the 16th storey all the way down to the basement. In just an hour, this caused total loss of main electrical bus risers, as well as damage to suites, offices, elevators and interior features in the building, which took six months to repair. The total loss came to $8.5 million AUS.

Even small leaks can cause extensive damage
950 litres of water per day can leak from a 5mm pipe crack.

A pipe reducer fitting failed on a water supply line in the 18th floor riser room of a recently-renovated high-rise hotel/apartment complex. Water damage spread to 65 units in the building, as well as to hotel common areas, corridors, the main lobby, electrical risers, and almost all elevators. Lost income and costs associated with rents for displaced tenants and limited hotel room availability totaled $5.2 million AUD.

Taller and high-value buildings are more at risk
There is a documented increased incidence in leaks and burst pipe events from taller and high-value buildings.

When a pipe burst on the upper floor of a medical building, over 750,00 litres of water cascaded onto several floors below. The incident resulted in the transfer of hundreds of patients — including infants — to neighbouring hospitals. It took a full year to repair the damage, and led to a loss of over $5 million AUD.

Protect your business against commercial water damage
Understand the risks of water damage — and be ready if it ever happens to your business with a proper preparedness plan and the right business insurance.

Not all pipes are created equal
Plumbing industry data indicates that “they don’t make pipes like they used to” — new pipe quality is often inconsistent.

One threaded coupling on an HVAC-connected water supply line failed in a pharmaceutical manufacturing plant. This caused over 45,000 litres of water to flood the active ingredient manufacturing area, 10 clean rooms, and special equipment. Production cycles were lost during the extensive clean up and re-validation per regulatory guidelines, costing $5 million AUD.

Regularly service your HVAC
Because 75% of heaters fail before they are 12 years old, it’s important to replace them regularly to avoid the risk of commercial water damage.