Water damage is a leading source of property losses for both building owners and tenants. In some cases, the risk of property damage from water leakage may even be greater than the risk of fire. A relatively small water release can soon result in significant damage if it comes into contact with sensitive electrical or electronic equipment, furnishings or highly susceptible stored commodities.
Sources of water leaks include burst pipes, roof leaks, overflowing toilets, faulty equipment and leaking appliances or plumbing fittings. Water damage risk has the potential to cause significant property damage and business interruption losses because of relocation costs, lost rent, lost trading revenue and can even negatively impact your reputation as a business.
Chubb has noticed an increasing number of commercial property claims involving interior water damage over the last few years. The following are descriptions of actual Chubb property claims.
Valve failure caused water damage to 16 floors of a high- rise office building
A major water leak was reported when a pressure relief valve coupling failed on the 16th floor of a 21 story multi-tenanted office building. The water flowed for at least an hour, from the 16th story all the way down to the basement, causing extensive damage to the electrical feeds on most floors. Water damage occurred on numerous floors wreaking havoc on suites, mechanical and electrical rooms, offices, and elevators. The main electrical risers were a complete write-off and would take months to replace. Carpeting was totally destroyed on most floors. Business interruption lasted approximately 6 months and the total loss was $9.5 million.
Massive water leak in hotel complex damages 18 floors
A pipe reducer fitting failed on the domestic water supply line in the 18th floor riser room of a 32-story hotel, causing a massive water leak. The building, containing hundreds of guest rooms and apartments, had recently undergone renovations. Over 65 apartments were damaged from the water, as well as building common areas, corridors, the main lobby, electrical riser rooms on 18 floors, and almost all elevators. The total loss amounted to $5.8 million due to lost income associated with rents for displaced tenants and limited hotel room availability during the period of restoration.
Risk assessment and mitigation, together with a comprehensive emergency response plan are key elements of a water-damage risk- management plan.
The preparedness or mitigations measures required will, of course, need to be customised based on the water damage exposures identified during the risk assessment process. However, some common risk mitigation measures to consider are as follows:
The water-damage risk- management plan should be reviewed, tested and updated annually. This process should include testing the effectiveness of management procedures and engineering controls.
Chubb has a team of dedicated risk engineers who can assist clients with their risk exposures and premises & plant start-up planning.
For more information, please contact Risk.Engineering.AU@chubb.com
¹ These claims’ scenarios serve only as examples and all claims will be evaluated on a case-by-case basis.
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