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5 commercial water damage claims and their impact on business

06/2022
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Commercial water damage can come from a number of sources. Corroded pipes can burst, be defective or improperly installed. Fittings can leak, and heating systems can fail — and all of these can result in major non-weather-related water disasters.

 

Read our commercial water damage case studies

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 to safeguard your interests with mitigation measures and the appropriate business insurance to cover you against water damage.

 

  1. A RM3 million loss, right before launch

    A new technology project was scheduled to be developed, manufactured, and launched when a corroded 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 RM3 million.

     

    Commercial water damage risks aren’t always visible

    Interior corrosion can be the underlying cause of pipe defects that make them more susceptible to bursts.

     

  1. Major leak costs business RM6.5 million

    The failure of a pressure relief valve coupling in a multi-tenanted high-rise caused water to flow from the 16th story 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 RM6.5 million.

     

    Even small leaks can cause extensive damage

    250 gallons (946 liters) of water per day can leak from an 1/8” pipe crack.

     

  1. RM4 million in damage from hotel’s faulty fitting

    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 RM4 million.

     

    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.

     

  1. Hospital patients suffer water emergency

    When a pipe burst on the upper floor of a medical building, over 200,000 gallons (757,082 L) of water cascaded onto several floors below. The incident resulted in the transfer of hundreds of patients — including infants — to neighboring hospitals. It took a full year to repair the damage, and led to a loss of over RM4 million.

     

    Protect your business against commercial water damage

    Understand the risks of water damage — and protect your business in advance of any potential water damage with a comprehensive preparedness plan and appropriate insurance coverage.

     

  1. Heating, ventilation and air-conditioning (HVAC) flood leads to lost production cycles

    One threaded coupling on an HVAC-connected water supply line failed in a pharmaceutical manufacturing plant. This caused over 12,000 gallons (45,425L) 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 RM4 million.

     

    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.

     

Source: Preventing Water Damage: Trends, risks, and mitigation for water leaks, pipe bursts and plumbing issues, Chubb Publication 09-01-0183 (Ed. 1/20)

 

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