Water damage claims a major concern for construction insurance
Water damage during construction can deliver significant financial losses to owners, developers and contractors making specialist insurance cover a key protection.
Besides financial loss, water damage can lead costly litigation along with significant indirect costs associated with construction delays and business interruptions. Insurance loss data shows that water damage has become a leading cause of Builder’s Risk claims from rain, ground water, flash flooding or water escape and fluid release which all impacts on a construction project.
For example, a building nearing completion has pressurised piping systems for domestic water, HVAC and fire protection and leaks can be hard to detect behind walls that have been enclosed.
Sources of water escape include:
- Fire suppression risers and piping
- Domestic water distribution system and fixtures
- Roof drains and storm drain leaders (piping)
- Sanitary sewer system
- HVAC fluid systems
Minimising potential water damage losses can help avoid expensive repairs and project delays through planning and testing throughout the construction process.
Advice should be sought on the scope of insurance for contract works, focussing on coverage, exclusion clauses and policy conditions. A number of standard exclusion clauses may impact upon the level of protection and contract works policies typically exclude cover for damage resulting from changes in the water table level.
When a loss does occur the legal test for damage requires proof of physical change to insured property, adversely affecting its value or usefulness. It is important to investigate and document the condition of insured property without delay following a water damage incident to minimise the prospect of insurance disputes which may involve the use of experts.
Insurers are increasingly focused on water damage risk management procedures as part of the underwriting process and may include specific provisions in the policy requiring compliance with the Construction Insurance Risk Engineers Group (CIREG) best practice guidelines.
W Denis is a leading broker in the area of construction insurance with a significant involvement in UK and overseas markets. To discuss this further with an expert at W Denis, please make arrangements with email@example.com and on 0044 (0)113 2439812
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