Article

Water Damage in Construction

Water damage has emerged as a major cause of loss on construction sites. This article outlines the numerous things a contractor can do to mitigate those risks.

Fire damage usually steals headlines for catastrophic loss on a construction site. While fire continues to lead the way for severity, it is water damage that has emerged as a major cause of loss for both frequency and severity. Non-weather water claims are among the most common type of property insurance claims.1 Industry experts are saying water damage now accounts for well over a third of all construction losses.2 Commercial, non-weather water damage losses cost the insurance industry over $16 billion per year.1 According to the United States Congressional Budget Office, if you add in weather related hurricane and flood damage, these figures are well over $50 billion annually.   

Water damage losses can negatively affect you as the contractor in multiple ways. These effects can include: project delays, liquidated damages, reputational risks, increased insurance costs, rework costs, etc. Water damage can have a direct financial impact with losses to: building, materials, tools, and equipment, but it can also present a liability to your operation. Liability claims can originate from both ongoing jobsite operations and completed work. Sources of water damage can be either exterior-driven (ground water, adjacent properties, rain, storm surge, ice dams, building envelope, etc.) or interior-driven (plumbing, fire sprinklers, mechanical systems, condensation, etc.). Common trades that are exposed to a higher degree of water damage exposures could include:  HVAC, plumbing, fire protection, glaziers, water proofing, excavation/grading, etc. However, liability is not limited to these trades, as it can extend to any contractors on the jobsite that may hit a water line, use a hose, or damage a valve or sprinkler head causing significant property damage.

Most water damage losses are preventable. Reducing these losses will take a multiprong approach and will need to be addressed in all phases of construction including pre-construction, ongoing construction and post-construction:

Pre-construction activities: Participate in pre-construction meetings and constructability reviews, provide input on design features relating to water damage prevention, choose the best water/mold resistant materials, hire waterproofing experts, evaluate topography and adjacent exposures for potential water hazards, implement a system to monitor weather for the project, develop a severe weather plan, source pumps and backup power sources, develop a water damage response plan, include water/moisture sensors for the project on your bid, implement proper risk transfer, etc.

Ongoing construction activities: implement a wet work permit program for all contractors working with water or other liquids, utilize water sensors/leak detection, map all water shut off valves, orient contractors to valve locations, conduct daily inspections, maintain after hours emergency contact lists, perform material verifications, create a shut-down checklist, ensure critical materials are off the ground and not stored in areas prone to water, perform water penetration tests on window and building envelope components and continue to monitor jobsite for water drainage concerns, etc.

Post construction activities: Dedicate a “punch list” team who have been trained and understands how to address water sensitive issues, document all re-work, address water sensitive issues quickly, maintain a quick response team from warranty issues involving water, ensure all shut-off valves are marked prior to delivering to customer, verify your water damage response plan is ready to be implemented while  the building still remains under your control, be prepared to implement your severe weather plan, centrally monitor fire sprinkler systems, continue to utilize leak detection/water sensors until final delivery and inspect the building regularly.

The data is clear that water damage is a significant exposure in construction and one that deserves attention on the jobsite. To combat this will require increased education on the risks and prevention measures associated with water damage and a commitment to implement sound risk management principles.

Nationwide has a customizable Construction Water Mitigation Program (CWMP) that is designed to help contractors of all sizes protect their assets and reputation, and to ensure their scope of work is completed without the costly impact of water damage.

1 https://www.propertycasualty360.com/2020/01/31/using-big-data-to-predict-non-weather-water-claims-risk/?slreturn=20210411140909

2 https://www.businessinsurance.com/article/20190604/NEWS06/912328845/Construction-m

 

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