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With the pandemic’s impact on occupancy, property owners have found some of the costliest water damage claims have resulted from water leaks in their unoccupied buildings.
By Gerald Chiddick, Head of Real Estate, Retail and Hospitality, U.S. Middle Market, Zurich North America
When most business owners imagine a large property loss, they likely envision a raging fire lighting up the predawn sky or a tornado lifting the splintered remains of a building into the heavens and spreading debris across an open field.
While both fires (natural and man-made) and windstorms (tornadoes, hurricanes and thunderstorms) are among the leading causes of property damage, water is often the number one enemy when it comes to the frequency and severity of losses.
The leading cause of property losses in offices, apartments and other real estate facilities is from water damage, according to a review of Zurich claims data, which shows there is nearly a 50 percent chance that the next property claim will be water-related. And if it is water-related, the loss will cost, on average, three times as much as a claim that does not involve water damage. The high dollar amounts result from payment for cleaning and drying out the building — the remediation of the building. In addition, tenant or rentable spaces may need to remain vacant following the loss until dried out and rehabilitated. Mold and other contaminants are also a concern and may need to be tested for and potentially remediated for before anyone can start to reuse the building.
In fact, 57% of Zurich North America’s real estate claims, in terms of frequency, are water damage, and 71% of Zurich’s real estate claims, in terms of severity, are water damage.
Some of the costliest water damage claims have occurred in unoccupied buildings, where no one is around to detect or monitor water leaks. This has been a big concern during the coronavirus pandemic, as many office buildings remained vacant for more than a year. Some real estate owners and managers are likely just now learning how their buildings have fared during the lockdown.
And in February 2021, Texans were in for a surprise when unusually cold weather gripped the Lone Star State, sparking wide-ranging and long-lasting power outages, loss of heat and, subsequently, frozen water pipes. The hardships of the 2021 Texas Freeze are immeasurable; the final cost of the water damage from burst pipes is still being tallied.
Water, water everywhere
Broadly speaking, there are three primary ways that water can cause property damage:
- Wind-driven rain entering the building through walls, roofs and windows
- Flooding caused by rising rivers and lakes, surface-water runoff and coastal storm surges
- Internal plumbing that bursts or leaks
While it may be easy to envision a water loss caused by heavy rain and winds, or a river that has overrun its banks, water damage caused by internal plumbing is often the most common, most damaging and most unexpected type of water loss. Consider the following scenarios:
- A frozen pipe bursts and water leaks down four floors. The pipe is located just inside an exterior wall. The heat in a tenant space was shut off when it was empty, and the space was not inspected. An inspection might have noted the fact that a window was open in the space, which, coupled with the shut-off of the heat, might lead to the line freezing. The loss is over $100,000.
- Water leaking from a water line abandoned during renovation, but still pressurized, leaked for an unknown extended period. The water accumulation eventually broke through the sheetrock and damaged four floors of a building, including several tenant occupied units. The loss was over $500,000.
It turns out that modern plumbing isn’t so modern anymore — it’s in every building you’re likely to see or visit, with the possible exception of garden sheds and ancient Roman ruins. Consider the age of the system, the age of supply lines, and whether it is public versus private water sourcing. With so many pipes running through the walls, subfloors, basements and ceilings of your building, you would be increasing your risk by not having a plan in place to address the potential water leak in your building, whether it’s a slow drip or a completely fractured pipe.
Regular inspections of plumbing and fire suppression systems can help prevent water-damage losses before they occur. In addition, a diagram of piping in your facility complete with location of shut-off valves is invaluable. Knowing where shut-off valves are located can be critical in limiting losses related to water pipe leaks.
Technology to the rescue
Property owners should also consider investing in technology like water leak detectors and temperature sensors, which can help prevent and respond to frozen pipes, cracked pipes and other possible water damage events.
A one-inch cracked pipe flowing at nine gallons per minute can release the equivalent of a 50-gallon water heater in about six minutes. A properly placed water detector can notify you and allow you to respond and shut off the water more quickly, thus reducing the impact.
Automatic shut-off valves will automatically shut off the flow of water to a connected pipe when they are triggered. Temperature sensors can help you identify and respond to areas where pipes may freeze and burst.
Wet Work Plan
Another common cause of water leaks is damage to pipes that occur while work is performed near or on the pipes themselves.
Consider implementing a “Wet Work Permit” program. Modeled on the Hot Work process, (for welding and cutting operations) this process includes a review of the work to be performed, identification of potential water leak causes and outcomes, prevention methods and the response plan should a leak occur.
But real estate owners and managers can also protect their properties by investing in a spill-response cart and pipe repair supplies.
A spill cart and emergency pipe repair supplies should be available for quick accessibility and use anywhere in the facility. Here is a list of some supplies in a spill-response cart:
- Plastic sheets or nylon tarps to throw over and protect equipment, furnishings and documents (should be readily available in the applicable areas for use by operators)
- Contractor-strength plastic or trash bags to dispose of wet material
- Wet vacuums (commercial grade with effective GFIs) or other water removal-equipment (squeegees, mops, buckets, etc.)
- Portable pumps and hoses
- Rain gear, Tyvek suits or other types of disposable suits
- Water-displacing solvents for applying to electrical equipment and supplies
- Towels for wiping up
- Absorbent socks to contain and absorb spills
- Pipe clamps to place around and stop a leak
- Diagrams of piping systems with valve locations highlighted
- Dehumidifiers (or a ready rental source available if unable to keep one at hand)
- Portable dikes for diverting surface water away from below-grade doorways and possible points of water entry (this would be necessary during unusually heavy rains and especially if the facility has a history of water accumulating near certain doorways, loading docks, parking ramps, etc.).
Natural hazards also a major cause of water damage
Of course, water damage isn’t always an inside job. Many buildings owners suffer significant losses from water entering the building from the outside. Flooding, surface water runoff, leaking roofs and wind-driven rain are some of the ways water can get inside a building and cause damage.
The results of a severe storm surge associated with a tropical storm or hurricane can be catastrophic. One of the most important things business owners can do is make sure that enclosed building spaces and key outdoor structures are located above the anticipated storm tide that may accompany a tropical storm or hurricane.
When water enters a building, it can damage production equipment and machinery; emergency generators, fuel tanks and fuel pumps; fire alarm panels; boilers and chillers; electrical equipment; and more.
Surface water runoff becomes a concern when the surrounding topography allows rainwater to flow toward high-value or critical equipment areas. Heavy rains may overtax drain systems that normally protect these areas, or a power failure may impair dewatering pumps that support the drain systems.
Business owners should consider grading their properties so surface water runoff is directed away from buildings and important structures.
Property owners should also consider locating building points of access and other important structures above the 100-year flood elevation. Important structures may include transformers, emergency generators, above-ground fuel tanks and other critical equipment.
Mitigating a top risk facing real estate owners and managers
There are many ways that water can cause damage, both from inside and outside a building — whether it’s unoccupied or occupied — and the losses often extend beyond wet carpeting, damaged walls and ruined equipment. Many properties are forced to shut down for an extended period during cleanup, which can result in a loss of business income.
The good news is that real estate owners and managers can take steps to mitigate the risk of water damage. Regular inspections and technology can help. So can a wet work program combined with a spill-response kit. Having a plan to deal with a potential water loss is key to keeping properties dry and holding the damage at bay.
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