Traditionally the expression ‘Escape of Water’ has not struck quite the same level of fear into the heart of an underwriter than the word ‘Fire’. However, this peril is actually the single biggest cause of claims under property policies. In 2018, 27% of all claims submitted listed Escape of Water as the proximate cause. In addition to the high frequency nature of these claims, the impact is also often very high. After Fire, Escape of Water is known to generate the highest claim payouts in large loss situations.
There is no doubt that Escape of Water is a peril which is now very much on the radar amongst insurers, and this has become increasingly true as the property market continues to harden and capacity shrinks. The result as far as policyholders are concerned is that the cover is harder to get, it can be more expensive, and its provision may be dependent on additional subjectivities.
Escape of Water occurs primarily when a breach occurs in a plumbing installation, but can also be caused by leaking appliances and poor seals around shower trays and baths. As a general rule of thumb, leaking appliances and poor seals will not generate huge claims, whereas burst pipes do have a significant potential to cause very large amounts of damage. This is particularly true when properties are unoccupied, and when the plumbing elements in question are fitted behind walls. A lack of accessibility and visibility can greatly increase the time it takes to identify that water is escaping. Pipes will burst for a number of reasons, but the primary causes are either breaches as a consequence of wear and tear to old installations, or a physical bursting of the pipe caused by the expansion of water which freezes within a confined space.
After fire, water has the greatest potential to damage the physical structure of buildings and the contents within them. There can be significant damage to decorative finishes, electrics and contents almost immediately, there can be further irreparable damage occurring over durations measured in hours and days (for example, the blowing of a parquet floor submerged in pooling water), and finally, there can be long term issues around the presence of damp if structures are not dried properly. These physical realities can be incredibly expensive to rectify, but more than that, the effect of a large escape of water can be emotionally devastating for a property owner, and the time and effort required to reinstate can be huge. It is fair to say that having a good quality insurance policy which will pay out in an escape of water situation is going to offer a degree of comfort, but there are so many reasons beyond the smooth operation of an insurance policy to seek to mitigate risk. The mental toll and the disruption to life of a big escape of water is a huge cost which rarely gets factored into insurance procurement processes.
The Mitigation Strategies:
New purchasers and renovators would be well advised to commission a full structural survey within which, an analysis of the existing plumbing situation would be advisable. The first step to any risk management and mitigation strategy is to understand the risk you are faced with.
Renovators in particular will increasingly find themselves being asked to supply ‘water management plans’ as part of the pack supporting their application for insurance cover. Insurers have always been hot on obtaining fire risk management plans. Escape of Water is now getting the same treatment. The purpose of these documents is to identify, assess and mitigate risk. It is worth re-stressing that, whilst a water management plan will often be crucial to ensuring the smooth operation of insurance cover, it is actually just basic common sense to reduce the risk of incidents which come with so much cost beyond the purely financial.
Renovators might want to consider locating water storage vessels on lower floors if it is practicable to so. In the event of a breach, the upper floors would avoid the effects of the escaping water.
Renovators should consider building their water management programme around the best practice detailed in the Construction Insurance Risk Engineer’s Group’s (CIREG) “Managing Escape of Water Risk on Construction Sites” document. This guidance considers escape of water from design stage all the way to testing and commissioning. Any confirmation of adherence to this framework would be viewed very favourably by the insurer.
In unoccupancy situations it will almost always be a requirement that water installations are drained down, and the water supply isolated at the mains entry point. This is particularly true over the winter months when the water within pipes is more likely to freeze and split the pipe. Insurers will often make an exception where the water is required to maintain a level of heat within the system which would prevent freezing.
Commercial risks will also have to consider not only heating systems, but also sprinkler systems. In the sense that a sprinkler system is just another closed water system, the same strategies you’d apply to pipes would apply to sprinkler systems.
Perhaps the most effective tool in the box when it comes to the management of the escape of water risk is what we would call the leak detection/suppression system. There are now various products on the market ranging in cost and functionality which will, to a greater or lesser extent, manage and reduce the risk of escape of water within a property. These systems, generally fitted to the mains riser, can offer simple detect and alert functionality (where changes in flow, pressure or humidity would seem to indicate a breach), through to the ability to actually shut down water systems and isolate parts of water systems automatically following escape detections. Such systems can often also be programmed to take account of unusual water flows (perhaps when a large number of visitors are present and placing increasing demands on the water system) so that the system is not shutting off when it shouldn’t be. Similarly, you might programme the system to shut down immediately if any flow is detected in situations where the property was unoccupied.
These leak management and suppression systems represent a fantastic risk feature as far as insurers are concerned, and will likely result in a discount on the insurance premium. They are generally pretty easy to source and fit as well. A requirement to have such a system in place is increasingly likely to be an insurance requirement, particularly in the high net worth and commercial sectors.
When it comes to escape of water, a small investment in time and money now can save a huge amount of cost and pain later. Working with Renovation Underwriting, we can discuss your options, and any potential obligations if you are in any way concerned. Please contact Cyrus Wakefield on 01306 734 102 for further information.