October 25, 2024
By: Nationwide
Water damage has emerged as a leading cause of loss in the construction industry. Recent data from Nationwide's construction loss analysis reveals that nearly one-third of all liability losses can be attributed to contractors working around water. 1 This isn't just a minor inconvenience: It can result in significant financial losses, project delays, and reputational damage for contractors.
According to Nationwide claims data, the cost of water damage claims is on the rise, with the median claim cost increasing by 21 percent year-over-year. Additionally, the number of large loss water claims exceeding $500,000 has doubled, and those over $1 million have tripled since 2015. 2 These statistics underscore the urgent need for effective water damage mitigation strategies.
Water damage affects contractors of all sizes and trades. While contractors working directly with water sources, such as plumbing and HVAC, are at a higher risk (nearly 60 percent of water damage claims fall within these trades), the remaining 40 percent of claims involve a diverse range of trade contractors. 3 Even those not directly working with water can be affected by water damage, especially if they are working around piping or fire sprinkler systems or using valves.
Nationwide recently saw an example of a large loss, according to Senior Technical Consultant Grant Hilton.
This loss could have been greatly minimized with proper planning and response plans.
It's crucial for all contractors to recognize their susceptibility to water damage. Awareness and planning are key when working around pipes, pumps, and fire sprinklers on a construction site. Even contractors working outside of the building—such as those involved with land grading, trenching, or excavating—can cause or be exposed to a potential water damage loss.
To be successful, contractors should evaluate their potential water exposures on the jobsite, conduct a self-assessment of current policies and procedures, and then adopt a formal construction water mitigation program to address their water risk potential.
Implementing a comprehensive water damage mitigation program will require you to address your exposure and controls in each phase of construction. The following are some key steps to get started.
Technology plays a crucial role in modern water damage mitigation strategies. Water leak detection systems are made up of a software platform, various sensors, and a communication network. The system is designed to work around the clock monitoring and detecting water problems as soon as they happen. When a problem is detected, alerts are sent to key contacts, and if enabled, remote shutoffs can be activated.
Additionally, tools like wet-work permits and valve tags help manage and document water-related activities on the jobsite, ensuring that proper precautions are taken. Severe weather planning tools and mobile apps can provide timely updates and guidance on protecting the site from weather-related water damage.
Water damage is a significant risk for contractors, but with proactive measures and the right technology, it is possible to reduce or eliminate these exposures. By understanding the trends, recognizing the widespread impact, and implementing a comprehensive water damage mitigation program, contractors can better protect their projects, assets, and reputation from the costly effects of water damage.
© 2024 Nationwide Mutual Insurance Company
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
Footnotes