Water Loss is the New Fire in Commercial Construction

Sponsored By:  Liberty Mutual Insurance

It is critical that independent agents are knowledgeable in current commercial construction loss trends to ensure that their clients are protected from potential losses and actively taking steps to avoid losses that could be costly and damaging to their businesses.  

Water damage has become a key driver in builder’s risk claims. According to data from the Insurance Services Office, Inc., 24% of incurred losses were caused by water damage. This makes water damage one of the most frequent and costly claims impacting the construction industry. Gaining an understanding of the common causes, impacts, and potential solutions for water damage will position you to better serve your construction clients.

Defective fixtures and poor workmanship

The primary causes of water loss during construction are defective fixtures and poor workmanship. Labor shortages are directly contributing to the latter. The U.S. Bureau of Labor Statistics reports that there will be a need for 747,000 more employees in the construction industry by 2026. However, in 2019, they reported that the median age of a construction worker was 43.

This aging workforce only exacerbates the skilled labor shortage that the industry faces. According to a survey conducted by Autodesk and the Associated General Contractors of America (AGC), 80% of construction firms are having a difficult time filling craft positions. A result of this turnover and lack of skilled workers is that much of the labor force is inexperienced in working with new systems and techniques. This directly results in water losses as two of the leading causes for water damage during construction are improper water line soldering and PVC joint gluing.

Given the increased risk of water losses, it is critical that contractors have flexible, customizable builder’s risk policies, like Liberty Mutual’s, that offer tailored coverage matching the individual project’s risks.

Water causes more than physical property loss

Projects are often on accelerated schedules, and contractors face penalties for delays. In these cases, even a small incident can cause substantial financial and reputational impact on a contractor.  

Water losses are more likely to occur during the water system testing, which is often towards the end of the project. This leaves most of the build’s value exposed and potentially increases the severity of the loss. Moreover, the more stories the building has, the higher the loss potential.

It is critical that contractors consider having coverage for a delay in completion, something that Liberty Mutual offers as part of its customizable coverage.

Wet work programs can prevent losses

One way that clients can prevent or mitigate water losses is through wet work programs – prevention measures put in place to prevent leakage and identify and minimize any water damage that does occur. Encourage your clients to take steps like:

• Post maps showing the location of water valves on the job site
• Install water flow alarms
• Hire a watchperson to monitor for issues during non-working hours
• Pressure test and quality check all water lines before turning on the water
• Prepare for rainstorms by developing ways to divert water away from the building during the course of construction
• Implement formal sprinkler shutdown and start-up procedures

Many carriers, like Liberty Mutual, offer risk consulting services to policyholders. These services are resources for advanced technical guidance and can help your clients control losses through a number of solutions.