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Escape of water and the significant insurance implications

Friday 10th July
Escape of water and the significant insurance implications

If you regularly carry our heating or plumbing work on larger construction sites, you are probably aware of the CIREG best practice guidelines. For those that aren’t aware, and to provide a brief reminder to those who are, CIREG is a group made up of Risk Management Professionals who work in the UK and the EU insurance industries that specialise in Risk Management of Building and Civil Engineering Construction. Their latest publication focuses on the escape of water and the insurance implications.
 
Escape of water is a big issue
The latest publication is the 5th edition of their document and comes five years after the previous version. Since 2015, escape of water occurrences have increased substantially, both in terms of frequency and severity. Large losses from escape of water are now as frequent, if not more so, than fire related incidents.  Losses regularly run into the several hundred thousand or even millions of pounds, especially with a general increase in mixed use construction.
 
As such, insurers’ approach to escape of water risks is undergoing a significant hardening stance.  As you would expect, this has increased the prospect of higher insurance costs, amplified the need for controls to be implemented during the construction period and increased insurance excesses in the event of a loss. Yet, it’s not just during construction that this presents a problem. Even after completion, losses that are as a result of defects can continue to mount up. It’s no exaggeration to say that with this, ongoing delays and penalties for late delivery, a contractor’s entire margin can often be wiped out. Not something that anyone wants to consider, let’s be honest.
 
As you are aware there is a long list of what causes escape of water claims. Worryingly, it’s happening at a time when advances in technology, such as monitoring water flow and automatic flow detection shut-off systems are more widely available. The trouble is that the uptake of these systems is low. And, according to CIREG, they are very rarely considered at design stage.
 
It’s time for change
Of course, change has to start somewhere and it’s encouraging that some property owners are beginning to appreciate the true cost of escape of water events and are looking at the cost of buildings across their lifespan. Interestingly, CIREG confirms that the early adopters amongst the UK’s contractors have seen a positive impact on their overall costs, with sites reporting less escape of water and, where a loss has happened, mitigation plans have prevented widespread damage.
 
At the end of this article you can find a link to the CIREG publication on our website, which I recommend you read in detail. It provides specific detail and recommendations on every stage of construction. If I can briefly summarise the key point, it recommends a Water Management Plan (also available on our website) which should ensure the following as a minimum. The days of relying on visual leak detection and manual isolation are long gone.

  • Appointment of ‘Responsible Persons’ to manage the escape of water risk
  • A risk assessment process for mitigating exposures at the design phase
  • The selection of competent contractors
  • Quality control throughout material storage, installation and testing
  • Mitigation measures, identification and implementation and maintenance of those mitigation measures
  • Emergency response plans
  • Regular review of the risk assessment and water management plan to ensure mitigation measures remain appropriate

 
The days of relying on visual leak detection and manual isolation are long gone. 
 
Insurance Implications
As you can see, there are significant insurance implications at stake here. If you’d like to talk about them and how that might affect your business then we’d be delighted to do just that. Simply get in touch with your usual contact or use the details below to get in touch. We look forward to speaking with you.
 
In the meantime, you can view the full CIREG report and a template water management plan on the CIREG website.

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