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Non-weather water damage risk rising for construction

November 1, 2023

Non-weather water damage risk rising for construction

Fire damage often steals headlines for catastrophic loss on construction sites. But while fire leads the way for severity, water damage has emerged as a leading cause of loss in construction in both frequency and severity.

Non-weather water claims are among the most common type of property insurance claims in construction costing the industry an estimated $16 billion per year.1 Industry experts estimate non-weather water claims account for over a third of all construction losses.2

Non-weather claims were problematic even before the pandemic led to supply chain issues, and inflation has since caused the cost of materials to skyrocket. Nationwide claims data shows costs are increasing with median spending for water damage claims up 21% year-over-year.3 And since 2015, non-weather large loss water claims over $500,000 have doubled, and losses over $1 million have tripled.4

Impact to contractors

Water damage losses can negatively impact contractors in multiple ways including project delays, liquidated damages, reputational risks, rework costs, etc.

Water damage can have a direct financial impact with losses to building, materials, tools, and equipment. It can also present a liability to the business. Liability claims can originate from both ongoing jobsite operations and completed work.

Who’s at risk?

Contractors working directly with water and around pipes such as plumbing and HVAC are at increased risk of water damage claims. Nationwide’s internal claims data confirms this and shows nearly 60% of water damage claims fall within these trades.3

Contractor risk for water claims.

However, that still leaves around 40% of claims being associated with a long list of trade contractors; many of these not working directly with water at all.3 Any contractor working around piping, fire sprinkler systems or using valves could be exposed and should be prepared to prevent and respond to water damage losses.  Even contractors involved with work outside of the building, such as grading land or excavating can be exposed to a potential water damage loss.

What to do

Awareness and planning are key when working around pipes and sprinklers, behind walls (carpenters, electricians, etc.), under floors and underground. To be successful, contractors should conduct a review of 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.

A formal water damage mitigation program specific to the construction industry can help contractors prevent a water loss from happening or mitigate its impact to their project and their business.

Nationwide has a customizable Construction Water Mitigation Program (CWMP) that is designed to be a guide to help contractors create a customized plan or supplement their existing plan.

Construction Water Mitigation Program