Increased risk of 'escape of water' incidents

Norwich Union said it had seen a significant increase in "escape of water" recently, and that the damage and cost to businesses from such events could be just as devastating as a fire or flood.

In the past such insurance claims have been associated with bursts from frozen water pipes, but other weaknesses have emerged. For instance, Norwich Union's property risk manager Allister Smith said it was increasingly common for plastic piping to be used in the construction of buildings, not least because of their ease of installation and reduced cost.

"However, losses relating to this indicate that these modern plumbing methods might not be so robust and are leading to an increase in escape of water claims," he told us.

Plumbing has traditionally involved metal piping and welds, but modern methods incorporate plastic push-fit joints. Pressurised water systems tend to find weak spots in any plumbing system, which are often at joints, and the downside to these modern techniques is that the places where pipe sections meet are often not sufficiently tightened, causing them to detach under pressure.

"Losses often occur when the owners or occupiers are away from the premises, during the night or at weekends for instance," said Allister. "This means that the leak goes undetected for some time and at 3bar pressure, approximately 300 gallons of water would run from a 22mm pipe in 10 minutes – resulting in substantial damage and cost."

'Be prepared'

Allister explained that many of the largest insurance claims had occurred in high-rise buildings where escape of water had occurred on an upper floor.

"Water will find the path of least resistance - tracking along channelling for services, down stairwells or lift shafts. As a result, damage can be widespread throughout a building, with damage often emerging some distance from the source of the original leaks."

He described a recent case involving a 17-floor apartment block. A leak occurred overnight in one of the upper flats and was only discovered after two hours. Being a modern block, many of the flats contained stud partition walls, which can be particularly vulnerable to the effects of water.

Carpets had to be removed, together with skirting boards and wooden flooring, and the initial repair estimate was over £1 million.

Allister suggested that businesses prepare themselves for such incidents, as this could greatly limit disruption and cost.

"Having a business continuity plan in place is key to minimising the effects and getting the business up and running again as quickly as possible."

He added: "Sums insured must also be accurate, incorporating not just the potential cost of the damage to the building, but also alternative accommodation costs or the loss of rent for a property owner whilst the property is dried out and reinstated for instance."