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Staying Above Water

by: Kirk Chamberlain
Here’s a scenario that’s been known to play out in one form or another at any number of construction sites: workers carrying a large ladder accidentally knock off sprinkler heads that had earlier been hooked up. They are a planned protection against fire, but pose a risk for flooding as a shut-off isn’t yet available. Thousands of dollars in damage are the result.

When it comes to construction site security, flooding and water damage cause more headaches – to contractors and insurers alike – than vandalism or even thefts. “Water” is the new “fire” with respect to underwriters’ leading concerns related to builders risk projects in particular. As one of the top drivers of builders risk claims, it makes mitigation strategies a top priority.
Behind the Trend
A variety of factors are behind this worsening trend for commercial and residential projects alike.

Climate change is partly responsible, having caused a 20 percent increase in bad storms in North America over the last 50 years. This year, structural damages from flooding in the U.S. alone may reach $13.5 billion – and are predicted to grow by 25 percent annually by 2052, to $17 billion. Canada is experiencing the same trends, with $1.3 billion (Canadian) in annual damages predicted.

But other factors can add to the risk. Incomplete building encapsulation. Poorly installed windows or siding. Roofs that are temporary or incomplete. Frozen pipes or sinks and hoses left running due to lack of monitoring. There also is a general failure by some contractors to comply with their own contractual site security and surveillance requirements. And bigger picture – deteriorating infrastructure – which can cost industry more than natural disasters.
Have a Plan for Both Pre- and Post-Construction
Preparedness is what clients and insurers want to see. Getting it right before construction starts will avoid a lot of problems. But builders should keep an eye on the potential for post-construction flooding issues as well, that might pose a liability. 

A plan for controlling water issues during construction will enable builders to better manage their builders risk claims, but also avoid costly project delays. Time is money. The prospect of Hurricane Ian’s landfall last year sparked a flurry of action among Florida’s builders as they acted to protect sites against the damages of wind and excessive. One builder with 25 projects across the state expected Ian to delay many projects by at least two weeks.

Certain builders risk insurers may offer preferred pricing on the policy to builders that provide a well-documented water damage mitigation plan. In fact, most carriers have highly detailed requirements for such plans. Some are also incorporating “penalty” provisions in builders risk policy forms if contractors fail to exercise prudent water mitigation strategies.

Key Elements of the Water Mitigation Plan
Here are some of the basics that every contactors’ water mitigation plan should cover to ensure water risks are considered and to minimize water damage losses: 

Pre-Construction Risk Assessment
It’s key to understand any vulnerabilities to external water infiltration problems before the project starts. This should be a thorough process that includes a detailed description of the project, specific areas around the site that pose exposure, mitigating risk factors and any historical losses at the site. The assessment also should account for safeguards against.

Commonsense Scheduling
The plan should also stipulate timing for when certain elements of the project are installed to offset risk. For example, finished products such as drywall and flooring should be scheduled after the building is watertight – window and door openings are closed and the roof is secured. One good practice is to plan to potentially have temporary roofs available, especially if work on a permanent roof is delayed. 

Detection Solutions
Whether a human or a technology solution, an approach for spotting issues, especially after hours, is important. Security guards should be trained on what to watch for and how to shut the system off. Internet of Things (IoT) technologies improve site security in general (like motion detection devices) but smart devices can detect water flow and send alerts when water usage deviates from norms. Even better, some carriers will underwrite some of the costs of smart solutions for such purposes.

Pre-Emptive Measures During Construction
One best practice is to identify and resolve all water issues by maintaining a punch list that’s reviewed regularly and where issue resolution is required. Others involve specific trouble spots, especially those that could be laid at the builder’s door after construction. Regular testing is important to heading off problems – of representative portions of the building envelope and of roofs, once completed, for water tightness. Further, final, “just-in-case” inspections/pressure tests should be conducted before piping systems are charged with water. Also important is ensuring snow and ice don’t accumulate; and identifying water shutoff valves on each floor.

Field-Based Data Capture and Management Reporting Apps
Contractors would also benefit by leveraging new technology platforms to create a “real time” feedback loop. This would provide key project stakeholders (owners, contractors, and insurers) with better visibility and confirmation of site security compliance.

Losses stemming from water damage can include direct and indirect property damage, debris removal, rework and increased reconstruction costs, delay penalties, lost profits, and reputational damage. Understanding and anticipating the full range of water issues from the outset makes a big difference in a contractor’s ability to contain water damage losses so projects can be delivered on time and on budget.

Kirk Chamberlain currently serves as an Executive Vice President and head of the global construction practice at insurance brokerage Hub International. His background comprises more than 30 years of leadership roles within the construction large capital projects sector as a broker, risk manager, underwriter and risk consultant, working with a wide range of public and private contractors, project owners and developers, and their legal and financial advisory teams.

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