When Every Minute Counts: Taking a Holistic Approach to Water Damage Risk

Some of the most disruptive property losses do not begin with a catastrophe. In the case of water damage, it often begins with something routine like a failed pipe, a leaking appliance, a malfunctioning HVAC system or another everyday building issue. However, what may seem like a mundane problem can quickly become a serious loss if the water is not detected early or reaches critical systems.

This is why water damage remains such a significant property exposure. Across CNA’s Commercial portfolio, non-weather related water losses have been the single most common source of property loss, accounting for roughly 25% of property losses over the past five years.

The frequency is only part of the story. What makes these losses especially challenging is that severity is rarely driven by one condition alone. A combination of factors, including building size, occupancy, location of equipment, timing and speed of detection, can all influence how far the damage spreads and how significantly operations are affected.

Two key response actions emerge as the most direct impact on loss severity:
 

1. How long it takes to detect and stop the water
2. The equipment and infrastructure exposed before the water is contained

Understanding how these factors work together is critical for organizations looking to build more resilient property programs.

Interconnected Exposures Shaping Water Damage Severity

It shouldn’t come as a surprise that many of the most severe water losses occur in buildings that are lightly staffed or unoccupied. We often see these losses emerge in office buildings overnight or on weekends, when fewer people are around to notice a problem and respond quickly. While in occupied buildings there is a greater chance that someone will spot a leak and escalate it before the damage spreads, knowing there is a leak is only part of the equation. If they don’t know how to shut off the water, or can’t quickly reach someone who does, valuable time can be lost.

Building height compounds the challenge, particularly in buildings over eight stories. In a high-rise, water from an upper floor can travel vertically and laterally, affecting multiple floors in a short amount of time and potentially increasing the scope and severity of the damage.

Severity is also driven by what sits in the water's path. Replacing drywall, flooring or finishes across several rooms can be disruptive, but these are not nearly as costly as electrical and mechanical damage. A very different loss develops when water reaches elevators, electrical switchgear, boilers, mechanical equipment, servers or other critical infrastructure.

Not only are those systems expensive to repair, they carry long lead times that may result in long-term business interruption. An elevator down in a 40-story office building causes far greater interruption than a few damaged walls in a hotel. This interruption can become as significant as the physical damage itself.

Build a Response Capability, Not Just a Plan

The challenge is not just identifying one source of water risk. Organizations need to understand how their building, operations and response capabilities interact. This provides the foundation for determining where controls are needed and how quickly people must be prepared to act.

A written response plan is an important starting point, but it is only effective if people can put it into action.

Know the Property Before the Loss

Water damage mitigation should begin with a clear understanding of the property. The longer the water flows without intervention, such as an automatic shutoff, the larger the loss. Property managers and building maintenance teams should know where major water sources, critical equipment and shutoff valves are located, and, just as importantly, how to operate those shutoffs quickly when a leak occurs.

Anticipate Inconvenient Timing

Water damage is never convenient and an incident outside of normal business hours adds to the inconvenience. Plans should account for who receives an alert overnight and on the weekends as well as who is tasked to respond. The people responsible should have access to the mechanical room and a clear understanding on how to shut the water off.

Tapping Technology for Protection

Technology can add another layer of protection. Remotely monitored water sensors can provide early notice of leaks or abnormal water flow, including when a building is lightly staffed. Where appropriate, active systems can go a step further by automatically shutting off or isolating the affected water supply.

Through our allied-vendor relationship with Alert Labs, a provider of IoT water-sensing technology that offers leak detection, CNA policyholders have discounted access to remote monitoring and remote water shutoff capabilities. We have seen firsthand the bottom-line impact this system can have on water damage claims, significantly reducing time to detect the source.
Technology, however, should be part of a broader mitigation strategy rather than a standalone solution. An alert is most valuable when the people receiving it know what to do next.

Combining appropriate detection technology with clearly identified shutoffs, trained personnel, regular maintenance and a tested response plan can help shorten the time between detection and action.

Turn Losses Into Lessons

After a water loss, organizations should look beyond what failed and ask why the event became as large as it did. Whether it be slow detection, inaccessible shutoff, employee knowledge or equipment reached, those lessons can inform the next round of risk-control decisions.

Water damage may be common, but severe outcomes do not have to be inevitable. The more organizations can shorten the time from failure to detection to shutoff, while protecting the systems that matter most, the better positioned they are to keep a manageable water event from becoming a major business disruption.

Water damage is just one of the many exposures shaping today’s property risk environment. CNA has long taken a coordinated approach across underwriting, risk control and claims, and CNA Touchstone Property™ builds on that foundation to address today’s increasingly complex property risks. The modern property solution features an admitted commercial property form built to deliver the coverage that matters, while helping policyholders understand exposures, prepare for potential losses and respond when events occur.