The rising cost of escape of water claims

Price comparison website, Go Compare, has recently published a list of the most common categories of claims made on home insurance policies.

Excluding claims for accidental loss or damage to household items, claims for damage caused by escapes of water are the most common claims made by householders against their home insurance policy. Go Compare’s survey found that claims for damage and loss caused by escapes of water make up 25.81% of all home insurance claims, with 19,749 claims being made for escapes of water last year.

According to the Association of British Insurers (“ABI”), insurers pay out £1.8 million every day for damage caused by escapes of water. The severity of escape of water claims is also increasing. This could be linked to the increase in extreme weather events caused by climate change.

The causes:

Insurers will be keen to minimise their outlay on these claims. However, the sheer number of potential causes of escapes of water mean that this is a problem which is difficult to contain. 

Typical causes of escapes of water include:

• Poor installation of appliances: Appliances such as washing machines being plumbed into properties to a poor standard or using inadequate materials or fittings. People generally have more water appliances in their homes than ever before, including filter taps, fish tanks, and dishwashers. Newer properties tend to have more than one bathroom which increases the chance of an escape of water as there is more plumbing that could go wrong.
• Poor workmanship: If work to pipework serving properties is carried out to a poor standard, which often occurs due to costs pressures, properties can become vulnerable to escapes of water. Failures of push-fit fittings and compression fittings due to poor quality installation can cause pipe connections to come apart and water to escape. We have seen cases where too much acid flux is used to solder the joints of copper pipework together, causing corrosion to occur, and the pipework to eventually fail.
• Lack of maintenance: Wear and tear such as the corrosion of pipes and the failure to clear gutters is also a primary cause of damage. 
• Properties left unoccupied for lengthy periods: Travel is now more affordable than ever before, with more people required to travel for business purposes than 10 years ago and more people going on foreign holidays. This means that properties are more likely to be left unoccupied for long periods oftime. This can mean that tenants and homeowners are less likely to be aware of problems in theirproperties and routine checks such as boiler services may be missed.

Other causes include frozen pipes, pressure fluctuations, physical or mechanical damage, and blockages.

The potential damage:

The damage to residential premises caused by an escape of water can be significant, especially if the source of the problem cannot be easily traced and mitigating measures put in place.

The origin of escapes of water in residential apartment blocks can be more difficult to diagnose if there are many apartments in the block as it may be caused by failures in communal pipework or pipework in individual apartments. The problem can be compounded further if the apartment block is a high-rise building, meaning it is more likely that multiple apartments are damaged by a single escape of water rather than a single unit.

How can insurers' costs be minimised?

Insurers can minimise their spend on these claims by ensuring that action is taken promptly upon first notification of the loss. It is important that policyholders know where the stopcock in the property is to stop the water supply to the property in the event of an escape of water.

Insurers should ensure that as much information is obtained when a claim is reported to enable the loss adjuster dealing with the matter to understand how the escape of water occurred. This will allow the loss adjuster to reach a conclusion on causation much more easily and in turn, allow for a quicker determination of the extent of policy cover to be provided.

It is crucial that both residential and commercial policyholders are aware of how they can minimise their chances of an escape of water occurring at their property. We recommend the following steps are taken by insurers:

1. At policy inception: Insurers should gather as much information as possible about the property including its age, details about any previous extensions or modifications which would involve plumbing work, and when the boiler and its serving pipework was last serviced. This will allow insurers to more accurately assess the risk of an escape of water occurring and determine whether cover should be provided at all. 
2. Educate customers: Policyholders should be encouraged to insulate their pipes to minimise potential issues caused by cold weather. They should also be advised to deal with any issues promptly, even if they are minor. Policyholders should be educated on the potential consequences of failing to deal with such issues and policies should be written in such a way to contain clauses excluding cover due to poor maintenance.
3. Monitor contractors: Landlords of residential properties should ensure that there is an appropriate system in place to make sure that work undertaken by their instructed contractors is carried out to the appropriate standard. 
4. Regular inspections: Regular inspections of premises by landlords of residential properties to try to identify potential issues with workmanship, wear and tear, and damage will allow for early detection of problems which might result in an escape of water. The tenants of the property should also be encouraged to regularly check their properties for any issues.
5. Ensure that repairs following an escape of water are carried out to a high standard: When an escape of water occurs, it should be ensured that repairs are done to a high standard and using materials which are not just the cheapest, but the most likely to prevent a re-occurrence of the problem.  

It is likely that technology will be able to assist insurers in the future. Various companies have now released leak detection and suppression systems which can measure water flow into a building and identify residual water loss and leaks. With the advent of Artificial Intelligence, there is likely to be scope for technological advancements to help insurers lower the risk of escapes of water further.

Clyde & Co’s Property Damage Team advises organisations including multi-national companies, insurers, re-insurers, and brokers on liability claims, subrogated recoveries, and policy coverage disputes arising from escapes of water. Please get in touch to find out more about how we can assist you.