Recognizing the Damage Caused by Water Leaks

Many home losses experienced by business owners demand water damage brought on by leaky pipes. Water can be very destructive whether it seeps out of a loose fitting or gushes from a ruptured main. Fortunately, many types of water leaks are insured by a commercial property coverage.

What's Covered
Most commercial real estate policies pay damage to covered property caused by any danger that is not specifically excluded. While land coverages have a broad water exception, the exception applies chiefly to flood and related perils such as surface water, waves, mudflow, and the flow of a body of water. It makes no reference of leaky pipes.

1. Water Damage From Sudden Events
Property damage brought on by water leaking from a broken pipe or appliance (like a water heater) is generally covered under a property policy if the damage occurs abruptly. For example, assume that a supply line to a water fountain in your workplace suddenly ruptures. Leaking water damages the floor close to the water fountain. Assuming your property coverage comprises building coverage, it must cover the cost to replace the damaged flooring.

Property policies cover sudden water leaks from fire resistant systems. For instance, an employee of yours is positioning a ladder on your workplace to change a light bulb when he accidentally hits a sprinkler head. Water pours from the damaged head, office furniture that is damaging. Your property policy should pay for the damage to the furniture.

Be aware that property policies normally don't cover damage brought on by water that backs up from a sewer, drain or sump pump. To make sure that such damage, you can purchase sewer backup coverage by means of another endorsement.

2. The Charge to Tear out and Repair Damaged Building
Many water pipes are situated inside ceilings, walls, floors, or other places that are difficult to access. As soon as an interior pipe is leaking, you may need to tear out a portion of the building to repair the pipe.

Fortunately, most home policies cover the cost of ripping out and replacing some portion of the building you remove to repair damage to the plumbing system or an appliance (like a boiler) from which water or another material has escaped.

In the water fountain scenario described above, assume that the supply line is located within a wall. To access the damaged pipe, then you need to get rid of a portion of the wall. Your policy should pay the cost to tear out and replace that part of the wall.

3. Damage to Fire Protective Systems
Property policies normally exclude the cost to repair any defect to an appliance or system through which water or other substance flows. However, they do cover the cost to repair or replace damaged parts of a flame protective system when the damage results in a discharge of water, powder, foam, gas, or another material used to suppress fires. Policies also cover the cost of repairing or replacing portions of the system that are damaged by freezing.

For instance, assume that you have a warehouse that's protected by a sprinkler system. A sprinkler head gets corroded and discharges water into your warehouse. The water causes damage to property saved on your warehouse. Your property policy should cover both the damage to your personal property and the cost to repair or replace the damaged sprinkler head.

What's Excluded
There are some types of water leaks which are typically excluded by commercial property policies. Included in these are slow leaks and particular leaks brought on by freezing.

1. Slow Leaks
A typical property policy excludes damage caused by water that leaks or seeps continuously for 14 days or more. This exception applies not just to pipe leaks but in addition to water in the kind of humidity, vapor or moisture. It is intended to eliminate coverage for water damage that results from poor maintenance rather than a sudden accidental event.

By way of instance, suppose a clogged drain line in an ac unit causes water to accumulate on the floor of your building. The leak is slow, so no one notices the water for several months. From the time the problem is found, the flooring below the air conditioner has suffered water damage. Because the leak lasted for over 14 days, your insurance company won't pay the damage to the floor.

2. Leaks Brought on by Freezing
A common cold weather hazard faced by business owners is a frozen water pipe. When a pipe freezes, water can slow to a trickle or not leak in any way. The pressure within the pipe from expanding ice can eventually cause the pipe to burst.

Many property coverages include a"freezing" exception similar to that found in the ISOproperty policy. The exclusion precludes damage caused by water, other fluids, powder or molten material that leaks or flows from plumbing, heating, air conditioning or other equipment brought on by freezing. This exclusion contains three exceptions. It does not apply:​

To fire protective systems: For example, you have a commercial building that includes a wet sprinkler system (meaning the pipes are filled with water). A serious cold spell strikes your area and several pipes in the ceiling freeze--one of those plumbing pops, causing water damage that your office furniture, computers, and other personal property.
If you do your very best to maintain heat in the construction : For example, you have a warehouse that is heated during the winter season. A power outage causes the furnace to shut off, and a plumbing pipe freezes--the pipe bursts, causing water damage to your equipment and stock.
In case you don't keep heat in the construction, but you do drain the gear and shut off the water or other liquid distribution : For instance, you have an unheated building which you use for storage. Before winter came, you emptied the water heater and provide lines. Unfortunately, some water remained in the hot water due to an undetected clog. The pipe froze and then burst. Leaking water caused damage to land you stored in the warehouse.
Mold Damage
Pipe leaks may lead to mold. Many property policies exclude damage brought on by mold(typically called alopecia ) but add back a limited amount of coverage.