What Impact Does Water Damage in a Commercial Facility Have on Property Insurance?
Blog Summary: SERVPRO of Logan Square/Humboldt Park helps businesses understand the impact of water damage on commercial property insurance.
At any time and without warning, a commercial water damage disaster can strike, filling the business owner’s life with stress and worry. The team at SERVPRO of Logan Square/Humboldt Park lives and works in this community. When local businesses suffer water damage, fire damage, or smoke damage due to any size disaster, the SERVPRO professionals are the premier cleanup and restoration company in the region who can quickly restore the damaged commercial building.
Businesses and institutions were confronted with water damage challenges in 2020 that will extend into the foreseeable future due to labor shortages and poor quality of workmanship.
According to a corporate-level manager overseeing the large property loss division for a major insurance company, “Water damage is one of the largest loss causes we deal with in the commercial insurance industry, yet only a small percentage of clients have a formal Water Damage Prevention Plan in place. Those with higher exposures should have plans to both prevent an incident and to mitigate the severity of loss should one occur.”
Common Causes of Water Damage in a Commercial Setting
Aging plumbing systems and sprinkler systems that have been poorly or improperly maintained can cause significant property damage resulting in disruption of business operations. Sprinkler system discharge causes more severe damage to multi-story buildings where the water can rapidly travel from floor to floor. Plumbing failures, though more gradual, can also cause water damage across many floors of a building. Both sources of water commonly damage physical property and the contents, including furniture, flooring, equipment, product, and raw materials.
The severity of the loss depends on the origin of water, how swiftly the issue is recognized, and the type of contents that are damaged.
Damage analysis reveals that small amounts of water can cause significant losses. Examples include:
- High-value equipment such as electronics, computers, or circuit boards
- The vertical risk loss multiplier - Water damage to multiple floors could involve demolition, repair, and replacement of flooring, ceilings, and walls on multiple floors.
- Property evacuation that results in litigation, the forfeiture of rental income, or the departure of tenants
- Production and fabrication equipment - Production interruptions incur direct and indirect losses such as short-term revenue interruption or the loss of customers. Customer acquisition costs, which can be substantial, are often overlooked or underestimated by businesses.
The scale of these losses often hinges upon a business’s preparation to respond to the disruption. Lethargy translates into losses. A rapid, focused response reduces losses.
Plan to Succeed When Faced With a Commercial-Sized Water Damage Disaster
Effective protection and mitigation strategies to protect against interior and exterior water damage encompass simple but critical action steps.
- Identify and understand the nature of exposures to damage.
- Take proactive measures to avoid water damage to production/fabrication machinery, product inventory, raw materials, tools, electronics, data storage stations, etc.
- Schedule regular building maintenance that addresses the upkeep of potential sources of water damage, such as plumbing and sprinklers. A component of this maintenance protocol should include searching for hidden water damage or deterioration resulting from a minute or slow water intrusion.
- Swiftly execute well-planned and practiced remediation strategies in the event of a water intrusion event.
How Are Insurance Companies Responding to Commercial Water Damage Claims?
Many insurance companies are implementing approaches that facilitate the creation of a culture in the commercial setting that fosters prevention, identification, and rapid response to stop the water intrusion and repair the damage before the occurrence of advanced secondary water damage, including mold and mildew infestation.
Achievement of this worthy goal includes the provision of risk engineering for clients. Businesses and industries will be subject to more stringent compliance requirements for coverage. Ongoing facility maintenance and the implementation of water leak detection technology may be components of these tighter requirements. Finally, business and industry may experience increased coverage premiums for compliance deficiencies.
The professionals at SERVPRO of Logan Square/Humboldt Park have formal training to recognize water damage liability exposures and consult with businesses regarding risk improvement strategies. Having a Ready Plan is crucial for every business.
SERVPRO of Logan Square/Humboldt Park is locally owned and backed by a nationwide system of qualified franchises. Being centrally located in Chicago means that the team is a short distance to any location in the community. The restoration experts specialize in residential damage restoration, commercial damage restoration, and large-scale disaster cleanup and restoration.
For more information about commercial water damage restoration in Logan Square/Humboldt Park, Chicago, IL, contact the office by phone at (773) 873-6300.