Internal Water Damage Claims – Flexible Hoses
30th September 2020
By Patrick Langan – Lanpat Pty Ltd
Recent reports from Insurers and Government agencies show water damage claims for homes and residential strata units have increased by over 70% in the past 5 years. They also note the average cost of each claim has more than doubled, to over $30,000.
Water damage claims can occur from external sources such as violent storms, heavy rainfall, blocked gutters, and damaged roofs. They also come from internal causes such as household appliances, faulty waterproofing, and burst pipes or hoses. When it comes to water damage claims, flexible hoses account for the greatest increase in the claim numbers and costs. These hoses can deteriorate over time and crack, causing significant water loss and damage especially if the owner is away from the premises at the time or worse still, on holidays.
Understanding what is covered by insurance
- Cover - Insurance Policies cover sudden and unexpected accidental loss or damage that occurs during the period of insurance. The policy also covers the reasonable costs associated with identifying and locating the source of damage and have varying limits of cover in relation to repairing any damage caused in locating the source of the escaping liquid.
- Your obligations - You are required to take all reasonable precautions to avoid or minimise loss, damage, or liability and maintain all premises, fittings, appliances, and equipment in sound condition.
- If you do not comply with your obligations the insurer may refuse to pay part or all of your claim.
The insurance market is currently hardening.
This means underwriters have less capacity for risk and are far more selective with the risks they will insure. They are more likely to decline to offer renewal or impose significant premium and/or excess increases if the risk does not fit their more stringent guidelines, or have had previous claims. It also means major claims are “more commonly delayed and often disputed” as underwriting profit comes under scrutiny according to law firm Herbert Smith Freehills in a recent Insurance News article.
The author was recently involved in a renewal where the client’s current insurer declined to offer renewal terms because the client had a single water damage claim in excess of $50,000 last year. Water had escaped from a faulty hose in the upstairs bathroom during the night causing significant damage upstairs, a collapsed roof downstairs, and destroyed the internal stairs which were made from compressed timber.
The account was marketed to a number of insurers and many insurers declined to offer terms. After reassuring the current insurer that the client had taken steps to mitigate further water damage claims renewal terms were offered and accepted by the client. The premium had increased by 46% and there was an imposed water damage excess of $5,000.
Other renewals where the client has had smaller multiple claims in the past 5 years have seen similar treatment. Risks that are poorly maintained will find it increasingly difficult to obtain reasonable terms for insurance cover or find that their claim may be reduced or rejected due to poor maintenance.
It is now more important than ever to maintain your risk in order to minimise damage and to demonstrate to the prospective insurer that all reasonable steps have been taken to mitigate loss or damage.
In the example above the Body Corporate manager was pro-active and engaged a plumber to inspect all the flexi hoses in the complex at the time of the loss. We were able to provide the underwriter with documentation from the plumber that all the hoses in the complex had been inspected and a number of hoses had been replaced. This is the reason why the underwriter reviewed their decision and offered renewal terms.
IT ALSO PREVENTED A FURTHER CLAIM. Why, because the plumber found a hose in another unit that was about to burst and would not even touch it until the water to the unit had been turned off. The unit owner was also about to leave for holidays so another major claim was prevented by replacing a $10 hose fitting.
There are a number of ways in which you can protect or at least mitigate internal water damage claims.
- If you manage a body corporate - include flexible-braided-hoses checks into your general maintenance program. My recommendation is to have them inspected by a licenced plumber every 3 years and have this documented for presentation to the underwriter.
- Lot owners or their property managers should regularly look for warning signs such as bulging and rust spots on the braided metal. Fraying and kinking are also potential signs of damage.
- Have licensed plumbers carry out all installations and work, no matter how simple the job appears to be. Make sure they follow best-practice recommendations like using the right length hose and using quality connectors.
- Use only flexible braided hoses that have a reasonable warranty period. Track warranty periods on your hoses so you can replace them within a reasonable, safe time frame. The collar of the hose will have an expiry date.
- Note if you store chemicals under the sink such as bleach and cleaning agents, your hoses could be at risk of damage well before the expiry date.
- Check around appliances such as dishwashers and washing machines and under sinks for any leaks.
- Repair cracked and loose tiles in the bathroom and ensure grout and sealants are intact. Signs of dampness, wetness, and rot indicate there are potential problems and should be repaired by a professional.
- Look for signs of leaking around toilets and bathtubs.
- Ensure your drains are not blocked. If you notice that the flow of water has slowed, clean the drain and the covering grill.
If you adopt these practices you will have a better chance of avoiding unnecessary damage, insurance claims, and time-consuming repairs to your property. Your risk will also be more attractive to potential underwriters and assist in obtaining competitive terms for your insurance program.
Dip. Fin. Serv.(Broking), QPIB
M. 0447 799 677
AR No. 1240016
AR No 1275978