087: The Creeping Effects of Water Damage with Miller Insurance
Why is water damage so significant in construction sites? Why does it create so many issues for insurers? How can we raise awareness of the prospect of water damage and reduce its incidence? In this episode, we’re discussing water damage, a rising problem in construction insurance and one of the leading causes for claims in the UK. It has caught the eye of insurers, who are doing all they can to make sure that construction companies recognise the issue. We’re thrilled to be speaking with returning guest Steve Cox and Jason Baston, who work in the construction branch of Miller Insurance. In conversation with Boston Tullis’ Sarah Myerscough, they explain how water damage can create huge litigious and reputational issues for clients, in addition to astronomical costs. Quote of the Episode “[Projects are] built on the understanding that there would be this revenue stream attaching to the project as soon as the building was complete and could be opened. And so now we've got this situation where that income is not going to be earned for quite some time [in the event of water damage], potentially a number of years later. And so, there are enormous losses, straight away from the revenue that was intended and part of that financing for the original construction project.” The costs that can be accrued by water damage are multifaceted and underappreciated. Much like the prospect of water damage itself, it is often not recognised just how significantly this can impact construction companies in many different ways. Water damage doesn’t receive a major profile, and it is generally not perceived as a major incident to the same extent as a fire, for example. This is perhaps due to the fact that it is less visible. As a silent damage event, it doesn’t receive press attention, but can nonetheless be responsible for major losses. Key Takeaways Greater awareness of the various consequences of water damage is absolutely essential for both insurers and construction companies alike. When we think of water damage, our minds are often first flung to water ingress - dramatic scenes of floods which only rarely appear on the news. We often fail to think of the water within a building causing damage, but it occurs very often on construction projects, and at considerable costs. During the episodes, Steve Cox reflects on a series of London fires in the late 1980s and early 90s, after which the insurance industry banded together to create awareness of fire on construction sites, forming the Joint Code of Practice (JCOB) for the prevention of fire on construction sites. This strategy was hugely successful in raising awareness of fire damage, and contributed significantly to the reduction of fire incidence. A similar strategy unfurled in recent years as water damage became more prominent. A group called Cireg have established a code for water management from a risk management perspective, linked in the resources below. However, this has not (yet) raised the profile of water damage, and it remains a hugely costly problem for insurers and construction companies. This is particularly significant in light of modern manufacturing processes, namely MMC. When identical units are built off-site, and subsequently put together on-site, if there is a problem with the water management in these individual units, it is replicated throughout the entire building. As such, what might have been a relatively minor water damage incident under traditional construction methods becomes multiplied a hundred-fold. Best Moments/Key Quotes “Water damage, through a number of things, whether that be ingress of water onto a site, or into a building, or escape of water within a building, has actually become one of the leading causes for insurance claims in the UK, and certainly for insurance claims in buildings undergoing construction or renovation.” “On the one hand, the growth towards modular and modern methods has created some fantastic opportunities and improvement in th