We’ve all heard the horror stories. A friend arrives back to their 22nd floor condo unit after a week on holiday in the sunshine. They walk in and throw their bags down, but instead of hearing the expected dry thud, they’re met with a ‘SPLASH!’ The floor is covered by a pool of water. The air smells damp and mouldy. A note has been pushed under the door (presumably to say something’s leaking), but the ink has run, and the paper is barely holding strong. The culprit … a burst pipe under the tap.
In a semi-detached house, the above scenario would be painful but manageable - as long as the homeowner has adequate insurance protection. In a condo setting, the above scenario could be absolutely catastrophic. A water leak in a condo unit will almost inevitably cause damages to the surrounding units. All of a sudden, it’s not just unit 2202 with the problem; it’s also 2201 and 2203, and the same units on the 21st and possibly even the 20th floors. Rather than one home being affected by a burst pipe, it’s nine or 10 homes.
Property and casualty insurer Chubb recently published its Third Annual Homeowners’ Risk Report, which found that when it comes to water damage, homeowners are concerned about property protection yet continue to take a passive approach to risk management. There were some inconsistencies that came to light between homeowners’ beliefs versus their actions. For example, roughly 90% of homeowners surveyed said are “very” or “somewhat” confident in their ability to check for possible damage or maintenance issues in their homes. But when it comes to water damage, less than 20% of respondents implemented any single water risk mitigation best practice.
While the Chubb survey is focused on homeowners in North America, the report findings ring true for condo or strata unit owners (also homes). People simply aren’t doing enough to mitigate water damage risk, which is particularly concerning as water losses are considered one of the most pressing issues for property insurers (both personal and commercial) worldwide.
“Being proactive is the best way to help combat internal water-related risks in the home,” said Fran O’Brien, division president, Chubb North America Personal Risk Services. “Without the proper preparation and necessary insurance coverages in place—particularly if a leak happens while you’re not there to handle it—property losses can be a significant source of unexpected out-of-pocket costs.”
One thing that can help to mitigate water damage claims is technology. There are many relatively inexpensive tools that condo unit owners and homeowners can purchase, such as leak detection alarms, flow meters, and water shut-off valves. These tools, when implemented properly, can assist in mitigating loss.
“It’s relatively inexpensive for all this technology to be adopted, and when you look at the increase in premiums that many condo owners are facing today, the cost benefit analysis is clear,” said C.J. (Chuck) Byrne, executive director & COO at the Insurance Brokers Association of B.C., and strong advocate of change in the B.C. strata insurance system. “There are very budget-able components that can be adopted for a whole building and for each unit owner. But that’s also a carrot and stick approach.
“We also need help from the insurers themselves. We need insures to publish their best practices, or their preferred products of how these two tools can be implemented to their satisfaction so that preferred policy terms can be offered. I think we’ll get to the point someday when these kinds of devices will be almost mandatory, but in the meantime, it would be helpful for insurers to offer a little bit of a carrot and stick approach, saying: ‘Here’s what you can do to protect yourself, here’s what’s going to make you more preferable as a risk, and here are the potential improvements in terms that we can offer.’”
One thing is absolutely clear, which is that proactive risk management is crucial. That’s what the Insurance Bureau of Canada (IBC) recently recommended based upon the work of its National Commercial Insurance Task Force. The IBC is recommending mandatory education for strata and condo board councils on best practices that would enable them to operate their stratas by maximizing resources and reducing risks – aka, proactive risk management.
In terms of condo or strata building water risk, the condo unit councils, the accountability councils, and the unit owners, have to make a collective effort to inoculate their buildings from frequent and/or any water-related loss. As Byrne pointed out: “There’s a lot that can be done with people in the building pulling together to think through that.”
