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Evaluating industry guidance on water damage risk management

Introduction by the Chair and host Dirk Vennix, CIRIA CEO

CIRIA has a proven track record of developing communities of practice to support industry good practice and performance improvement. Our independence, industry reach, expertise and facilitation have brought people together to further the aims and objectives of these communities. We run specialist contaminated land networks and a practitioner community that provides a range of events, awards and resources for those involved in delivering local flood risk management.

The insurance and construction sectors have a vital role to play in managing flood risks and other issues. Increased collaboration and understanding amongst practitioners are needed to improve the management of risk from construction activity. After extensive consultation with insurance providers, clients, contractors and consultancies CIRIA has launched and developed a new Community of Practice.

This CIRIA network brings together practitioners from construction and insurance sectors aimed at improving the management of risk and financial performance. CIRIA will continue to deliver more focused collaboration and enhance knowledge transfer in risk management over the next two years. The community has held a series of network events and provided integrated resources within one point of reference. There is also a growing network on Linked in called Managing Construction Risk. This new community of practice has been looking at some of the challenges related to contract works, project insurance, design risk and PII.

This event built on last year’s webinar which covered the challenges and practical solutions of managing the risk of water damage. On July’s webinar we heard for the first time from the authors of trade body guidance and how this is being used on site. We also got the perspectives from clients, T1 contractors and brokers.

Experience with Construction Industry Risk Engineers Group (CIREG) guidance on managing water damage risk by co-author Mark Redding, Vice Chair and Secretary CIREG and Risk Engineer UK, Protector Insurance

Mark Redding provided some background on CIREG’s advisory guidance which was launched 15 years ago and is now in it’s 5th edition now (Managing Escape of Water Risk on Construction Sites, September 2019). Insurers have adopted aspects of the guidance and it remains important as water damage is still the most prevalent case of loss on site. We know there are large losses but the industry is poor at sharing claims data. The most common factors for the losses, usually in high risk residential buildings, continue to be defective workmanship, untrained personnel, lack of onsite presence, lack of quality assurance, poor emergency response and lack of designing in measures should a leak occur.

Mark highlighted the general issue that “water risk” continues to be the “poor cousin” of Health & Safety protocols when it comes to managing risk on construction sites. This could be remedied by better risk assessment at design stage such as considering taking out unfavourable features. Fundamental to problem solving in this case is considering the competency of contractors and having mitigating measures in place.

CIREG’s guidance included a water management plan template and it was noticeable that more plans are being included in broker submissions although larger contractors are better at implementing them. However, they often looked like “cut and paste” jobs from the CIREG template and they lacked specific detail. The proposed installation of water management devices was getting some traction but there is still reticence to implement them.

There were also still challenges around risk assessments at design stage, competence and “responsible person”. Mark asked himself the question whether CIREG’s guidance had been successful. Had the advice avoided losses? It was hard to say but his conclusion was that current risk management practice revolved mainly around mitigation rather than prevention. There is a lot more guidance out there now and at least the industry is having a serious conversation about it now.

Experience with BESA’s TR60 Water Management Plan on managing water damage risk by co-author Nick Mead, Technical Director, Laing O’Rourke

Nick Mead explained the background to BESA’s TR60 plan which was aimed at the MEP world of sub-contractors and T1 contractors. It wasn’t a design guide. It tried to flag up the key water management risks to contractors as these services were often implemented towards the end of a project.

The storage of materials is critical as is the quality of installation. Temporary support and fixings installations should be treated as permanent installations and valve labelling is really important. Valves may need caps and contractors needed to make sure anomalies are avoided with filling and pressure testing.

When sub-contractors are commissioned, they should work to the main contractor’s standards. Most problems appear in the early construction stages. The main contractor develops their own plans but puts the ownership with the MEP sub-contractors. One of the things which needs to be checked is the temporary structures. Are barriers in place? Is there water escape provision? Designers should incorporate emergency isolation devices and allow for associated costs.

During the construction stage there are often issues with insufficient closure, pipe failures, joints not properly made, classic strikes to services and poor workmanship. A lot of these issues could be prevented by quality assurance and risk management. The risk register should catalogue the risks throughout the building and show where the water will go. Emergency plans should have drawings and out of hours personal details in it. Leak detection, shut off and alarm facilities need to be covered too. Managers should be assigned to manage emergency procedures per floor/zone and make sure documents are kept updated. It is also important that security guards get quality management controls and training. 

Client perspective from Veronica Flint Williams, Contract and Risk Manager, Environment Agency

Veronica Flint-Williams welcomed the guidance and emphasised the need for making the risk of water a shared risk in the design and construction phases of the client’s asset management cycle. There should be no surprises to clients and insurers and collaboration needed to be strengthened. There was room for improvement in designing for these risks and imbedding processes in KPIs which clients should ask for from the outset.

Good practice in managing water damage risk by Tim Howard, Marsh Construction & Delay Practice Leader – Claims Preparation

Tim Howard provided an overview of when water claims happened and what good practice in response to a catastrophe looked like. He also talked about early engagement with the broker and settling an insurance claim.

In his experience most claims from building services resulted from escape of water on construction sites, usually at the end of the project. Weather ingress, disconnected pipes and rivers run off were the main causes. Good practice solutions included water watching, cut off valves, set alarms and seal penetrations and ducts, even temporarily.

What does a good response look like? Tim stressed early notification of an incident giving rise to a claim to the broker/insurer. It was critical that the loss adjudicator and broker were invited to site as soon as possible. Late notification could lead to increased damage and inflation as well as loss of evidence and opportunity to investigate.

The speed of response to the incident was vital. This included stripping out the damp load, salvaging what could be salvaged, forced or mechanical drying and recording the damage with surveys and photographs. Getting support throughout this process could make a difference, including forensic experts such as scientists, delay experts, accountants or claim preparation services. Ultimately it was important to scope and agree the damage and cost estimates through engagement with the loss adjudicator and broker.

Tim also talked about the importance of making sure the T&Cs of a building contract were insured until handing over the building for operational, purposes. The policy should identify the principal insured employees and make sure that the so-called “specific perils” for sub-contractors included escape of water. Definitions were also important. Did escape of water include rainwater run off/? Causation, potential for recovery and claim preparation costs could be covered.

Tim mentioned the contractual matrix. Terms and conditions between Sub-Contractor and other sub-contractors/suppliers had to be aligned to the main contract and all parties had to have access to the main insurance policy. It was not uncommon for this to be missed. This often left the sub-contractor at the bottom of the supply chain not covered for the costs of repair.

He had two final tips for concluding a successful claim. A simply put narrative often carries a claim. It had to be clearly linked to policy extensions. The second tip was to make sure forensic analysis underpinned every claim. Every cost has to be clearly linked to the damage and substantiated.

Q&A with panel of expert speakers

The panel discussed questions which came up during the presentations. When asked what the biggest issue was with water management plans Nick Mead said that they should be considered much earlier. This would enable risks to be designed out. Mark Redding added that we assumed things will fail so including post-loss mitigation measures such as water management devices were key in the design phase. Tim Howard believed prevention was more important than mitigation. Plans should be shared more with the supply chain. It would need a carrot and stick approach and a cultural shift.

Veronica believed the water management plan should be embedded in client’s standard specifications. It should be a given. Clients should set a baseline and reward excellent performance against the specification. More professionalism was also needed in the industry. This could be encouraged by sharing “foresight” and learning from combined experiences in the supply chain.