It happens all the time in commercial buildings, pipes leak or burst. Water damage from the plumbing can be severe. Replacing drywall, flooring and sub-flooring can get very expensive, not to mention the repairs to the plumbing. Is the damage covered by commercial property insurance? What about the plumbing? The answer lies in the definitions of the insurance policy itself: what is considered an “accident” in commercial property insurance?
What Causes of Plumbing Problems are Covered By Property Insurance?
In property insurance, an accident is defined as a sudden unexpected event which causes damage to property. Bursting pipes would certainly qualify as sudden and accidental. The problem many insureds face is in the leaking pipes. Depending on the details, water leaks are usually excluded. The reason is that such plumbing failures are more of a maintenance problem that really arising from an accident.
What Types of Property are Covered?
When plumbing problems are covered by a property insurance policy, the coverage is typically for damage caused by the plumbing failure, but not for the actual plumbing. Again, it depends on what is determined to be the cause of the failure. If it is determined that the plumbing probems were due to maintenance failures or normal wear and tear, the pipes themselves are not covered. If the plumbing burst due to another insured cause such as fire or wind damage, then the pipes would be covered.
What About Pipes Running Into or Out of the Building?
Property insurance only covers property above the bottom floor of the structure. For example, property in a basements or underground parking garages are covered by insurance. Underground pipes, unfortunately, are not. Therefore, for underground pipes, the property owner is responsible for all damage.
Is There Insurance Coverage for Backup of Sewers or Drains in Commercial Insurance
Unfortunately, coverage for sewer backup is not covered by business insurance. It is possible for homeowners to buy this protection on a personal insurance policy, but not on commercial property insurance forms. For this risk, like underground pipes, a building owner is on their own.
Water damage in buildings should always be addressed quickly to avoid more costly remediation of mold or dry rot in floorboards or framing. If there are any questions about whether or not the damage is covered, a claim should be filed as soon as possible. Even if the insurance company files a reservation of rights on the claim or outright denies it. Commercial insurance is vital to the financial health of any business. It is advantageous for owners or managers to speak with an experienced insurance agent or company representatives to fully understand all the possible coverage and exclusions in small business insurance policies.
