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commercial water damage

What to Do When You Experience Commercial Water Damage

Water damage can take a serious toll on your business operations. Commercial property owners and renters can lose months of revenue due to the impact of water damage, which can result in mold growth and other health risks, electrical fires, and damage to the structural integrity of the commercial property.

In this blog, we will mention the main causes and what to do when your property faces commercial water damage to minimize downtime.

What Are the 7 Most Common Causes of Commercial Water Damage?

Knowing the source of water damage is essential in the water damage restoration process and in preventing further damage.

  1. Roof Leaks: 15% of all commercial water damage insurance claims are credited to roof leaks. These leaks cause ceiling damage that can be expensive and time-consuming to fix.
  2. Plumbing Issues: Leaks and burst pipes are among the biggest causes of water damage in commercial properties. Issues like old plumbing, corroded pipes, freezing temperatures, and faulty connections are often the main cause. They can lead to unexpected flooding, requiring water damage restoration.
  3. Sprinkler System Malfunctions: Sprinkler systems are important to protect commercial buildings from fire. However, they are responsible for 14% of commercial water damage loss.
  4. HVAC System Issues: HVAC units cause about 8% of all water damage losses, primarily from leaks. Clogged drains, frozen evaporator coils, and improperly connected pipes are all causes for water leaks.
  5. Water Heater Failure: Water heaters have around 7-10 years before they start malfunctioning and causing water damage. Replacing the heaters before they start causing problems is recommended.
  6. Appliances Malfunction: Leaks from appliances, like refrigerators, dishwashers, and washing machines, can accumulate, causing water damage. These leaks can result from faulty hoses, seals, and internal components.
  7. Natural Disasters: Floods, hurricanes, and heavy rains can cause large volumes of water to enter business property. Flood damage can overwhelm the building’s structure and drainage systems.

What to Do If Your Business Suffers Water Damage

When water damage occurs, you may get overwhelmed and frustrated. Still, taking the right steps to fix the damage and make the right financial decisions is important.

If you have commercial property insurance, you’re in luck. Your insurance company can cover all the repair costs, provided that you follow the next steps.

Step 1 – Shut Off Water and Power

The first thing to do is identify the water source and stop it from causing more damage. For instance, turn off the main water supply or address the specific issue, be it burst pipes or malfunctioning appliances.

Then, a very important thing to do is to turn off all electrical sources in the affected areas to avoid any hazards resulting from water meeting electricity.

Step 2 – Contact Emergency Restoration Services

Contact emergency water intrusion and restoration services to help you minimize the damage by extracting the water and drying the area. This is one of the most important preventative measures to stop mold growth. Skip this step if you plan on cleaning it up yourself.

Step 3 – Document the Damage (Photos + Inventory)

If you have insurance policies that can help with repair costs, it’s crucial to document the damage caused by the water leaks.

Take comprehensive images and videos before the clean-up to help with the water damage insurance claims.

Make a thorough list of all the damaged items, including their descriptions, approximate values, and the extent of the damage. This will help streamline the insurance claims process.

Step 4 – Notify Your Insurance Provider

Report the incident to your insurance company as soon as possible, providing the documents you’ve gathered.

If you have questions about your policy details, like which damages are covered, the claim procedure, or any deductibles or limitations, contact your insurance agent. They would provide all the answers you need.

Step 5 – Begin Restoration Process

After notifying your insurance company, it’s time to start the clean-up process. If you plan on DIYing it, use pumps and wet/dry vacuums to remove standing water. The quicker you do this, the less damage the water can cause.

Then, use industrial fans and dehumidifiers to dry out the affected areas thoroughly to prevent mould growth.

Afterwards, discard the damaged item that cannot be salvaged and begin cleaning and disinfecting the rest of the affected items.

Most importantly, whether you DIY it or hire a professional service, it’s important to monitor the affected area for mold. Mold takes time to cause damage, but the damage can be substantial. Also, mold damage isn’t covered by insurance policies.

Does Commercial Property Insurance Cover Floods?

Flood damage is a high risk in Florida, so it’s not covered by commercial property insurance. If your area is prone to flooding, get a separate flood insurance policy for more protection. Flood insurance covers rising water from natural disasters, like hurricanes, river overflows, and heavy rainstorms. Installing flood barriers is also a good measure to prevent flood damage.

What Types of Insurance Cover Commercial Water Damage?

The most common types of insurance that cover business water damage are commercial property insurance and business interruption insurance. Commercial property insurance covers damage that is accidental and sudden. That means that anything that happens over time or is a result of an intentional action is not covered by insurance. Examples of covered damage include:

  • Burst pipes or HVAC system leaks.
  • Sprinkler system malfunctions
  • Water damage from fire suppression efforts
  • Accidental overflow of water from appliances
  • Roof leaks caused by wind or storm damage

Business interruption insurance covers water damage if it causes the business to shut down its operations for a while. It covers lost income, ongoing expenses like payroll and rent, and temporary relocation costs. The payouts largely vary based on income loss calculation, policy waiting period, and maximum duration coverage.

How Much Does Insurance Pay for Water Damage?

The water damage insurance claim payout varies, depending on the scope of damage, business size, industry, and the policy’s limits. Minor damage that only requires a cleanup and minor repairs costs anywhere between $5,000 and $25,000. Incidents with moderate damage that require interior repair and equipment replacement may range between $25,000 and $100,000. Payouts for severe structural damage may go up to $500,000, especially for large companies.

How Much Is Commercial Water Damage Without Insurance Coverage?

If you don’t have insurance, your business will suffer greatly from water damage. Insurance pays for most of the expenses of damage repair, including structural damage repair, equipment replacement, water extraction and clean up, and lost revenue. In many cases, depending on your coverage limit, you will have to pay the deductible only. Here’s how much water damage costs if you don’t have insurance.

  • Water extraction can cost anywhere between $2000 and $20,000.
  • Structural repairs range from $5,000 and $75,000, depending on the extent of the damage.
  • Mold remediation costs between $10,000 and $50,000.
  • If you’ve lost equipment and inventory, you may have to pay up to $150,000, depending on the value of lost items.
  • A 2-week closure can cost your business between $10,000 and $100,000, depending on your revenue.

What Types of Water Damage Aren’t Covered by Commercial Property Insurance?

  • Wear and tear: Universally, normal wear and tear is never included in insurance coverage. Any damage that happens gradually over time is excluded; insurance companies expect business property owners to perform regular maintenance and replace aging equipment.
  • Mold is only included if it’s a result of a covered claim and gets discovered quickly.
  • Flood water is only included if you have a flood insurance policy.
  • Sewer and pump sump backups aren’t included unless you have a sewer backup as an endorsement.

How to Prevent Commercial Water Damage

While accidents are inevitable at times, you can always minimize the chance of water damage if you follow these maintenance tips.

  • Regular inspections of your plumbing system help you stay on top of any issues and ensure proper drainage.
  • Install commercial water leak detection systems with sensors that alert you to leaks or moisture buildup.
  • Insulate your water pipes to prevent bursts in winter.
  • Train staff on what to do if a leak or flood occurs to minimize damage quickly.
  • Check your HVAC units to make sure the drain lines and filters are clean and functioning properly. This prevents overflow.
  • Repair cracks in walls, floors, and the foundation to block water entry.

Helpful Insurance Types In Case of Business Water Damage

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Commercial Water Damage FAQs

 

Who is liable for water damage in a commercial building?

It depends on the cause of damage and the lease terms. The property owner is responsible for structural systems, while tenants are liable for damage to their units or other people’s units.

Does commercial property insurance cover water damage?

Yes, if it’s sudden and accidental, like burst pipes or sprinkler malfunction, but it usually excludes flood damage, sewer backups, and long-term leaks unless you have specific endorsements.

What’s the difference between flood damage and water damage insurance?

  • Water damage insurance: Covers internal issues like pipe bursts or appliance leaks.
  • Flood insurance: Covers external flooding from rain, storm surge, or overflowing bodies of water. Requires a separate policy.

How much does insurance pay for water damage?

Payouts vary, depending on the coverage limits and scope of the damage, ranging from $5,000 to $500,000+, depending on damage severity, business size, and policy limits. Deductibles and exclusions apply.

Why should I get commercial property insurance for water damage?

Because water damage can be very expensive, and without insurance, you may face tens to hundreds of thousands in repairs, equipment loss, and lost revenue. Commercial property covers your building, items you own inside the building, and other items owned by others.

Why would a water damage claim be denied?

  • Neglected maintenance
  • Gradual leaks were not reported quickly.
  • Excluded causes like flooding
  • Damage that wasn’t addressed and prevented on time.

Can my business property landlord sue me for water damage?

Yes, if the damage was caused by your negligence or breach of lease, like not reporting a leak or damaging equipment due to improper use.

How long does commercial water damage repair take?

Depending on severity:

  • Minor damage: 3–7 days
  • Moderate damage: 1–3 weeks
  • Severe damage: 1–3 months or more

Will mold always follow water damage?

Not always, but mold can start growing within 24–48 hours if water isn’t dried properly. Quick cleanup is key to prevention.

What should I ask my insurance agent about commercial water damage Insurance coverage?

Ask your agent:

  • What types of water damage are covered?
  • Is flood, sewer backup, or mold included or optional?
  • What are my limits and deductibles?
  • Do I have business interruption coverage for water damage events?

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