Sponsored: Philadelphia Insurance Companies

We Studied 433 Burst Pipe Claims. Here’s What You Need to Know Before Winter Arrives.

Frozen and burst pipes cost businesses millions every year, but prevention is simple. Here’s how to identify your exposures and mitigate loss.
By: | November 13, 2018 • 6 min read

Winter is coming. For most of the country, that means freezing temperatures, snow, ice and all of the property risks that come with them.

“From 1996 to 2016, average losses for winter storms were about $1.5 billion per year for the insurance industry. The most expensive year for insured losses was 2015, at $3.5 billion,” said Peter Kim, AVP, Risk Management Services, Philadelphia Insurance Companies.

As recently as 2014, all 50 states were affected by freezing temperatures. Even if there is no snow, sleet or ice, freezing temperatures can be enough to cause damage from the inside out if pipes freeze and burst. At best, a burst pipe results in water damage to floors and carpeting. At worse, it can require a total building overhaul.

“Our average loss related to frozen pipes is $27,000, but our most expensive claim was $1.7 million,” Kim said. “People tend to get complacent about winter storms, but they can be extremely damaging. There’s very little awareness of the significance of the loss potential.”

Philadelphia studied 433 burst pipe claims to look for common risk factors and cost drivers. Here’s what risk managers need to know:

Building Characteristics Matter

Peter Kim, AVP, Risk Management Services, Philadelphia Insurance Companies

The size and age of a building impact its vulnerability to freezing pipes, as does the design and layout of the plumbing system.

Unheated attics were the most common cause of burst pipes. “Many people don’t realize there’s plumbing there, so they don’t think they need to heat that space or install insulation,” Kim said. The same goes for pipes in concealed spaces between interior and exterior walls.

Sprinkler systems also increase loss potential. Philadelphia’s claims were split 51/49 between sprinkler and domestic water pipe losses, and sprinkler claims were 33 percent more expensive.

“The water is coming down from overhead, affecting a larger area, whereas with domestic pipes, there’s not a direct outflow onto the items and materials below the leak. Sprinkler pipes are also larger – anywhere from one to eight inches in diameter — and have more forceful water flow,” Kim said.

Sprinkler pipe bursts are especially damaging in high-rise, multi-unit buildings.  Water damage does not stay contained to the floor where the pipe burst. Depending on the amount of water released, it can damage every unit below it.

“In our largest loss, a pipe in the fire sprinkler system burst on the top floor of a 19-story building, damaging the drywall, carpeting and lighting in about 200 units,” Kim said.

Age is another contributing factor. Claims from older buildings also tend to be more severe because they often require code updates during cleanup and repair process.

“We’re obligated to help the property owner bring the building up to date. We can’t just fix the pipe issue and move on,” Kim said. Renovations can be especially expensive if they include structural changes needed to improve accessibility and ensure compliance with the Americans with Disabilities Act.

This type of construction is what resulted in Philadelphia’s second-largest loss. “We had a fairly typical pipe burst in the attic of a building, but it was very old and needed multiple code updates, which ran up the cost significantly.”

Complications During Cleanup Drive Up Costs

Certain environments are more difficult to return to their pre-loss state. Factors like the presence of contaminants, specialized equipment, and the need to relocate building tenants can all complicate cleanup.

“Any contaminant encountered during remediation poses challenges and will make repair more expensive,” Kim said. Facilities like processing plants that regularly deal with waste will have to ensure that any water flow from a burst pipe does not carry the pollutants into the environment. Cleanup will require more care.

Repair of damaged walls and ceilings could also reveal asbestos in foam insulation or patching compounds, which requires removal and extra precautions taken for workers. Any building constructed before 1989, when the EPA banned most asbestos-containing products, could house the carcinogenic mineral.

The type of equipment inside a building also plays largely into the total cost of a claim.

Doctors’ offices, laboratories, food processing plants, electronics manufacturers, and any operation requiring a clean and sterile environment will have specialized equipment rendered unusable by pipe leakage, even if still mechanically operational.

“Similar to cleanup of contaminants, facilities that must have sterility will need a more intense level of sanitation and will have to be tested to ensure the environment is clean enough for their operation,” Kim said. “This takes more time and more resources.”

Impaired infrastructure like elevators are also expensive in their own right to repair or replace, but they drive up costs further by necessitating displacement of tenants. “With a broken elevator, anyone living or working above the second or third floor will need alternative arrangements,” Kim said.

Risk Mitigation Steps to Take Now

Despite the loss potential, many people don’t regard winter storms as a severe a risk as a hurricane or fire, and thus devote insufficient resources to freeze prevention. But “there is no excuse not to prepare because, unlike a hurricane or fire, you know exactly when to expect temperatures to drop,” Kim said.

The risk management services group at Philadelphia Insurance provides several winter weather resources, including recommendations for temperature, water flow and leak sensing devices that alert risk managers to a potential problem and can automatically shut off water supply.

Simple leak sensors cost as little as $50, while water flow detection and shut-off systems top out around $2,000. “These are relatively inexpensive and easy steps every organization can take that make a critical difference in preventing pipe freeze losses,” Kim said.

The group also developed a 4-step checklist — dubbed the HEAT plan — to help property owners and risk managers identify and manage exposures. Its key directives are: adding heat and insulation to cold and drafty areas, examining pipes and buildings to make repairs, alleviating pressure on pipes, and using available technology to warn and prevent damage from pipe bursts.

“Eighty percent of our field consultants’ focus is on risk improvement,” Kim said. “We want to know what concerns you and how we can help your organization meet its safety risk management goals.”

To learn more about Philadelphia Insurance’s winter weather resources, visit https://www.phly.com/HEAT.




This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.

Philadelphia Insurance Companies (PHLY) offers product-specific resources, alliances, and service capabilities to achieve a multi-faceted approach to risk management, including safety program development, site audits, and training (including interactive web-based training). We offer a wide range of products and value-added services at financial terms to be agreed upon to help you achieve your risk management goals.

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]