Understanding the Damage Caused by Water Leaks

Many Water Leaks Are Preventable Through Proper Maintenance

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A 3/4" water copper pipe burst and leaking after being frozen
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Many businesses suffer costly losses caused by water leaks. Water can be very destructive whether it seeps from a loose fitting or gushes from a ruptured main. While the standard commercial property policy excludes many water-related losses, it does cover damage caused by the typical burst pipe.

Water-Related Exclusions

Many commercial property policies contain water exclusions like the ones found in the standard ISO Special Causes of Loss Form. This form excludes three categories of water damage.


The water exclusion applies to damage caused by water that accumulates in various forms, including a flood, waves, mudflow, and water that backs up from a sewer or drain. The exclusion is very broad as it is subject to the anti-concurrent causation language that appears at the beginning of the exclusions section.


You can protect your business against property damage caused by sewer backups by purchasing sewer backup coverage.

Slow Leaks

The Special Causes of Loss Form excludes damage caused by water that leaks or seeps continuously for 14 days or more. It also excludes damage caused by the presence or condensation of humidity, moisture or vapor that extends for 14 days or more. The seepage exclusion eliminates coverage for water damage that results from poor maintenance rather than a sudden accidental event. An example is water that leaks from a clogged drain line in an air conditioning unit.


Many water damage claims are the result of frozen water pipes. When a pipe freezes, water may slow to a trickle or not flow at all. The pressure inside the pipe from expanding ice may eventually cause the pipe to burst. The ISO Special Causes of Loss Form excludes damage caused by water, other liquids, powder or molten material that leaks or flows from plumbing, heating, air conditioning or other equipment caused by freezing. 


The Special Causes of Loss Form contains a broad mold exclusion. The exclusion provides a small amount of mold coverage via an exception.

What's Covered?

The Special Causes of Loss Form is an "all-risk" form, meaning it covers damage caused by any peril that isn't specifically excluded.  The three types of water losses outlined below are covered because they aren't caused by an excluded peril.

Water Damage From Sudden Events

Property damage caused by water leaking from a broken pipe or appliance (such as a water heater) is generally covered if the damage occurs suddenly. For example, a copper pipe that feeds a faucet in your office suddenly ruptures. The event occurs on a weekend and pooling water causes extensive damage to a wood floor. Assuming your property policy includes building coverage, it should cover the cost to replace the damaged floor.

The Special Causes of Loss Form also covers sudden water leaks from fire protective systems  For example, a maintenance employee is replacing a lighting fixture when he accidentally damages a sprinkler pipe. Water pours out of the pipe, damaging your office furniture. The damage to the furniture should be covered by your property policy.

Rip and Tear Coverage

Many water pipes are situated inside walls, ceilings or floors, where they are difficult to access. In order to repair a leak, you may need to tear out a portion of the building. Fortunately, the Special Causes of Loss Form covers "rip and tear," meaning the cost to tear out and replace any portion of the building you remove to repair the plumbing system or an appliance (such as a boiler) from which water or another substance has escaped.

Damage to Fire Protective Systems

The Special Causes of Loss Form excludes the cost to repair any defect to an appliance or system through which water or other material flows. Nevertheless, it does cover the cost to repair or replace damaged parts of a fire protective system if the damage results in a release of water, powder, foam, gas, or some other substance used to suppress fires. It also covers the cost of repairing or replacing parts of the system that are damaged by freezing.

Exceptions to Freezing Exclusion

The freezing exclusion cited above contains some exceptions. These afford coverage for the following types of losses.​

  • Damage to fire protective systems. For example, you own a commercial building that contains a wet sprinkler system (meaning the pipes are filled with water). Several pipes in the ceiling freeze during a cold spell and one bursts, causing water damage to your personal property.
  • You do your best to maintain heat in the building. For instance, a power outage causes the furnace to shut off in your warehouse. You bring in a portable heater but a plumbing pipe freezes anyway. The pipe bursts, damaging to your equipment and inventory.
  • You don't maintain heat in the building, but you do drain the equipment and shut off the water or other liquid supply. For example, you own an unheated building that you use for storage. In October, you drain the water heater and supply lines but a clog prevents one pipe from draining. The pipe freezes and then bursts. Water damages property you stored in the warehouse.
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  1. Property Insurance Coverage Law. "Causes of Loss - Special Form." Page 2. Accessed March 23, 2020.

  2. Property Insurance Coverage Law. "Causes of Loss - Special Form." Page 1. Accessed March 23, 2020.

  3. Property Insurance Coverage Law. "Causes of Loss - Special Form." Page 7. Accessed March 23, 2020.

  4. Capstone Brokerage. "Water Damage Commercial Property Insurance Coverage." Accessed March 23, 2020.

  5. IRMI. "Special Causes of Loss Form." Accessed March 20, 2020.

  6. National Real Estate Insurance Group. "Is It Covered? Burst Pipes." Accessed March 23, 2020.

  7. Rough Notes. "Sprinkler Systems and the Agent's Risk Management Role." Accessed March 23, 2020.

  8. Property Insurance Coverage Law. "Causes of Loss - Special Form." Page 9. Accessed March 20, 2020.

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