Water damage is one of the biggest issues facing rest home operators today. Whether it’s caused by a hidden plumbing leak, a resident leaving a tap running, or an unforeseen equipment failure like a burst sprinkler system, the consequences can extend far beyond a quick mop-up operation.
Severe water damage is not only costly to repair it can also mean a loss of income if residents need to be relocated while work is carried out.
The ripple effect of gradual and unseen leaks.
With multiple ensuites, shared bathrooms, and commercial kitchens, rest homes are a high-risk environment for gradual water damage. When a hidden pipe leaks or a tap is left running unnoticed, the resulting saturation often compromises surrounding walls, flooring, and adjacent rooms. Repairing the damage can take weeks or months. Relocating affected residents uses up vacant beds, preventing you from admitting new longer-term residents or short-term respite clients. That of course then translates into lost income.If the leak impacts a critical operational hub, like a commercial kitchen or laundry, you may be forced to outsource catering and linen services at a premium until repairs finish.
When a sprinkler system caused over $100k in damage.
To understand how rapidly a water-related incident can escalate, especially in terms of cost, here is a recent example involving a local rest home under new management. Just days after the new owners took over, an overheating fault triggered a massive burst in the sprinkler system. The resulting flood damaged the fire protection system and caused extensive water damage throughout the facility.
All residents had to be evacuated and accommodated in other facilities while drying out and temporary repairs were completed. Despite immediate action by the owners to mitigate the loss, the repairs took several months. Part of this was attributed to the fact that the incident occurred two weeks before Christmas, meaning up to a month just to get quotes and secure tradespeople to do the work.
Although they could move the residents back in after eight days, they had to shuffle them around and share rooms as the renovations were undertaken. No new residents or respite care clients could be accommodated during this time. This not only reduced the rest home’s income, but they also had to pay the other rest homes for the care of the residents. On top of this, some of the displaced residents did not return after the initial eight-day evacuation resulting in a long-term revenue impact.
How insurance steps in to assist.
Good insurance cover is often the only shield against the catastrophic financial impact of major water damage. Here’s how it assisted in this instance and how it can also step in when other water-related incidents occur.
- Material Damage insurance.
Covers the physical loss (including the fire protection
system repairs in the case above) along with associated costs such as - emergency
cleaning/drying, container hire for temporary storage, building repairs, carpet and
furniture replacement, and electrical work. - Increased Cost of Working.
Covers the elevated operational costs incurred during a
crisis, such as compensating other facilities for taking in residents. - Business Interruption based on gross revenue.
Ensures loss of income during major disruptions is compensated based on lost gross revenue rather than gross
profit, therefore protecting the home's baseline operational stability.
Be prepared before the water flows.
Water damage is rarely just a building repair issue, it is a full-scale business interruption event. Regular maintenance of taps and sprinkler systems, clear emergency response plans, and tailored Business Interruption insurance are essential to keeping your facility operational and secure.
Understanding the ripple effects of water damage not only help you to safeguard your residents but also your bottom line.
ICIB has been working with rest home operators for over 30 years. If you need confidence that your business can sustain serious water damage or other disruptions, get in touch to arrange a no obligation review – insurance@icib.co.nz or 0800 644 444.
