Commercial water damage: a guide for Ontario businesses

The first hour

1. Safety. Keep staff and customers out of the wet area. Water near electrical equipment, panels or machinery is a shock hazard. Switch off power to the area if it can be done safely.
2. Stop the source. Know where the shut-offs are for your unit and for the sprinkler system. If a sprinkler head has discharged, call the fire department or the building’s sprinkler contractor. Do not shut down a sprinkler system during a fire.
3. Call the property manager or landlord. In a multi-tenant building this is essential. The source may be outside your premises, and water from your unit may be affecting others.
4. Call your insurance broker or insurer.
5. Photograph and video the source and all damage before anything is moved.
6. Protect what you can. Move stock, records and equipment to dry areas. Lift things off the floor.
7. Get a restoration contractor on site.

Common causes in commercial buildings

• Burst pipes and failed fittings, including over weekends and holidays when nobody is there
• Sprinkler discharge, from a damaged head, freezing or a system fault
• Roof leaks on flat roofs, and blocked roof drains
• Rooftop heating and cooling units and their condensate lines
• Sewer and drain backups, particularly in restaurants and ground-floor or basement units
• Leaks from the tenant above
• Water heaters, dishwashers, ice machines and coffee equipment
• Storm water at grade-level doors and loading docks

Why speed matters more for a business

Every day closed costs revenue, and the damage itself gets worse by the hour. Wet stock becomes unsaleable. Drywall, ceiling tiles and carpet start to grow mold within a day or two. Electrical and electronic equipment corrodes.

The aim is to stabilise the building quickly and reopen, in whole or in part, as soon as it is safe.

Who is responsible in a leased space

The lease decides. Read it, or have your lawyer or broker read it. As a general pattern:

• The landlord insures and repairs the building: structure, roof, common areas and base building systems.
• The tenant insures and repairs its own leasehold improvements, such as the fit-out, flooring, partitions and fixtures, along with its equipment, stock and business income.
• Maintenance obligations for plumbing, heating and cooling equipment serving the unit vary from lease to lease.
• Waivers. Many commercial leases have each party look to its own insurance, and limit claims between landlord and tenant.

Notify the landlord in writing promptly. Leases often require it, and may set out what happens to rent if the premises cannot be used.

Insurance for a business

Commercial policies are assembled from separate coverages. The ones that matter here:

• Property: building, if you own it, and contents, equipment, stock and tenant improvements
• Water damage, sewer backup and flood are often separate coverages or endorsements with their own limits and deductibles. Check which you have.
• Business interruption: lost income and continuing expenses while you cannot operate because of an insured loss. There is usually a waiting period, and a maximum period of indemnity.
• Extra expense: the additional cost of keeping the business running, such as temporary premises, equipment rental and overtime.
• Equipment breakdown for certain mechanical and electrical failures
• Liability, if water from your premises damages others

Ask your broker before a loss exactly which water perils are covered.

Records for the claim

Business interruption claims are built on documents. Start a file on day one.

• Photographs and video with dates
• A timeline: when the loss was found, who was called, what was done
• An inventory of damaged stock and equipment, with costs
• Do not dispose of damaged stock or equipment until the adjuster has seen it or agreed
• Sales, payroll and financial records for the period before the loss, to show normal income
• Records of income and expenses during the interruption
• Receipts for every extra expense
• Staff time spent on the cleanup
• Correspondence with the landlord, insurer and contractors

An accountant familiar with insurance claims can be worth involving on a larger loss.

How commercial drying differs

• Scale. Larger spaces need more and bigger equipment, sometimes trailer-mounted desiccant dehumidifiers and temporary power.
• Working round operations. Areas are isolated so that the rest of the business can trade. Noisy or disruptive work is often done at night.
• Building materials. Commercial carpet glued to concrete, suspended ceilings, steel studs and concrete block dry differently from house construction. Wet ceiling tiles are replaced.
• Hidden routes. Water travels through raised floors, service chases, lift shafts and along slabs to other units and floors.
• Equipment and stock. Electronics, machinery and inventory need specialist handling. Food businesses must discard affected food and packaging.
• Documentation is more detailed, for insurers, landlords and regulators.

Health, safety and regulatory points

• Employers have duties under Ontario’s Occupational Health and Safety Act to protect workers. Do not have staff clean up sewage or work in unsafe areas without proper training and protection.
• Asbestos. Ontario Regulation 278/05 applies to workplaces. Building owners must keep a record of asbestos-containing materials in many buildings, and materials must be identified before they are disturbed. Ask the landlord for the building’s asbestos record before any demolition.
• Food premises. A restaurant, grocer or food processor affected by a flood or sewage backup should contact the local public health unit. Reopening may need its approval.
• Health care, child care and similar settings have their own requirements.
• Fire protection. If the sprinkler or alarm system is out of service, the Fire Code requires measures such as notifying the fire department and a fire watch. The building’s fire safety plan sets out the procedure.
• Permits may be needed for the rebuild.

Reopening

Before staff and customers return to an affected area:

• Electrical systems checked and safe
• Structure and finishes dry, confirmed by readings
• Contaminated materials removed and surfaces cleaned
• No mold or odour
• Fire protection back in service
• Any public health or building approvals in place
• Slip and trip hazards removed

Partial reopening is often possible with the work area properly separated.

Being ready

• Know where the water and sprinkler shut-offs are, and label them
• Keep an emergency contact list: landlord, broker, plumber, electrician, restoration contractor
• Fit leak sensors in mechanical rooms, kitchens and under water-using equipment, with after-hours alerts
• Keep stock and records off the floor, and back up data off site
• Maintain roof drains, heating and cooling equipment and plumbing
• In winter, keep unoccupied areas heated
• Review your coverages and limits with your broker each year
• Have a simple written plan, and make sure more than one person knows it

More: water damage restoration. See also our commercial services.