Staying Dry

Basement flooding is still a learning experience for everybody involved and the appreciation of risk is still relatively new.

For insurance companies, part of the learning curve includes acquiring better data about sewer backup risk. Companies can then be more realistic about what they offer in terms of pricing and consequently more confident in providing the product, said Kevin Smart, assistant vice president of person lines underwriting policy with Aviva Canada.

Smart was speaking at the Institute for Catastrophic Loss Reduction’s (ICLR) Basement Flooding Symposium in Toronto in May 2011. Insurance industry and municipal representatives, along with experts from ICLR, joined him in discussing how to prevent water from entering into and damaging homes. For municipalities, this includes determining the best way, through both public and private solutions, to minimize the risk of water infiltration.

“Water is the most contentious peril we deal with and the least understood,” said Carol Jardine, senior vice president of claims services with TD Insurance. “Hopefully by creating this dialogue between municipalities and the insurers, we will actually create a dialogue in society.”

Water is the new fire risk for the insurance company, said Grant Kelly, director of climate change adaptation projects at the ICLR. He said an insurance policy is in fact a fire policy with other coverages added on. But from an insurance point of view, water has now overtaken fire in terms of importance.

Today, water claims comprise roughly 40 per cent of the total claims in Canada.

Water claims grew by 34 per cent over the past five years – from more than $1.2 billion in 2005 to more than $1.6 billion in 2009, according to the Insurance Bureau of Canada. These claims include losses due to sewer backup, broken pipes and water that entered a home through a window or wall broken open by an insured peril.

Whether or not overland flood insurance becomes an insured peril in Canada still remains to be seen. “It’s very difficult in light of all the catastrophes around the world right now to get an increased appetite for flood insurance,” Jardine said. “It doesn’t say it won’t happen; I’m not pinning all my hopes on it.” ICLR has been instrumental in funding research in this area. Also, global (re)insurer Swiss Re is championing the cause.

But as of this time, the federal government does not license insurers in Canada to underwrite residential overflow of water from another body of water. “The federal government has decided – for federally licensed insurance companies – it would be too big a risk for an insurance company to bear,” Jardine said.

In the interim, discussion continues about how municipalities, insurance companies and homeowners can mitigate the occurrence and severity of water damage into a home.

Homeowner uncertainty

When it comes to insurance coverage for sewer backup and flooding, research shows homeowners are uncertain about what is covered and what isn’t, says Dan Sandink, manager of resilient communities and research for the ICLR. “A 2007 study of homeowners in Toronto and Edmonton revealed that 33 per cent of respondents from Edmonton and 38 per cent of residents from Toronto who had experienced sewer backup in the past did not know whether or not they had insurance coverage for sewer backup,” Sandink writes in Involving Homeowners in Urban Flood and Risk Reduction: A Case Study of the Sherwood Forest Neighbourhood, London, Ontario.

This uncertainty also appears in a study of residents living in the Sherwood Forest neighbourhood of London, Ont. These residents experienced flooding on May 28, 2009, after 83mm of precipitation fell during a five-hour period. Forty-five per cent of the 674 respondents did not know whether or not they had sewer backup coverage, the research paper notes. Twenty-three per cent of the 52 respondents who reported sewage flooding did not know if they had insurance coverage. Of those who reported clean water flooding, 45 per cent could not identify whether coverage existed.

Forty-one per cent of the 75 respondents who did not have insurance coverage for sewer backup said they chose not to purchase the coverage. Twenty-five per cent did not know the coverage was available. A further 17 per cent indicated their sewer backup coverage was cancelled, Sandink wrote.

Policyholders  will frequently call up insurers assuming that they are covered for overland flooding, only to become livid when they realize their claim will be denied, Jardine said. Further complicating the issue, insureds do not understand why their home insurance rates are continuing to rise even though they have never reported a claim. “I think both of us (insurers and municipality representatives) must have the conversation with society that it is a spread of risk,” she added. “That allows us to offer this infrastructure from a municipality perspective or this insurance from an insurance perspective. It’s not an easy conversation to have when people are standing in three feet of water.”

Insurer stance

Water damage claims tend to bring out the insurance companies’ most vocal critics, Jardine pointed out. “I have been on more Twitter accounts and Facebook accounts in the last year than I have in my entire career, and it’s people complaining and swearing and saying nasty things about us,” she said. Frequently the cause of the complaint is that the claimant has a coverage limit. Either that, or the claimant was not aware that the municipality covers the damage, not the insurer.

Many insurance companies are providing credits to insureds who install a backwater valve in their homes. Unfortunately, people often expect to receive more from that credit than the insurer is able to provide, Jardine said.

Furthermore, there are restrictions on obtaining sewer backup coverage. In a high-risk area, coverage limits will be lower. If a client wants to access a higher limit, they will have to pay a much higher price. “It’s all vetted by the limits that are available, the risks we perceive in your area and whether you’ve taken any risk mitigation,” Smart said.

Municipalities’ efforts to mitigate flooding would also factor into underwriting the risk. Communities that do not have fire stations, or that have volunteer stations, pay a higher premium than those staffed with career firefighters or a municipally owned fire station. Insurers’ are looking to obtain similar data as it pertains to water: Which municipality is undertaking efforts to protect  their communities and citizens from flood damage? Over time, insurers hope to collect enough data to show which communities invested in infrastructure (resulting in lower risk and ultimately lower premium) and which did not invest (elevating the risk and premium for their residents).

Municipality input

Toronto

After eight separate incidents of extreme weather in the past 20 years overwhelmed the city’s aging infrastructure, Toronto undertook an engineering review of the system. Council subsequently approved an adaptive management approach.

The review showed there was nothing wrong with the sewer system – it performed exactly as it was designed to do. But the system was designed for minor storms: one-in-two-year storms, or one-in-five-year storms. During extreme storms, the sanitary sewer system completely overloaded, resulting in widespread flooding, including flooding onto private property, said Michael D’Andrea, director of water infrastructure management of Toronto Water. The storm water industry has evolved over time; now, the city’s corporate and major storm systems are designed to handle one-in-one-hundred-year storms.

With respect to surface flooding, many low points around the city have no water outlets, causing “ponding” during extreme conditions. But now, when a new subdivision is built a major system design is incorporated that channels t
he water (via the road network) out to a low point, typically a storm water pond, before the water is released into a watercourse or lake. None of the new subdivisions using this system have experienced chronic flooding, D’Andrea said. City council advocated and approved an adaptive management approach in April 2006. Thirty-two areas were deemed to be basement flooding-prone zones which were then identified as priority study areas. Council then approved upgrading existing storm drainage systems in high risk areas to standards set for new subdivisions, meaning a one-in-100-year storm.

No downspouts are connected to the sanitary sewer system in Toronto. But in many areas in the city, they are connected to the storm sewer system. Council mandated the disconnection of all downspouts in the city, with the higher risk areas to be disconnected by 2013.

The city has also launched a basement flooding protection subsidy program, which provides up to $3,200 in financial incentives for the installation of a backwater valve, sump pump and pipe severance and capping.

The municipality is also looking at restricting flow that actually enters the storm sewer system. “The caveat being that flow running on the road surface needs to be intercepted and captured in order to make this an effective measure,” D’Andrea said. City officials are looking at diverting overland flow to underground storage systems or storm water ponds.

The preferred option is to install storm water ponds. Where this is not a viable option, the municipality will have to take a more expensive route and look into tanks or oversized pipes to reduce damage.

The cost of the upgraded infrastructure is $272 million  for only four of the 32 study areas. Only $20 million of that represents upgrades to the sanitary sewer system; the rest is for storm drainage system upgrades.

Sanitary sewer system improvements are the city’s first priority. With respect to storm drainage system improvements, these have been prioritized from the highest to lowest number of benefiting properties. The cost per benefiting property is capped at $25,000.

Furthermore, the mandatory downspout disconnection program has been extended to the affected areas. Bylaws have been amended so that backwater valves must be installed with all new developments. The construction of reverse-slope driveways has been banned.

London

In an effort to reduce the impact of basement flooding, the City of London is looking into mandatory weeping tile disconnections. In many of the “problem areas,” weeping tiles are connected directly to the sanitary sewer system. At least, this was true prior to 1985. Subsequently, weeping tile was connected to a sump pit that directed the discharge overland. This worked until 1995, at which point all sump pump discharge in new developments was directed to a new storm sewer private drain connection (PDC). In a PDC, an individual homeowner sanitary lateral runs from the house to the sewer mainline, explained Kyle Chambers, wastewater and drainage engineering division with the City of London.

London’s Sherwood Forest subdivision, built between the late 1970s to early 1980s, is a chronic basement flooding problem area in the city. It is a separated system with no combined sewers and no catch basin connected to the sanitary system. On May 28, 2009, the area was flooded with more than 80mm of rain in a five-hour period. Flow monitors in the subdivision’s sanitary sewers showed an increase of flow between a normal level of 2L/sec to 5L/sec during dry weather to more than 40L/sec during the rainstorm.

The subdivision is built on clay soil, which, when combined with lot grading issues and zero lot line homes (a large number of homes built close together with very little green space), means the water falls onto the ground and shifts directly to the house, down into the weeping tile and out into the sanitary sewer, Chambers said.

Following the May 2009 event, the municipality engaged a consultant, analyzed all the flow monitor available and built and calibrated an inflow works computer model to look at the flows and determine the best way to mitigate basement flooding. Two different alternatives were explored, one for the city and one for homeowners.

The city alternative would look at increasing the pipe size to try and accommodate the flow. For a cost of $10 million, pipe upsizing would include an additional 2.3 km, an additional 1,400 cubic meters of inline storage and a 2,200 diameter underground pipe.

This solution comes with a number of issue. First, a pipe can only be designed to a certain size event. The next, bigger pipeline can ruin the system and there’s basement flooding again. Second, a bigger pipe only accommodates the inflow and infiltration (I/I), it doesn’t actually remove it, Chambers explained.

However, on the homeowner side of things, by disconnecting the weeping tile from the sanitary laterals, the I/I doesn’t have a chance to make it into the sanitary sewer. Disconnecting these, which would cost $2 million for 160 homes, would remove an adequate level of I/I to bring the load down and protect basements up to and beyond a 25-year design event. This would be done in addition to weeping tile disconnection, sump pump and backwater valve installation, dedicated storm PDC for sump pump discharge, and road resurfacing for those 160 residences.

Additionally, the city offers a 75 per cent grant program to all homeowners in basement flooding-prone areas to cover the cost of disconnecting the weeping tile from the sanitary sewer and installing a backwater valve. However, as is the case in many other municipalities, there is very poor uptake on this offer. The municipality is currently trying to move to a mandatory solution, which would bump up the funding to 100 per cent in the problem areas. Currently, a council report is being drafted, with the ultimate goal of having council buy in to this program, Chambers said.

Saskatoon

Saskatoon has always had two sewer systems: a storm sewer system and a sanitary sewer system. No household sewage is connected to the storm sewer systems and no roof or downspout leaders and no catch basins are connected to the sanitary sewer systems, said Galen Heinrichs, stormwater utility manager for the City of Saskatoon.

As a means to reduce the risk of flooding in the city, some small-scale solutions and some large-scale solutions have been, or are in the process of being, implemented.

Beginning in 2003, new homes were designed so that water would go through the weeping tile straight into a sump pit and then be pumped out. “It’s very important, if you are ever involved in this, to make sure that when they are pumping out the water, they extend the lead past the backfill zone,” Heinrichs cautioned. “If you don’t, you’ve just got this vicious circle: When you are pumping water out, it goes through the back fill zone and then continues on.”

All new homes are required to be built with a backwater valve installed. Furthermore, any home with a demonstrated risk of sanitary sewer backup that was not built up to the Jan. 1, 2004 standard could take part of the flood protection program. Funded 100 per cent by the city, the program offered residents up to $2,500 to upgrade their plumbing with a backwater valve and sump pit.

The program ran three times, once in 2005 and again in 2007. It offered the program in 2010 with the cap raised to $3,000. “Coincidentally plumbing prices went up by $500,” Heinrichs mused. “Our participation rate in these programs was pretty consistent all around the 50 per cent level,” he said. “So, we only had about 700 homes that actually took us up on the program.”

Heinrichs and his team concluded the backflow valve was 85 per cent effective in eliminating sewer backup. After flood events, in areas in which flooding would have been expected again they would go back to the homes that had completed the plumbing upgrade to note the damage. Sewer back
up was eliminated in 85 per cent of the instances; in the 15 per cent of homes that did experience damage, 96 per cent of the time the damage had been reduced.

With respect to large-scale infrastructure solutions, the municipality has gone the route of super pipes. It is not as simple as building bigger pipes, however, Heinrichs pointed out. “The primary purpose of the sanitary sewer system is conveying domestic sewage,” he said. “And when you start altering the design of that you create problems. Sanitary sewers have to run at minimum flow speeds in order to convey the solids that are inherent in that sanitary sewer.”

Furthermore, they have to be self-cleaning. In larger pipes, the flow will be less, due to a drop in slope. Solids will simply accumulate at the bottom and eventually capacity is reduced. The pipes must be deep enough to prevent freezing, but not so deep that they cannot be maintained or built. In addition, they cannot be designed for extreme events because in many situations there is an actual physical limitation to what can be done with sanitary sewer. It has to both convey the rainwater from weeping tile and convey sewage from the home, which is its primary purpose.

With the Saskatoon super pipe concept, the idea is to build a tank and to build it lower than the lowest basement in the area. Then, when the water needs somewhere to go, it goes into the tank and not into the basements.
After a rainstorm, the tank will either self-drain or someone will have to go and manually pump out the water. Currently, the municipality is in the process of switching these manual pumps over to an automated system which will drain the tank immediately after a heavy rainfall, Heinrichs said.

Two pipes were installed in 2008, two more in 2009 and two more in 2010. Another one is currently being built, with two more planned for 2012 and one more for 2013. The city has currently spent $10.2 million on superpipes. The total projected cost is $19.3 million by the time the project is completed.

Stratford

For the city of Stratford, a massive rain event on July 28, 2002 and a subsequent class action lawsuit motivated the municipality to take action.

The Norfolk and Elgin area was known to be problematic. In a normal area, storm sewers are designed to take water away and the road system removes the rest of the water. But that did not happen in this basin. After the rain on July 28, residents could canoe between the properties. The municipality was already planning to fix this area, but the July 28 storm changed everything, said Ron Shaw, chief administrative office for the city of Stratford.

Immediately following the event, two emergency council meetings were held and an emergency aid program was initiated. The program offered up to $5,000 per household after insurance, including $1,000 for lost wages. Within a month, four people initiated a class action lawsuit against the city for $210 million. The case was recently settled out of court for $7.7 million, with no admission of liability on the part of the city, Shaw said.

A sanitary sewer master plan was initiated prior to the flood of July 28. The plan was to analyze the sanitary collection system in problem areas and to identify solutions. The goal was to evaluate existing conditions, taking into account future development. The plan identified $35 million in priority projects for the sanitary system and $16.5 million in strategic projects. Following the July 28 flood, council demonstrated a strong will to proceed with these recommendations, Shaw said.

A storm master plan was intended as a follow-up to the sanitary plan. The goal of the storm master plan was to prepare a comprehensive action plan for the planning and implementation of the required changes and/or improvements to the storm system infrastructure to meet current and future needs.

It was found that a lot of the rural drainage system flowed into the city through a number of drains into the Lorne Avenue pipe, Shaw said. The city was legally obliged to deal with that and came up with a solution. The capital works project proposed for this outlet system will cost $50 million or more.

The storm master plan recommended three categories:

• Capital works: the proposed Lorne Avenue outlet system would cost more than $50 million. A Collegiate Arch system would cost more than $15 million. Other projects would amount to more than $5 million. It was also determined that a five-year inspection and maintenance program needed to be implemented. This has been done and continues to be done, Shaw said.
• Programs: These include monitoring identified problem areas; flow reduction areas; and PDC Isolation.
• Policy measures.

“Our priority has been on the capital project,” Shaw said. “Given the situation, it is an area that we needed to address.” Council has agreed to implement a 250-year level for stormwater management. Five storm ponds have been completed and some storm sewers are in place in the city.

Understanding what municipalities are doing is important to the insurance industry, said Glenn Matheson, program manager for property losses at Gore Mutual. By bringing all parties together, those involved are able to learn more about water claims.