In losses concerning structural components, the loss is often attributed to the failure of a corroded component (for example corroded steel reinforcement within a concrete structure). Most policies exclude losses caused by corrosion and/or gradual deterioration. As such, when a large loss occurs, and such condition is encountered, this can have a tremendous effect (financially and commercially) for both the Insured and Underwriters.
Typical causes of corrosion within concrete structures are:
i) insufficient concrete cover provided for the steel reinforcement
ii) improper concrete placement (existence of voids, gaps or joints)
iii) exposure to environmental and chemical substances
iv) improper and/or lack of protection and maintenance. Many losses involve a combination of the above.
For example, if the steel reinforcement does not contain enough concrete cover and is, at the same time, exposed to corrosive chemicals (such as those encountered in water treatment plants), corrosion can occur in a relative short period of time (2 to 3 years in some situations). Given that hairline cracks can develop during the normal curing process of concrete, exposure to such chemicals could be further increased.
Improper and/or lack of maintenance are also another important factor in mitigating the development of corrosion. Examples of these include painting of exterior building structures (recommended every 7 to 10 years, especially in coastal areas) or application of epoxy coatings to concrete surfaces exposed to corrosive chemicals or environments.
To illustrate this condition, we will briefly discuss a claim in which a retaining wall from a water treatment plant collapsed, which in turn caused the collapse of adjacent walls and other structures, resulting in a multimillion dollar loss. The existing vertical reinforcement had corroded completely along the base of the wall and similar condition existed throughout the entire plant. It was evident that the retaining capacity of the concrete wall was substantially reduced due to the deteriorated condition, resulting in its collapse.
A cold joint (the normal separation caused when pouring of concrete is conducted in two separate phases) existed at the base of the wall which also coincided with the location of the deteriorated steel reinforcement. At the same time, the hydrostatic pressure experienced at this location further contributed to the intrusion of water into the cold joint.
It was further noted that the water under treatment had also contained sulphuric acid as part of the treatment process, a highly corrosive chemical. This, in conjunction with the cold joint, presented an ideal condition for the accelerated corrosion observed.
The policy excluded losses caused by corrosion and/or deterioration. We were able to determine clearly that deterioration due to corrosion was the main cause of the loss specifically since the affected reinforcement served as the main wall support.
Corrosion as a cause of loss however, is not entirely accurate; the presence of corrosion does not imply failure or damage to a structural system, in order for failure to occur, following the corrosion, deterioration of the affected component must have occurred.
The Insured argued that the exclusion should only apply to the affected steel reinforcement of the original collapsed wall and that all other damage should be covered. However, as we will describe later, the extent of the deteriorated steel reinforcement (due to corrosion) played an extremely important role in the adjustment of the loss.
The plant retaining walls were all interconnected by a metal walkway; this in turn led us to treat the metal walkways and adjoining walls as an interdependent structural system. The concrete and steel reinforcement within the wall were acting as a single structural element and therefore cannot be separated and treated independently as argued by the Insured. We were able to determine that the collapse of the first retaining wall displaced the walkways laterally, creating a domino effect with adjacent walls. Deteriorated reinforcement due to corrosion was also present in other walls and the corrosion not only caused the collapse of the initial wall, but was also a governing factor in the collapse of the remaining walls. As such all of the structural damage was excluded.
In investigating losses relating to corrosion, it is extremely important to clearly demonstrate corrosion, as the deteriorating factor and main cause of the loss. Corrosion may not specifically be limited to just the initial cause of the loss. It can, as demonstrated above, play a significant role to the resultant loss as well, carrying with it substantial implications when applying the corresponding exclusion(s).
Christopher Moorefield can be contacted at firstname.lastname@example.org