Groundwater degradation, incidents that occurred at construction sites
Apr 2, 2023
From: Omri Nissany, Civil Engineer, Licensed Insurance Agent
Third article in the series
Dealing with groundwater on construction sites in Israel entails engineering challenges at the planning and execution levels, as well as many issues from the world of construction insurance.
As an insurance agency that has been supporting construction projects all over the country
Because "test cases" are an important barometer for understanding the complexity of the field, in the following short article we will review a number of prominent rulings from recent years regarding groundwater at construction sites. Among them are several dramatic events in the context of groundwater degradation, and as a result - enormous damages and huge lawsuits filed in their wake.
From: Omri Nissany, Civil Engineer, Licensed Insurance Agent
Third article in the series
Dealing with groundwater on construction sites in Israel entails engineering challenges at the planning and execution levels, as well as many issues from the world of construction insurance.
As an insurance agency that has been supporting construction projects all over the country for over 30 years , it is important to us to flood the topic (literally) and we upload quite a bit of content dealing with this.
Because "test cases" are an important barometer for understanding the complexity of the field, in the following short article we will review a number of prominent rulings from recent years regarding groundwater at construction sites. Among them are several dramatic events in the context of groundwater degradation, and as a result - enormous damages and huge lawsuits filed in their wake.
Was the groundwater breach at the "groundwater-rich" site unexpected?
One of the most famous lawsuits in the field of groundwater degradation in Israel was filed by Malibu Construction Ltd. ("Malibu") against Ayalon Insurance Company ( Tel. 39617-03-12 Malibu Construction Ltd. v. Ayalon Insurance Company Ltd. - filed in 2016 ) . This was as part of a request for coverage and compensation for damages caused as a result of a groundwater outburst at an infrastructure site for the construction of an underground passage.
Even during the planning stages of the project, it was clear that the designated land was "rich in groundwater" and Malibu carried out groundwater depletion accordingly. The work progressed smoothly, but two years after starting, a powerful groundwater eruption occurred at the site.
The incident caused very large damages to the contracting company, starting with significant operations required to lower the groundwater and repair the damage, and ending with significant expenses incurred in light of the delays in the schedules.
The dispute between Malibu and the insurance company concerned the question of whether the outbreak was expected, as Malibu claimed, or unexpected, as Ayalon believed. The parties were unable to reach an agreement outside of court, and after lengthy discussions, the District Court ruled that the insurance company would pay the insured an amount of approximately 9.4 million shekels .
As is known, a contractor's insurance policy can also provide a solution for cases of groundwater outburst, provided that the event was "unexpected." As stated, coverage will be provided for " sudden and unforeseen physical loss or damage at the project work site or part thereof, for any reason not excluded under this policy " (emphasis not in the original).
In this case, the heart of the dispute was whether or not the water breach was covered under the policy. The insurance company argued that because the area was known to be rich in groundwater, the contractor should have faced any challenges associated with it and the breach was “foreseeable.”
Malibu, on the other hand, argued that it was not tasked with preventing any seepage or sudden breakthrough of groundwater "where it is" and that it was impossible to foresee every possible scenario of water intrusion into the excavation. It was also emphasized that the groundwater that flooded the site was "of a special and powerful type" even "according to preliminary estimates."
The complex legal process included countless discussions and numerous opinions from experts in the fields of geology, hydrology, hydrogeology and engineering. In the end, the District Court accepted the position of the contracting company and ruled in its favor for significant compensation. An appeal against the ruling was rejected by the Supreme Court.
One of the most famous lawsuits in the field of groundwater degradation in Israel was filed by Malibu Construction Ltd. ("Malibu") against Ayalon Insurance Company (
Even during the planning stages of the project, it was clear that the designated land was "rich in groundwater" and Malibu carried out groundwater depletion accordingly. The work progressed smoothly, but two years after starting, a powerful groundwater eruption occurred at the site.
The incident caused very large damages to the contracting company, starting with significant operations required to lower the groundwater and repair the damage, and ending with significant expenses incurred in light of the delays in the schedules.
The dispute between Malibu and the insurance company concerned the question of whether the outbreak was expected, as Malibu claimed, or unexpected, as Ayalon believed. The parties were unable to reach an agreement outside of court, and after lengthy discussions, the District Court ruled that the insurance company would pay the insured an amount of approximately
As is known, a contractor's insurance policy can also provide a solution for cases of groundwater outburst, provided that the event was "unexpected." As stated, coverage will be provided for
In this case, the heart of the dispute was whether or not the water breach was covered under the policy. The insurance company argued that because the area was known to be rich in groundwater, the contractor should have faced any challenges associated with it and the breach was “foreseeable.”
Malibu, on the other hand, argued that it was not tasked with preventing any seepage or sudden breakthrough of groundwater "where it is" and that it was impossible to foresee every possible scenario of water intrusion into the excavation. It was also emphasized that the groundwater that flooded the site was "of a special and powerful type" even "according to preliminary estimates."
The complex legal process included countless discussions and numerous opinions from experts in the fields of geology, hydrology, hydrogeology and engineering. In the end, the District Court accepted the position of the contracting company and ruled in its favor for significant compensation. An appeal against the ruling was rejected by the Supreme Court.
A. Dori Construction Company ("Dori") was contracted as the main contractor for the project and simultaneously purchased contractor work insurance from Harel Insurance Company. The project was carried out at a great depth of approximately 7 meters below ground level and while dealing with a lot of groundwater. Including constant hydraulic pressures.
In light of the constant water pressures that were a consideration in the design of the sealing system, a groundwater pumping system operated continuously on the project. Several incidents of pump failures caused unexpected outages, groundwater seeped into the sealing system and then breached it. The outage in pumping caused extensive damage, for which a claim was filed against the insurance company for coverage of more than 13 million shekels .
The construction company claimed that the water intrusion (and the resulting damage) was sudden and unexpected, and occurred despite the fact that it followed all the instructions of the experts. The insurance company, on the other hand, claimed that the incident was foreseeable or that there were numerous water intrusions throughout the project that resulted from ignoring the professional factors and/or from a performance and construction failure.
The pump malfunction is what caused the parking lots to flood.
The ruling determined that the construction company proved that it adhered to the instructions of the professional authorities throughout and that the pumping interruptions, which were due to unexpected malfunctions, were what caused the groundwater intrusion. The court based its conclusion on several aspects:
1. The unplanned interruption (as a result of a malfunction) in the water degradation system was unforeseeable.
2. The movement of water under the waterproofing system was unpredictable, as once the water penetrated under the waterproofing layers, it was not visible and could erupt at a variety of places and times.
3. The site suffered from previous leaks, but these occurred at least a year and a half before the outbreak, which severes the causal link between them and the insured event.
The court ruled in the ruling that " the insurance case is based on those events of cessation of pumping and subsequent flooding, as sudden and unexpected events, within the meaning of this term in the policy " ( A. Dori Construction v. Harel Insurance Company - Tel Aviv 8867-09-15 - issued in March 2021).
The court accepted the claim.
6-year delay in apartment delivery due to groundwater outburst.
Another famous case from recent years of groundwater breaching a construction site occurred in 2015 in the prestigious "Young People's Tower" project (about 480 apartments) built in central Tel Aviv. A project whose official marketing campaign was launched in 2010, but the keys to the tenants were handed over about 11 years later .
The purchasing group in the Youth Towers filed a financial claim in late 2017 for approximately 207 million shekels following a delay of approximately 6 years in the delivery of the apartments [1] .
According to the lawsuit, which is still pending, the main reason for the delay in the schedules was a groundwater breach . A breach defined by the project developer as a "rare explosion" of a water well whose collapse flooded the construction site and caused the failure of the foundations that had been built up to that stage. The defendants claimed that the unexpected event was unpreventable given that it was a "force majeure."
The procedure is still ongoing, but according to media reports, it appears that the groundwater breach was caused during the excavation of six underground floors for parking lots, when the excavation tools reached the groundwater level.
As is known, this is a situation that can be resolved in one of two ways: lowering groundwater by pumping or sucking water and disposing of it (to the drainage system if it is fresh water, or to the sewage system if it is salt water). The method chosen in the youth project was the second method, but an explosion in the well led to flooding of the compound and a rapid rise in groundwater.
The lawsuit was filed, as expected, not only against the project's developer but also against many other parties, including the "Clal" insurance company, which issued the insurance for the contractor's work for the project, A. Dori Construction Ltd. (the main contractor), the subcontractor who planned the demolition work, and more.
The unfortunate case of the youth tower in Tel Aviv:
In conclusion,
Claims for groundwater incidents at construction sites are filed for extremely high amounts, often reaching millions or even hundreds of millions of shekels. In most cases, the question that will be at the center of the dispute will be – whether the water breach was expected or unexpected. The three test cases we discussed in this article indicate this, and the length of the hearings on their matter indicates that there is never a clear-cut picture.
In conclusion, we note that today insurance companies tend to exclude damage from groundwater outbursts from insurance coverage in the contractor's policy, which requires a thorough examination of the insurance offers.
Sometimes the exclusions relate to both damages to the project itself (Chapter A of the policy) and liabilities - damages to third parties or employees (Chapters B-C of the contractor's policy). In addition, if coverage is already achieved, the deductibles skyrocket.
To read the first article in the series, click the link
To read the second article in the series, click the link
To read the fourth article in the series Link
תביעות בגין אירועי מי תהום באתרי בנייה מוגשות בסכומים גבוהים במיוחד המגיעים תדיר לכדי מיליוני שקלים ואף מאות מיליוני שקלים. ברוב המקרים השאלה שתעמוד במרכז המחלוקת תהיה – האם פריצת המים הייתה צפויה או בלתי צפויה. שלושת מקרי הבוחן שעסקנו בהם בכתבה זו מצביעים על כך ומשך ניהול הדיונים בעניינם מעיד כי אין כאן אף פעם תמונה חד-משמעית.
בסיפא נציין כי כיום חברות הביטוח נוטות להחריג מכיסוי ביטוחי בפוליסה הקבלנית ניזקי התפרצות של מי תהום, מה שמחייב בחינה יסודית של הצעות הביטוח .
לעתים ההחרגות מתייחסות הן לנזקים לפרויקט עצמו (פרק א' בפוליסה ) והן לחבויות - נזקים לצדי ג' או לעובדים (פרקים ב'-ג' בפוליסה הקבלנית). בנוסף, אם כבר מושג כיסוי ההשתתפויות העצמיות מרקיעות שחקים.
לקריאת המאמר הראשון בסדרה קישור לקריאת המאמר השני בסדרה קישור לקריאת המאמר הרביעי בסדרה קישור
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