The Simple System That Caught Over 3,000 Leaks

Water damage is insidious: it will eat into your building's budget and drive up insurance costs. John Rusk, president and co-founder of ProSentry, reveals how an affordable leak detection system can transform your building's risk profile through the story of a condominium that saved $300,000 on insurance after installing sensors throughout the building. You'll learn about the surprisingly simple installation process and how you may even end up with a discount on your insurance. If you're facing rising insurance premiums or struggling with repeated water damage, this episode offers practical solutions that pay for themselves. Habitat's Carol Ott conducts the interview. 

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Transcript

Carol Ott:

Welcome to Problem Solved, a conversation about challenges facing New York Co-op and condo board directors. I'm Carol Ott with Habitat Magazine and I'm joined today by John Rusk, President and Co-founder of Pro Sentry, a building monitoring solution. John, thanks so much for being here.

John Rusk:

Thank you very much. I'm delighted to be here, Carol.

Carol Ott:

There's a critical issue that's impacting building finances and operations, and that's water damage coming from leaks. They are a common occurrence in buildings, and if they can be stopped at the start, the resulting damage will be minimized. We are going to discuss how to do that and how an early warning system can reduce insurance costs for both building and homeowner policies. John, you worked with a condominium that was plagued by leaks and turned to you for a solution. What was going on there and what solution did you offer?

John Rusk:

So water leaks, and that was an amazing introduction because I agree with everything you said. Water leaks come from all sorts of places. In New York City, the most common one probably is fan coil overruns. So those buildings that were built from the fifties to the late eighties that have two-pipe fan coil systems, those create a lot of slow leaks that then cause wood floors to blow up. But then there's toilets, there's regular air conditioning systems, there's sink overflows, there's dishwashers, there's ice makers, there's the new bidet systems, all of those things. There's no one single cause other than those fan coils that are probably the number one cause. So for this building, sorry.

Carol Ott:

No, go ahead.

John Rusk:

For this building, they had a number of issues. I think they had three different bad leak events over, I think, three years. And it caused them, when they went back out to the market, it was going to be very expensive for them. Their insurance broker then recommended they speak to us and see about putting in some water leak detection system with our brand of instant notification where we call the building in case of leak, and also temperature monitoring at all those locations because the New York freezes are the other big cause of frozen pipe leaks. So we set up a system for all those things throughout the building.

Carol Ott:

So I'm going to take a step back first. In this particular building, when there was a leak, who had to pay for it? Was the condominium or was it the homeowner?

John Rusk:

So for some reason, and I don't know the exact reason, so many buildings, if you leak on your neighbor, your neighbor can sue you. But for many buildings, they don't like those resident to resident lawsuits. It's just not pleasant. So most buildings, or many buildings, have you indemnify your neighbor so that even if the leak came from them, you are going to pay for it on your own homeowner insurance. Now in this case, the building itself was having a hard time getting insurance. So I believe that it could have been the originally installed air conditioning system in the building. I also know they had to change some element of their bylaws. So my guess is the building was taking responsibility for probably their internal systems and the bylaws. And I know in their process of reducing insurance claims, they had to change something in their bylaws, but they had to put in a water leak detection system, too.

Carol Ott:

So if we take this building, describe to me what the system looked like and how intrusive it was into each unit owner's apartment.

John Rusk:

Yep. So primarily, this is our typical water leak detector, and for those of you just listening, it is about the size of a popsicle stick. It is white, but it can be painted on the top decoratively, if you want to. And this little device about the size of a popsicle stick can fit behind toilets, under dishwashers, under washing machines, underneath pedestal sinks, and it's really innocuous. And that's why many people who would object to the regular pucks of water leak detection equipment or those pucks don't fit underneath dishwashers and washing machines, this device is acceptable.

So in the building, we installed these small wireless detectors where they needed to be, along with some devices that used a rope. And the rope I'm holding up is probably an eighth of an inch diameter and about 10 feet long, and this can be wrapped around inside and around air conditioning equipment where you don't know where the leaks going to come from. The only other piece of equipment then in the building is one gateway, and I'm holding up the gateway. It's about five inches by five inches by an inch thick. It has an antenna, it has a simple transformer that plugs into an outlet and these are installed in this building every two floors in the building. And that is all that we need to connect to all the detectors that we install in the building. And they have other things beyond water detectors.

Carol Ott:

Can you tell me the thin pencil leak thing that you held up?

John Rusk:

Yep.

Carol Ott:

How is that fastened to a wall or how is that fastened to anything?

John Rusk:

So it's typically not fastened because it's typically put down behind the toilet. So then when the person comes, they can just lift it up, clean behind the toilet and put it back down. I see underneath the dishwasher, it's just going to slide in there and live happily underneath the washing machine, slide under there, live happily underneath the sink. When that cabinet gets cleaned up, you just pick it up, clean, and lay it back down. And it's part of the reason why the system is so low cost because the installation process is simply the building's handyman usually bringing around a box of these devices. The devices already know they're in this apartment house, he opens up the box, there's a QR code, he shoots that with a smartphone app. And from a drop-down menu, he says it's at the dishwasher in apartment 21-J, and he places the device and if the building wants, he can snap a photo of it in place and he's done. Everything else is in the cloud.

Carol Ott:

All right, so let's talk about cost. How much does we could look at this particular condominium or, in general, how much do these systems cost?

John Rusk:

So pretty inexpensive, and we have worked very hard to be the lowest cost provider in the space because we really know that as your show and your magazine so often puts out and is having been a former co-op board member, the costs are endless. It's so expensive. And so we recognize that one of the solutions to being ubiquitous to being able to put these devices everywhere there could be a leak is if we could really drive down the cost. So typically with this device, somewhere around $75 per sensor, including the network, as long as it's a full deployment in the whole building and the building is bigger than, say, 30 apartments. And then for the monitoring cost, it's about a dollar per month per device. But on a smaller building, it could be a little more, it could be up to two bucks.

Carol Ott:

And what happens when a leak is detected for your monitoring? How does that, who finds out about that?

John Rusk:

And just to finish on the cost, just to put that into perspective, a one-bedroom apartment might have five sensors, so maybe $350 for all the sensors for that one-bedroom apartment, and those are going to last 10 years. So it's quite economical in $5 a month for that one-bedroom apartment. So very economical.

So when this sensor goes off, we're using a different technology. Everybody listening to this podcast knows about Wi-Fi. Wi-Fi can stream a lot of data, a short distance, and it goes down a lot. And there's privacy concerns. We recognized early on we did not want to be on Wi-Fi. So we are on a different technology called LoraWAN, long range wide area network, which was made for devices like these wireless water leak detectors. It's focused on long battery life.

 That's why all of our devices have a ten-year battery life and on efficiency of connection, that's why I only need one of these every two or three floors in the building. With Wi-Fi, I would need a router inside every apartment. This, only one every two floors. Also because it only needs to send out a little data packet about a 10th the size of a text, it's very simple. So it never goes down. The devices are up like 99.99% of the time. There's no big upgrades of, now we're at 3G, now we're at 4G, now we're at 5G. It's a stable platform that they expect to last for 20 years before they really upgrade it.

So it's very simple. So what happens when there's a leak, as soon, and actually I had one this weekend in my sink cabinet at home. My wife was cleaning some stuff and water got in and I found out I had a leak inside a cabinet. It hit this, it then sent a signal in this case two floors away to the gateway. The time between it hitting the water, hitting the signal, going to our platform and me getting a text for it was about probably 20 seconds. Our platform knows about it within about four, but it takes time for Verizon to send me the text. In terms of the live operator call, usually the building's getting the live operator call to the front desk or if they don't have a front desk to the building super within a minute. And if the person that they're calling struggles in English, they're going to roll over to Spanish because these are underwriter laboratory certified call centers. Very serious because we also have gas leak detectors and that's life safety.

So it's a very seamless, it's not a robocall and you're finding out right away. They're telling you there's a water leak inside the sink cabinet in the primary bathroom at your address.

Carol Ott:

And for each unit owner. So I understand you got a text. Can each unit owner designate that they would get a text, the front desk would get a text, and their mother gets a text?

John Rusk:

So they could. Most buildings, to save money, and also because most residents don't want to give out their cell phones to anyone and we respect that. We found, I would say probably 98% of the buildings, we just contact the building and then the buildings call that person because they have their most updated cell phone numbers and they know the mother is staying in the apartment right now. So we're finding in general, buildings want to save money because it's people for us to have to manage to just do the one or a string of contacts. So it might be the front desk for a water leak, the porter, if we catch a mouse, we call up the super on his cell phone if there's a gas leak. All of that is flexible and all of that's included in the low price I quoted.

Carol Ott:

And if a building were to install this kind of a system, what could it expect in terms of its insurance costs? Once you do it and you go out to your insurance company and say, I've done this, you still have a loss record of leaks.

John Rusk:

Sure.

Carol Ott:

How does that work?

John Rusk:

Since we started the company, I've learned a lot about insurance. So there are two tranches of insurance. There is the homeowner tenant policy, so the shareholder's private policy to Chubb or Daisy or whoever else, Berkeley 1, All Pure, AIG, didn't want to leave anybody out. And then there is the building's property insurance. So we've actually worked to lower the costs on both and let both of them help pay for the system.

So as you might imagine Chubb Insurance, which is basically the system that we're now starting to put in buildings, is to meet their guidelines, is to put a water leak detector at every point where there would be a leak in the house; ice makers, refrigerators, dishwashers, sinks, toilets, and then if the air conditioning system is the type that leaks, because not all do, the rope around there. Chubb Insurance offered a 3% discount for that and would offer an additional five if there was an automatic valve. We came to Chubb and said, "Hey, it's impossible to retrofit all of these apartments with automatic valves, but by calling the front desk, they're going to take action fast enough. It's as good as an automatic valve." They said, "Prove it."

So over the last year we recorded all of our water leaks as we do anyway, and we went back to Chubb in October and said, "Hey, and for the whole year we ended up catching 3,610 leaks in New York and New Jersey in calling the buildings. Of those, zero were false alarms and zero ended up being insurance claims." So when Chubb Insurance heard that, they went, okay, this is as good as a valve. They immediately went to New York State because for the homeowners insurance, they have to be approved to give a discount. They then went to New York State and said, "We want to give an 8% discount if a building has water leak detectors in all the places in the apartments and it has 24/7 staff that we can call that the system will call, they'll give an 8% discount." And in record time, New York State approved that, and we are now expecting the rest of the insurance companies to follow suit because it only makes sense.

Carol Ott:

And the 8% discount is for the homeowner or the building?

John Rusk:

Exactly. A homeowner insurance.

Carol Ott:

And what about the building?

John Rusk:

So let me just finish on homeowner and then we'll move to building. So for the homeowner insurance, that means in rough order, because the homeowner in a co-op condo, they're going to get assessed when costs go up and they're going to get savings. So the cost of the system, they're probably going to get about that much discount on their insurance within a year or two, which means for the next eight years on this system, they're going to be putting money in their pocket, which could be anywhere from 300 bucks to 2,000 bucks per year, then it goes in. Which triggers most people to say, well, that's a no-brainer, then, we should put in the system. Now we don't have all the insurers, yet. We have Chubb, but we expect over the next year, we should get most of the rest because it only makes sense much better for the residents to put in this system. 3,600 leaks and no insurance claims. Yeah. Okay.

On the other side is the building insurance. Building insurance doesn't give discounts. What they do is they rate risks. So when the underwriter looks at a building and the building has no water leak detection and no temperature detection, that is a certain risk. And especially if it's had leaks in the past, it's becoming dangerous. But if a building, even if it had leaks in the past now has water leak detectors at every point inside people's apartments that have leaks according to Chubb's plan, and all of those leak detectors also look for temperature being cold, then they will judge that as a less risky building.

So that is something that's just happening. We're in wonderful conversations with GNY right now and with Chubb's commercial department and other of the commercial underlying insurers for buildings. And we believe as they look at the risk, and you'll just have to explain it to your underwriter and Pro-Sentry is always happy to talk to those underwriters. And many of the good insurance brokers, probably almost all of them that your listeners use and readers use, we have relationships with them because they're already using us for buildings that can't get renewed. We had two buildings last year that we were getting called to make sure that they put in the Pro-Sentry system or else they couldn't get renewed. And then one of the buildings from last year actually saved $300,000 on their renewal. Once they went back and said, "Hey, we know we had some leaks, but we put in this water leak mitigation system." The insurer looked at it and that along with a change to the bylaws, ended up saving them $300,000.

Carol Ott:

Whoa.

John Rusk:

You have a casino in Atlantic City that saved $4.9 million by putting in a leak detection system, oil leak detection, automatic valves.

Carol Ott:

And for the building insurance, do the insurance companies also have to go to New York State?

John Rusk:

No, so good question. So for the tenant policies, New York State is there to protect them because what they're afraid of is that an insurer will come into the market, offer discounts, that if everybody took the discounts, the insurer would go out of business and so then they could not meet their obligations. So New York State, to protect the consumer, says, "We want to look at any discounts you're offering to make, study to make sure that there's a good case for it, and only then will we let you do it because we don't want you to take the business only to go bankrupt." For the commercial insurance companies, they let the insurance companies rate their own risks.

Carol Ott:

And I presume you're working with Chubb, but if I were a building, my residents have homeowner policies with many different companies.

John Rusk:

Sure.

Carol Ott:

So either those many different companies hopefully will go to New York State or as, perhaps, as a board. I would try and orchestrate a group purchase. Is that?

John Rusk:

Yeah, not really necessary because on the underlying building, which you, as the board, are responsible for. In that, if you put in a full Pro-Sentry system, you'll probably talk to your broker before you do it, they'll talk to the insurers and you'll find out, if we did this, are we going to save money? Are we going to have a lower deductible? What's the ROI here? We're here to give an ROI and we can't forecast the ROI on how a building might be rated. On the tenant policies because now Chubb did the hard work of filing it, going through all the due diligence with us for four years, blah, blah, blah, blah, blah, the security testing. Now it's very easy for the other insurance companies to file what's called a Me Too at New York State to just say, "Hey, Chubb has it. We want to do it, too." The state's already looked at it, so it's easy. So our hope is that most of the rest of the insurers will do it.

While I'm sure my friends at Chubb would love me to say, yeah, but it's not necessary certainly for the board because the board's just worrying about the underlying building.

Carol Ott:

Right.

John Rusk:

The individual tenants, they'll do what they want, but I imagine they're going to put pressure on their own insurance companies because if four do it, they'll start getting more business, especially in the best places they could write insurance, which is buildings with full water leak detection systems. As an insurer, that's the business you want to be in.

Carol Ott:

You mentioned buildings with fan coil, but if you're a older building with radiators and you have a, maybe you're on steam or you're on gas, how does this water detection system work?

John Rusk:

So there are some buildings that have leaky radiators, and leaky radiators do cause damage every year, every building. It's not one of the Chubb-required locations, so the board may elect not to do it. If the building has a history of these leaks, they have to do the cost-benefit analysis because there's a lot of radiators in an apartment. There's one in every room, typically. And so is it worth to put a $70 sensor at each one of those along with the temperature sensor?

Now, one of the interesting things, in fact, that same building that had the $300,000 savings about three weeks ago, Pro Sentry ended up calling them because they had one of their apartments at 48 degrees on a 16 degree day in New York City. The super told me the story and said, "I heard that I was 48 degrees, and I started to go crazy because I can't have another pipe freeze. I'm going to lose my insurance. And he's running up to the apartment," and he said, "Wait, that's why we got Pro Sentry and put it in. And they did call, and it's 48 degrees, not 32. So he's a little calmed down. He said by the time he got to the apartment, he went in, the apartment was on the market. A realtor had shown the apartment and had opened the door to the balcony and had not properly locked it on their way out, and it had blown open. So all the super had to do because he was notified it was at 48 degrees, before it was at 32, he just shut the door, went downstairs, finished his coffee.

But those kinds of things are really going to make a difference for the building's risk profile. And so likewise, if you have a building that has radiators where you've had a few leaks, it will cost some more money. But if one leak ended up costing $100,000, it can pay for it. And the reason I brought up the leak detectors is one of my clients on the construction side of my company had turned off a radiator had left town, and her upper sash in an older building had slipped down and it had frozen the building. And if she had a leak detector at the radiator, that would've been the detector that would've caught that cold air first.

Carol Ott:

You mentioned the temperature monitoring. Is the thing that you showed us that little stick, is that also temperature?

John Rusk:

Yeah, so we insist that all of our water leak detectors also do temperature monitoring, because it's so important. Some of our other sensors do humidity monitoring, which can be used like in Florida and in other instances in New York City for steam coils and other things like that. But for New York, I want temperature wherever I want water because a frozen pipe is going to create an immense loss. And we're a risk mitigation company, so if we can catch that pipe as it's coming down to 45 degrees and you go stop that problem, you never had a water leak and we're the best risk mitigation company.

Carol Ott:

For buildings, and I guess it wouldn't make a difference if your building was not staffed and you didn't have an on-site super, then the leak detection is really going to notify residents within their apartments.

John Rusk:

So it could do that. If it was a small building, say it had six units, 10 units, we can put an automatic valve on the valve coming into the building. So that pipe coming into the building of water, might be a two-inch valve, we could put an automatic valve on that. So as soon as any of the sensors in these six-unit or ten-unit apartment hits water, it would just turn off the valve automatically. Then the building super who might live a mile away, 20 minutes away, would get the text and he would go, oh, there was a water leak at the dishwasher in 21-J. Now he would then know that person's number, he would call her up. If they're not home, or they might reach the person, the person would say, "Oh my God, I just had water coming under my dishwasher, and then it stopped." Great. Or if she says, "You know what? I just spilled some pasta water. Sorry, Jimmy." No problem. From his phone, he could then start that valve again.

And because we come from New York City building world, to all the supers listening right now, you can turn on that valve at only 20% open. So it's not like turning on a valve and having a big slug of water, which potentially could pop off pipes because we're from the world. I've spent 39 years in the basements with these guys. I know turn it on slowly when you start it again. So it could do that, or a building could choose that we would notify each of their individual residents.

Carol Ott:

Whoa. Well, all very good news and interesting for boards to consider. So thank you very much for joining us today.

John Rusk:

Thanks so much, Carol. It's been a pleasure.

Carol Ott:

We've been speaking to John Rusk, the President and Co-founder of Pro Sentry. Thanks so much, John.

John Rusk:

Thanks. Bye.