We recently had a house flood when a valve behind the toilet busted in the middle of the night.  A call to the owner had to be made to tell them that the house had flooded and the cleanup costs would be considerable.

Of course, no one wants to make that call, to tell the owner the bad news.  

But, when the call is made, I think it should be as soon as possible and with as much information as possible.  The information should includle the initial known costs and the likely future costs to complete the repair.  It should also be noted that the repair and cleanup is a possible insurance matter.  That might soften the blow to the owners pocketbook.  

I think the best way to handle this is to put yourself in your clients shoes.  "Mr Owner, I know this is upsetting, and I am upset too.  I am sorry to have to deliver this news to you.  Here is how we can solve the problem"

Having the solution along with the problem will go a long way to making the call much easier to swallow.