After getting hit with a court order, Colombian public utility Empresas Públicas de Medellín S.A. E.S.P. (EPM) recently revealed that it received $983 million USD in a 2021 insurance settlement with insurer Mapfre Seguros Generales de Colombia S.A. following damage caused by the flooding of a machine room at the massive Hidroituango hydroelectric dam in Ituango, Antioquia.
The payment, which was only disclosed last month after a Medellín court issued a judgment demanding it be made public, dates back to losses that began to be incurred in April 2018 when a series of natural and human-made issues led to flooding within the mega-dam, causing a lengthy operational disruption, equipment loss, and a subsequent drop in revenue.
EPM filed a claim under its “all risk construction” policy with Mapfre, which was reportedly designed to cover damages that the project could suffer during the construction, operation and maintenance operations.
An Extensive Claims Process
During the claims process, each of the incurred damages had to be assessed and validated. While the policy had an upper limit on material damages in construction and loss of profits of more than $3 billion USD, the EPM board of directors at the time set a probable claim amount at 2.8 billion Colombian pesos given that the full value would have only been considered in a total-loss scenario, according to EPM head Jorge Carrillo.
“This is a loss, not a work that has ceased to exist,” said Carrillo in a statement. “The loss of profit is not unlimited.”
Mapfre worked on the known loss assessment with EPM, according to the utility, and between 2019 and 2021 paid out initial sums of $350 million USD.
Carrillo said that the insurer then accelerated the process when the Office of the Comptroller General of Colombia linked the claim to the fiscal responsibility process, as a civilly liable third party, for damages of 4.3 billion Colombian pesos.
This advanced the process and, with the $983 million USD awarded by Mapfre, after the different readjustments that were carried out, for, 90% of the amount assessed by the comptroller’s office was covered, per officials.
The Recent Epilogue to the Hidroituango Settlement
When EPM abided by the court order and revealed the value of its $983 million USD settlement last month on August 30, it included the following statement
“The amount reached with the settlement agreement covers the insured losses, taking into account all the conditions of the policy. In addition to the benefit that represented the early receipt of resources that allowed the progress of the work. Consequently, EPM did not waive to claim values or concepts that would have been covered, since the policy has some conditions that frame the maximum liability of the insurer such as deductibles, exclusions and sub-limits, which applied within a technical adjustment process make that not all the losses derived from the contingency have been indemnifiable by Mapfre. EPM thanks Mapfre.”
Carrillo added that the agreement had not been made public because of a confidentiality clause. “We could not release it because we would be in breach of contract,” he said.
Photo: The Hidroituango hydroelectric dam in Ituango, Antioquia. Hidroituango hydroelectric dam. (Photo credit: EPM)