Insurers Seeking To Avoid Payout On Brazil's Jirau Dam -Report

Insurers of Brazil's Jirau hydroelectric dam are refusing to pay claims on as much as 1 billion Brazilian reais ($550 million) in damages that resulted from a workers' protest last year, the Estado de S. Paulo newspaper reported Tuesday.

The insurers claim that because the protest was political in nature they are not required to fully cover the damages, according to the paper.

Workers at the Jirau dam being built in Brazil's Amazon River basin last year set fire to their temporary lodging and the buses that transported employees to and from the work site in protest of work conditions and pay. The insurance companies allege that the protests were "politically motivated," limiting the level of damages that are covered by the BRL7.3 billion insurance policy, Estado reported.

But lawyers for Energia Sustentavel, the group building and operating the dam, say that the fires were a criminal act and should be fully covered by the insurance companies, Estado said.

Reinsurers of the original insurers in Brazil--which include SulAmerica, Allianz SE (ALIZF, AZSEY, ALV.XE), Mapfre SA (MAP.MC), Itau Seguros and Alianca do Brasil--have asked a London arbitration panel to resolve the case, even as two lawsuits work their way through the courts in Brazil, Estado said.

According to lawyers for Energia Sustentavel, the reinsurers are pursuing a resolution through the London arbitration group Arias because the group was founded by insurance companies, Estado said.

The construction companies are worried that Arias will defend the interests of insurance companies in their decisions, Estado said. Ernesto Tzirulnik, a lawyer representing Energia Sustentavel and construction company Camargo Correa, asked that the case be decided in Brazil because the contracts with insurance companies were signed in Brazil, Estado said.

-By Paulo Winterstein, Dow Jones Newswires; 55-11-3544-7073; [e-mail]