Lloyd’s underwriters will not have to pay for an industrial clean-up at a glass reprocessing business after Victoria’s Environment Protection Authority took control of the site.

Although the authority removed stockpiles covered as property under an industrial special risks policy, exclusions and endorsements applied, the Victorian Supreme Court has found.

These included exclusions for property confiscation by a government authority.

In early 2020, the EPA took control of the Coolaroo site owned by Glass Recovery Services, citing fire hazard, discharge of contaminants and a risk to public health and the environment.

The authority removed the company’s glass, ceramic and porcelain stockpiles, and revoked its licence. It returned the site to Glass Recovery Services that June.

The EPA wanted $28.8 million from Glass Recovery Services and its landlord – a related company – for clean-up costs. It settled for $4.2 million, and the companies claimed against the underwriters for the settlement cost.

Although it was accepted the stockpiles were insured property, the underwriters cited exclusions stating their loss was not covered, and nor was the cost of their removal.

Justice Patricia Matthews says the “litany of inspection reports and notices issued by the EPA paint a clear picture” of stockpiles not being stored in accordance with guidelines, a risk of hotspots forming and causing fires, and contaminates leaching out.

The insurers argued the stockpiles were worthless, but Justice Matthews says some could have been sold for $8 million without processing.

However, she accepts the policy does not cover the cost of removing the stockpiles.

She also accepts the insurers are not liable when property is confiscated under a government order.

The policy covered business interruption, but the court says temporary loss of access to premises was not an insured loss.

Glass Recovery Services had not shown it suffered a loss of gross profits due to the interruption or interference with its business caused by the loss of stockpiles, nor had it established it had a profitable business that was interrupted by an insured event.

Administrators had been appointed to Glass Recovery Services in January 2020.

Read the judgment here.

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