Lloyd's underwriters beat a multimillion-dollar claim after Victoria's environment regulator hauled away a glass recycler's waste piles.
In a judgment handed down on May 28, 2026, the Supreme Court of Victoria sided fully with insurers in a long-running fight over an Industrial Special Risks policy - the all-risks property cover used by large commercial operators.
The dispute traces back to Coolaroo, north of Melbourne, where Glass Recovery Services ran a glass reprocessing plant on land owned by a related company, 82 M Pty Ltd. Two large piles of material had built up on the site - one of glass "fines," one of mixed ceramic, glass and porcelain. The judgment calls them the Stockpiles.
The Environment Protection Authority had inspected the site for more than a year, issuing notice after notice about fire risk, leachate (liquid runoff from waste) and "hotspots" - spots inside the piles that were heating up on their own. In late 2019 the EPA took over the premises, removed and disposed of the Stockpiles, and later revoked the company's licence. Glass Recovery Services went into administration, then liquidation.
The recycler and the landowner turned to their Lloyd's insurers, claiming for the lost Stockpiles, the clean-up bill, damage to site equipment and lost profits. The insurers refused, pointing to a stack of policy exclusions. The court worked through them one by one - which is what makes the decision a useful read for claims professionals.
The central exclusion was Perils Exclusion 1(b), which removes cover for loss "resulting from confiscation, nationalisation, requisition or damage to property by or under the order of any Government or Public or Local Authority." The recycler argued the EPA only ran a "clean-up" and never confiscated anything. Justice Matthews disagreed, finding the EPA "took the Stockpiles and did not give them back."
The plaintiffs also tried to read "by or under the order of" narrowly, arguing the EPA's authority was disputed. The court rejected that, drawing on a recent English decision, AerCap Ireland v AIG Europe, which arose from aircraft stranded in Russia after sanctions. There, the judge read the same phrase as covering both a government acting directly and a longer chain ending in a government order. Justice Matthews took the same view: it was enough that the confiscation was "by" the EPA, and the exclusion did not require the order to be undisputed or even lawful.
That sank the property claim. The policy did carry a "Write-Back" restoring cover for "sound property" removed "for the purpose of preventing or diminishing imminent damage by, or inhibiting the spread of, fire." It failed on two counts. First, the court found the Stockpiles were not "sound property" - their own contaminated condition was the source of the fire risk, so they could not be sound. Second, the carve-out only applies to an imminent fire danger, and the court agreed with the plaintiffs that there was no imminent fire risk. The EPA acted to head off pollution and environmental harm, and those risks had been building for months. A small fire the day before the takeover, quickly put out, did not make the danger imminent.
The insurers had more in reserve, and won on those too. Perils Exclusion 4(a) knocked out loss "occasioned by or happening through" contamination, and the judge found the paper, cardboard and green waste in the piles was a contaminant that helped drive the heating. Perils Exclusion 6(c) excluded loss through "spontaneous combustion" and self-heating, which the court found helped trigger the EPA's intervention. And Endorsement NMA 2342, a seepage and pollution exclusion, swept up any loss or cost "incurred, sustained or imposed by order, direction, instruction or request of... any court, government agency or any public, civil or military authority" arising from pollution - including from "clean-up or removal." Even the one item the court found was covered, the site's pits and drains, was knocked out by NMA 2342.
Not everything went the insurers' way, and that is worth noting on the burden of proof. The court rejected their reliance on Condition 11, the "reasonable precautions" clause, finding they had not shown the recycler "deliberately courted a recognised danger by taking measures known to be inadequate." A warranty argument was dropped because neither side ran it at trial.
The stakes were large. The EPA originally claimed $28,797,163.18 for the clean-up, then settled with the insureds for $4.2 million, paid by 82 M in July 2025. The plaintiffs also chased lost profits and a separate "Gate Fees" claim of $6,250,533 - money the recycler said it would have earned charging suppliers to take in mixed glass. The court found no link between the lost Stockpiles and the gate fees, treating that as a claim about lost site access, not lost stock.
Justice Matthews ran through the figures item by item to show that, even if the amounts had been accepted, the policy's $1 million Section 1 deductible and the exclusions left nothing payable. The claims were dismissed, with a preliminary view that the insureds should pay the insurers' costs. The court will hear the parties on the final orders and costs, with submissions due by June 10, 2026.
The lesson for the market: when a government authority removes contaminated property during an environmental clean-up, a well-drafted ISR policy with a confiscation exclusion, a contamination exclusion and an NMA 2342-style pollution endorsement can shut out the entire claim - and a fire-focused write-back will not save it unless the property is sound and the fire danger is truly imminent.
