Insurers refused Marsa scrapyard's €600k claim after 2021 fire

Insurers of a Marsa scrapyard that caught fire on Friday had refused a €600,000 payout claim for a previous blaze that engulfed the same site in September 2021, due to unsafe practices.

The scrapyard on Marsa’s Triq Giuseppe Garibaldi caught fire for a second time last week, sending huge plumes of black smoke into the sky. It led to a health warning for residents in surrounding areas, the cancellation of MCAST lectures, the suspension of light aircraft flights and a 24-hour firefighting effort.

PN MPs Rebekah Borg and Adrian Delia have demanded an investigation into what they described as an “environmental disaster”.

Court documents reveal that the previous blaze led to a three-year legal battle between scrapyard operators JAC Steel and their insurers Argus.

The 2021 fire broke out at around midnight and people in Valletta and Sliema woke up to the smell of burning rubber. Photo: CPD

Argus initially refused a €600,000 insurance claim for the 2021 blaze on the grounds of unsafe practices at the scrapyard, which they said led to an increased risk of a fire breaking out and spreading.

According to court documents, Argus said there was evidence of “disregard for good working practices,” which culminated in ERA, the environment watchdog, ordering the operators to clean up their act.

“In the period leading up to the incident none of the issues had been properly addressed leading to ERA imposing fines for non-conformity,” Argus said in response to JAC Steel’s payout claim.

“In our opinion the circumstances described are of material significance, leading to an increased risk of a fire inception and also an increased risk of the fire spreading.” 

The location of the fire at the scrapyard owned by JAC Steel. Photo: Google Maps

The breaches included exceeding the permitted amount of hazardous goods at the site, using an industrial waste material shredding machine without a permit, and failing to properly clean up liquid spillages of hazardous waste.

These violations, Argus said, were in breach of the scrapyard’s insurance policy obligations to maintain a safe environment and prevent injury to others. In later correspondence with JAC Steel, Argus argued that the entire policy was invalidated from the outset, as when the policy was up for renewal, JAC Steel had failed to disclose that ERA had issued a stop and compliance order against it for unsafe handling of hazardous materials.

JAC Steel sued Argus in 2022 over its refusal to pay out the claim.

The case was concluded in September, with Judge Henri Mizzi ordering Argus to pay the claim.

According to the court judgment, Argus Insurance’s initial argument that JAC Steel had breached specific conditions of its insurance policy invalidated its later argument that the entire policy should be considered void from the outset due to the operator’s failure to disclose the ERA stop order.

In other words, by initially rejecting the claim on the basis of a breach, Argus confirmed the policy’s validity and lost its right to later argue that the policy was void from the beginning due to non-disclosure. An appeal against the decision has been filed.