Scrap metal cargo fires - Court highlights assured’s disclosure obligations

A recent English court decision involving a scrap metal cargo fire highlights two important lessons. First, insurers require a complete and transparent picture of a risk when considering policy renewals. Second, scrap metal remains a cargo with well-known fire hazards, capable of causing significant damage both ashore and on vessels.

The dispute arose following a fire on board a vessel loading a shipment of scrap metal in Belgium, likely caused by Li-ion battery, which led to a substantial claim by the shipowner against the charterer alleging breach of the IMSBC Code. When the charterer sought indemnity under its Charterers' Liability insurance, insurers declined cover, arguing that the assured had failed to disclose a number of previous scrap metal fire incidents and had therefore breached its duty of fair presentation under the UK Insurance Act. As per the insurers, had these incidents been disclosed, they would not have renewed the policy on the same terms given the significantly greater level of risk posed by potential vessel fire claims.

The assured, a scrap metal trader, had maintained Charterers' Liability and Freight, Demurrage and Defence (FDD) insurance since 2008 in connection with its voyage chartering activities. The cargo was described to insurers as non-oily, non-radioactive steel scrap, including HMS 1, HMS 1+2 and shredded scrap grades. Between 2020 and 2022, however, several fires occurred involving the assured's scrap metal cargoes, including incidents in shore stockpiles and during loading and discharge operations. There were also fire incidents at facilities involved in processing the scrap.

The court found in favour of the insurers, concluding that the frequency and nature of these incidents materially altered the risk profile originally presented. Particular significance was attached to the fact that multiple fires had occurred within a relatively short period after many years without similar events. Additionally, the ruling underscores that an underwriter's general familiarity with the inherent hazards, does not mean insurers are assumed to know about an operator's specific past incidents; and the burden of disclosure remains with the assured.

Link to judgement: https://www.bailii.org/ew/cases/EWHC/Comm/2026/1837.html