Ansari v New India Assurance Ltd

In a post-contractual insurance condition providing that cover ceases after a material change in facts stated in a proposal, materiality does not have the relatively low threshold applicable to pre-contractual disclosure. It means a change that significantly affects the risk and takes it outside what reasonable parties contemplated when the policy was issued. A temporary interruption of an automatic sprinkler for maintenance may remain within the original contemplation, but indefinite disablement of a system represented as protecting occupied premises does not. An insured who knows of such a change and gives no notice cannot rely on a non-invalidation extension. Appeal dismissed.

Qayyum Ansari claimed under a commercial property insurance policy for fire damage to premises in Manchester. New India Assurance relied on a condition providing that cover ceased after a material change in the premises or in facts stated in the proposal form. The claimant relied on a non-invalidation extension protecting a freeholder where the increased risk was unknown to him. Patten J dismissed the claim in the Chancery Division: [2008] EWHC 243 (Ch). The appeal, limited to construction of the policy, concerned the facts stated in the proposal, whether disabling the sprinkler system or changing the tenant’s business amounted to a material change, and whether the claimant knew enough to invoke the extension.

Moore-Bick LJ gave the judgment, with Thomas and Waller LJJ agreeing. The appeal was dismissed.

1. The proposal form referred to the factual answers given to the insurer’s questions, not merely to the proposer’s knowledge or belief. In the context of occupied commercial premises, an affirmative statement that the premises were protected by an automatic sprinkler system meant that the system was installed and ready to operate, rather than merely that equipment existed. The tenant’s business was also stated to be the sale of kitchenware.
2. Condition 2 required the court to identify the relevant stated facts, determine whether they subsequently changed, decide whether any change was material, and consider whether the insured knew of the change so as to lose the benefit of Extension 3. A sprinkler system temporarily out of service for maintenance or repairs might remain within the general status represented by the proposal. Here, the system had been disabled indefinitely. That was a change in the stated fact because the premises could no longer properly be described as protected by a functioning system. The tenant’s substantially different business also constituted a change in a stated fact.
3. The word material in this post-contractual condition did not bear the same meaning as in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 A.C. 501, which concerned pre-contractual disclosure. The relevant change had to significantly affect the risk and take it outside what reasonable parties contemplated when the policy was made. The common-law principle stated in Law Guarantee Trust and Accident Society v Munich Re-insurance Company [1912] 1 Ch. 138 informed the construction, but the wording of Condition 2 governed. The approach had a similar effect to Kausar v Eagle Star Insurance Co Ltd [2000] Lloyd's Rep IR 154.
4. The judge’s findings, taken together, established that Ansari knew the sprinkler system had been out of operation for a considerable and indefinite period. Since he had not notified New India, he could not rely on Extension 3. The court also refused to reopen the water-supply issue on late evidence that could have been obtained at trial.

1. Court of Appeal (Civil Division): dismissed the appeal concerning construction of the insurance policy, [2009] EWCA Civ 93.
2. High Court of Justice, Chancery Division: Patten J dismissed the insured’s claim, [2008] EWHC 243 (Ch).