The issue in Qayyum Ansari v New India Assurance Limited  EWHC 243 was whether, when a sprinkler system had been turned off prior to a fire, there had been a material change in cover in the facts stated in a proposal form so as to bring into effect a termination of cover. The case turned on, firstly, the proper construction of a general condition in the policy providing that the insurance would cease to be in force if there was any material alteration to the insured premises and, secondly, if there was such an alteration, whether the policyholder could rely on a "non-invalidation" clause providing that his interest would not be prejudiced where, without his knowledge, the act or negligence of another person had increased the risk of damage occurring. The policyholder sought to rely on the decision in Kauser v Eagle Star Insurance Co Ltd  Lloyd's Rep IR 154 in arguing that the turning off of the sprinkler system did not constitute a material change in the facts stated because it did not create a situation that was outside the risk which on the true construction of the policy the insurer had agreed to cover.
The common law rule referred to in the Kauser decision severely limits the right of an insurer to avoid liability for an undisclosed increase in the risk of damage which occurs after the grant of cover. For this reason, it has become common for insurers to insert express provisions into policies requiring increases of risk to be notified and suspending or terminating cover if notification is not given. The English courts have often given such clauses a fairly narrow construction. However, the common law does distinguish between an increase of risk and cases where the nature of the subject matter insured has changed. In finding for the insurer, Mr Justice Patton drew a distinction between Kauser, where the condition in question was focussed in terms of a change of circumstances which increased the risk of damage, and the present case. In the latter the general condition was not limited to changes of circumstances which increased the risk of the insured peril occurring but operated on a material change in the facts stated in the proposal form. It was held that the existence of a working sprinkler system was on any view material to the proposal and the absence of such a system was by the same token a material change in the facts stated in that proposal. In addition, there was sufficient evidence that, whilst the policyholder himself had not disabled the sprinkler system, he was made aware that it was not working. As a consequence he was precluded from relying on the non-invalidation clause. Insurers will be pleased that this decision reflects their need to assess the likelihood of future risk on the basis of information contained in the proposal form and to calculate the premium accordingly.