Ansara v New India Assurance (Court of Appeal - 18 February 2009)
The claimant sought insurance from the defendant insurer for premises he owned and rented. He completed and signed a proposal form which asked, "Are the premises protected by an automatic sprinkler system?" He answered, "Yes". The defendant issued a policy of insurance in March 2004, which was renewed in March 2005 to take effect from 4 May for a further year without any relevant amendments.
In September 2005, a fire broke out in the premises which caused considerable damage. As a result, the claimant made a claim under the policy.
The defendant rejected the claim and cancelled the policy as it came to light that the sprinkler system had been turned off at the mains. During the trial, evidence was given that a filing cabinet had been placed against the control handle of the system to prevent it from being opened and that the water supply to the building had been cut off in August 2005 (ie the sprinklers could not have worked in any event). Although the claimant had not turned off the system himself, he was aware, prior to the fire, that it had been.
The claimant challenged the defendant's decision and, having been unsuccessful at trial, appealed. His appeal was dismissed and the Court of Appeal held: firstly, the proposal form stated as a fact that the building was protected by a properly functioning automatic sprinkler system; and secondly, there had been a change in facts - the system had not been turned off temporarily, so the premises could not be described as being protected by a properly functioning automatic sprinkler system. Furthermore, the change in fact was a material one, as it significantly affected the risk; and the claimant was aware that the system had been turned off indefinitely and was no longer providing the protection indicated in the proposal form and had failed to inform the defendant of the position.
This case illustrates the importance of insurers making enquiries - before confirming cover - to establish why a sprinkler system, which should have activated in the event of a fire, did not. If it transpires that a sprinkler system has been turned off temporarily (for example, for maintenance or repairs) an insurer is not entitled to cancel a policy. However, an insurer will be so entitled if, as here, a sprinkler system has been turned off indefinitely, with the policyholder's knowledge and the information has not been passed on to the insurer. - Alison Heard, BLM London.
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