OK well I will use myself as an example, my car is fitted with non-permit and illegal mods yet I got paid out when my car was written off.... No mods to blame, purely driver error...
Its quite simple, if we cant PROVE that the 'illegal' mod was the reason for the claim, then it should be paid out.
Using your brake query as an example, proving that by not upgrading them caused you to hit someone is VERY HARD to prove, so most likely pay you out if all mods on the car were noted.
Its a very touchy issue, but atleast an insurer like Shannons wont write off the claim straight away like your regular insurers who hate to deal with imports, may....