Centriq Insurance Company Limited v Oosthuizen and Another

Mrs Marisa Vogel Oosthuizen, recently widowed and financially vulnerable, sought investment advice from Mr José Francisco Castro, a registered financial services provider and broker. Acting on his advice, she invested R2 million from her late husband’s life insurance proceeds in a Sharemax property development scheme. The scheme was fundamentally flawed and later collapsed after a Reserve Bank investigation found that Sharemax was unlawfully taking deposits. Mrs Oosthuizen suffered a near-total loss and sued Mr Castro for negligent financial advice and breach of his duties under the Financial Advisory and Intermediary Services Act 37 of 2002. Mr Castro, in turn, claimed indemnification from his professional indemnity insurer, Centriq Insurance Company Ltd. Centriq repudiated liability, relying on an exclusion clause that purported to exclude cover for claims arising from depreciation in the value of investments or representations as to investment performance. The High Court held Mr Castro liable to Mrs Oosthuizen and found that Centriq was obliged to indemnify him. Centriq appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel. Centriq was obliged to indemnify Mr Castro under the professional indemnity policy.

The case is an important authority on the interpretation of exclusion clauses in professional indemnity insurance policies in South African law. It affirms that insurers cannot rely on ambiguous exclusions to undermine the essential purpose of cover and reinforces a purposive, commercially sensible approach to contractual interpretation, particularly in the insurance context. The judgment provides guidance to insurers and financial advisors regarding the scope of cover for negligent financial advice.