Business all-risks insurance is commonly used to insure specified business assets against loss, damage, or theft from any cause except where cover is expressly excluded. Because this form of insurance is broader and typically more expensive than standard cover, policyholders often assume it provides comprehensive protection for insured items in all circumstances.
A recent settlement discussed in the FAIS Ombud’s December 2025 newsletter illustrates why this assumption can be misplaced, particularly where exclusions limit cover in a way that undermines the commercial purpose of the insured asset.
Background to the complaint
The complainant, who operated an agricultural business, purchased two drones for use in farming operations and requested comprehensive insurance with no excess. The drones were added to the complainant’s business all-risks policy in July 2024.
Subsequently, one of the drones was damaged after colliding with a power line while in flight. The insurer rejected the claim, valued at R244 700, relying on a policy exclusion that specifically excluded damage to drones while in flight.
The complainant contended that the exclusion had never been explained, and cover that excluded in-flight damage was unsuitable for a drone used in agricultural operations.
The broker maintained that its role in adding the drones to the policy was purely administrative, following a written instruction from the complainant’s office. It argued that no advice had been rendered, and all material disclosures were contained in the policy schedule and documentation provided to the complainant.
It was further argued that the complainant bore responsibility for reading and understanding the policy terms, including the exclusions clearly reflected in the schedule.
The Ombud’s assessment
The FAIS Ombud approached the matter by considering whether the broker had rendered “advice” or “intermediary services” as contemplated in the Financial Advisory and Intermediary Services Act.
The Ombud concluded that the addition of the drones to the policy constituted the introduction of a new financial product, rather than a mere administrative amendment. As a result, the transaction fell within the definition of “advice” under the FAIS Act, triggering the broker’s regulatory obligations.
In particular, the Ombud relied on the following provisions:
- Section 7(1)(a) of the General Code of Conduct, which requires a financial services provider to provide a reasonable and appropriate general explanation of the nature and material terms of the contract, including any information reasonably necessary to enable the client to make an informed decision.
- Section 8 of the General Code of Conduct, which obliges a provider to take reasonable steps to obtain appropriate information regarding the client’s needs and objectives and to ensure that the financial product recommended is suitable for those needs.
Furthermore, Treating Customers Fairly (TCF) Principles 3 and 4 require that customers be given clear information before, during and after contracting, and that advice and products be suitable for the customer’s circumstances.
The Ombud found that an exclusion removing cover while a drone is in flight is a material term, particularly where the insured asset is intended for operational use. The broker’s failure to draw the exclusion to the complainant’s attention and assess suitability accordingly constituted a breach of its duties under the Code of Conduct and the TCF framework.
Notwithstanding these findings, the Ombud also emphasised that the complainant had received the updated policy schedule, in which the exclusion was clearly recorded. The Ombud held that the complainant ought reasonably to have read the schedule and identified the limitation in cover. This failure contributed to the loss remaining uninsured.
Considering the shared responsibility of the parties, the Ombud recommended that the broker compensate the complainant for 50% of the claim amount, or R122 350. The recommendation was accepted by both parties, and the matter was resolved.
Implications for business policyholders
The FAIS Ombud’s findings reinforce that effective insurance protection depends not only on the breadth of cover described, but on a clear understanding of its limitations. Business all-risks insurance can offer valuable protection, but only where exclusions and endorsements are properly understood and aligned with the policyholder’s operational needs.
Although financial services providers are obliged to disclose material terms and ensure suitability, policyholders also bear responsibility for reviewing policy schedules and endorsements.
