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Monday, September 1, 2008
Road Accident Fund amendments introduced August 1st

The Road Accident Fund Amendment Act, 2005 introduces fundamental and far-reaching changes to the Road Accident Fund Act, 1996, and the system of compensation of the victims of motor vehicle accidents, which has endured in South Africa since 1942. The Amendment Act was brought into effect on 1st August 2008.

Writing in the firm’s gildmail newsletter, David Kapelus of Deneys Reitz, explains that the material changes introduced by the Amendment Act include:
• all claimants who claim non-pecuniary (general) damages are subject to an assessment by a registered medical practitioner, to determine the severity of the injuries suffered by the claimant, and whether or not the injury is to be classified as a “serious injury” in relation to the circumstances of the claimant;
• according to the new Regulations, a “serious injury” is one that results in 30% or more of total body impairment. Failing this the injury may still be assessed as serious if it results in ‘serious long term impairment or loss of a body function’, constitutes permanent and serious disfigurement, results in severe long term mental or a severe long term behavioural disturbance or disorder or results in a loss of a foetus;
• general damages (for pain and suffering, disablement, disfigurement, loss of amenities of life) are excluded in all cases save for injuries classified as serious;
• damages for loss of income are capped at a maximum amount of R160 000.00 per year;
• damages for loss of support are capped at a maximum amount of R160 000.00 per year in respect of each deceased breadwinner, i.e. irrespective of the number of dependants claiming loss of support as a result of the death of the deceased breadwinner;
• the maximum amount upon which claims for loss of income and loss of support are calculated (R160 000.00) is subject to a quarterly inflationary adjustment;
• future medical expenses are payable by the RAF in terms of an Undertaking to pay such future expenses as and when incurred, subject to the proviso that such expenses are now based on the tariff for health services provided by public health establishments;
• claims against the RAF for damages as a result of emotional shock suffered by secondary victims (those who merely witness or observe an accident or are informed about another person having suffered injury or death in an accident) are excluded;
• the most significant consequence is the extent of the continued abolition of a claimant’s common law right to claim any damages that are not recoverable from the RAF, from the negligent owner or driver of the vehicle that caused the accident, or the employer of such negligent driver. The Act now significantly limits the damages recoverable by an injured person from the RAF and gives no right to claim the remaining loss from the guilty party. In general terms under the previous RAF legislation the quantum of damages recoverable from the RAF was not limited, except in claims by passengers, so that the effects of the limitation were not so drastic;
• the limit of R25 000.00 placed on the claim of a passenger in a motor vehicle, where the driver of the vehicle in which the claimant was a passenger was the sole cause of the accident, has been removed;
• the exclusion of claims by members of the same household as the driver of the motor vehicle has been removed, and such claims are now permissible.

Kapelus says the Amendment Act does not have retrospective effect, and relates only to those motor vehicle accidents occurring as from 1st August 2008.

Claims by Foreigners

There has been much speculation about the possible exclusion of claims against the RAF by foreigners, he adds. But the Act does not exclude such claims, which remain enforceable, although obviously subject to the limitations set out above.

The Need for Insurance Cover

The effect of the amendments is that:
• a person’s full common law damages (in respect of loss of earnings, medical expenses insofar as such exceed the public health tariff, general damages and loss of support) are not recoverable in terms of the Act, in circumstances where:
o such person earns more than R160 000.00 per year;
o such person undergoes medical treatment in the private sector at a cost in excess of the public health tariff;
o such person does not suffer a serious injury, therefore excluding general damages:
o the total loss of all dependants exceeds R160 000.00 per year.
• there is no right of action by such injured person, or a dependant of a deceased breadwinner, against the wrongdoer, namely the negligent owner or driver of a motor vehicle, or the vicariously liable employer of the negligent driver of such motor vehicle, for those damages not claimable against the RAF, except in circumstances where the RAF is unable to pay any compensation. This abolition of a right of action does not apply to claims for emotional shock by secondary victims who merely witness or observe an accident or are informed about another person having suffered injury in an accident;
• the Act will substantially limit the need for owners or drivers of motor vehicles to take out liability insurance cover for personal injury. That would be necessary only to cover the possibility of a claim for damages for emotional shock suffered by secondary victims unless motorists over-cautiously wish to insure against the insolvency of the RAF, or a foreign claim (see below);
• the Act effectively shifts the responsibility onto every individual to ensure that he or she has adequate personal accident insurance cover, disability insurance, life insurance and health insurance;
• there is considerable scope for insurers to develop appropriate insurance products to fill these gaps in cover;
• there may be an increased risk for insurers in instances where a policy provided cover subject to any damages claimable in terms of any third party legislation being taken into account. As the damages claimable from the RAF are now limited, this may result in increased payments by insurers in terms of such policies;
• there is a possibility that a foreign claimant will get a substantial award overseas against a local negligent motorist. Although the judgment may not be enforceable here, it may preclude the defendant owner or driver from travelling to or having assets in that jurisdiction without risk of attachment.
All information provided by Deneys Reitz Attorneys

Copyright © Insurance Times and Investments® Vol:21.8 1st September, 2008
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