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Motor Insurance
Saturday, November 1, 2008
A right liability

Limitations imposed by the new Road Accident Fund Amendment Act – including the removal of a claimant’s right to sue the guilty party in the event of an accident – may severely restrict the victim’s potential for seeking full compensation.  From an insurance perspective, therefore, the only option is to ensure appropriate income protection, medical aid and disability cover.
Lourens Joubert, Head of Corporate and Commercial Underwriting at Santam, says that the promulgation of the Amendment Act, which is applicable to all accidents that occurred on or after 1st August of this year, has far-reaching implications for clients and brokers alike.  In particular, it serves to limit the extent to which claims can be made against the Fund and the right of victims to seek separate legal redress from the guilty party in the event of an accident.
He points out that general damages will in future be limited to serious injuries, as determined by a medical practitioner, only, and that all other general damages, such as pain and suffering, disablement, disfigurement and loss of amenities of life will be excluded.  Loss of income will be limited to R160 000 per annum and, where the claimant has died, the loss of support to dependants is equally limited to R160 000, irrespective of the number of dependants.
Furthermore, medical expenses are to be limited to the rates charged by public health authorities, and no claims will be paid for secondary emotional shock, such as the costs claimed by a person who was not involved in the accident but witnessed it taking place.
“Importantly, a claimant’s common law right to sue the guilty party – normally the driver of the vehicle – has been removed in all situations, except where the fund is unable to pay by virtue of financial bankruptcy, and for secondary emotional shock,” says Joubert.
“Under the old Act, claimants were able to sue for unlimited amounts.  Practically, however, there was seldom reason to sue the guilty party, as the amounts paid out by the Fund were also unlimited. The only time they needed to recover against the driver of a vehicle was if they were passengers in a vehicle, as their claim against the Fund was limited to R25 000.
“In terms of the Amendment Act, it is not possible to sue the guilty party.  The limitation of R25 000 which previously applied to passengers has been removed, however, and the fund will therefore pay in full, but subject to the maximum amounts now applicable.”
Joubert notes that the new limitations mean that persons who earn in excess of the R160 000 per annum maximum will need to purchase additional insurance cover by means of Personal Accident type policies or other income-protector policies, to limit their financial loss.  The removal of the common law right to sue also means that clients may have to consider additional cover for medical costs and potential disability.
The removal of one’s common law right to sue is a very emotional issue and it remains to be seen whether this will be tested and accepted in the Constitutional Court. Until such time, however, clients need to ensure that they are adequately covered in terms of income protection, medical aid and disability cover provided by short term insurance companies or their life insurers.

Copyright © Insurance Times and Investments® Vol:21.10 1st November, 2008
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