ASSESSMENT OF THE ROAD ACCIDENT FUND
SECOND AMENDMENT BILL, 2003 AND PROPOSALS
TO BE MADE BY THE COALITION:
Section 3 of the Road Accident Fund Act of 1996 provides for the establishment of the Road Accident Fund, which has as its objective: "the payment of compensation in accordance with this Act for loss or damage wrongfully caused by the drivers of motor vehicles".
2. During the past 10 years concern has been expressed in respect of the funding of Road Accident Fund compensation, the cost of Road Accident Fund compensation, abuse of social security benefits, assessment of injuries and disablement, health care for road accident victims, and delivery of Road Accident Fund compensation. This resulted in the appointment of the Road Accident Fund Commission on 1 June 1999 to "enquire into and to make recommendations regarding a reasonable, equitable, affordable and sustainable system, for payment by the Road Accident Fund of compensation or benefits, or a combination of compensation and benefits, in the event of the injury or death of persons in road accidents in the Republic."
The Road Accident Fund Commission published its report during March 2003, advocating far reaching changes to the system. In the light of the far reaching implications in terms of cost, structure and law, the implementation of the Commissions proposals will take considerable time, and various role
players have expressed a need to, on an interim basis, improve the system of payment of compensation to victims of road accidents. Against this background, the Ministry of Transport published on 16 September 2003 the "Road Accident Fund Second Amendment Bill, 2003".
4.1 The cash flow of the Road Accident Fund.
4.2 The administrative burden of the Road Accident Fund .
4.3 The issue of fraud within the Road Accident Fund.
4.4 The continued compensation of seriously injured victims of road accidents.
4.5 The concern that money should reach those that it is intended for.
II) ROAD ACCIDENT FUND SECOND AMENDMENT BILL, 2003:
The Coalition wishes to make the following comments in respect of the formulation and implications of the Road Accident Fund Second Amendment Bill, 2003, and submit proposals in order to address the aims identified in paragraph 4 above.
I) Ad provision 2(a) of the RAF Second Amendment Bill:
The said draft bill proposes that Section 17 of the Road Accident Fund Act, of 1996 is amended to read "(a) includes a claim for the costs of the future accommodation of any person in a hospital or nursing home or treatment of or rendering of a service or supplying of goods to him or her, the Fund or Agent must after furnishing the third party concerned with an Undertaking to that effect or a competent Court has directed the Fund or the Agent to furnish such Undertaking, to compensate the third party in respect of the said costs after the costs have been incurred and on proof thereof"
I.1 The relevant section envisages a promise or expression of intent to pay the medical costs of successful claimants. This section provides that the RAF shall be entitled "to compensate the third party in respect of the said costs after the costs have been incurred and on proof thereof"
I.2 The RAF Commission states on page 622 of it’s report "for years there has been sullen antagonism between claimants and the RAF by reason of interpretation of this Section.
Claimants believe that the legislation intends that they are, at most, required to obtain a costing in respect of hospital, medical, pharmaceutical treatment or prosthetic or other equipment and then make an arrangement for the provision of same, thereby assuming an obligation for such costs or rendering themselves liable to payment as and when the service is actually provided."
Investigation by the Commission led to the conclusion that "the wording of the Section, as also the advice given by the RAF, makes it quite clear that the claimant is first required to pay a service provider a sum of money in respect of medical expenses. Such services must actually been paid for and provided before the RAF will assist."
The Commission states on page 623 that "This practice can severely prejudice an indigent claimant who cannot afford to pay for hospital expenses, a doctor, a wheelchair or prosthesis and who is therefore unable to utilise an Undertaking because, in the absence of advanced payment, the costs have not been "incurred" ". (Our emphasis).
I.3 The RAF Commission draws attention to the fact that there "is a danger that the Undertakings document, or the settlement agreement which incorporates an Undertaking, does not adequately identify and define the bodily injuries and sequelae for which the RAF accepts responsibility", and that this has led in many instances to animosity and mistrust.
I.4 The RAF Commission also draws attention to "harsh results" in circumstances where the RAF is entitled to tender a partial Undertaking, where a claim has been reduced in terms of the Apportionment of Damages Act, in other words in those instances
where the Fund only accepts liability in terms of a specific percentage eg 20%, 40%, 50% of the claimant’s future medical expenses.
I.5 Significantly, the RAF Commission deals with the "Road Accident Fund Amendment Bill, 2002" which proposed a similar amendment of the Act to which the Commission replies on page 642:
"22.127 The RAF motivation for the proposed amendment is that the current legislation entitles the Fund to elect, after having exercised the discretion, to furnish an Undertaking in respect of future medical expenses and future loss of income or support. It is stated that in practice it is very difficult for management to superintend the proper exercise of this discretion.
22.128 It is highly doubtful that the current legislation on the discretion in nature of the power to furnish an Undertaking is the route of the problem. The problem lies within the RAF itself.
22.129 The forensic auditors report prepared by Nkonki Sizwe Ntsaluba Incorporated identifies questionable competencies within executive and senior management, low levels of experience and expertise in certain relevant positions, and generic failures in operational matters, which undermine efficiency and maximise risk within the RAF. Where reference is made to the current administration of Undertakings it is clear that any "difficulties in management to
superintend" the system arise not from the current legislation but from the absence and failure of systems, inappropriate or non-existent expertise, and, in certain instances, fraud and corruption", and
"22.135. The reservations about the efficiencies of the RAF in general and the Undertakings Department in particular are again of application", also,
"22.136 These proposals with regard to the obligatory nature of undertakings appear to be motivated solely by the desire to reduce the RAF’s expenditure. When one has regard to the available data that indicates that an excess of 80% of undertakings issued are never utilised by the recipients, the expectation of denying compensation and thereby saving money is probably well founded.
22.137 Since the RAF does not appear to have engaged in any appraisal of the merits or demerits of the traditional system in terms whereof compensation is paid by way of a pre-determined ‘capitalised lump" sum award, the proposals with regard to compulsory undertakings do not appear to be situated within the context of such an appraisals. The efficacy of undertakings and the interests of injured and disabled claimants appear to have played no part in this proposal." (Our emphasis)
I.6 It is important to note that the RAF has in any event followed a policy during the past three years to furnish claimants with Undertakings, without the choice of a cash-lump-sum. The RAF Commission’s conclusions in respect of the difficulties occasioned by obligatory undertakings is further borne out by the practical experience:
I.6.1 It takes the RAF up to 7 to 8 months to furnish the claimant with the actual Undertaking, during which period the claimant cannot be reimbursed for medical treatment.
I.6.2 By the time the claimant’s file reaches the Undertakings Department, the file is often incomplete, and has to be reconstructed, leading to further delays in dealing with the claimants needs.
I.6.3 The Undertakings Department has a very high turnover in staff, necessitating new staff to re-peruse files, leading to further delays.
I.6.4 The Undertakings Department often summarily dismisses the claimants medico legal reports, and insists on following the reports furnished on behalf of the RAF, necessitating Attorneys to re-enter the process to protect the claimants’ rights, despite the fact that these issues have often been dealt with at the time of trial.
I.6.5 Heavily apportioned Undertakings become virtually worthless due to the fact that claimants cannot raise the capital to pay the difference in medical costs.
I.6.6 Delays in furnishing payment to claimants for medical costs often exceed six months from submission of vouchers, leading to judgments being taken by medical suppliers against claimants.
I.6.7 Notwithstanding its dilatory obstructive approach, the Undertakings Department refuses to pay interest on medical bills, causing the claimant further out of pocket expenses.
I.6.8 Claimants outside Pretoria have difficulty arranging meetings with Undertakings Department staff for on site visits and evaluations.
I.6.9 Great amounts of paper work are often generated for small expenses which could easily have been dealt with by once off
I.6.10 The RAF often insists that new medico legal reports be obtained when claimants request payment of medical expenses under such Undertakings. Such reports have to be provided at the claimants’ own cost.
I.6.11 Because so many South Africans are illiterate, they cannot handle the stream of queries from the RAF and the result is that they "eventually give up and make no use of their Undertakings"
The netto result of the practical experience in respect of Undertakings, is one of compensation denied.
I.7 It is significant to note that the RAF Commission states on page 641
that "the RAF management proposed that Section 17 be amended by deletion of the words "after the cost has been incurred and on proof thereof" and substituted with "upon the third party furnishing proof that an obligation to pay for the provision for such costs has arisen or shall imminently arrive""
I.8 Although this would be a more equitable formulation of the Act, enabling "claimants...... to work with the Undertakings Department to maximise the value of that portion of future medical treatment for which the RAF is liable" and to "development and structuring of a medical management plan and negotiating discounted fees for treatment", it is doubtful whether the RAF has the capacity to implement such a system, and the initial focus should be to ensure that the RAF has the capacity to implement such a system.
The Coalition has obtained opinion from Senior Counsel, namely that the Undertaking system of payment of future medical expenses, as it presently exists under Section 17(4) of Act 56 of 1996, in-so-far as it has the effect of depriving an indigent person of his or her right to compensation for such future expenses, infringes upon Section 27 (1) of the Constitution (the right to access to healthcare), and Section 9 (3) of the Constitution (the right not to be unfairly discriminated against). It may also infringe upon Section 12 (the right to bodily and psychological integrity) and Section10 (the right to dignity). These challenges are reinforced by the proposed Amendment to be introduced which makes the Undertaking system compulsory in all circumstances. Section 17(4) (as amended) is not rescued by Section 36 of Constitution’s limitations-clause.
The said draft bill provides in Section 2 (b) for "(b) includes a claim for future loss of income or support, the Fund or Agent must, after furnishing the third party in question with an Undertaking to that effect or a competent Court has directed the Fund or the Agent to furnish such Undertaking, to pay the amount payable by it or the Agent in respect of the said loss, by instalments in arrear."
1. The Section provides that all future loss of income or loss of support suffered by the dependants of a deceased party, will receive their loss of income by instalments in arrear.
"22.133 This is, in effect, a repetition of the previous proposal in respect of Undertakings with one significant exception to the reference to periodic instalments being paid "in arrear" confirms the interpretation applied to the present Section 17(a) whereby the patient must incur and pay for his or her own medical costs before being refunded by the RAF.
22.134 The RAF captures no data on the injuries or disablements sustained by its claimants, the demographic profiles of such claimants and, in particular, employment and income details and the source and cost of health care rehabilitation of such patients and claimants. It is thus difficult to comprehend why the RAF should believe that it is equitable or reasonable for compensation to be paid "in arrear". How long will the disabled wait for their compensation? On what must they live in the meantime" (Our emphasis)
22.135 The reservations about the efficiencies of the RAF in general and the Undertakings Department in particular are again of application.
22.136 These proposals with regard to the obligatory nature of Undertakings appear to be motivated solely by the desire to reduce the RAF’s expenditure. When one has regard to the available date that indicates that an excess of 80% of Undertakings issued are never utilised by the recipients, the expectation of denying compensation and thereby saving money is probably well founded".
3. DEFERRED LOSS OF EARNINGS:
It is important to note that payment of loss of earnings in instalments will:
3.1 Necessitate the RAF to undertake to inflate the monthly pension paid to the claimant by at least the CPI. This will result in a considerable increase in future liabilities of the RAF.
3.2 The relationship with the claimant is extended over a period of time which could extend as long as 50 to 60 years, with the inherent perpetuation of hassles between the parties.
3.3 The RAF Commission states on page 656:
"22.208 The Actuarial Society of South Africa cautions against "the cost of administration associated with effecting and controlling regular payments", while the South African Insurance Association points out that the RAF is not geared up to make monthly payments to victims of road accidents and that this would "add
massive costs". Mr G W Jacobson believes that considerable administrative capacity would be required and questions the extent to which and by whom legal costs would be paid.
22.209 In addition the experience of Section 17 Undertakings indicates that the RAF does not currently have the capacity to administer a system of reviewable period payments." And "administrative skills and computerisation on a par with those in the private sector would be required." (Our emphasis)
3.4 Actuarial calculations which previously were only necessary at the time of conclusion of the matter, will have to be repeated at regular intervals due to changing economic data and circumstances.
3.5 Verification of identities, banking details and other information which presently is dealt with on a once-off-basis at conclusion of litigation, will now be required on a continuous basis in the future. The opportunity for fraud in this context is particularly pertinent.
3.6 The RAF will no longer have the benefit of having determined "once and for all" it’s liability to the claimant, and will enter an extended unquantified quagmire, which can remain so for up to 60 years.
3.7 The RAF finally still has to pay the actual loss suffered in an actual month, sometimes 20, 30, 40 or 50 years later, instead of enjoying the benefit of paying to the claimant an accelerated cash lumpsum at conclusion of the litigation process. The uncertainties and exigencies
relating to the investment of the RAF income, and CPI increases in respect of the petrol levy, are pertinent in this context.
Lumpsum compensation for damages is not taxable in the hands of the recipient.
Such amount is excluded from gross income both because it is not received by way of annuity and because it is a receipt or accrual of a capital nature. It is important to note that the RAF Commission on page 661 of its report states:
"22.239 In the event that RAF benefits are no longer paid by way of once and for all lump sum awards but in the form periodic payments these amounts would be taxable in the hands of the road accidents victims / claimant. It is suggested that there are a number of reasons why this would be both inappropriate and anomalous.
22.240 Firstly the scheme of RAF benefits is currently funded by way of a dedicated levy on fuel by all purchasers of such fuel, not by payment of premiums to a private insurer in respect of which there are any tax rebates or exemptions. It seems in congruous that a tax should be raised from amongst the fuel purchasing and road using population, on which a further tax is imposed as and when benefits are paid to them. (Our emphasis)
22.243 Thirdly, the proposed income support and family support benefits are, in relation to "earners" based on nett or after tax income. It would be invidious to deduct a hypothetical amount in respect of tax before calculation of the benefit and then subject the benefit itself to taxation."
It is therefore clear that at the very least the Income Tax Act number 58 of 1962 would have to be amended to exempt all benefits payable in instalments to road accident victims.
4. DELIVERY OF COMPENSATION:
4.1 The Road Accident Fund Commision states in its report:
"41.55 Delivery of benefits to the victims of road accidents essentially involves two components. First, there is compilation, lodgement and prosecution by claimants of claims for damages against the RAF. Second, there is receipt of, assessment and response to claims and repudiation or settlement by the RAF.
41.56 There are also detours along the way. These may involve investigations by road accident investigators, examination by health practitioners, preparation of medico-legal reports, resort to litigation and even trial proceedings. These ancillary, but important, issues have been dealt with elsewhere in this Report.
41.57 The first component requires much of the claimant. It is expected of a person who has sustained serious injuries in a road accident, who is without access to office facilities and who is ignorant of and inexperienced in bureaucratic requirements to prepare and lodge his or her own claim for compensation.
41.58 The theme has emerged throughout this Report that the claimant and the disburser of benefits are in grossly unequal bargaining positions. The road accident victim emerges from a distressing situation of pain and shock, is frequently ill educated and without resources, and has no comprehension of and is incapable of independently pursuing his or her rights. The RAF is staffed by highly paid, quasi-lawyers with every facility at their fingertips.
41.59 There can be no question but that victims of road accidents require someone to stand at their side, lift them up and help them move forward. With the best will in the world, one cannot expect that any administrators of road accident benefits will do this with enthusiasm and vigour.
41.60 The attitude of the RAF has been expressed several times, most recently in its discussions with the Law Society of South Africa as it seeks to justify paying compensation directly to claimants and not to legal representatives:
"One of the principal reasons for payments directly to plaintiffs is that it cannot be expected of the RAF to assist plaintiffs to litigate against the RAF: - RAF Executive Management."
To which comment of the RAF one can only respond: "Why on earth not?"
"41.61 Attorneys have, over many years, performed and continue to perform valuable services in regard to some aspects of delivery of benefits. Not only do they investigate accidents, search and obtain essential documentation, pay for and procure medical assessments and even provide funds to tide the claimant over, they also prosecute claims against the RAF and frequently go the extra mile on behalf of their clients.
benefits. In the absence of lump sum compensation paid on a "once-and-for-all basis", attorneys will be unable to rely upon these funds to recover the portion of their fees and disbursements to hospitals, doctors, pharmacists, therapists, actuaries, etc., which have not been met by the RAF. In the circumstances, there will be little incentive for attorneys to remain involved in ensuring delivery of State benefits to road accident victims.
"41.66 What is equally important is that the road accident victim does not find himself or herself without the assistance of a representative in accessing road accident benefits, facilitating the bureaucracy, challenging unfair determinations and resolving disputes."
4.3 The netto result of the proposed payment by instalments in arrear is that the claimant will no longer be in a position to secure access to a lawyer, due to the fact that he will not be able to guarantee payment of the lawyer’s fees, as well as the disbursements, including costs of obtaining medico legal reports and briefing Counsel. Similarly, in the event that he has an apportioned claim, the claimant will no longer be in the position to pay medical suppliers for services rendered by them from his monthly damages award.
In the event that the claimant wishes to obtain a loan from a financial institution in order to "tide him over", until such time as he receives his compensation, the netto result of payment of loss of earnings by instalments in arrear will be that he will not be able to obtain such finance, and will not be able to make up the difference in respect of interest levied, on conclusion of the litigation process in the Arbitration Forum or at Court.
Due to the extended relationship between the claimant and RAF direct payment to the claimant, as opposed to his legal advisor, will effectively deny the claimant access to legal representation.
In the opinion of senior Counsel provided to the Coalition, where the netto result of this clause is that claimants will no longer be able to afford legal representation due to direct payment by the Fund to the claimant over an extended period, this clause impairs an indigent persons right to obtain legal representation and thus arguably infringes upon Section 34 of the Constitution and also Section 9(1) of the Constitution. An infringement of Section 9(3) of the Constitution right not to be discriminated against) is also pertinent. These infringements are not reasonable and justifiable, and therefore are not rescued by the Limitations-clause.
1. The proposed legislation states that Sections 17(4)(a)(b) and (c) as amended, shall apply to all claims for compensation under Section 17 of the Principal Act, that have not been finalised prior to the commencement date of this Act. The result hereof is therefore that its provisions will be retrospective in operation.
Senior Counsels opinion furnished to the Coalition on the retrospectivity of these clauses is that retrospectivity constitutes an infringement of the Rule of Law-Principal which is generally accepted in our law, namely that people should be able to regularise their affairs, secure in the knowledge that they are at liberty to perform any action that has not been proscribed by law of general application. Retrospective legislation is inconsistent with the Rule of Law, because it makes it impossible for citizens to regularise their affairs in this manner.
Retrospective application of these clauses will effectively:
In the view of Senior Counsel, retrospective application would be a clear violation of the "reliance interest" inherent in the prohibition of retrospective laws and would be unreasonable and irrational.
III) AD PROVISION 2 OF THE RAF SECOND AMENDMENT ACT, 2003:
Provision 2 of the said bill provides that " (c ) includes a claim for non-patrimonial loss, the Fund or Agent must, after furnishing the third party concerned with an undertaking to that effect or a competent Court has directed the Fund or Agent to furnish such Undertaking, pay that portion of the amount payable by the Fund or the Agent in respect of the said loss, that exceeds the amount prescribed, by instalments as prescribed"
1. This section provides for payment of general damages suffered by the claimant in respect of pain and suffering, loss of amenities of life and disfigurement be paid by way of instalments over a future period.
2. The RAF Commission on page 1132 of its report states:
"36.80 The RAF motivation for the amendment is that payment of general damages in a single capitalised cash sum has a major effect on the cash flow position of the RAF. It is postulated that some of the pain, suffering and loss of amenities is experienced on an ongoing basis for much of the remainder of a claimants life, especially in the case of the seriously injured.
36.81 There is no indication than an appraisal of the purpose of compensation for non-percunary loss has taken place. There are many arguments in favour of such compensation, one being that this provides the opportunity to finance lifestyle changes. In the absence of rehabilitation and life care assistance through the medium of Section 17 Undertakings and the non-inclusion of many life care requirements in compensation awards for future medical expenses, it is
argued that "general damages" provide the only opportunity for victims of serious accidents to re-establish their life-style after a traumatic event. These include adaptation of motor vehicles, provision of sound responsive computers, provision of brail recognising computers, building of swimming pools, purchase of or paying of home of one’s own. General damages are thought to provide capital for a little business of the disabled who now becomes self-employed.
36.82 The RAF has not conducted any research into the way victims of road accidents used lump sum awards of compensation for general damages. It also does not know whether, if compensation were paid by way of instalments, it would be of any benefit to the seriously injured road accident victim.
36.83 The motivation for the proposal to pay general damages in instalments is purely a financial one. The RAF intends to alleviate the pressures on its cash flow position. It does not appear to have had regard for the impact on the life of the seriously injured and disabled and their families" (Our emphasis)
4. The reality is that general damages paid in a lump sum:
1. Finances shortfalls in medical and income expenses in the case of apportioned claims.
2. Is utilised to repay loans and/or bond and hire purchase arrears which may have accumulated as a consequence of the accident.
3. Finances and ensures access to representation for claimants due to the Regulations governing party and party costs not having been addressed since October 1996, leading to larger than should be short falls in attorney and own client costs and the party and party costs paid by the RAF.
See the remarks in respect of Section 17 (b) above on page 18.
See the remarks in respect of Section 17(b) above on pages 19-20.
7. RAF COMMISSION RECOMMENDATIONS
RE: DEFERRED PAYMENTS:
7.2 It follows that deferred payment of loss of earnings and general damages as proposed in this Bill, constitutes an iniquitous piecemeal implementation of the RAF Commissions’ recommendations, without having regard to the context in which the commissions recommendations were made and, its implications for the accident victims.
8. The Coalition therefore respectfully submits that the legislator’s intention to:
8.1 Make the furnishing of Undertakings in respect of medical expenses obligatory.
8.2 Introduce a system of deferred payment of future loss of earnings and general damages:
8.2.1 Disregards the findings of the RAF Commission. (See pages 622-623, 641-643, 656,661 and 1132 of the Commission report)
8.2.2 Is impracticable to implement and will lead to great hardship and harsh results for victims of road accidents. (See pages 7 - 8 above)
8.2.3 Falsely creates the impression that cash savings will result for the RAF, ignoring:
1. Enormous transaction costs that will be incurred by the RAF in administering and implementing the system. (eg. Verification of identities and banking details, issuing of IRP5-forms; also page 656 of the RAF Commission report; CPI increases).
2. The fact that the RAF will still have to pay the actual costs in the future, and that the actual costs are simply deferred, not negated or reduced; when in fact they will be higher because of CPI increases.
8.2.4 Creates a RAF that will have to coexist with any new Road Accident Benefits Scheme for 40-50 years due to the relationship with the claimant being extended.
8.2.5 Is constitutionally open to attack.
IV) The Coalition therefore submits that these proposals do not address the aim of:
1. Addressing the cashflow of the RAF.
2. Assisting in the administrative burden of the RAF.
3. Ensuring that the money reaches the individual that it is intended for.
V). The Coalition proposes that the legislature adopts recommendations made by the Road Accident Fund Commission on page 176 of its report, where it states that:
"8.58 Expenditure of fuel levy income on administration and provision of compensation of minor injuries with negligible impact on health and no lasting effect should be eliminated or reduced. Resources should be conserved to provide benefits to those persons who have sustained serious injuries with life changing consequences for themselves or their families."
In this regard it is significant to note that:
1. The RAF Commission states on page 167 of its report that:
"8.22 The greatest proportion of claims finalised over the past five years have been of a value of less than R20 000.00.
8.23 Claims under R20 000.00 accounted for 21% of monies paid out by the RAF as compensation", also
8.26 The distribution of claim size indicates that, even though the majority of these claims might be in respect of less serious injuries and be less complicated to administer, some 95% of the attention of the RAF is devoted to claims below R50 000.00. A file must be opened in respect of each claim, the RAF must be satisfied that there has been a road accident and that either the claimant or a third party was injured therein and that the claimant has sustained loss thereby. The RAF must apply its mind to the quantum claimed and any offer made and settlement thereof. It is not known what proportion of these small claims proceed to litigation.
8.27 If these claims prove to be in respect of less serious injuries or injuries where there is no permanent or long lasting disability, it is of some concern that the RAF is expending the greater proportion of its funds on victims of road accidents who have not suffered a catastrophic or life changing or permanently disabling injury." (Our emphasis)
The Commission continues in paragraph 8.29 "from these tables it can be seen that the "smaller claims" (ie. those below R20 000.00) are mainly (between 62% and 65%) in respect of general damages for pain and suffering, emotional shock, psychological trauma,
disfigurement, loss of amenities and loss of enjoyment of life). This would appear to indicate that those claimants are better able to motivate for the more nebulous and less exact "General damages" than for the more precisely calculated loss of earnings and medical expenses which require proof of employment, proof of earnings, proof of time off work, proof of hospitalisation or medical treatment and proof of payment therefor.
8.30 It is of some interest to note the "smaller claims" cited above paid out more in respect of future medical expenses than for past medical expenses. At face value this would suggest that claimants will require more medical treatment and care in the future than they have received by the time their claim against the RAF was settled. In fact, it is more likely that the claimants initially received medical treatment at a State or Provincial hospital where they paid little or nothing for medical care but that their claims for future medical expenses are predicated upon receiving treatment at private hospitals or from private health providers." and also,
8.31 It is also of interest to note that the larger claims (where compensation awarded in excess of R400 000.00) are mainly between 51% and 64% in respect of claims for future losses of earnings and (between 12% and 21%) in respect of claims for future loss of support. The fact that claims for future loss of earnings are such a noticeable and significant proportion of total compensation paid, clearly indicates that the claimants are considerably financially prejudiced by reason of inability to work because of injury and resulting disablement. The fact that loss of support claims constitutes a significant amount is understandable when one has regard to the fact that the deceased
victims of road accidents may leave a number of dependents all of whom may have substantial claims for loss of support."
The Commission also states in paragraph 8.47 "A direct comparison between claims under R5 000.00 and claims in excess of R300 000.00 gives an indication of the nature injury and disablement suffered and hence the different needs for compensation. The "small" claims consisted of 10.6% medical expenses and 2% of loss of earnings, which suggests that little expenditure was incurred for health care, and very little, if any, time was taken off work. The larger claims comprised 18.5% of compensation in respect of medical expenses and 67.2% in respect of loss of earnings or support. This clearly indicates higher past care costs because of more serious injuries but also suggest significant and probably permanent disablement resulting in an inability to work, hence the claim for loss of earnings compensation. Section 14 of this report which deals with benefits for non-economical loss comments on the anomaly that victims with less serious injuries and disablement receive a greater proportion of "general damages" than persons who have sustained extremely serious injuries with life changing and often catastrophic consequences."
2. If consideration is given to Table 8.1 on page 167 of the Commissions report, it is clear that an abolition of claims smaller than R20 000.00, will lead to an annual saving for the Road Accident Fund of an amount of R463 423 010.00, out of total compensation paid of R2 049 446 887.00.
It is therefore clear that the abolition of claims less than R20 000.00 will lead to a substantial cash saving for the RAF.
3. It is clear from the Commissions report in respect of small claims that these are the claims that are easiest manipulated, and creates the opportunity for fraud. Due to the fact that proof of hospitalisation or medical treatment, proof of time off work etc is not required, the abolition of claims smaller than R20 000.00 will therefore also assist in eradicating the incidence of fraud, and ambulance chasing.
4. The abolition of claims smaller than R20 000.00 will in the short term greatly assist in the administrative burden of the RAF, which is often cited as one of the most important problems in the present administration of claims of victims of road accidents, thereby creating the opportunity to address more serious issues timeously, and limiting litigation due to failure by the RAF to address seriously injured victims claims sooner.
5. It is also significant that the Commission states in its report on page 286 that:
"12.17 Transaction costs of the more serious injuries, such as fractures of the upper leg, fractures of ribs and intercraneal brain injuries, comprise less than 20% of total expenditure, whereafter sprains and strains of the back and superficial injuries to the knee and head accounted for transaction costs amounting to 33% of total expenditure". and also,
12.40 Smaller claims appear to have been handled mainly by the RAF’s own staff. The HSRC report indicates that Attorneys were used only in 6.4% of claims and Advocates in only 2% of claims. In none of the claims below R15 000.00 was the services of an Advocate used. It seems clear that smaller claims were mainly handled by RAF staff with minimal or reduced expenditure on external assistance."
It is therefore clear that the abolition of claims smaller than R20 000.00 will lead to considerable savings on costs for the RAF internally,
and will enable RAF claims handlers to apply their minds to the more seriously injured individuals, and address their claims at an earlier stage, thereby cancelling out unnecessary litigation and providing compensation to seriously injured victims at an earlier stage.
6. It is important to note that the claimant with a claim of less than R20 000.00 will still retain his or her common law right to claim for his damages against the negligent party. It is significant to note that the RAF Commission on page 488 of it’s report states that "the South African Insurance Association advised that the short term insurance industry would certainly be prepared to provide cover to motorists over and above the stated benefits to be provided by a State funded and regulated scheme of road accident benefits.
18.113 The appendix to this chapter contains extracts from a memorandum prepared by SAIA with quotes from various insurance companies for personal accident insurance. The figures given were applicable as at May 2000. It appears that it is possible to obtain personal accident insurance cover for Road Accidents at a premium ranging from R45.00 for R100 000.00 cover and R375.00 per annum for R5 000 000.00 cover."
Victims with claims for less than R20 000.00 will therefore be able to claim from the wrongdoer in his personal capacity, whilst the wrongdoer will have the opportunity, at negligible cost to obtain cover to protect himself in these circumstances.
Retention of the common law right ensures that this proposal remains constitutionally sound, and also encourages responsible conduct by road users.
11. The Coalition would like to propose the following amendment to the Road Accident Fund Act 56 of 1996:
11.1 By deleting the full stop at the end of Section 19 (f) (ii) and by substituting in its place a semi colon.
11.2 By inserting after the said semi colon the word "or",
11.3 By inserting at the end of Section 19 the following additional Section 19(g): "(g) where the amount of the compensation does not exceed R20 000.00"
An alternative proposal to sub-paragraph 3 above for discussion purposes only would be the following:
"(g) where the amount of the compensation, whether determined by the Fund or such agent by way of offer of settlement or otherwise or by a Court of Law, does not exceed R20 000.00".
Although the alternative proposal may provide greater certainty, it could be argued that, properly interpreted, it means that every claim, no matter how small, must be submitted, and the Fund will only be absolved from liability if it or a Court of Law has determined the amount of compensation to be less than R20 000.00.
The claimants entitlement to claim damages under the common law where the amount does not exceed R20 000.00 is protected by the provisions of Section 21 read with the proposed amendment to Section 19 of the RAF Act of 1996.
The R20 000.00 threshold in the instance of a claim for compensation where the identity of neither the owner nor the driver can be established, ie the "hit and run"
collision, would be achieved by regulation 2 (ii) which reads as follows: "(2) the liability of the Fund in the case of any claim for compensation referred to in Section 17 (1) (b) of the Act shall not exceed the amount for which the Fund would have been liable had it been a claim for compensation referred to in Section 17 (1)(a) of the Act."
The Coalition would however like to propose the following amendment to the regulations:
By inserting at the end of Regulation 2 (1) the following Regulation 2 (1) (e): "(e) the amount of the compensation exceeds R20 000.00". Alternatively for discussion purposes only : "(e)" the amount of compensation, whether determined by the Fund by way of offer of settlement or otherwise or by a Court of Law, exceeds R20 000.00"
12. PRACTICAL APPLICATION:
It may be argued that the introduction of the R20 000.00 threshold may encourage claimants to lodge claims in excess of R20 000.00, when their claims are in fact worth less. Such conduct will be discouraged and minimised through repudiation of their claims and/or adverse punitive cost orders by the Arbitrator.
VI) AD THE INSERTION OF SECTION 17(A) IN ACT 56 OF 1996:
The draft legislation proposes that "17(A) The liability of the Fund or agent to compensate a third party in respect of the costs of accommodation in a hospital or nursing home, treatment of a bodily injury, rendering of a medical service or supplying of medical goods is limited to the prescribed medical tariff, to be made under Section 26 of the Principal Act."
1. The Coalition attaches a submission to the Portfolio Committee on Transport by the Board of Healthcare Funders, marked annexure "A", highlighting the netto effect of the proposed clause in-so-far as it will limit the victims’ of road accidents right to access to healthcare, contravening Section 27(1) of the Constitution as well as Section 9(3) of Constitution (the right not to be unfairly discriminated against).
4. The Coalition proposes public learnings with the Board of Healthcare Funders, Hospital Association of South Africa and the like in order to ensure fair tariffs.
VII) AD THE INSERTION OF SECTION 17(B) IN ACT 56 OF 1996:
The said Draft Bill proposes that "17(B) Where a third party is entitled to compensation in terms of Section 17 for loss or damage suffered as a result of bodily injury or death, all benefits from whatever source, including insurance, pension or gratuitous benefits, payable to the third party as a result of that injury or death must be deducted from the compensation payable in terms of this Act, except benefits which the third party proves to be legally reimbursable to the payer after compensation had been paid in terms of this Act."
1. The motivation for the amendment is to avoid "double ompensation" of the claimant.
2. The Section is prospective in operation and therefore does not infringe upon the prohibition against retrospectivity. It also, as a consequence does not interfere with vested property rights and therefore does not infringe Section 25(1) of the Constitution.
3. The comments made in Annexure "A" by the Board of Healthcare Funders are again applicable.
VIII) AD PROPOSAL 3 OF THE SAID DRAFT BILL:
The said Draft Bill proposes the addition of the following clause after Section 18 of the Principal Act namely, "(5(a)) If a third party or the injured or deceased person concerned is a non-resident of the Republic, the liability of the Fund or an agent to compensate the third party concerned for any loss or damage contemplated in Section 17 is limited to the amount determined by the Minister, on the recommendation of the Board, by Notice in the Gazette or the amount determined in accordance with Section 17(b), whichever is the lesser amount.
(b) For the purposes of this sub-section "non-resident of the Republic" means a person who is not permanently resident in the Republic at the time of the occurence which caused the injury or death concerned."
1. In the Coalitions view "non-residents claims" are extremely costly due to the higher cost of living overseas and the weakness of our currency, and are a drain on the resources of the Fund. The purpose of the distinction is to limit the amount of resources expended on non-residents claims to a "reasonable amount". In the Coalitions’ view, this is a legitimate purpose, especially given that due to their temporary status, non-residents are unlikely to make any significant contribution to the fuel levies to finance the Fund.
There is also a rational connection between the purpose of limiting the funds expended on non-resident’s claims, and reducing the entitlement to that of a reasonable amount. By virtue of their non-residents status, non-residents will, unlike residents, also not become a further burden on the state in the event that they are not afforded equal benefits. They also retain their residual common-law right to sue the wrongdoer for damages. It therefore does not appear irrational for the State to concentrate it’s resources on residents.
2. The Coalition therefore supports the Amendment to the Act in this respect.
IX) AD THE AMENDMENT OF SECTION 19 OF ACT 56 OF 1996:
The said Draft Bill proposes that Section 19 of Act 56 of 1996 be amended by the addition of the following paragraph:
"(g) suffered as a result of a emotional shock sustained by that person when that person witnessed or observed or was informed of the bodily injury or the death of another person as a result of the driving of a motor vehicle."
In circumstances where this clause is prospective in operation and does not infringe the Rule of Law Principal or Section 25 of the Constitution, the Coalition supports the Amendment of the Act in this respect.
X) AD PROPOSAL 5 SAID DRAFT BILL:
The said Draft Bill proposes that Section 24 of Act 56 of 1996 be amended to read:
"5 Section 24 of the Principal Act is hereby amended by the substitution for
sub-section 6 of the following sub-section:
(6) No claim shall be enforceable by legal proceedings commenced by a summons served on the Fund or an agent unless the third party has exhausted the prescribed procedure for the resolution of disputes through mediation and arbitration."
1. The Coalition is of the opinion that the requirement that a claimant first exhaust prescribed mediation and arbitration procedures does not in and of itself infringe Section 34 of the Constitution.
Having exhausted the mediation and arbitration procedures, it is still open to a claimant, in terms of the proposed Amendment, to approach a Court for relief thereafter. At most then, access to a Court is suspended by this clause, pending the requirement that a claimant exhausts his or her remedies in other alternative forums. This clause does not bar all judicial proceedings, including review proceedings of any administrative action of the Fund, where appropriate.
2. The Coalition proposes that the procedures providing for mediation and arbitration be made public in order to ensure that they do not infringe on Section 34 of the Constitution, prior to promulgation of this Act.
3. The Coalition, however, supports dispute resolution through the arbitration process.
1. The Coalition respectfully submits that the Amendments proposed in respect of Sections 17(a), (b) and (c) of the said Draft Bill:
1. Disregards the findings of the RAF Commission.
3.1 Enormous transaction costs.
4 Is constitutionally open to attack.
2. The Coalition submits that proper implementation of Sections 17(A) and 17 (B) can only occur after broad consultation with members of the healthcare industry, ensuring that the proposed amendments remain constitutionally sound and equitable in respect of it’s netto effect on victims of road accidents.
3. The Coalition supports the Amendments proposed in respect of Sections 18(5)(a) and 5(b) and Section 19(g), as well as Section 24 (6) (a) and 6(b)
and ambulance chasing, and ensuring timeous attention to the claims of seriously injured victims of road accidents.
8 October 2003.