The RAF and What That Means for the Industry

April 29, 2014

The Road Accident Fund Amendment Act, No. 19 of 2005 introduced fundamental and far-reaching changes to the Road Accident Fund (RAF) 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 1 August 2008.

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 an injury, which results in 30% or more of total body impairment. If an injury does not result in 30% or more total body impairment, the injury may be assessed as serious if the injury 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 behavioral disturbance or disorder or results in a loss of a fetus
  • 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 dependents 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

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

WHAT DOES THIS ALL MEAN FOR THE INBOUND TOURISM INDUSTRY AND VISITORS TO SOUTH AFRICA?

As the law stands at the moment the abolition of the injured parties (passenger/tourist/guest) common law right to sue the wrongdoer (operator), means that following a motor vehicle accident the severely injured tourist will only receive limited compensation from the Road Accident Fund and will have no right of recourse against the wrongdoer i.e. historically all parties ( both injured and the operator ) would rely on the operators Passenger Liability Insurance for indemnification, this now by law no longer exists . By very definition Passenger Liability Insurance is a policy of liability i.e. legal liability needs to be shown for the policy to respond, if the law removes this liability as stated in section 1 above , a Passenger Liability policy can never respond as no legal liability exists.

As South Africa?s core inbound markets emanate from European Union countries who are all subject to compliance with the E.C. Directive on Travel and Trade Act, the Agents or suppliers will find themselves even more exposed to risk and should be advising their insurers accordingly of this material change in South Africa. If an injured guests damages cannot be recovered against the local operator in South Africa their client will no doubt seek to hold them responsible in terms of said directive. SATSA believes we have to show international agents as well as guests / tourists that we are taking some form of responsibility and providing alternative insurance coverage, which is available.

NB:  It is important to bear in mind that the RAF legislation changes are only applicable to motor vehicle accidents that occur in South Africa. So operators who are based in South Africa and operate outside of South Africa need to be aware that other Southern African countries generally do not have such restricted legislation in place and accident victims can generally claim meaningful compensation from the wrongdoer or his employer making it vital that Passenger Liability cover be kept in place for vehicles travelling outside the RSA. It is also important to note that the new Road Accident Fund legislation only applies to legal action following a motor vehicle accident. The right to sue the wrongdoer following injury from any other incidents outside of the motor vehicle still stands in South Africa. So the need for General Public Liability insurance is as important as ever

THE NEED FOR APPROPRIATE ALTERNATIVE 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:
  • Such person earns more than R160 000.00 per year
  • Such person undergoes medical treatment in the private sector at a cost in excess of the    public health tariff
  • Such person does not suffer a serious injury, therefore excluding general damages
  • The total loss of all dependents exceeds R160 000.00 per year
  • There is no right of action by such injured person, or a dependent 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

THE RECOMMENDED SOLUTION

All agents and suppliers of inbound tourism to South Africa should be insisting that all operators carry Personal Accident Insurance, these policies pay out on a no fault basis and legal liability does not have to be proven. It is a very simple cover with a capital benefit or sum insured, which will be paid in full following death or injury, and paid in terms of a sliding scale based on severity of injury in the case of permanent disablement. There is also medical costs insurance cover that is included to be used to cover such costs resulting from the accident.

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