Another accident waiting to happen
South Africa’s legislators have been at it again; but for once the financial services industry has escaped the brunt of their intervention. This time it’s those who earn their keep from the country’s notorious Road Accident Fund (RAF) and the thousands who make claims against the Fund, who are up in arms. Amendments to the Road Accident Fund Act 56 of 1996 were published on 21 July 2008 and are in force from 1 August 2008.
The RAF claims that the changes were necessary to create an environment in which the fund could stave off bankruptcy. Amounts earned by the Fund from a government established fuel levy are insufficient to meet current claims with the result that a deficit of some R20bn already exists. “The amendments introduce a number of limitations on the Fund’s liability to pay for certain types of compensation. It is expected that these limitations will improve the Fund’s financial position and ensure its ability to pay claims in the future.”
Changes should limit the Fund’s future liability
Some of the major changes included in the RAF Amendments Bill are:
- The R25 000 claim limit which applied to passengers will be lifted
- People conveyed for reward on a motorcycle will be able to claim in future
- The exclusion of claims by passengers, in a single motor vehicle accident, where the claimant is in law responsible for the maintenance of the driver, or where the claimant is a member of the same household as the driver is abolished
- A new exclusion in respect of claims for secondary emotional shock has been introduced
- The Fund’s liability in respect of medical expenses is limited to one of two medical tariffs
- And the Fund’s liability in respect of claims for loss of income is limited to R 160 000 per year, irrespective of the actual loss!
We expect most RAF claimants will be happy with the changes. There are certainly indications that the bill is tailoring the Fund to better serve the majority of South Africa’s road users. But that doesn’t mean there aren’t problems.
Everyone shouts when their money is involved!
Tucked away among the list of amendments we found one that’s caused more than its share of fuss over the past week. The Act will allow “the RAF to pay the compensation to the claimant or directly to the medical service provider.” Hundreds of attorneys who earn a living from assisting claimants with RAF claims are up in arms. The reason is most of them offer services on a ‘no win, no fee’ basis. These attorneys have agreements in place with the claimants to ensure payment when a claim is settled. Not only does the law now fly in the face of the legal agreements drawn up between claimants and attorneys; but the risk to the legal profession in providing these ‘free’ services has escalated significantly.
To make matters worse the RAF has already instructed its staff to bypass attorneys and law firms in settling claims. Affected attorneys were quick to turn to the courts for assistance. The Law Society of SA has an urgent application with the Cape Town High Court to have certain instructions issued by the RAF declared invalid. A firm of attorneys has brought a similar motion in Johannesburg. Part of the Law Society’s official statement reads:
“The [RAF] decision is aimed at eliminating the current system of paying compensation awards for road accident victims to their authorised attorneys. Attorneys, up to now, have acted for them on the basis that they will have to pay from their own pockets substantial costs needed to mount the claims, and to run the risk of the claims failing.
“Currently, sums owing to claimants by way of compensation and costs are paid into the trust accounts of attorneys with powers of attorney signed by their client directing the RAF to do so. From those payments, attorneys -- who are under the supervision of their law societies and who are backed by the Attorneys Fidelity Fund -- deduct what they have already advanced in payment of medical, actuarial and other experts and counsel.”
More smoke and mirrors…
We’ve known for some time that the RAF is financially unsound. Part of the motivation for making amendments to the bill was to bail out a system with a claims deficit in the region of R20bn. What we need to ponder at the moment is what motivated the decision to encourage RAF staff to settle with claimants directly. The value of the claim won’t be affected – so we must assume this move is aimed at reducing attorney involvement in the claim process. With less ‘free’ attorney assistance we might see fewer cases making it to claims stage… Or perhaps we’re just being cynical.
As things stand the amendments may go part of the way to solving the RAF’s financial crisis. But the real solution lies in improving the operation’s administrative ability and ensuring that claims are dealt with efficiently and appropriately.
Editor’s thoughts:
The RAF claim is about as close as South Africa gets to the US personal injury lawyer. Legal personnel are so keen to get in on the action they’ll take cases on a ‘no win no fee’ basis. RAF lawyers offer similar services – preying on those injured in accidents and taking a healthy slice of any award made. Can the average citizen make an RAF claim without the assistance of an attorney? Add your comment below, or send to gareth@fanews.co.za
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