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PFA: Ruling concerning the participation employers being held liable for failing to timeously lodge claims

25 January 2008 The Office of the Pension Funds Adjudicator

Landmark ruling concerning the participating employers being held liable for the employee's repudiated disability benefit due to failure by the employer to timeously lodge a written claim with the trustees of the provident fund

The Pension Funds Adjudicator has issued a landmark ruling in the matter of G v Private security sector provident fund (PSSPF) and Sechaba Protection Services Western Cape (Pty) Ltd regarding the employer being held directly liable for the member’s (complainant) disability claim in the event whereby the employer negligently failed to timeously lodge a formal written claim on behalf of the member (complainant) resulting in the member’s (complainants) claim being repudiated by the provident fund.

Facts

The facts of the matter are briefly the following:

The complainant was employed as a security officer with Sechaba Protection Services Western Cape (Pty) Ltd since 28 February 2000. The complainant by virtue of his employment with Sechaba Protection Services became a member of PSSPF in November 2002 when Sechaba Protection Services commenced its participation therein. On 4 June 2003, he was pushed out of a moving train and sustained some injuries as a consequence of which his left leg was amputated above the knee.

One year and four months after the accident (5th October 2004), Sechaba Protection services submitted a Termination Claim form in respect of the complainant, which was signed on 7 July 2004. Before the claim for a withdrawal benefit could be processed, on 18 November 2004 the PSSPF received notification from Sechaba Protection Services that the complainant had, as a result of being disabled during July 2003, been unable to return to work. PSSPF referred the claim to its insurer, African Life Assurance, which repudiated it on the grounds that the Sechaba Protection Services should have lodged the claim not later than 6 months from the date of disablement as is required by the provisions of the group life policy.

During March 2006, the board of the PSSPF referred the claim to a team of Occupational Therapists employed by NBC Health Risk Management Services for an assessment of its medical validity. The occupational therapists assessed the claim and compiled a report, dated 25 March 2006, wherein they expressed the opinion that the complainant was totally and permanently disabled, as envisaged in the rules of PSSPF, from performing his own occupation or any other occupation for which he could reasonably be considered capable of engaging in by virtue of his training and general experience. Therefore the PSSPF board concluded that the complainant was permanently and totally disabled as envisaged in the rules. It thereupon decided to make an ex gratia offer, without acknowledgement of liability, to pay to the complainant an amount of R11 681.28 in full and final settlement of any claims that he may have had against the PSSPF arising out of the of the lump sum portion of the disability benefit. The complainant accepted the offer. However, this is not the amount that the complainant was entitled to. According to the administrator of PSSPF, had the complainant’s claim been lodged timeously and accepted by the insurer, he would have been entitled to be paid from PSSPF a lump sum disability benefit equal to two times the complainant’s annual salary. The complainant’s annual salary at the date of disability was R14 601.60, while his fund credit was R766.05. Therefore, the complainant’s capital disability benefit would have been the sum of R29 969.25 had it not been for the delay by Sechaba Security Services in lodging the claim.

Complaint

The complainant then lodged a complaint with the Adjudicator for the difference between, what he would have been entitled to had the claim been lodged timorously and the ex gratia payment that he had received from PSSPF.

Determination and findings

The Adjudicator applied the ordinary principles of delict in determining liability by the employer (Sechaba Protection Services) for the amount over and above the ex gratia payment. The Adjudicator reached the conclusion that the employer is liable to compensate the complainant for wrongfully and culpably, through an unlawful act or omission, causing the complainant to sustain quantifiable loss. This conclusion by the Adjudicator was based on the following:

· On assessment of rules of the Fund, the Adjudicator noted that there was a clear duty placed on the employer to notify the Fund in writing about a member’s disablement and to submit the all documentation required by the board in support of the claim, not later than 6 months after the member’s last working day.

· The employer had on the facts negligently failed to submit the claim form timeously and in line with the Fund Rules.

· The claim form was only submitted on 18 November 2004, some seventeen months after the complainant’s last day at work.

· Therefore premised on the above facts the Adjudicator concluded that the employer by failing to submit the complainant’s disability claim documents on time, the employer breached a duty owed by it to the complainant arising out of the provisions of the funds rules and had acted wrongfully and unlawfully.

· The employer was then held liable for the complainant’s loss calculated as being the benefit amount of R29 969.25, less the ex gratia payment of R11 681.28, which left R18 287.97 plus interest at the rate of 15.5% from date of determination to date of payment.

Click here to read the full determination (PDF file 64kb)

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