The Road Accident Fund (RAF) Amendment Act, which took effect in August 2008, has created various challenges and confusion for transport users and operators, most notably on the issue of third-party liability. Without any clarity or legal precedent-setting event since the Act took effect, transporters have been lulled into a false sense of security without realising the serious implications that the Act holds.
Aon South Africa has warned that an in-depth analysis of the implications of the RAF Amendment Act shows that the changes have far-reaching implications for South African road users and transport operators. It is essential that transport providers carefully assess their risk in the wake of these changes.
“The key changes in the RAF are that it now makes it the responsibility of each individual to purchase their own appropriate additional cover in respect of income protection, medical costs and disability, raising the question whether passenger liability insurance for the transport provider is now necessary. Some businesses have even considered cancelling their cover in this regard to streamline costs. The reduction in premium would be negligible,” explains Andre du Sart of risk advisors and insurance brokerage company Aon South Africa.
Du Sart recommends that cover is retained for the following reasons:
- The transporter could still be sued, incurring considerable legal defence expenses.
- The transporter could be liable for compensation for secondary emotional shock. Secondary emotional shock of someone who is not the third party, but has witnessed the accident, is not recognised under the amendments. This could be somebody who sees the accident happen or somebody who hears about it after the event. This would have a profound impact on the lives of other co-passengers, family members, children and other parties, so the potential for secondary emotional shock claims exists.
- The transporter will still be liable in respect of property damage, i.e. clothing, personal effects, etc.
- The fund may be unable to pay.
- You may incur liabilities outside of SA’s borders, in which case the Fund has no liability.
- Third-party RAF claims are limited to a prescribed level of special damages (medical expenses and loss of earnings) and to compensation only for serious injuries, under what used to be known as general damages. The RAF is developing a list of injuries that will not be considered as serious, which will be promulgated once the list is finalised.
- Medical expenses under the RAF are limited to the reasonable cost of hospitals and treatment and a tariff for emergency treatment (roadside assistance and ambulance transport). Passenger Liability cover pays future medical costs as they arise and they are paid in full, i.e. are not subject to a tariff.
- Loss of income claims under the RAF is presently capped at R204 904 per annum, and this also applies for loss of support.
“Superficially, it may appear that the need for cover is reduced, but the reality is that the transport operator could still be sued directly, entailing legal expenses and can still incur liabilities where the RAF will play no buffer role. Aon strongly recommends that businesses do not cancel their third-party liability cover. There are still many unresolved issues around the amendments that can leave your business exposed and at risk. We recommend that transporters should at least obtain cover for all emergency and other medical and hospital treatment required as a result of a motor accident at private rates, which could be part of medical aid cover,” advises Andre.
The reality is that RFA compensation is very limited, unlike the comprehensive services provided through Aon’s Isithuthi insurance, a product designed specifically for the passenger transport industry. Premiums costs are negligible and yet provide the essential peace of mind that comes with knowing that the best possible care of your passengers is available in the event of an accident.
Furthermore, the fund has a right of recourse against the owner if he, or the driver with the owner’s knowledge or permission:
- was under the influence of alcohol or drugs
- did not hold a valid driver’s license and PDP
- failed to report the accident within the 14-day period allowed
- knowingly gave the fund false information regarding the accident
- if the owner was genuinely unaware, the fund has the right of recourse against the driver.
“The amendments to the RAF represent a massive erosion of common law rights that have now been legislated away or reduced to negligible proportions – sooner or later somebody involved in a serious situation is bound to challenge this and, if any rulings are made retrospectively, any operator that opted not to retain this cover could find themselves facing a financial catastrophe. Understanding the complex legalities and implications for transport operators of the amendments is an arduous task and cancelling your third-party cover represents a tight rope walk without a net at best,” concludes Du Sart.