Road Accident Fund Amendment Bill: hearings

Meeting report

TRANSPORT PORTFOLIO COMMITTEE
12 April 2005
ROAD ACCIDENT FUND AMENDMENT BILL: HEARINGS

Chairperson: Mr J Cronin (ANC)

Documents handed out:
Coalition on the Road Accident Fund submission
General Council of the Bar of South Africa submission
National Council of Persons with Disabilities in SA submission
Proposed amendments to Road Accident Fund Amendment Bill – proposed changes by the Department as gazetted on 26/11/04
Original Road Accident Fund Amendment Bill [B64-03] as tabled in 2003
Road Accident Fund Act, No 56 of 1996

SUMMARY
The Committee heard submissions from three stakeholders on the Road Accident Fund Amendment Bill: the Coalition on the Road Accident Fund, the General Council of the Bar of SA, and theNational Council of Persons with Disabilities in SA. The main issues included the complex legislative processes preceding the new Bill; that the Bill was not in line with the substantive research conducted by the Satchwell Commission of Inquiry; that placing a minimum threshold on ‘General Damages’ claims could potentially save the RAF up to R300 million annually; and that the cost of establishing assessment centres could impose huge and ongoing costs, as well as potentially resulting in the creation of a massive bureaucracy. All submissions opposed the instalment regime in favour of lumpsum payments to claimants.

MINUTES

Coalition on the Road Accident Fund submission
The Coalition on the Road Accident Fund, represented by Mr Calitz, made the most substantial presentation to the Committee, complaining about the various processes pertaining to the RAF compensation regime in particular the establishment of a new inter-parliamentary committee which ‘would duplicate the extensive work conducted by the Satchwell Commission’, the fact that the new Bill paid little regard to shareholder contributions made on previous occasions and lastly, the cost implications of the intended new compensation regime. The Coalition also bemoaned the lack of philosophical direction of the new Bill.

Discussion
Mr Ainslie (ANC) asked how the alternative administrative process suggested by the Coalition would be more financially prudent than the current RAF regime.

Mr Calitz was unsure what philosophy guided the Bill. If the aim was to save money the planned establishment of numerous panels with the resulting huge bureaucracies would incur more costs on an ongoing basis. Under the new Bill, the RAF had to establish assessment centers and employ doctors to assess injury claims. The new regime would require claimants to travel long distances to assessment centres imposing undue difficulties especially on the poor and those living in rural areas. Currently claimants could simply receive medical attention at their nearest medical practitioner.

Mr Ainslie asked what the legal fraternity’s objection to the instalments system was and specifically how instalments would limit claimants’ access to legal representation as the Coalition asserted in their presentation.

Mr Calitz said the average citizen could not afford to engage lawyers’ services and therefore lawyers generally assisted injury claimants on a contingency basis. This meant that the lawyers undertook substantial financial risk by investing their own time and resources in such cases for a portion of the final settlement. If no settlement was achieved the lawyer would not receive any compensation and could potentially lose a considerable amount of money. In injury claims the lawyer engaged in a thorough investigation of the context and causes of the accident and initiated the claims process without demanding any compensation for their services until the claim was successfully completed. Thereafter, a lawyer could only receive 20% or 25% of the settlement for their services.

A Member asked Mr Calitz to explain his reference to the ‘50 -60 years case law experience that this Bill was ignoring’.

Mr Calitz said the courts had established a clear correlation between potential financial claims that could be lodged for various levels of injury. He said this constituted a wealth of information that this Bill did not even consider.

He suggested the Committee introduce a minimum threshold of R15 000 on injury claims to the RAF. This implied that if a claim was granted for R100 000 the first R15 000 would immediately be deducted and the claimant would only receive R85 000. The Satchwell Commission’s report substantiated this and said that implementing a minimum threshold for ‘General Damages’ could save the RAF between R200 million and R300 million annually. This saving could be achieved without spending a single cent and would allow the RAF to focus on more serious injury claims i.e. non-‘General Damages’ claims.

Mr Cronin asked how ‘excessive zeal on the parts of lawyers or medical practitioners in investigating a claim’ could be prevented. He made the example of taking 20 photographs of an accident scene when only two were required.

Mr Calitz said this was part of the beauty of the current system as lawyers could only receive 25% of the settlement as compensation. Additionally, should a client feel in any way unfairly treated he/she could lodge a complaint with the Law Society Disciplinary Committee. Only 1000 complaints were lodged to this Committee annually, in comparison with the 156 000 claims made by lawyers to the RAF during the same period. The Attorney’s Fidelity Fund would compensate clients for any loses incurred due to improper actions by lawyers.

The costs claimed by the lawyers underwent close scrutiny by the Taxation Master who had to verify every single claim lodged by a lawyer. After the costs incurred by the lawyer were substantiated and reimbursed, that amount was deducted from the 25% of the settlement award due to the attorney. In essence, clients paid less than 25% for legal services as those costs were reimbursed directly to the lawyer.

The Satchwell report cautioned against the employment of an instalment regime as it would create huge administrative costs and would require annual verification of claimants’ details and continuous costs to the RAF instead of a once-off payment. The lumpsum payment made to victims was also not taxable whereas monthly instalments would be. He stressed that the RAF Undertakings Department was already overburdened and often spent 9 months before replying to claims.

Mr S Farrow (DA) was very disturbed that stakeholders were not consulted in the drafting of the Bill and asked whether instalment payments were allowed in the current dispensation.

Mr Calitz said the stakeholders suffered through a very confusing period trying to understand the processes initiated around this legislation. Initially, the Satchwell Commission was created to conduct a detailed study on the RAF. This Commission sat for three years and drafted a report consisting of over 2000 pages, at huge costs to taxpayers. It was by far the most in-depth report on the personal injury field ever.

In 2003, the new Bill stated that victims would be compensated in instalments as opposed to lumpsum payment as was the case at that time. In May 2004, the RAF suspended payments to victims indefinitely and established an interim instalment regime.

Later an interdepartmental committee had been established to investigate the RAF compensation regime duplicating the work already completed by the Satchwell Commission. The interdepartmental committee did not communicate its activities with any of the stakeholders and in November 2004, the present Amendment Bill was tabled. The new Amendment Bill did not follow any of the recommendations of the Satchwell Commission report.

Mr L Green (ACDP) asked Mr Calitz to clarify which sections of the Constitution were ‘violated’ by the Amendment Bill. He asked whether the fact that negligent drivers were not held personally liable for their actions was not part of the problem with the current regime.

Mr Calitz said he could not understand the philosophy of the current Amendment Bill. The Constitution guaranteed access to health care and legal representation to all citizens. Adopting this Bill would prejudice these freedoms of victims of car accidents.

Under the instalment system, victims were paid over a 30 to 40-year period; thus reducing the amount to such an extent that it lost much of its benefit. Accident victims often had to spend large sums of money renovating homes, buying enabling devices and adapting motor vehicles to accommodate their injuries or disabilities.

Mr L Mashile (ANC) said ordinary rural people often felt at the mercy of more educated service providers such as lawyers and asked what could be done to keep victims informed on the progress of their claims.

Mr Cronin asked whether the minimum threshold of R15 000 for General Damages was arrived at through a scientifically verifiable process. He agreed that arbitration was very strongly considered in 2003.

Mr Calitz said page 167 of the Satchwell report listed the profile of the claims made against the RAF. This clearly indicated that claims under R20 000 constituted a sizeable proportion of claims. This category included injuries such as whiplash, which could not be ascertained beyond doubt or other light injuries. Injuries in this category cost the RAF between R300 million and R400 million annually. The RAF was administratively overburdened by such claims and as a result, serious injuries could not be addressed in a timely manner.

He said not one clause of the Amendment Bill could achieve such savings and this minimum threshold clause was one of the few Satchwell Commission recommendations that could be introduced without overhauling the whole Bill.

The arbitration system was currently operational only in the Western Cape, through a pilot project. Despite the numerous appeals by the Portfolio Committee to extend the process to the rest of country, this pilot project would also be terminated in the near future. The arbitration process ensured friendly, efficient and informative services to all parties. The system ensured that all parties were properly informed and prepared for their cases and avoided costly duplication. The arbitration process saved the RAF some 35% of its administrative costs annually.

Mr Cronin said the RAF would not make a formal presentation to the Committee during the public hearings but they were available for questions.

Mr Farrow said the actuarial projections done by Mr Munroe and presented to the Committee indicated that the instalment regime would not necessarily improve the RAF’s current financial woes and could potentially create a large bureaucracy.

Mr S Cooper, RAF Chairperson, said the Fund would provide a considered response to many of the questions raised at later stage. He would only respond to issues that could be clarified immediately.
He was not aware of the 35% figure stated by Mr Calitz. As far as he knew, the savings were probably less than 15%. The RAF was liable to pay for the physical infrastructure housing the arbitration project, which further whittled away at its administrative cost effectiveness. The arbitration process in the Western Cape was only a pilot project and thus of limited lifespan. The RAF would soon implement a formal arbitration process in the Western Cape and eventually the rest of South Africa. The RAF would also implement some changes to the current arbitration process in light of lessons learnt during the pilot project.

The RAF was forced to suspended payments to claimants as a result of immediate cash flow difficulties experienced by the Fund. They subsequently centralised payments as well as reducing payments to once a week instead of making hourly payments on a daily basis. The RAF board was considering outsourcing the Undertaking Department.

National Council of Persons with Disabilities in SA submission
Ms Dorothy-Ann Howitson for the Council painted an illuminating picture of the daily struggle of disabled persons. The Council opposed instalment payments as these would not allow disabled persons to acquire support devices and make the necessary alterations to their homes and cars.

Discussion
Mr Cronin said the RAF Board consisted of between 8 and 12 members and the Bill stated that they must have extensive experience in all relevant fields including people living with disabilities. He asked whether this sufficed as a response to the request that disabled persons should be represented on the Board.

Ms D Howitson, Council Vice Chairperson, said it was possible to know about disabilities without necessarily appreciating the real plight of disabled persons. Only a disabled person could appreciate the plight of the disabled community.

Mr Cronin said not every disabled person necessarily represented the whole disabled community but the point was nonetheless appreciated.

Mr Green asked how the disabled community viewed the instalment regime, especially in light of the Coalition’s view regarding the cost of support devices for disabled persons.

Ms Howitson supported the lumpsum payment process, as instalments would not allow for the immediate purchase of assistive devices. Home alterations were essential aids to ensure the continuation of normal life for disabled persons and not luxuries. Limiting the compensation amount to R15 000 was insufficient as the required alterations to a bathroom alone amounted to approximately R40 000, while the purchase of a basic wheel chair cost approximately R25 000.

Mr Farrow said the tendency with lumpsum payments was to acquire the support devices immediately and this often resulted in insufficient arrangements being made for future living expenses. He suggested that the RAF refer disabled persons to the various support organisations in the community to assist in this regard.

Ms Howitson said all persons with disability could receive free medical treatment if they passed the means test. Unfortunately, certain medications such as catheters were not always available due to budget constraints.

Mr Farrow said immediate needs such as support mechanisms and home alterations should be considered when deciding on the compensation regime.

Ms Howitson said assistive devices had a limited life span and needed to be replaced at regular intervals. Cars also had to be routinely adapted as no motor vehicle lasted forever. She recommended that the RAF took these cyclical needs of especially persons with spinal chord injuries into consideration. Wheelchairs in rural areas were especially prone to fall into disrepair.

Mr Cronin said, although Ms Howitson expressed the real ongoing needs and cycles of replacement of supportive devices, she still appeared to support the lumpsum payment regime. The Satchwell Commission proposed a more interventionist social network to support disabled persons in the future. He said there was at least one disabled member serving on the board.

Ms Howitson said all support organisations endeavoured to make disabled persons independent members of society.

Mr Farrow asked which section of the disabled community she represented.

Mr Cronin said it was not important which constituencies, organistions supported as all submissions would be considered on the merit of their arguments.

Ms Howitson said the Council was a national organisation for people with disabilities irrespective of how such disabilities originated.

General Council of the Bar of SA submission
Mr E Dane said Mr Calitz had engaged in an in-depth exposition of the Bill and would therefore not duplicate issues raised previously. The General Council of the Bar of South Africa agreed on many points with the Coalition but opposed placing any minimum thresholds on ‘General Damages’ claims. The Council also proposed that funds allocated to under-age accident victims should be placed in the care of a curator to protect their interest.

Discussion
Mr Mashile asked how the Council would protect funds awarded to minors and asked if such funds would be withheld from the minor claimants until they reached adulthood.

Mr Dane said limiting the funeral award to R5 000 would not be beneficial in the Council’s view, as funeral expenses constituted a small component of the RAF’s overall expenditure. He did not believe this should be capped. He disagreed with Mr Calitz and said all claims including ‘General Damages’ should be compensated as proper administration of the RAF could potentially alleviate much of its financial woes. He was not prepared to support limiting ‘General Damages’ claims without studying the RAF’s financial documents.

The aim of placing minors’ compensation with a curator was to prevent its abuse by adults. The curator could release the money for the benefit of minor children as per their requirements and living expenses.

Mr Cronin said he would like to hear more about the Undertaking system as he was concerned people were being ‘asked to take a leap of faith’.

Mr Dane said it was unconstitutional to take away rights by placing limitations on claims to the RAF and then further limit claimants’ resort to the courts. He said the difficulty with establishing thresholds was that they were not ‘cast in stone and could be reduced’ at a later stage. These considerations were redundant as compensation was dependent on the financial health of the RAF in any case.

The meeting was adjourned.