Road Accident Fund Amendment Bill: deliberations

Meeting report

TRANSPORT PORTFOLIO COMMITTEE
6 September 2005
ROAD ACCIDENT FUND AMENDMENT BILL: DELIBERATIONS

Chairperson: Mr J Cronin (ANC)

Documents handed out:
Road Accident Fund Amendment Bill - version as of 6 September 2005
Department of Transport presentation - Overview of Impact
Department of Transport presentation
Department of Transport presentation on Second Opinion
Department of Transport - Second Opinion by Trengove and Cassette (document awaited)

Relevant document:
Road Accident Fund Amendment Bill - version as voted on 7 September 2005

SUMMARY
The Department of Transport briefed the Committee on the latest proposed amendments to the Road Accident Fund Amendment Bill. General damages would only be paid for serious injuries but foreigners could not claim for such damages and only had recourse through the common law. The assessment method had to be as objective as possible. The definition of serious injury correlated with that found in the Compensation for Occupational Injuries Act. The Panel would monitor the assessment process to ensure that medical practitioners adhered to the regulations. A suitable definition of serious injury would be determined by case law over time. Future loss of income calculations would incorporate an inflation projection and public sector tariffs would be applied to private sector institutions to recover treatment costs. The Fund would not be liable for claims for emotional shock for witnesses not involved in the actual accident. Payment for loss of income would be capped to R160 000 per annum irrespective of annual salary. Limitations on emergency treatment for passengers had been removed.

The Chair reminded the Committee that it should focus on the key issues within the Amendment Bill and leave the wider reform of the Road Accident Fund for a later date. The Committee discussion focussed on the need to publish a list of competencies of appointed Board members, clarity on the definition of a serious injury, the inclusion of socio-economic issues into the assessment process, the conflict between payment by instalments as opposed to lump sum, the role of the Panel in monitoring accredited medical practitioners, the provision of emergency treatment within the private sector, continuing cash flow problems within the Fund, the payment of party to party costs. The projections of the effect of this Bill was that the additional spread of compensation to more people would create an increase of R500 million to 1 billion. The removal of a claimant's right to claim for general damages except if seriously injured would create a decrease of R1,1 billion. The saving incurred by capping loss of income to R160 000 per annum would save R500 million. Thus it was estimated that the total impact of the Bill would create a saving for the Fund.

MINUTES
Road Accident Fund Amendment Bill Departmental Briefing
Ms M Du Toit (Manager: Policy Advocacy and Co-ordination: Department of Transport) presented an overview of the changes in the latest draft of the Bill on a section-by section basis.

Clause 1 (Amendment to Section 1 of the Act)
An addition had been made to definition of a third party. Any foreigner or person without a permanent residency permit could not be regarded as a third party. Foreigners could claim for medical costs or loss of income but could not claim for general damages. No limit was currently placed on the amount of general claims that could be claimed. The constitutionality of this approach had to be determined as pain and suffering could not be distinguished between citizens and non-citizens. Foreigners were excluded from the Fund but could claim through the common law. The unaffordability of liability of the Fund for foreigners had to be considered.

The Chairperson summarised that non-citizens would be excluded from the definition of claimant within the Fund but could make a common law claim against a negligent South African driver in a South African court.

Ms Du Toit confirmed that the additional impact was now on the road user in creating an additional risk of liability.

Mr S Swart (DA) sought clarity on the highest claim received by the Fund and asked whether an individual driver would now be responsible for such a claim.

Ms Du Toit agreed that the individual driver would have to contest a claim within the civil court to prevent a pay-out in the case of negligence. No further changes had been made to the governance issues. Service on the RAF Board had been restricted to a three year consecutive term period.

The Chairperson noted that previous requests from Members had been included within the amendments.

Clause 4 (g) (Amendment to Section 10 of the Act)
Ms Du Toit added that a list of nominees for the Board would be published for information purposes and the selected Board members would be published in the Government Gazette.

Mr S Farrow (DA) stated that the competencies of selected individuals should also be published within the Gazette.

Ms Du Toit agreed that the list of competencies would be provided to ascertain areas of specialisation of the Board. The Chief Executive Officer would be appointed by the Minister on the recommendation of the Board.

Clause 7 (Amendment to Section 17 of the Act)
This clause dealt with the liability of the Fund and agents for compensation.

The Fund would pay general damages only for those victims seriously injured. The method of assessment of a serious injury had to be reasonable. The circumstances of the victim would not be considered in the determination of the seriousness nature of the injury. The variable nature of personal circumstances made it extremely difficult to establish an assessment method that could easily distinguish between serious and non-serious injury. The nature of an injury could have an adverse effect on an individual whose ability to earn a living was infringed upon. For example, the loss of a finger for a pianist would be regarded as serious. Compensation for income would consider the impact of the injury on the person’s ability to work and earn an income. However, the pianist would not be entitled to general damages as the nature of the injury would not be perceived as serious. The assessment method had to be as objective as possible. The circumstances of the individual could only be considered in terms of compensation for loss of income.

Ms B Thomson (ANC) asked whether the clause would not apply to an unemployed individual.

Mr Swart said that the unemployed would rely on general damages as a form of income. However, the amendment would close this option. He asked for clarity on the definition of a serious injury.

The Chairperson stated that a broken ankle within the rural context would have a serious impact on a person and the nature of the disability may not be properly acknowledged by the amendment. The introduction of socio-economic issues into an assessment resulted in a blurring of the definition and could result in forms of abuse.

Ms Du Toit confirmed that the unemployed person would not be able to claim for loss of income due to the inability to prove loss of income. However, the unemployed could claim for medical expenses incurred to treat the injury. The definition of a serious injury correlated with the definition found in the Compensation for Occupational Injuries Act. A serious injury was one that led to paralysis or disability and included loss of limb, sight and brain damage. Multiple injuries had to be considered within the assessment process. The Panel had to monitor medical practitioners and ensure that regulations were adhered to. The Panel could not turn around medical assessments but could advise the Fund that certain practitioners were negligent or fraudulent. The victim could acquire a second medical opinion if desired. The assessment of a medical practitioner's ability would remain within the medical field and would not be the responsibility of the Fund. The Panel would monitor and regulate accredited practitioners.

Mr Ainslie (ANC) asked whether any appeal mechanism existed to overturn medical assessments.

Mr Mashile (ANC) stated that the Fund should intervene on behalf of the poor to assist in obtaining a second opinion.

Ms Thomson asked what consequences would accrue to negligent medical practitioners.

Ms Du Toit stated that accessibility to the Fund was an important consideration and a large number of accredited practitioners was the optimal scenario. The victim of a poor assessment could obtain a second opinion or proceed with court action to overturn the decision. Fraudulent practitioners would be removed from the accreditation list.

Mr Mashile provided the hypothetical example of a rural dweller who receives a negative assessment and proceeds to give up on the claim. He asked what the Fund would do to rectify the situation if the Panel subsequently found fault with the decision.

The Chairperson stated that many practical challenges were involved in the envisaged system. The Fund was stretched in terms of resources and accredited practitioners. The Committee sought to reduce general damages claims that clogged up the system and debate appropriate definitions for relevant concepts. The Panel had to review the involvement of practitioners within the system and establish acceptable from unacceptable behaviour and maintain standards. The involvement of the Fund in accreditation of additional practitioners seemed unrealistic. General damages claims that did not contain any serious injuries would be rejected by the Fund.

Mr Farrow agreed that the accreditation of more practitioners was impractical and asked why the court route should not be pursued from the beginning.

The Chairperson stated that the accreditation process would burden the Fund unnecessarily and provide opportunities for corruption. The health profession should handle the registration of practitioners while the Fund should consider issues such as the definition of serious injury and general damages. The Panel would monitor the regulation of the system.

Ms Khunou (ANC) asked how the panel would determine whether medical practitioners had made a wrong decision.

Ms Du Toit referred to New Zealand where the clinical code was matched with the treatment code to determine anomalies that might arise. The nature of injuries was matched to the type of treatment administered. The Minister would prescribe the method of assessment while the Health Professionals Council of South Africa would indicate the suitable level of expertise needed to implement the assessment method.

The Chairperson stated that the physical accreditation of medical practitioners by the RAF would create problems in terms of resources and capacity.

Mr Swathe (DA) asked whether the Fund would financially assist claimants to acquire a second opinion.

The Chairperson stated that a problem arose if a limited number of practitioners were available to conduct assessment of injuries. The Fund could not assist claimants to find a sympathetic or reasonable practitioner. Accredited doctors would tend to apply the regulations in an austere manner to ensure continuation of business opportunities as members of the Fund.

Mr Swart suggested that a limit on a claim for non-serious injury such as R25 000 would reduce the amount of claims that clogged up the system.

The Chairperson stated that the Members had considered such a scenario but a serious injury could involve a claim of that amount.

Ms Khunou asked for the average time frame in repayment of claims and whether extensive backlogs existed.

Mr Farrow stated that the courts kept the medical profession in check and the courts should play a role in the assessment of claims.

The Chairperson added that professional bodies would maintain standards within specific fields.

Ms Du Toit stated that the RAF processed 160 000 claims per annum and the time period for repayment averaged two to three years. Case law would define the nature of serious injuries based on legal contestation. The courts could be approached to determine the validity of a practitioner's assessment. The Fund could either support claims or reject them by legal contestation. The Fund could issue an undertaking for third party claims and the service provider could be paid directly from the Fund. Treatment costs would be paid as a lump sum based on apportionment of responsibility. A concern remained that payment by instalments would hinder the benefits of the lump sum approach.

The Chairperson stated that payment by instalments for general damages was problematic. Instalments had been proposed as a result of recent financial difficulties experienced by the RAF. The apportionment approach restricted the poor from a portion of the damages that limited the ability to access damages. The Committee should focus on the key issues within the Amendment Bill and leave the wider reform of the RAF for a later date. The Committee had to insist on the lump sum approach rather than instalments as a means of payment.

Mr Farrow noted that the attempt to reintroduce instalments seemed deceitful and should be discussed. The position of the Committee in rejecting instalments was being undermined.

The Chairperson concurred that the Committee should reject instalments and remain with the lump sum approach.

Ms Du Toit stated that the Department had decided to cap payment for loss of income to R160 000 per annum.

The Chairperson said that future loss of earnings would be calculated based on the R160 000 limit irrespective of annual income.

Ms Du Toit stated that future loss of income calculations would be based on inflation projections and would be adjusted quarterly. A salary below the cap would attract an increase to achieve parity but an income above the threshold would only receive inflation-related increases. The tariff offered by the Fund would be a public sector tariff following a request by the Minister. Private sector service providers could therefore claim back for costs incurred in the treatment of a victim based on a public sector rate.

Mr Farrow asked how fees owed to a private institution for emergency treatment would be covered if the tariff offered was inadequate. He asked whether the victim would be expected to cover the outstanding amount. The requirement could be construed as an infringement of personal rights.

Ms Du Toit stated that the private sector was not keen to provide emergency care but the Fund would cover public provision for treatment in full.

Mr Mashile asked how unconscious people would be able to make a decision on the type of treatment to be administered.

Ms Du Toit stated that private institutions had two options namely to treat a victim through cross-subsidisation or increase tariffs paid for medical aids to carry the additional risk.

The Chairperson reminded Members of the inequities within the health system that could not be addressed by the Bill. Private institutions had a constitutional responsibility to provide emergency treatment to accident victims despite the level of tariff offered. The health sector could only be transformed through additional funding.

Mr Farrow added that a prolonged stay at a private institution would create additional problems for the Fund.

Ms Du Toit stated that limitations on emergency treatment for passengers had been removed and compensation claims would be processed. The Fund was expecting an increase in compensation levels of 20% as a result of the alteration.

Mr Swart asked how cash flow problems would be balanced with the removal of limitations and what additional figure of compensation was envisaged. He asked if the additional amount had been costed within the Medium Term Expenditure Framework.

Ms Du Toit replied that the Fund expected an increase in compensation of approximately R1 billion per annum. The broader sample of claims would result in initial delays in payment but would be rectified over time.

Mr Farrow raised a concern of additional costs for the Fund given the liquidity problems.

The Chairperson commented that the answer lay in decreased accident levels within the country and the poor could not be excluded from assistance.

Ms Du Toit pointed out that the Fund would not be liable for emotional shock suffered by a witness to an accident. Witnesses could claim compensation by means of the common law.

The Chairperson added that the RAF would compensate passengers within a vehicle for emotional shock but not witnesses at a distance from the scene of the accident. Such witnesses could claim through the common law for redress. The RAF should not become a target for emotional shock claims from witnesses.

Ms Du Toit noted that Section 21(2) (b) provided a list of claimants that would apply for compensation by means of the common law.

The Chairperson asserted that the legislation sought to place a limit on future loss of earnings claims and block the liability of the Fund in certain cases. The exclusion of foreigners from the Fund would place an additional responsibility upon road users with regard to common law claims. An alternative approach would be to abandon the current definition of third parties.

Ms Du Toit added that the Fund received a small amount of foreign claims but these tended to be excessive amounts. The unlimited liability for general damages had to be addressed through amendment.

The Chairperson asked why foreign claims were so high and whether future loss of earnings raised the amount.

Ms Du Toit replied that general damages were a subjective area that contained contextual issues. No direct pattern existed between the nature of injuries and the type of general damages claim. The loss of enjoyment of life was relative to the individual concerned. The adverse impact on future lifestyle was difficult to determine.

Mr Swart argued that case law on general damages created parameters that defined claims and no difference could be discerned between South Africans and foreigners in terms of lifestyle changes.

Clause 10 (Substitution of section 21 of principal Act)
Ms Du Toit explained that doubt had prevailed whether the reference was to a particular claim or to the Fund in general. The correct understanding was that the common law could be approached if the RAF was bankrupt.

Mr Mashile stated that the time taken to determine whether the Fund was bankrupt could have an adverse effect on the rights of claimants.

The Chairperson reiterated that a bankrupt Fund would have a general adverse impact on South Africa. Claimants should have the right to access the civil courts in the event of a bankrupt RAF. The government had a responsibility to ensure adequate financial resources to the RAF and the Committee had to improve the functions of the Fund through amendments. Future additional funding had to be considered to strengthen the RAF.

Mr Swart stated that the removal of the common law right from road users to claim for general damages presented serious constitutional challenges.

The Chairperson agreed that a dilemma remained and would have to be considered.

Clause 11 ( Substitution of section 26 of principal Act)
Ms Du Toit referred to the section that dealt with the resolution of disputes and the time period to process claims.

Mr Farrow stated that the extension of the claims period presented more obstacles for road users in accessing payment.

Ms Du Toit stated that inflation projections for loss of income claims would be published on a quarterly basis by the RAF and would no longer be determined by the Minister's regulations. Regular change would be to the advantage of the claimant and would impose certainty on to the system.

Mr Mashile sought clarity on the link between decisions of the Fund and Minister's regulations and whether regulations should remain the responsibility of the Minister.

Ms Du Toit responded that the RAF would consult with outside experts in determining the inflation figure and would not make adjustments on a unilateral basis.

The Chairperson then highlighted key issues that had been identified by Members: The Board was empowered to recommend the candidate for the position of the Chief Executive Officer to the Minister. The Committee was of the opinion that social circumstances should be taken into account when assessing the nature of an injury. A non-serious injury could have a devastating impact upon a particular individual within a specific situation. The assessment process for serious injury should remain largely medical but incorporate social issues to some extent.

Ms Du Toit replied that the assessment method had to make a distinction between serious injuries and non-serious injuries by means of an objective mechanism. The introduction of individual circumstances blurred the process to determine general damages. The unemployed could produce an affidavit to support a loss of income claim.

Mr Farrow asked whether the third party should remain entitled to party to party costs in respect of the claim.

Ms Du Toit replied that the Fund was not responsible for payment of party to party costs.

The Chairperson asked whether payments by instalments should be allowed or whether the lump sum approach should remain as the only form.

Mr Farrow referred to the problem of emergency treatment in private institutions and whether the Fund should provide assistance for a prescribed period due to the lack of capacity within certain public facilities.

The Chairperson stated that the issue would be discussed during final deliberations on the Bill on the following day and that it involved a policy decision.

Ms Du Toit stated that the public tariff was a recommended price and not a statutory tariff and the actual price could be negotiated.

The Chairperson added that the regulated price would regulate the Fund to set a workable price as the RAF had market power.

The meeting was adjourned.