Road Accident Fund Amendment Bill: briefing, Consideration and adoption

Meeting report

PUBLIC SERVICE SELECT COMMITTEE
12 October 2005
ROAD ACCIDENT FUND AMENDMENT BILL: BRIEFING, CONSIDERATION AND ADOPTION

Chairperson: Mr R Tau (ANC)

Relevant documents:
Road Accident Fund Amendment Bill presentation

SUMMARY
The Department of Transport briefed the committee on the Bill. Governance, areas of compensation and transparency were the issues elaborated on. Concerns were raised over the fact that the RAF considered its claims on an apportionment of fault basis and that coverage was not provided to all road users. Members were however reminded that the RAF provided a liability assurance system and not a social security system that was all encompassing. A policy decision had to be made if a change in system was required. This however fell outside the ambit of the Bill. The Bill was placed before the Committee for consideration and was adopted by a majority vote. The DA objected.

MINUTES
Department of Transport briefing
Ms M Du Toit (Director: Policy Advocacy and Co-ordination) briefed the Committee on the fundamental issues that the Bill covered. The Bill allowed for an improvement in the corporate governance of the Road Accident Fund (RAF) in that it would abolish the executive committee of the RAF Board. In addition, the Minister would appoint the board members from a list of candidates nominated by key stakeholders. The Minister would also have the power to appoint the CEO and the Vice-CEO from nominations received from the board.

The Bill further provided for the extension of areas of compensation. Certain categories of persons whose claims had either been limited or excluded were now covered by the Bill. Compensation for general damages would be limited to persons who had suffered serious injuries. Permanent injuries like a disability or a loss of a limb would fall into this category. The idea was to allow for damages to be claimed only in those instances where the injuries justified it. Constitutionality concerns over the exclusion of damages for minor injuries had been overcome by the inclusion of multiple minor injuries within the definition of a permanent injury. Ms Du Toit also pointed out that the Bill excluded the liability of the RAF to entertain claims by persons who had suffered trauma for observing an accident. In the past, such claims had been entertained by the courts.

The Bill’s removal of the RAF’s statutory obligation to pay party-party costs (costs between a client and attorney) was welcomed. It was left up to the courts to decide in whose favour costs would be granted based on the merits of each case. This would therefore limit the entertainment of frivolous claims by attorneys. Some of the changes brought on by the Bill were aimed at bringing about greater transparency and much time was spent on elaborating on it. The RAF had in the past given claimants an undertaking to compensate them for medical expenses that had already been paid. The only requirement was that proof of payment was required in order for the claim to be successful. Claimants had however been sceptical about the promise of reimbursement and had refused to pay upfront. The Bill now allowed for doctors to claim directly from the RAF.

The financial burden placed on the RAF by the sheer amount of loss of income and loss of support claims had necessitated the amounts for either to be capped at R160 000 per year. In the event that the claimant’s annual income was above the capped amount the shortfall would have to be covered by personal insurance policies. Concerns had been raised in the past over the great inequalities that existed in private and public sector medical tariffs with the former substantially higher than the latter. The Bill aimed to close the gap by way of limiting private sector claims up to the maximum amounts charged by the public sector.

Ms Du Toit concluded by noting that policy changes to the RAF would be finalised by year-end and that it would be placed before the Committee in 2006.

Discussion
Mr M Mzizi (IFP, Gauteng) asked who the agent was that was often referred to in the Bill. He also asked in whose bank account staggered amounts and lump sums would be paid. It was also asked why doctors were allowed to claim from the fund when many inevitably billed patients’ medical aid funds.

Ms Du Toit answered that in the past the RAF had dealt with insurance agents in the handling of third party claims. When the system moved from third party to a fuel levy based system, agents were no longer used. Ms Du Toit noted that payments would be made directly to claimants or if power of attorneys had been signed, payment would be made into the account of the relevant attorney.

Mr A Watson (DA, Mpumalanga) insisted that medical aids did not cover accident injuries, only illnesses. He noted that some medical aids paid out as a gesture of goodwill where the person had an accident and it was of his own accord. The point was made that medical aids were often not reimbursed for payments that had already been made. Mr Watson expressed disapproval over the power that the Bill gave the Minister of Transport to appoint the RAF board, the CEO and the Vice CEO. He was convinced that the appointments would be of a political nature.

Ms Du Toit agreed that medical aids did not pay for road accidents. She said that claimants were required to reimburse medical aids when claims were paid. The true state of affairs was that claimants hardly ever reimbursed medical aids. Ms Du Toit said that the burden of risk borne by medical aids had been discussed at length with medical aid schemes. The Bill only allowed for payments to be made according to public sector rates which meant a shortfall for medical aids. It was conceded that the medical aid industry would inevitably absorb the risk.

Ms Du Toit reacted that the issue of governance was totally transparent as nominations to the RAF board would be a broadly-based process. Nominations to the board would come from the public. The board in turn would make nominations for the appointment of a CEO and Vice CEO. Based on the nominations that were received, the Bill empowered the Minister to make the actual appointments in either case.

Mr L Van Rooyen (ANC, Free State) was concerned about claimants being "ripped off" by the attorneys handling their claims. He felt that the Bill was silent on addressing this problem.
It was also asked why the capped amounts for claims for loss of income would be adjusted on a quarterly basis. It was felt that the adjustment should be kept on par with inflation on a yearly basis. Mr Van Rooyen noted that quarterly adjustments would inevitably place a huge administration burden on the RAF. He lastly asked when the RAF’s annual report would be made available.

Ms Du Toit responded that attorneys’ contingency fees were limited to a maximum of 25% in terms of the Contingency Fees Act. She however pointed out that it did not preclude attorneys from entering into common law agreements with claimants in order to secure higher fees. The Heath Commission had made it clear that the RAF was not to regulate fee structures for attorneys in private practise. The RAF annual report would be made available shortly.

Ms B Dlulane (ANC, Eastern Cape) was concerned about how assessment of a serious injury would be made. She also asked for clarity on the issue of compensation for observers of accidents who suffered from emotional shock.

Ms Du Toit explained that the World Health Organisation and the American Health Association had established guidelines for the assessment of a serious injury. The guidelines entailed a waiting period of 18 months after the injury in order to determine the permanency of the injury. If the claimant’s way of life had been adversely affected by the very nature of the disability, damages would be payable for pain and suffering. It was made abundantly clear that medical expenses would be covered by the RAF irrespective of whether the injury was minor or serious. Ms Du Toit said that the RAF would not provide compensation for emotional shock suffered by an observer of an accident. The person would have the common law right to take the matter to court.

Rev P Moatshe (ANC, North-West) asked what financial implications the Bill had for the state. He also asked why the RAF considered claims based on driver error. It was pointed out that accidents were often caused by bad weather and that driver error was not an issue. Why had victims of accidents not been part of the consultation process on the Bill?

Ms Du Toit said that the state would save between R500 million and R1 billion over a period of five years if the Bill was enacted. She explained that the RAF used a liability assurance system based on fault. If it were a social security system, the issue of where blame or fault lay would not be an issue. Ms Du Toit noted that a policy decision had to be made on the issue. This fell outside the ambit of the Bill. She conceded that consultation had only taken place with key stakeholders and not accident victims.

The Chair asked why reference had been made to a Senate in the Bill when it no longer existed.

Ms Du Toit noted that the reference was in relation to an old provision that would be deleted.

Mr Van Rooyen reiterated previous sentiments that legal practitioners were taking advantage of accident victims by claiming huge portions of paid out claims as payment for services rendered.

Mr Watson felt that the Bill would give the general public less than what it had before. He made specific reference to Ms DuToit’s earlier statement that personal insurance would cover shortfalls where amounts paid out by the RAF were capped.

Ms Du Toit said that insurance companies and medical aid schemes needed to offer packages to cover shortfalls as the RAF could not cope with its current financial burden. She remarked that it would be surprising if medical aids refused to make payouts to persons who were injured in motor vehicle accidents. It was felt that if they did refuse such claims, they would lose business. The Bill would enable a larger slice of the public to receive more. Those able to afford additional insurance cover should consider it.

Mr Mzizi also pointed out that the Bill did not address circumstances where fault was not an issue in an accident. He noted for example a driver sneezing and losing control of a vehicle.

The Chair added that the Bill did not cover collisions with animals in rural areas.

Ms Du Toit once again explained that the current system was fault-based and did not cover the two scenarios pointed out. The only way to protect all road users was to motivate for a no fault based system. It was a policy issue that was not covered by the Bill.

Mr Watson asked whether the policy changes to be made to the RAF by Cabinet would hamper the progress of the Bill.

Ms Du Toit said that the two issues were separate and were not dependant on each other. The Bill had to be passed as soon as possible.

The Chair placed the Bill before the Committee and it was adopted by a majority vote. The DA objected.

The meeting was adjourned.