Recently Bell Dewar advised the Road Accident Fund in respect of a plethora of challenges brought by the organised legal profession.
The Law Society of Africa and others ("the applicants") applied to the North Gauteng High Court to have certain provisions of the Road Accident Fund Act 19 of 2005 ("the RAF Act"), Regulations and a Government Notice declared unconstitutional.
On 31 March 2010, Fabricius AJ dismissed the application in its entirety.
The applicants then applied for leave to appeal to the Constitutional Court. In the Constitutional Court, the applicants limited their attack to the following provisions:
- section 21 of the RAF Act which abolishes a road accident victim's common law right to claim compensation from a wrongdoer for losses which are not compensable under the RAF Act;
- section 17(4)(c) of the RAF Act which caps the amount of compensation that the Road Accident Fund ("the Fund") is obliged to pay the victim for loss of income or a dependant's loss of support where the victim dies as a result of a motor vehicle accident; and
- Regulation 5(1) which prescribes a tariff for health services which are to be provided to accident victims by public health institutions.
The abolition of the common law claim
Prior to the amendment of the RAF Act, victims of motor vehicle accidents were required to claim compensation from the Fund instead of the wrongdoer. Where the fund was unable to compensate the victim for all damages suffered, the victim could sue the wrongdoer to recover those losses.
A rudimentary example of the pre-amendment scheme is as follows:
Total damages suffered by the victim: R200 000.00
Compensation paid by the Fund: R150 000.00
As is evident from this example, the Fund did not compensate the road accident victim in full. The road accident victim could under the pre-amended RAF Act sue the wrongdoer for any residual amounts not covered by the Fund. In this case, that amount would be R50 000,00.
Section 21 (in its amended form) provides that a victim of a motor vehicle accident will have no claim against the wrongdoer. In other words the road accident victim would not be able to claim R50 000.00 from the wrongdoer.
The Constitutional Court held that the abolition of the common law claim is rationally related to the legitimate government purpose to make the Fund financially viable and its compensation scheme equitable.
The capping of claims for loss of income and support
Pecuniary damages have been limited by section 17(4)(c) of the RAF Act. Compensation for loss of income and support is calculated (irrespective of actual loss) on the basis of a maximum annual income which is currently set at R182 047.00 per annum.
This amount will be adjusted by the Fund on a quarterly basis to counter the effect of inflation.
The Constitutional Court held that the capping of claims for loss of income and support advances a legitimate governmental purpose to make the Fund financially viable and sustainable and to render the scheme "transparent, predictable and equitable."
The implication of this provision is that if any road accident victim's income exceeds R182 047.00 per annum, he or she will not be able to claim that amount from the Fund. This provision will therefore have an adverse affect on high income earners who will no longer be able to claim for their actual loss of earnings.
The impact of this provision can be reduced in the following ways:
- Income Protection policies can protect actual income lost above R182 047.00 per annum (limits are set by insurers); and
- Life Cover to cater for loss of income upon the death of the road accident victim, the proceeds (a lump sum payment) is for surviving dependants.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.