PASSENGER LIABILITY AND THE ROAD ACCIDENT FUND (KNOWN AS THE “RAF” ACT)
The amendments to the Road Accident Fund Act No. 56 of 1996 (RAF Act) and which i.a. affects the passenger liability coverage offered by insurance products, came into effect at the end of 2010. The RAF Act provides two types of cover to all road users within the borders of South Africa. First, it provides insurance against injury or death for victims and their families resulting from car accidents. Secondly, it provides indemnity coverage for the driver who caused the accident. The RAF Act alone is therefore responsible for payment of compensation claims to the injured person(s) and/or their families.
Motor vehicle policies previously provided coverage for passenger liability. A rate for paying and non-paying passengers, respectively, was automatically included in the calculation of the car premium. Claims for injuries could previously have been instituted by injured passengers under the Common Law against negligent drivers and the passenger liability extension of the respective policy products provided the necessary cover against such claims.
However, the RAF Amendment Act has far-reaching consequences for the insurance industry. It deprives victims of car accidents of their right to claim under the Common Law against the negligent driver or his employer or owner of the vehicle in which they were a passenger. As the RAF Act also places a maximum limit on the amount that a victim can claim under the Act, it also deprives victims of their right to be allowed to claim of the negligent driver, his employer or owner of vehicle for the portion of their claim which exceed the limit.
This therefore means that passenger liability coverage as provided by the motor vehicle policies no longer serve their full purpose but has been watered down to limited coverage within the borders of South Africa. The limited policy cover in short implies that it provides cover, firstly if the RAF does not have money to pay compensation claims, i.e. is bankrupt. Second, it will provide coverage where an eyewitness to an accident makes a valid claim for emotional shock. In the third place, it provides coverage where the accident in our neighbouring countries, i.e. takes place outside the borders of South Africa. The RAF Act only applies within the borders of South Africa and not outside.
The fact that the negligent driver can no longer be sued by the victims and that the amount that can be claimed under the RAF Act is limited, has created a gap for compensation in the event of an accident. In the event of a serious accident, this can even lead to serious financial implications. Fortunately, there are alternative insurance products to fill this gap. This should definitely be considered when compiling an insured’s portfolio.
Personal line policies provide cover in the event of Death and Permanent Disability under the Personal Accident Section. Some insurers also offer stand-alone Personal Accident products or they can be included as an extension under the Motor Section. Under the Commercial Policies, employers can take out Group Personal Accident cover for their staff members, especially for those who are frequently on the road. It should be noted that with all Personal Accidents products, a minimum and maximum age limit applies to insured persons. Insured amounts are also limited to a maximum amount in accordance with the underwriters’ underwriting policies and products.
Author: Bert Kleinhans
Short Term Advisor
bert@bvsa.co.za
028 754 2009
