Road Accident Fund Amendment Bill: hearings

Meeting report

TRANSPORT PORTFOLIO COMMITTEE
5 November, 2003
ROAD ACCIDENT FUND BILL: HEARINGS

Chairperson: Mr J Cronin (ANC)

Documents handed out:
Road Accident Fund Amendment Bill [B64-2003]
Submission by Congress of South African Trade Unions (COSATU) Mr S Kgara
Submission by Life Offices' Association of South Africa (LOA) Ms A Rosenberg
Submission by Board of Health Care Funders (BHF) Prof. D Krige
Submission by Department of Health Ms K Lowenherz
Submission by South African Society of Psychiatrists (SASOP) Dr E Allers
Submission by Road Accident Fund (RAF) Mr D Anderson
Department's proposed amendments to the Bill (email [email protected])
Road Accident Fund Amendment Bill [B64-2003]

SUMMARY
The Portfolio Committee considered submissions from COSATU, Life Offices' Association of South Africa, Board of Health Care Funders, Department of Health, South African Society of Psychiatrists and Road Accident Fund. The issues raised during the hearings and the discussion period, concentrated on lump sum versus instalment payments, collateral benefits and double indemnity, prescribed tariff system and the emotional shock provision.

MINUTES
Congress of South African Trade Unions (COSATU) submission
Mr S Kgara said COSATU was disappointed that the Department and the RAF Management had failed to table the Bill at the National Economic Development and Labour Council (NEDLAC). The submission concentrated on two principal concerns, namely, the Committee's stance on the findings of the RAF Commission, and the aptness of the proposed amendments in relation to the objectives of the Bill.

Discussion
Mr S Swart (ACDP) drew attention to COSATU's support for payments by instalments. He pointed out that most submissions have indicated the need for some form of lump sum payment to meet immediate expenses such as buying a wheelchair. He asked if COSATU would consider supporting lump sum payments to accommodate the most immediate and urgent expenses.

Mr S Kgara (COSATU) said that lump sum payments in principle were acceptable, however, there had been many problems with lump sum payments in the past, hence instalments seemed to be the more appropriate resolution.

Mr A Ainslie (ANC) asked why COSATU was not opposed to the system of collateral benefits.

Mr Kgara said that the idea behind the special protection system was intended to protect the poor, and that he agreed to it in principle. Nonetheless, the social system was open to corruption and abuse and there had been reported problem with the administration.

Life Offices' Association of South Africa (LOA) submission
Ms A Rosenberg said that LOA argued that the insertion of Section 17B - which provides that benefits received from outside sources shall be deducted from the compensation payable by the Fund - would constitute a major policy shift from the original Act. The victims of road accidents should not be penalised nor the RAF be relieved of its current statutory obligations. The only motivation, it seemed, for this proposed amendment was increased savings for the Fund. Road users and road accident victims who have made private arrangements should still be entitled to claim benefits. The LOA asked that the Committee not allow the insertion of Section 17B.

Discussion
The Chair noted that the intention of this section was to avoid double indemnity. He asked if double indemnity was currently used in practice.

Adv A Meiring (LOA) said that the common law prevented the use of double indemnity and that there was a clear distinction between indemnity insurance and sum insurance. Therefore, if Section 17B of the Bill was left unchanged, there would be no problem of double indemnity.

The Chair said that double indemnity would be more of a practical concern rather than a principal issue. The drafters would need to decide whether to change the clause to prevent such actions or leave it unchanged and avoid the dilemma of dealing with consequential amendments in other pieces of legislation.

Board of Health Care Funders (BHF) submission
Prof. D Krige stated that the BHF broadly supported the position presented by the LOA. The BHF raised concerns with provisions of sections 3(b), 3(c), and 8(3) of the proposed Bill. Presently most medical schemes had an exclusion clause contained in their rules, in terms of which schemes were not obliged to effect payments of medical expenses in instances, where there was a third party from whom such expenses might be recovered. Strict implementation of this clause could have dire consequences for members faced with financing treatment in such cases. The proposal rendering collateral benefits deductible contradicted h the "Assessment of Damages Act". In addition, the prescribed tariffs should not be lower than the appropriate BHF scale of benefits applied at the time of the treatment. The legislation should not be implemented in its present form until the implications of any proposed prescribed tariff were thoroughly investigated and affected parties have been given sufficient opportunity to comment thereon.

Discussion
Mr Ainslie asked if the Board and other service providers had undergone a consultation process to arrive at the recommended prescribed tariffs.

Prof D Krige (BHF) replied that there had been extensive consultations about those tariffs in the past and that presently that task fell into the hands of the Department and the Council for Medical Schemes.

Mr S Farrow (DA) asked about the figures regarding the financial implications of traffic accident claims that have already gone through that process.

Prof Krige said that accident-related claims amounted to about R400 million per annum. (1 per cent of the total revenue).

Department of Health submission
Ms K Lowenherz said that the Department wished to establish clarity regarding the following in order of priority: 1) The reimbursement by the RAF for acute and rehabilitative services rendered to road accident victims by the Department at the cost recovery rate, namely the Uniform Patient Fee Schedule. 2) Collaboration with the RAF in respect of rehabilitative care and the establishment of rehabilitation centres of excellence based on best clinical practice.

Discussion
The Chair said that in the light of having a huge public fund and a public health system faced with many challenges, one of the advantages of introducing tariffs would be ensuring that some of the public funding was directed at the public health system. The tariff system, would effectively reduce the temptation of taking patients out of the public health establishments to the private clinics.

Ms Lowenherz (Department) agreed with the Chair on that matter and added that there was no profit incentive from the side of the Department.

South African Society of Psychiatrists (SASOP) submission
Dr E Allers said that SASOP argued that it would be not only be irresponsible but also unconstitutional to exclude patients who suffered emotional trauma or shock while witnessing a road accident from the benefits offered by the RAF. The proposed amendment in relation to the non-payment of claims relating to emotional shock discriminated against mental health care users.

Discussion
Mr Swart asked about SASOP's position of treating claims for emotional shock of bystanders as being unconstitutional.

Mr G Schneemann (ANC) found it problematic to allow witnesses of road accidents to claim on the basis on emotional shock. He would rather have the Bill aimed exclusively at helping people directly involved in the accident. Otherwise, virtually anybody could claim financial assistance, especially since it was difficult for specialists to determine whether a shock did actually occur and if so, to what extent.

Mr Ainslie agreed with Mr Schneemann and reiterated that the RAF was established to bring assistance to those suffering from being physically involved in an accident.

Dr E Allers (SASOP) said that a psychiatrist would translate witnessing the accident into direct contact. He agreed, however, that such claims were sometimes being abused by claimants in court cases. That is why there should be strict guiding regulations determining the eligibility to claim to the fund. A huge gap would be created in the Act if the legislation distinguished between a direct and indirect contact that would give the lawyers space for interpretation. Instead, he suggested insertion of a full range of strict criteria relating to emotional trauma that would leave little room for subjectivity.

The Chair said that the Committee would not exclude emotional shock from the Bill, however, the legislation should be written is such a way that would prevent the abuse of the Fund.

Department of Transport
In order to clarify concerns raised by various interest groups, Mr S Khumalo (Department) explained that there was only one amendment Bill produced, namely the original Road Accident Fund Amendment Bill [B64-2003] and that the Committee was working with that specific document. The drafters from the Department have incorporated the suggestions given during the discussions into the new working draft of the Bill to include improved wording and message of its clauses. He dismissed accusations from the media that the Department attempted to prolong the life of RAF in the current form or delay its transformation towards a new regime. Secondly, the Department did not attempt to undermine the report presented by the Satchwell Commission or its proposals. The common goal was creation of a new social benefits scheme for the country. He added that if the financial drain was not reduced, the Fund could experience serious crisis in the near future.

Mr S Mphahlele (Department) presented the redrafted version of the Bill with the amendments.

Clause 1
A specific time frame and amount of money were introduced to the clause. The undertakings would be paid out in instalments over a period of 7 years as exceeded the amount of R15,000 or 40 per cent of the amount payable by the Fund, whichever was greater. There would be both lump sum and instalment payments involved. The instalment would be used if the amount exceeded R15,000 or 40 per cent of the non-patrimonial loss. In other cases a lump sum would be paid out instead.

Mr Khumalo said that stipulating amounts in the Bill could be problematic.

Clause 2
The Minister should publish tariffs in the Gazette and invite the interested parties to comment. After consultation, the Minister would prescribe the tariffs.

The Chair provisionally agreed, since there were no strong objections to the idea.

Mr Mphahlele said that there was no provision within the RAF Act that would oblige the third parties to disclose the all benefits payable as a result of an injury or dearth. The new formulation of the clause would make it obligatory.

The Chair agreed with the principle that the Bill ought to aim at avoiding paying out double indemnity, however, he was concerned that the new formulation of the clause was too long and asked the drafters to make it simple and concise.

Mr H Smuts (State Law Adviser) said that the previous provisions in the Bill changed the common law. The new provision was, however, merely a restatement of the law, hence the long list of sub-clauses was unnecessary and did not add anything exclusively distinct.

Mr Swart argued that if it was in fact only a restatement of the common law, the long formulation of the clause was not necessary and suggested to leave those parts out.

The Chair said that option was the removal of the long list of sub-clauses or the entire clause.

Mr Khumalo said that the reason for including the list of sub-clauses was to clearly define what needed to be disclosed.

The Chair said the core of the argument was included in sub-clause 2.

Clause 5
The amendment, while seeking to oblige claimants to follow the mediation and arbitration option, also seeks to do away with the current period of 120 days and the provision that claimants must first comply with the requirements of section 19(f) before a claim against the Fund may be enforceable by legal proceedings.
The alternative option was to leave section 24 of the Act as is and to add the mediation procedure to section 19(f). Section 19(f) could then be changed and an amplifying section 19A be inserted, as follows:

19. The Fund or an agent shall not be obliged to compensate any person in terms of section 17 or any loss or damage -
f) if the third party refuses or fails -
(i) to submit to the Fund or such agent, together with his or her claim form as prescribed or within a reasonable period thereafter and if he or she is in a position to do so an affidavit in which particulars of the accident that gave rise to the claim concerned are fully set out; [or]
(ii) to furnish the Fund or such agent with copies of all statements and documents relating to the accident that gave rise to the claim concerned, within a reasonable period after having come into possession thereof, or
(iii) to submit any dispute between the Fund and the third party to mediation as contemplated in section 19A

NEW SECTION
Mediation
19A (1) Fur purpose of section 19(f)(iii). the Fund shall appoint a mediator with the concurrence of the third party.
(2) The mediator-
(a) may make such enquiries and conduct such Investigation as may be necessary in the circumstances;
(b) shall determine the mediation procedures; and
(c) shall interview the parties with a view to reaching a settlement out of court or, if such settlement cannot be reached the simplification of the issues between the parties.
(3) (a) After completion of the mediation proceedings the mediator shall issue an order in respect of the settlement reached between the parties or1 if such settlement could not be reached, an order in respect of the agreements reached by the parties in relation to one or more of the matters considered.

Mr Swart summarised the changes made in the clause by stating that everything remained more or less unchanged except for the fact that mediation process was now made an obligatory step before litigation.

The Chair later made a remark on the non-residence draft by saying that he consented to it and asked the State Law Adviser to comment on the legal language of the clause.

Mr Smuts said the legal language was fine.

Clause 6
Retrospectivity
Mr Mphahlele said that the Department would like to retain the provisions relating to retrospectivity as they were in fact constitutionally sound.

Road Accident Fund (RAF) submission
Mr D Anderson presented the submission. The RAF submission addressed many issues raised during the previous Committee meetings and how the proposed changes would be implemented by the Fund. The intended benefits included the unhindered access to relevant medical treatment, no apportioned undertakings, removal of administrative burden and of financial disadvantages to the claimant, establishment of a dedicated instalment unit to handle monthly payments, management of monthly payments of future loss of income and/or support, claimants to receive what was due to the directly, proposed lump sum greater of R15,000 or 40% of general damages at settlement, expansion of the Litigation Department to incorporate an Arbitration component.

Discussion
Mr Swart asked for clarification on the operation of that long-term instalment system and on the problems faced by the Undertakings Department.

On the question of instalments, Mr Anderson said that currently every service provider was paid on the basis whereby the claims handler or the administration unit processed payments according to a claim file, that was in turn electronically accredited to the service provider's account. There was no need for increase in system capacity, as it was quite capable of handling a lot more payments on monthly bases. There will be a dedicated unit controlling the undertakings. The claims handler will be able to identify on that settlement exactly what is required.

Mr H Kgomongwe (CEO of RAF) said that it should be born in mind that there were certain activities, which the Fund never entertained in the past, like forensic activities. The focus of such investments should be aimed at the broad picture of cost benefit as opposed to only an increase in the administrative costs. Establishing of forensic department would save the Fund R100 million.

Mr Prince Zulu regretted that the Committee did not have the opportunity to discuss reasons for the Fund's financial crisis and address those problems accordingly. He was also concerned about the provision that burdened claimants with financial costs of the arbitration process. He suggested that that fact be made known in the Bill to notify victims that if they chose that route the financial burden would become their own liability.

The Chair asked whether it would be stated in the Act that the litigation and arbitration could not run as concurrent processes.

Mr S Mphahlele (Department) said that it needed to be clearly stated that arbitration would become an alternative to litigation and not, as some understood, a mandatory step before litigation.

The Chair said that the original intention was to proceed to formal considerations during this meeting, but because of a number of unresolved concerns, that was not feasible. The Committee still needed more time for discussions. Nonetheless, there hearings period came to an end and there would be no additional submission tabled. The Chair also requested a clear draft of the amendment Bill incorporating the input provided in the past to be prepared for next meeting. He pointed out that there was little sympathy for the retrospectivity and proposed that the new draft excluded that provision. The main issue in this Bill, both for the RAF and the victims, would be the case of instalment payments. He noted that in the context of the fault system, the concept of instalments in general did not receive much support and that most submissions from the public favoured lump sum payments.

The meeting was adjourned.