Road Accident Fund folly South Africa must avoid at all costs

Prominent law firms DSC Attorneys, Sohn & Wood Attorneys, and A. Batchelor & Associates have slammed South Africa’s Road Accident Fund (RAF) after it recently published a paper outlining its intentions to develop a “standard formulae” and an automated platform for calculating the losses of road accident victims.

The paper applies to calculating settlements for loss of earnings, loss of support, and general damages.

The RAF itself has been a vocal critic of the RAF Act that governs it, claiming that the way in which it must operate is financially unsustainable.

The proposal is ostensibly its attempt to streamline the long claims settlement process and reduce costs in an effort to become profitable.

“However, it appears that the RAF has fundamentally misunderstood a number of electuary public law principles,” said the law firms.

“The RAF itself has no power in law to propose changes to the RAF Act. It doesn’t have the authority to set standardised damages through a discussion paper.”

Instead, the fund is responsible for administering the RAF Act as it was passed by Parliament.

“Also, road accident victims have a constitutional right to fair compensation for losses – as decided by the courts and based on the unique facts of each case,” said the law firms.

Objection one

In its paper the RAF called for public comment on its proposals, which the three law firms supplied en masse.

They explain that the proposal mainly seeks to:

• Introduce standardised “social benefits” for road accident victims
• Automate the computation of these standardised “social benefits” using algorithms and formulae

This, they said, would be a radical departure from the existing scheme as it exists under the RAF Act, with their objections summarised in six points.

“First, the proposal is utterly out of kilter with the scheme of the Road Accident Fund Act 56 of 1996 (“the RAF Act”) and the purpose of the Fund,” said the law firms.

“The Fund is not a social benefits scheme. The Fund is obliged in terms of the Act to provide compensation to road accident victims and step into the shoes of the wrongdoer.”

This is clarified in section 3 of the Act, which states: “The object of the Fund shall be the payment of compensation in accordance with this Act for loss or damage wrongfully caused by the driving of motor vehicles.”

The compensation which is payable in terms of the Act, as governed by section 17, is individualised.

“In terms of the law, the Courts are the ultimate arbiter of the quantum of damages that is available to claimants and payable by the Fund,” said the attorneys

“Damages for loss of earnings and support and general damages are determined and calculated with reference to the individual circumstances of the victims (subject to the provisions of the Act).”

They further highlighted that the Fund has never had the object of providing standardised social benefits, and that the Act would have to be amended by Parliament for that to occur. The Act has not been amended.

Objection two

In their second objection, the law experts holds that the RAF’s proposal is not to amend the RAF Act.

“Rather, it appears to believe that it (i.e. the Fund) has some power to set standardised damages through a discussion paper,” they said.

In doing so, the RAF has “fundamentally misunderstood” a number of electuary public law principles.

As per the attorneys, the RAF itself doesn’t have power in law to propose changes to the RAF Act.

“The Fund is responsible for administering the Act as it was passed by Parliament. It cannot change the Act but must give effect to it,” they said.

Furthermore, the paper’s reference to the provisions of section 17, concerning the prescribed method for assessing serious injuries, does not assist it.

“The Minister of Transport is responsible for prescribing these matters – not the RAF itself,” said the attorneys.

Also, the RAF has no power in law to prescribe matters under the Act.

“It certainly has no power in law to prescribe standardised or any damages,” they said.

These reasons are sufficient enough for the RAF not to continue with its proposal.

“If the RAF were to attempt to enforce its proposal it would be acting entirely ultra vires its powers in law, and would indeed violate its obligations to compensate road accident victims as the RAF Act requires,” said the attorneys.

“The Minister and Department are the appropriate bodies to undertake these kinds of investigations and to, if appropriate, introduce bills to amend the Act in Parliament. Parliament, in turn, would need to amend the Act before these kinds of radical proposals could be made.”

Objection three

In the third objection, concerning the detail of the standardised damages, the attorneys note that the actual algorithms that will be used still have to be created.

They also highlight that the proposal is to categorise claimants into different “cohorts” for loss of earnings and to use what is referred to as “statistical” methods to determine general damages.

“But again, the specific methods and classifications are not properly explained. It is thus impossible to address them in a comment,” said the attorneys.

“We should note that we do generally support any initiative aimed at expediting offers and improving efficiency, but this cannot, in our submission, be at the expense of the claimant.”

Not only would that conflict with the Act, but would also violate victims’ constitutional rights which compensation is aimed at vindicating, they said.

Objection four

The fourth objection surrounds the RAF’s proposed approach to standardising damages, which is based on its view of the fact that damages and compensation are currently determined taking into account the individualised circumstances of the claimant.

In its own words, the RAF said: “The current process of formulating a RAF claim is time consuming, complex, and non-transparent. There are many specialists required to write expert witness reports which are used to eventually justify calculation of the final quantum of the settlement value.”

“The process followed currently involves a lot of judgment by medical, actuarial, industrial psychology and educational psychology experts, among others. The significant application of subjective judgment and personal assessment has led to inequity in computation of settlement value quantum.”

“The Standard Formula is expected to resolve some of the challenges encountered by the RAF with respect to consistent, fair, and transparent calculations for Loss of Earnings, Loss of Support, and General Damages products.”

The attorneys note that calculating claims for compensation with the assistance of professionals is consistent with the purpose and object of the RAF.

“Individual circumstances are plainly highly relevant and need to be assessed on that basis,” said the legal experts.

“The RAF appears to believe that it can remove the necessity of these judgments using algorithms and automation. The problem is that in doing so, the RAF will flatten out any individual circumstances that in our law influence the proper determination of loss of earnings and support and general damages.”

Objection five

In the fifth objection, the attorneys maintain the use of automation raises a number of other issues.

Most importantly, victims will likely be unable to understand the justifications for a determination made by computer using an algorithm.

“This is contrary to our constitutional ethos and culture of justification,” they said.

“Automated calculations using an algorithm that makes calculations based on opaque data sets, would be impossible to challenge as to the reasonableness of the calculation. And the calculations would fail to consider the individual circumstances of victims.”

For these computational methods to be effective, standards would have to be set for the automation, the formulae, and a manner in which calculations could be checked, debated, and analysed by victims to take into account their individual circumstances.

“This, again, is why Parliament’s imprimatur through legislative reform would need to precede any attempt to calculate compensation in this manner,” they said.

Objection six

The sixth and final objection indicates that the RAF’s proposed new methods of doing things would increase litigation instead of reducing it.

The paper contemplates the launching of an online portal where a victim (or their attorney) can submit a claim digitally which will in turn generate an assessment of damages.

This will result in an automated offer made to the victim, or an offer made by a claims handler using the compensation so determined.

“Far from decreasing litigation and disputes, this proposal is a recipe for more litigation.”

“This is because the formulae cannot be negotiated or reasoned with. If a claimant is dissatisfied with an offer calculated with the formula, because their individual circumstances are not adequately taken into account, they will have no option but to turn to the Court. And the Court will have regard to their circumstances and the judgments of warm-bodied experts who are in fact able to make a proper assessment of the issues that inform damages for loss of earnings and support and general damages.”

In conclusion, the attorneys wish to emphasise that while they support reforms to streamline claims and reduce unjustified and wasteful expenditure by the Fund, the Fund itself should focus on its primary responsibility of implementing the Act and compensating road accident victims.

“The proposals made in the paper are appropriately left for Parliament to debate and consider,” they said.

“The RAF itself has no power to change law and should not attempt to do so through a discussion paper.”