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Calculation of Annual Loss as per the Road Accident Fund Amendment Act

Among the changes brought by the Road Accident Fund Amendment Act 19 of 2005 (Amendment Act) was the limitation of loss of income and support claims to R160 000 per annum, regardless of the actual loss (inflation adjusted). This is applicable in respect of claims arising out of accidents that happened after 1 August 2008.

road accident fund south africa

Road Accident Fund South Africa

In the case of Road Accident Fund v Sweatman (162/2014) (2015) ZASCA 22 (20 March 2015) the Court was asked to determine the interpretation of section 17 (4) (c) read with 17 (4A) (b) of the Road Accident Fund Act 56 of 1998 (as amended).

Section 17 (4) (c) of Act 56 of 1998 as amended, caps loss of income per annum to R160 000 despite actual loss. Central to this case was the method of calculating annual loss. Since such determination involves actuarial calculations, the Court relied on the evidence of expert witnesses in coming up with its finding.

As was held in the case of Southern Insurance Association Ltd v Bailey NO 1984 (1) SA 98 (A), Courts rely on actuarial calculations to determine present day value of prospective loss.

In the above referred case of Road Accident Fund v Sweatman (162/2014) (2015) ZASCA 22 (20 March 2015) the actuaries on either side could not agree on the correct approach with regards to when exactly the cap must be applied, before or after discount of the actual loss. The actuary of the Appellant contented that actual loss should be discounted only after the annual loss had been established, though the view of the SCA was that this could introduce leeway for general contingencies.

The actuary of the Respondent argued that the claimant’s pre-morbid earnings were to be calculated first, then calculate post-morbid earnings. The cap can then be applied on the difference of the two amounts (actual loss). If the actual loss was less than the annual loss, then the Fund would pay for the actual loss. In the event that the amount exceeded R160 000, then the annual loss would be payable. The Court favoured this view.

In dismissing the appeal of the Fund from the Western Cape High Court, the Court then referred to the case of Sil and Others v Road Accident Fund 2013 (3) SA 402 (GSJ) where it was held that the introduction of the cap was to put a perimeter on the liability amount of the Fund and not to introduce a new method of calculation of loss. Due to the highly technical nature of the deliberations in the matter, we will only highlight the decision of the Court in as far as it will be the binding authority on cases:

  • The cap of R160 000 should be applied after discounting the actual loss;
  • Contingency deductions were to be applied first to determine the actual loss

Claiming from The Road Accident Fund in South Africa

There is disagreement still persisting with regards to the practical implication of this judgment with a different viewpoint submitting that this case laid bare the risks of having judicial decision makers making rulings on matters were specialised knowledge such as actuarial sciences is involved. The result in such instances could be that the Court’s interpretations in making rulings may expose serious implications which the Courts might not have foreseen or intended.

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