THE CLAIMS-SETTLING PROCESS

Transcription

1 HSRC THE CLAIMS-SETTLING PROCESS THE CLAIMS-SETTLING PROCESS 17.1 INTRODUCTION Road accident victims or their dependents may lodge a claim with the RAF within three years of an accident. In the case of hit-and-run accidents, claims must be submitted within two years of the accident. A claim is lodged on a prescribed statutory claim form (RAF1), which provides details on the claimant, the vehicles and parties involved in the collision, the date and place of the accident, and the amounts claimed. The form also contains a medical report by the treating doctor. The claim form must be accompanied by an affidavit setting out the full particulars of the accident, statements of witnesses, police reports, hospital and medical records, as well as vouchers and documents in support of amounts claimed. Further information is also furnished, for example details of the accident from all the drivers of vehicles involved in the collision (RAF3) and information offered by witnesses to the accident. Once a claim has been submitted, the RAF registers it on its claim system and commences with investigations. These investigations are aimed at determining the validity of the claim (Was there in fact a road accident?; Does it comply with statutory provisions?; Was it submitted in time?; etc.); the merits of the case (the degree of fault; blame or negligence to be ascribed to the drivers of the vehicles and the claimant respectively), and the quantum (the amount of damages or losses suffered). If the information submitted to the RAF is incomplete, more information is requested in order to enable the RAF to better assess the situation. 1 In this chapter an analysis is given of the processes involved in the settlement of the claims finalised in the 1998/99 financial year. The following specific issues are addressed: The number of claims that were repudiated and reasons for rejecting them. The settlements reached between the RAF and claimants. The stages at which settlements was reached. The time that it took to settle these claims REPUDIATION OF CLAIMS Of the claims finalized by the RAF in the 1998/99 financial year, almost (19%) were rejected and received no compensation. The main reasons for rejecting these claims are indicated in Figure In 3% of the claims the claimant or deceased caused the accident. Under the current fault-based system of the RAF the driver who was solely responsible for the accident, and his/her spouse are excluded from compensation by the RAF. 1 Greenland, C.N Road Accident Fund Status Report, p. 7.

2 182 ROAD ACCIDENT FUND COMMISSION REPORT 2002 VOLUME 3 Four percent of the claims prescribed. That means that the claim was either not lodged within the required 3-year (or in the case of a hit-and-run accident, 2-year) period following the accident, or that the claim was not settled within five years and the claimants did not issue a summons in order to avoid prescription. In 1% of cases the RAF was able to prove that the injury was not a result of the accident and in a further 1% the claim was extinguished because the claimants failed to provide the RAF with the required information within the specified time scale. One percent of claims were also excluded. These were for example claims lodged by people who were not eligible for compensation from the RAF for instance persons who wrongfully claimed to be the dependants of a deceased road accident victim. Two percent of the claims were rejected because the claimants could not prove damages. The category other included fraudulent claims (e.g. there had been no accident) and duplicate claims (claims lodged on behalf of the same claimant by more than one attorney). In 3% of the claims the reason for rejection was not captured. FIGURE 17.1 CLAIMS PAID, CLAIMS REPUDIATED AND REASONS FOR REPUDIATION

3 HSRC THE CLAIMS-SETTLING PROCESS APPORTIONMENT OF DAMAGES Apart from the fact that some claims were completely rejected on the basis of fault, apportionment of damages took place in 26% of the claims. The percentages apportioned (i.e. the percentage of blame ascribed to the claimant) varied between 10% and 90%. The compensation paid to these claimants was reduced by the percentage of blame ascribed to the person. The percentage of compensation paid to claimants in this category is shown on the right hand side of Figure Only 2% of all claimants received less than 25% of the compensation they would have received were they not partly responsible for the accident. Four percent received between 25 and 49 percent of compensation and 9% received between 50 and 74 percent. In 11% of successful claims the claimants received between 75% and 90% compensation. FIGURE 17.2 APPORTIONMENT OF DAMAGES 17.4 SETTLEMENTS REACHED Claims against the RAF can be settled by means of one of three types of agreements: a lump sum payment only, an undertaking from the RAF to pay for future medical expenses, or a combination of the two. In the latter case all historical costs are paid as a lump sum and the RAF pays all future medical expenses as they are incurred and proof is submitted to the RAF s undertakings division.

4 184 ROAD ACCIDENT FUND COMMISSION REPORT 2002 VOLUME 3 FIGURE 17.3 SETTLEMENTS REACHED In the 1998/99 financial year the vast majority of claims (97,1%) was settled with a lump sum payment only. Only 2,7% of claimants received a lump sum payment plus an undertaking, and a small number of cases (0,2%) were settled by means of an undertaking only. According to claims handlers of the RAF, lump sum payments are by far claimants preferred way of settlement. However, these payments place tremendous strain on the cash flow of the RAF, with the result that the Fund recently started to use undertakings to a much larger extent than in the 1998/99 financial year STAGE AT WHICH SETTLEMENT WAS REACHED The aim of the RAF claims-handling process is to reach a settlement between the claimant and the Fund without litigation. However, if no settlement can be reached, the claim goes to court. During 1998/99 the RAF also started using arbitration as a means of settling claims. At the time of this investigation, this arrangement was fairly new and only used on an experimental basis in the Cape Town office. The stages at which settlements were reached are shown in Figure Most of the claims (83%) were settled before a summons was issued, but in 16% of cases this had to be done. The latter figure is, however, somewhat misleading, since the mere fact that a summons had been issued does not mean that litigation started. In many instances claimants issue a summons in order to avoid prescription of the claim (i.e. in cases where a period of five years has lapsed since the accident claimants are obliged to issue a summons or else the claims will prescribe). This is evident from the fact that 14,7% of claims were settled after a summons had been issued but before the allocation of a trial date. Another 1,5% were settled after the allocation of a trial date, but before the trial started. Only 0,8% of claims cases went to court. A quarter of them (0,2% of all claims) were settled during the trial and 0,6% on court order.

5 HSRC THE CLAIMS-SETTLING PROCESS 185 FIGURE 17.4 STAGE AT WHICH SETTLEMENT WAS REACHED The average costs and compensation amounts paid in respect of claims settled at different stages are shown in Figure As could be expected, costs increased as the process moved towards litigation. Similarly, the RAF was more inclined to take large claims to court. The average amount of compensation paid with respect to claims that had been settled before a summons was issued, was R The average amount paid to the legal representatives and experts employed by the RAF and claimants was R As mentioned in the previous chapter, these costs exclude the RAF s own administrative costs as well as any additional amounts paid by claimants to their legal representatives and experts. In the case of most (85%) of the claims that were settled in court, the RAF had to pay compensation. The average amount paid in this regard was R However, the average and total amounts paid by the Fund still constituted only 34% of the amounts claimed. The average amount of compensation paid with respect to claims that were settled during trial was R The fact that this amount is higher than the average amount ordered by court may seem like an anomaly. However, the number of claims settled during trial was very small hence an average that is strongly influenced by a few exceptional cases.

6 186 ROAD ACCIDENT FUND COMMISSION REPORT 2002 VOLUME 3 FIGURE 17.5 COMPENSATION PAID AND COSTS IN RELATION TO THE STAGE AT WHICH A SETTLEMENT WAS REACHED 17.6 TIME TAKEN TO SETTLE CLAIMS The time involved in the settlement of claims has become extremely important to the functioning of the RAF. Due to the dramatic increase in the number of new claims since 1994, the RAF has developed a huge backlog. At the same time the Fund started experiencing greater financial pressures and the need for greater efficiency became crucial PERIOD FROM OCCURRENCE OF ACCIDENT TO LODGING OF CLAIM Road accident victims must submit their claims to the Fund within three years. However, claims are in fact lodged within an average period of 1,3 years following the accident (see Figure 17.5). As can be seen from the figure, the time that it takes to lodge a claim is related to the seriousness of the injuries. The more serious the injuries, the longer it takes. The reason is quite obvious. If injuries are more serious, claimants tend to finish their treatment before submitting a claim. It also takes longer to prepare the documentation (for example expert reports) in more serious cases. The average time -scale before the submission of claims related to deaths is 1,7 years. In the case of a fatal accident the legal inquest has to be finalised before a claim may be lodged.

7 HSRC THE CLAIMS-SETTLING PROCESS 187 FIGURE 17.6 AVERAGE YEARS FROM ACCIDENT TO LODGING OF CLAIM, ACCORDING TO SEVERITY OF ACCIDENT PERIOD FROM LODGING OF CLAIM TO SETTLEMENT The time that it takes to settle a claim depends to a large extent on the process required for settlement. As indicated in Section 5.3, most claims had been settled before summons were issued. As furthermore illustrated in Figure 17.6, these were the claims that took the shortest period to be settled, namely 1,1 years on average. Claims that were settled during trial or that went through the whole litigation process took on average more than three years to be finalised. In Section 2.3 of this report it was mentioned that a small percentage (1,2%) of the claims that were finalised in the 1998/99 financial year were related to accidents that had occurred before 1990, while 10,8% were related to accidents that had taken place between 1990 and These claims were thus not settled within the prescribed five-year period. One of the reasons for this is that the claims of minors do not prescribe as the others do, and that minors may still submit claims until they are 21. Other claims are kept alive beyond the five-year period by claimants issuing summons. FIGURE 17.7 AVERAGE YEARS FROM LODGING OF CLAIM TO SETTLEMENT, ACCORDING TO TYPE OF SETTLEMENT

8 188 ROAD ACCIDENT FUND COMMISSION REPORT 2002 VOLUME TOTAL PERIOD TO SETTLE CLAIM The total average period from the accident to the settlement of the claim is shown in Figure The average period for settling all claims was 2,6 years. Only claims that went to trial took longer than five years. The periods also increased with the seriousness of injuries. On average it took 2,3 years to finalise a claim pertaining to a light injury while a claim related to a fatality took 3,3 years. The data show that once a claim was settled, compensation was paid within two weeks. Costs were mostly paid simultaneously. FIGURE 17.8 AVERAGE YEARS FROM ACCIDENT TO SETTLEMENT OF CLAIM ACCORDING TO TYPE OF SETTLEMENT FIGURE 17.9 AVERAGE YEARS FROM ACCIDENT TO SETTLEMENT, ACCORDING TO SERIOUSNESS OF INJURIES

9 HSRC THE CLAIMS-SETTLING PROCESS CONCLUSION This chapter described the processes used and time-scales involved in the settling of claims. In the period under investigation the majority of claims were settled by means of a lump sum payment. In only a small percentage of claims the RAF undertook to pay future medical expenses in addition to a lump sum payment. This may have changed after 1999 as the RAF was required to better control their cash flow and thus had to reduce the number of lump sum settlements. Of all the claims finalised in the 1998/99 financial year, almost a fifth were rejected. The reasons for the repudiation of these claims were varied and included prescription, exclusion because of the guilt or negligence of the claimant, duplicate claims and fraudulent claims. The dramatic increase in the number of claims lodged with the RAF since 1994 has necessitated greater efficiency in the settlement of claims. However, the excessive amounts claimed and the relatively large number of ineligible claims underlines the need for thorough investigations by the RAF. As this study was limited to one specific period, it was not possible to assess changes in the efficiency with which claims are being finalised. The data nevertheless show that the vast majority of claims were handled by the RAF s own staff and were settled without litigation. The time-scales involved in the total process were influenced by various factors. The seriousness of the injuries clearly had an influence on the time that lapsed between the accidents and the submission of claims to the RAF. The time that it took to finalise claims once they were in the RAF s system, depended on the processes involved in settling the claims. On average, claims that were taken to court took more than five years from the date of the accident to settlement, while claims that were settled without litigation took more or less two-and-a-half years to settle.

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