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In terms of current legislation, the Road Accident Fund (RAF) is entitled to offer undertakings or guarantees to a Plaintiff who is in the process of instituting a claim against the Fund. The fact that an undertaking is offered instead of a traditional lump sum payment has certain positive and negative aspects to it. It is important to know when to accept or reject certain offers from the Road Accident Fund.

In terms of Section 17(4) of The Road Accident Fund Amendment Act[1], there are 2 categories of undertakings that can be offered by the Road Accident Fund.

Firstly, in terms of Section 17(4)(a) of the Act, an undertaking may be offered by the Road Accident Fund when the Claimant has a claim for medical expenses. When the Claimant has actually paid the amount required for whatever treatment was needed, the Fund will refund the proven amount. In terms of Section 17(4)(a) the Claimant has no option as to whether the amount may be accepted or not and when the Fund makes an offer in terms of future medical costs, it has to be accepted by the Claimant.

In terms of Section 17(4)(b), the Road Accident Fund is entitled to make an offer to the Claimant for an undertaking to pay the Claimant’s future loss of earnings. Payment would only be suspended when the Claimant reaches his predicted retirement age, or if the payments are made to the deceased breadwinner’s dependant. The payment will cease when the dependant’s right to maintenance is suspended.

This type of undertaking differs from the type as mentioned in terms of Section 17(4)(a), however, as the Claimant or his/her representative is not obliged to accept the offer that is made by the Road Accident Fund. There must be consensus between the Road Accident Fund and the Claimant regarding the content of the undertaking and the instalments paid to the Claimant must then reflect the agreement that was reached. This was established in the case of Coetzee v Guardian National Insurance Co Ltd.[2]

In this regard it is important to note that it is often advantageous for the Claimant if an initial lump sum is paid instead of an undertaking for the payment of a periodical amount. When future loss of income is paid in terms of a periodical payment from the Fund, payments will be terminated if the Claimant dies. This would be different if an initial lump sum was paid, because even if the Claimant dies before the predicted date, as future losses are calculated, the Fund will not be able to have any amount repaid to them by the Claimant. Of course this will benefit the Claimant’s estate and family, as a bigger amount will be paid than where an undertaking was made.

The benefit of accepting an offer by the Fund is that the Fund will be more likely to make a settlement offer to the Claimant when it is done in the form of an undertaking. This will be preferred by the RAF as it will have a lesser impact on the Fund’s cash flow. The important thing to consider is that a fair settlement should be negotiated between the RAF and the Claimant, bearing the aforementioned factors in mind.

It will be beneficial for a Claimant to appoint an attorney to make sure that the Claimant receives fair compensation from the Fund.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. (E & OE)

[1] Road Accident Fund Amendment Act 19 of 2005

[2] Coetzee v Guardian National Insurance Co Ltd 1993 (3) SA 388 (WLD)

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