Some Short Term Insurance Companies Have Dropped Third Party Liability Cover

A couple of short term insurance companies have removed third-party liability cover from their policies without informing the insured parties.

Third party liability is also known as passenger liability. It covers you if you were negligent as the insured driver and caused an accident in which injury or death resulted in others involved in the accident.

The decision to drop third party liability stems from changes in the Road Accident Fund (RAF).

In the past, insured parties merely claimed the difference between the amount the Road Accident Fund covered and the total cost of the damages from their insurers under the third party liability clause, but an amendment in the Road Accident Fund Act of 2008 has abolished the victim's common-law right to sue the responsible person for damages or losses not covered by the RAF. 

You can only claim back from the Road Accident Fund.

The only thing you can do to recoup losses after an RAF claim is to claim for disability or loss of income insurance if you have such policies in place. You cannot even sue the driver or owner of a taxi or bus that was not roadworthy and caused an accident.

Some insurers claim that they have done away with the third party liability cover as it is no longer an insurable risk, due to the fact that their policyholders cannot be sued for damages anymore. But other insurers still think that this cover is necessary.

Why was the Road Accident Fund Act of 2008 Changed?

The act was changed and the common-law right to sue abolished as many motorists are uninsured. Therefore if a successful claimed was levelled against them, they would be unable to pay in any event.

The removal of this basic right was originally disputed in court in 2010 by the Law Society of South Africa (LSSA). Their challenge, however, was unsuccessful. One of the lawyers involved in the case was Jacqui Sohn. She commented that most people are still unaware that they are left exposed to financial risk due to the changes in the Act.

The LSSA also challenged two other changes to the Act: the limit the fund pays out for loss of income, or for a dependant's loss of support, and the regulations prescribing the amount one can claim for medical costs.

The LSSA was successful on one count only: the prescribed tariffs were found to be unconstitutional. The Act has been changed again to remove all tariff limits.

Which Insurers Dropped Third Party Liability and Which Ones Kept It?

The list of major insurers that dropped the third party liability clause include but is not limited to:

·        Hollard;

·        Outsurance;

·        DialDirect; and

·        All other Telesure underwriters.

Hollard's personal lines policies have excluded the cover since 2008, but none of their policyholders were informed about this in writing. The Telesure Group, including Dial Direct, is currently in the process of informing all of their policyholders about the changes.

The list of major insurers that still kept the third party liability clause include but is not limited to:

·        Mutual& Federal;

·        Santam; and

·        Zurich.

Boni Zondani, specialist underwriter at Santam, commented that Santam's cover is still relevant in case the RAF does not have the funds to settle the claims, or if one of their policyholders drive outside of South Africa (the RAF applies to incidents on South African roads only.)

Mutual & Federal and Zurich policies also allow for incidents in some neighbouring countries.