Archive | February 2011

Static or fluctuating cap, which gives greater cover to claimant?

Dear Reader,
Welcome to the nineteenth edition of Independent Actuaries & Consultant’s (IAC’s) monthly newsletter.
WE PROVIDE LOSS OF INCOME AND LOSS OF SUPPORT CALCULATIONS TO ATTORNEYS DEALING WITH MVA & OTHER DAMAGES CLAIMS.  WE ALSO PROVIDE FREE TRAINING SEMINARS ON THE RAF AMENDMENT ACT TO ALL OUR VALUED CLIENTS .

If you send us instuctions you are entitiled to the same.
Via this newsletter we will keep you updated of all the latest case law relating to motor vehicle accidents, the quantification of damages relating to personal injury claims and dates and venues of training seminars.
Now, as you might or might not know there are three main opinions on how the cap on loss of earnings and support, as introduced by the amendment act, should be interpreted and applied.  On a strict interpretation of the amendment act it would seem that a static cap should be used. The loss limit shall be the cap amount set out in the last notice issued prior to the date on which the cause of
action arose, this limit will then be applicable to each future year of loss and no adjustment will be made to the claimants future earnings for the time value of money before the cap is applied.  When allowance is made for the time value of money it simply means that the current value of a future amount is taken into account instead of simply taking the face value of a future amount into account.
Example, if you receive R 10 000.00 5 years from now, it will not be worth the same as R 10 000.00 today. That is because things become more expensive as a result of inflation which erodes the value of money.  A second opinion is similar to the first except that the claimants earnings is adjusted for time-value of money before applying the cap.  Finally the RAF has stated that a fluctuating cap should be applied. However, they do not motivate how they managed to come to this interpretation or why it should be favoured. It basically means that the cap changes every quarter in line with Gazetted amounts and in future the cap is assumed to increase with inflation. What is of importance to you is that the static cap with the adjustment for earnings, the second scenario, is the interpretation that gives the claimant the widest possible cover in that it relates in the biggest quantum in every situation.
The Fund aims to provide the maximum cover to third parties subject to the limitations set out in the RAF act and subsequent amendment act.   Therefore it is my opinion that the interpretation that gives the claimant the widest possible cover within the limitations which the amendment act introduces should be the one favoured by the courts.
Sending us an Instruction
Our dedicated full time professional team receive instructions by any of the following means:

• Email : damagesclaims@iac.co.za, or
• Post : PO Box 1172, Cape Town, 8000
• Fax : 086 616 8308
Now for some words of wisdom –
“A man of wrath stirs up strife, and a man given to anger commits and causes much
transgression” – Proverbs 29:22 (AMP)

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