RAF to seek millions in ‘unlawful payments’ from Discovery Health

An application by Discovery Health for an order declaring the Road Accident Fund (RAF) to be in breach of a previous high court order related to the RAF’s liability for the payment of the past medical expenses of road accident victims who are members of medical schemes has been dismissed with costs by the High Court in Pretoria.

A full court comprising Judge Dunstan Mlambo, Judge President of the Gauteng Division of the High Court, Judge Noluntu Bam and Judge Ingrid Opperman, who issued a dissenting judgment, handed down the judgment on Tuesday.

RAF CEO Collins Letsoalo said the RAF is “happy with the judgment” and described it as “a watershed for South Africa and the RAF”.

Letsoalo said Discovery Health must know that “we are coming for our money they [Discovery] have claimed illegally from the RAF”.

“I have no idea how much it is. But Discovery said to us that they are losing R500 million a year by not claiming from us.

“We will get our accountants to work on it and then we will give them the bill. We want that money back so that it can go to our claimants that are deserving of that money,” he said.

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RAF is ‘not an insurer’

Letsoalo referred to two paragraphs in the judgment that he indicated were particularly interesting because they say the RAF is not an insurer.

Letsoalo has claimed for some time now that the RAF is a social benefit fund.

“We have been saying this for a very long time. It’s good that this comes from the full bench of the high court.

“Prescribed minimum benefits (PMBs) and emergency medical services are exclusive obligations of medical aids and the RAF is not an insurer and subrogation does not apply in this case, and medical aids are not insurers themselves,” he said.

Subrogation allows an insurer to sue any third party legally liable for the insured loss.

Discovery Health CEO Dr Ron Whelan said the scheme has noted with concern the judgment handed down by the Gauteng High Court.

“Discovery Health respectfully disagrees with the judgment delivered by Mlambo JP and Bam J and aligns with the dissenting judgment by Opperman J.

“Given the far-reaching implications of the judgment, Discovery Health intends to apply for leave to appeal and believes the matter warrants the attention of the Supreme Court of Appeal,” he said.

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Discovery’s case

Discovery Health was also initially seeking an order that the RAF and its CEO were in contempt for their failure to implement an order handed down on 27 October 2022 by Judge Mandla Mbongwe that declared unlawful a 12 August 2022 RAF directive that instructed RAF employees not to make any payments to claimants if their medical aid scheme has already paid for their medical expenses arising from a road accident.

However, Discovery Health did not persist with the contempt application and instead asked for an order that the RAF and Letsoalo were in breach of Judge Mbongwe’s order.

Discovery Health was further seeking a pronouncement by the court that the RAF’s reliance on two directives it had issued subsequent to the order issued by Mbongwe perpetuates the RAF’s breach of that order.

It claimed the RAF, directed by Letsoalo, has intentionally disobeyed Mbongwe’s judgment and continues to reject claims for past medical expenses on the grounds that they have already been paid by the victims’ medical aids.

Discovery Health further claimed Letsoalo and the RAF have sought to circumvent the judgment by adopting a new ‘phantom’ directive on 13 April 2023, which it has refused to disclose to Discovery Health.

This ‘phantom’ directive related to the obligations of medical schemes under the Medical Schemes Act to provide PMBs for emergency treatment required by medical scheme members.

Judges Mlambo and Bam condemned the RAF for secretly issuing and implementing the directive and said the fund had a duty to disclose it prior to implementing it.

However, they disagreed with Discovery Health’s claim that the principle of subrogation applies to claims submitted against the RAF by claimants.

They said any medical scheme registered under the Medical Schemes Act, among others, assumes liability for and guarantees the benefits offered to its members and their dependants in terms of the rules.

“The contract between Discovery medical scheme and its members is not based on the success of a claim from the fund.

“On the contrary, when the scheme pays PMB’s and emergency medical conditions (EMC’s) it is not only discharging a contractual obligation but a statutory one,” they said.

They concluded that the legal premise of the second directive was not before Judge Mbongwe, and for that reason, it is not struck by the res judicata rule.

In terms of this legal principle, a matter that has been finally determined by a competent court cannot be re-litigated by the same parties through another court application.

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Discovery’s rules ‘only for members’

Judges Mlambo and Bam said Discovery Health claimed it is a standard requirement of medical schemes’ rules that their members reimburse the medical scheme for payments regarding past medical expenses recovered from the RAF.

But they said the rules published by Discovery Health are only for its members and the scheme and not third parties like the RAF.

“The rule dealing with recovering from the RAF what the scheme has paid in discharge of its contractual and statutory obligations is a rule of Discovery Medical Scheme’s own making.

“It cannot bind third parties, including the RAF,” they said.

Judges Mlambo and Bam added that the RAF is not an insurer and, unlike insurers, does not underwrite risk and does not charge a premium reflecting the extent of risk it has assumed.

“Bar the limited instances in law, it cannot exclude any person from cover.”

Mlambo and Bam said they were called to decide whether, by relying on the two subsequent directives, the RAF breached Judge Mbongwe’s judgment and ruled that the fund did not.

“Discovery Health has also not made out a case to interdict these and/or to set them aside as unlawful. The result is that they remain operative,” they said.

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Dissenting judgment

In a dissenting judgment, Judge Opperman said Judge Mbongwe ruled it unlawful for the RAF to reject a claim for past medical expenses on the grounds that a medical aid scheme has already paid for those expenses.

She said whether the payment by the medical aid scheme was made pursuant to its contractual or statutory obligations does not seem to her to be relevant to what the RAF’s statutory obligations are, which is to pay claims.

“To carve out from the term’ expenses’ the portions labelled prescribed minimum benefit costs and emergency medical condition costs and to contend that such lesser, ‘carved out’ costs are excluded because they derive from another statute not a private contract, in my view, cannot hold,” she said.

Judge Opperman added that where an issue has been litigated to finality between the parties, it is not permissible for a litigant to seek to obtain a reversal of the decision of the same question by advancing different reasons.

“This, in my view, is exactly what the ‘phantom’ and third directives seek to do.

“In my view, the conduct of the respondents [RAF] is both inimical to, and seriously subversive of, a sound and efficient system of public administration.

“Allowing the RAF to ‘bypass’ compliance with a judgment in these circumstances by these means would open the floodgates to directives and similar internal documents being used as a means of circumventing compliance with court orders,” she said.

Judge Opperman said Discovery Health is seeking a declarator that the RAF is in breach of Judge Mbongwe’s order.

She said the granting of this relief would follow upon a finding that the “defences” embodied in the ‘phantom’ and third directives are res judicata.

This article was republished from Moneyweb. Read the original here.