Passenger liability cover: an absolute necessity when transporting people from A to B

Road safety statistics provide a continual reminder of the dangers encountered on South African roads. The reality is that accidents can and do happen on our roads each day, resulting in serious injuries and, sometimes, fatalities to drivers and passengers alike.

“Whether an individual or commercial entity operates a taxi service for large or small groups of passengers, cover against accident or injury has become essential,” says Dave Gould, managing director of Vulindlela Underwriting Managers (VUM), Santam’s taxi underwriting specialists.

What is passenger liability cover?

Passenger Liability Insurance protects a business in instances where it may be liable in terms of the law for the injury or death of passengers that were transported in a company vehicle.  The amount of cover is normally optional and clients can select the limit that they require.  Factors that might influence the limit of cover can include, amongst others, the number of people that the vehicle can carry and the countries where the client’s taxi business travels to. 

“Most insurance policies have a limit per occurrence and not a limit per seat,” Gould adds. “This influences the limit of cover that an operator might need.  The more passengers carried, the higher the limit that will be required.”

Passenger liability should also not be confused with public liability. Passenger liability provides insurance against any claims that may arise while a client is in the motor vehicle, whether moving or stationary. Public liability only comes into effect when the client is outside the vehicle.

Is passenger liability insurance compulsory for a service company?

In South Africa, the need for passenger liability insurance has often been debated due to the existence of the Road Accident Fund (RAF). The RAF is a state-supported insurance fund that provides cover for injury and loss of income to all road users in South Africa in the event of a road accident.  The Road Accident Fund Act also prevents an injured person or his or her dependents from suing the driver or owner of the vehicle that was responsible for the accident.  Without engaging in a legal process, the owner or driver cannot be held liable for the injury; therefore, there can be no claim against passenger liability insurance. The Act also states that, should the RAF go insolvent, the injured party’s right to sue will be reinstated.

Even after the RAF, there are still two ways that business owners, taxi operators or other entities can be held legally liable for someone’s injury:

1. If the RAF is unable to pay the claim; and
2. If the claim is for secondary emotional shock. Secondary emotional shock is when the person who claims was not involved in the accident but either witnessed or heard of the accident. In this instance, the RAF excludes these claims. 

“It is important to remember that motor insurance policies normally cover other countries too, like Namibia, Botswana, Lesotho, Swaziland, Zimbabwe, Mozambique and Malawi. However, it is often the case that motor liability policies will exclude the portion of a claim that is paid by compulsory third party insurance. The same would apply in many of the neighbouring countries,” notes Gould.

What other types of insurance should businesses that transport people consider?

Most motor insurance policies exclude cover if a vehicle is used to transport fare paying passengers. If a business or individual then considers using a vehicle as a full-time or part-time taxi to transport people from one place to another be it a school, a tourist destination or even from one location to another, the driver needs to be correctly licensed according to the regulations of the province in which he or she drives – with the added necessity of having the proper passenger liability in place.

“What is vital to bear in mind is that the insurance policy will not cover your client if they carry more passengers in the vehicle than it is built or licensed to carry,” says Gould. “This means that if a vehicle is licensed to carry five people and a post-accident investigation finds there were six or more occupants in the vehicle at the time of the accident, the claim will not be paid,” he concludes.