Running a cab service? Here’s what clients need to know about passenger liability cover

Whether your clients operate a taxi service for large or small groups of passengers, they may have wondered how your insurance will protect them if, for example, one of their vehicles is involved in an accident and their passengers are injured. Santam’s underwriting team have answered some of our frequently-asked questions about cab services in South Africa and liability below.

What is passenger liability cover?

Passenger Liability Insurance protects a business if your client is liable in terms of the law for the injury or death of passengers that were transported in your vehicle.  The cover is normally optional and clients can select the limit that you 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 your client’s taxi business travels to.  Most insurance policies have a limit per occurrence and not a limit per seat and this influences the limit of cover that clients might need.  The more passengers they carry, the higher the limit they will need.   

Is passenger liability insurance compulsory for a cab service company?

In South Africa, the need for passenger liability insurance in general has often been debated due to the existence of the Road Accident Fund (RAF). This 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 dependents from suing the driver or owner of the vehicle that was responsible for the accident and without 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 says 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 your client 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. The RAF excludes these claims. 

Remember that motor insurance policies normally cover other countries too, like Namibia, Botswana, Lesotho, Swaziland, Zimbabwe, Mozambique and Malawi.  If your clients do travel to other countries, passenger liability insurance is something they should consider.

Motor liability policies generally exclude the portions of a claim that is paid by compulsory third party insurance and this might exist in other countries that you travel to. 

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

Most motor insurance policies exclude cover if the vehicle is used to transport fare paying passengers, so if your client considers using their vehicle as a full-time or part-time taxi, remember that they must inform their insurer about it so that their policy can be underwritten properly.  It is also important to remember that the insurance policy will not cover your client if they carry more passenger in the vehicle than what it is built or licensed to carry, so if their vehicle is licensed to carry five people and they are involved in an accident when there are six or more occupants, their claim will not be paid.

Need advice?

Running a cab service is hard work. Because the chance of a passenger liability claim is quite low, Santam’s taxi underwriting specialists, Vulindlela Underwriting Managers (VUM) has taken the following steps to keep insurance cover fair and relevant:

1. VUM AssetSure clients enjoy passenger liability Cover free of charge. This cover is limited to R2.5 million per event;
2. VUM taxi clients can get passenger liability at a reduced insurance premium. The monthly cost ranges from as little as R5 a month for R500 000 cover to R20 a month for R2.5 million cover. Higher limits can also be purchased, all the way up to R25 million.

If you have any questions about passenger liability insurance or insurance for your taxi, contact VUM on 087 135 1000 or info@vum.co.za

For more advice and tools to grow your business visit our intermediary advice page.