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The Collateral Source Rule

The Collateral Source Rule is a legal doctrine that prohibits the admission of any evidence of a plaintiff receiving compensation from another source besides the defendant from whom damages are being sought.

The general idea of the Collateral Source Rule is that the money a victim/plaintiff received from another source does not reduce the damages owed by a negligent party. As an illustration:

Consider Mr. X who is owed damages by Mr. Y but receives money from Mrs. Z. The money that Mr. X receives from Mrs. Z as compensation for the damages does not in any way reduce the money that Mr. Y owes Mr. X.

  • In Makuapane vs. Road Accident Fund (2012/12871) [2015] ZAGPJHC 70 (10 April 2015), it was argued that “Mr Marais, on behalf of the defendant, once more, did not deal with the issue of contingencies in his report, and the application thereof to the plaintiff’s calculations. In these circumstances, it was not unreasonable to infer that he deferred to the Court. On the other hand, based on the credible evidence that the plaintiff currently experiences difficulties in his employment environment, it was argued on behalf of the plaintiff that a much higher post-morbid contingency i.e., 25% contingency deduction, should be applied. I do not agree. In addition to the difficulties presently experienced by the plaintiff, he is undoubtedly in sympathetic employment. It is a precarious situation. He may lose his employment any time. The sympathy of the employer may terminate sooner, or upon the plaintiff receiving the award currently under discussion in this matter. The defendant must take its victim as it found him. In my view, a post-morbid contingency deduction of 15% only, will be just and equitable in all the circumstances of this case. 15% percent of R2 077 100,00 is the sum of R311 565,00. That leaves a net amount of R1 765 535,00.”

How the Rule applies to RAF claims:

Sympathetic employment, as the name implies, is a situation where the employer retains the services of the employee/claimant following the accident even though, owing to accident-related injuries, the employee is not making a material contribution to the organisation. If a claimant in an RAF matter is sympathetically employed following an accident, these earnings will not count towards the claimant’s past loss when calculating the claimant’s loss of earnings. In other words, we take the claimant’s earnings to be nil from the time of the accident to the calculation date.

It is important to note that actuaries will only make use of the rule if it is quoted by the Industrial Psychologist. If, for instance, the Industrial Psychologist states that the claimant is in sympathetic employment but does not invoke the Collateral Source Rule, the claimant’s past-loss earnings will be considered for calculation purposes.

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