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Eskom sued over funeral fund switch

Beleaguered power utility Eskom’s woes are set to be exacerbated, thanks to a R641-million lawsuit being brought against it. An insurance company is claiming that the parastatal “acted wrongfully and unlawfully” when terminating a contract to provide funeral insurance to 31 000 Eskom employees.

Salt Employee Benefits lodged the lawsuit on November 14, asking for damages for lost income. Insurance provider Sanlam is also being sued for “usurping” Salt when it took over the utility’s funeral insurance. The two respondents were given 20 working days to lodge notice of their intention to defend the charges, and another 20 days to file their pleas. With the courts closed over the festive season, the case will only resume in the second half of January.

Salt, a pension fund company, said in court documents that it was the “lawful owner, manager and administrator” of the Eskom employees’ funeral scheme. It established the scheme in 1994 and was paid R1.2-million a month to administer it. African Unity Insurance Limited, the other plaintiff in the matter, was its underwriter.

Salt said that, in May 2013, “Eskom unlawfully gave notice in writing to Salt Employee Benefits of the termination of the scheme”. It then asked Salt to hand over the data it had on the funeral scheme’s members. The core claim of the lawsuit is that Eskom did not have the authority to do so – its only role was to collect monthly contributions from its employees and deposit them in Salt’s account. Salt then took its R1.2-million management fee and African Unity received a R1.4-million premium for providing insurance.

Illegal
What Eskom did next was illegal, Salt claims. From June 2013 it took the workers’ monthly deductions and gave them to Sanlam, which it nominated to take over the running of the funeral scheme. Salt alleges that, because Eskom “did not have a mandate” and “deliberately and intentionally interfered with the contractual rights” of the previous scheme managers, it “acted wrongfully and unlawfully”.

Sanlam then allegedly “unlawfully gained possession” of Salt’s “business know-how, trade secrets, confidential information and confidential knowledge”. This included the claims history of each funeral policy member, their names, ID numbers, where they worked and their contact details.

The court documents show that the information seems to have been given to Sanlam by a former Salt employee, who is also being sued.

By gaining possession of the data and taking over the running of the funeral scheme, Salt accused Sanlam of “unlawfully and wrongfully usurping” its role as scheme manager.

Leonard Cowan, the attorney handling the plaintiffs’ case, said they had lodged an urgent court application to interdict Eskom and Sanlam from taking over the funeral scheme. This had failed, but it did force Eskom to show its hand in its heads of argument. “We have seen their argument, so now we know that we have a really strong case,” he claimed.

Lost profits
The court documents allege: “As a direct and foreseeable result of Eskom’s unlawful and wrongful acts and breach [of mandate], Salt Employee Benefits and African Unity Insurance Limited suffered damages.” They are asking the court for relief – R290-million for Salt and R351-million for African Unity. This amounts to 20 years of lost profits. Cowan said the plaintiffs want either the money, or for their contract to be reinstated as well as the lost profits accruing to them since June 2013.

Ainsley Moos, Sanlam’s spokesperson, said his company was the “current underwriter and administrator” of Eskom’s voluntary funeral fund. The financial services group had informed the registrar of the court of its intention to defend the claim by Salt and African Unity, he said. “Sanlam is busy formulating its response and confirms that it will oppose all legal action in this regard, which in Sanlam’s opinion is baseless and without merit,” Moos said.

Eskom had not responded to a request for comment by the time of going to print. The power utility has been implementing countrywide electricity blackouts because of technical problems at its power stations, as well as water and diesel shortages.

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Sipho Kings
Sipho Kings is the acting editor-in-chief of the Mail & Guardian

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