IAI Actuarial Core Principles · Business Management · Professional negligence

An actuary, Farah Khan, negligently omits a data check in a valuation for a small cooperative society. As a result the society's board wrongly approves a bonus. The board's shareholder-members then suffer an unusual loss only because a rare, unforeseeable regulatory action froze the society's accounts, a type of harm no reasonable actuary would anticipate. Under the remoteness principle, what is the likely position on this unusual loss?

The unusual loss is likely too remote. Even where the breach is a cause in fact, damages are limited to loss of a type reasonably foreseeable from the breach. A rare, unforeseeable regulatory freeze is not such a type, so the actuary is not liable for it.

1. AIt is too remote, as it was not a reasonably foreseeable type of loss from the breachCorrect
2. BIt is recoverable, because the actuary's breach was a cause in fact
3. CIt is recoverable if the society proves the actuary was paid a fee
4. DIt is recoverable in full under the eggshell skull rule
5. It is too remote only if the actuary acted without any negligence