IAI Actuarial Core Principles · Business Management · Professional negligence
An actuary negligently advises a Delhi client to buy an annuity product. The client buys it and, as a result, loses ₹8 lakh. Separately, a market-wide fall that no one could have predicted would have caused the client the same ₹8 lakh loss in any other product they would have bought on non-negligent advice. Which statement best reflects the damages position?
Damages would be nil or minimal. Compensation restores the claimant to the position they would have occupied without the breach, and the same ₹8 lakh loss would have occurred anyway from the market fall, so the negligent advice caused no additional damage.
- ADamages are the full ₹8 lakh because the advice was negligent
- BDamages are nil or minimal because the client would have suffered the same loss without the breachCorrect
- CDamages are doubled to reflect both causes
- DDamages are limited to the actuary's professional fee
- Damages are punitive since the advice was given in a fiduciary context
Explanation
Compensation puts the claimant where they would have been without the breach. Since the same loss would have arisen from an unforeseeable market fall anyway, the breach added no loss. The negligence therefore does not yield the full ₹8 lakh.
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