IAI Actuarial Core Principles · Business Management · Professional negligence
An actuary, Sana, advises a Delhi company on a capital model. The model later proves inaccurate, but it was built with proper methods, tested, and its limitations were disclosed. The company claims negligence solely because the forecast was wrong. What is the best response?
Sana is not liable if she used reasonable skill and care. A professional's duty is to take reasonable care, not to guarantee accurate results, so a wrong forecast alone does not prove breach where methods were sound and limitations were disclosed.
- ASana is liable, because professionals warrant the accuracy of every forecast
- BSana is liable, because the company suffered loss
- CSana is not liable if she exercised reasonable skill and care, since an inaccurate outcome alone does not prove breachCorrect
- DSana is liable unless the company is a listed entity
- Sana is not liable only if she holds professional indemnity insurance
Explanation
The duty is to use reasonable skill and care, not to guarantee outcomes. An incorrect forecast does not by itself show breach where proper methods were used and limitations disclosed. Insurance and listing status are irrelevant to breach.
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