IAI Actuarial Core Principles · Business Management · Professional negligence
Rohan, an actuary, advised a firm to adopt a reserving basis. The firm's CFO, Sunita, was told of a data gap but ignored Rohan's written warning and used unreliable figures anyway. The firm sues Rohan for loss. Which defence is most directly supported by these facts?
The best defence is contributory negligence. The firm ignored Rohan's written warning and used unreliable figures, so its own fault contributed to the loss, and damages may be reduced accordingly. Frustration, novation, waiver and undue influence do not fit the facts.
- AContributory negligence by the client, which can reduce damagesCorrect
- BFrustration of the contract by supervening impossibility
- CNovation of the contract to a third party
- DWaiver of all claims by the firm through payment of fees
- Undue influence exerted by Rohan on the firm
Explanation
Sunita ignored a clear warning and used unreliable data, so the firm's own fault contributed to its loss. Contributory negligence may reduce damages in proportion. The other doctrines have no basis in the facts given.
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