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The Actuary The magazine of the Institute & Faculty of Actuaries

Causation in negligence clarified

In an important judgment for professionals in all fields and their insurers, in February the Court of Appeal ruled on losses caused by the downturn in fortunes of Equitable Life, in the case of Andrews vs Barnett Waddingham.

Mr Andrews had amassed a pension pot of nearly £2m and, in 1994, approached Barnett Waddingham for assistance. In the event he split his fund between two products from Equitable Life:

  • an annuity linked to the retail prices index;
  • a with-profits annuity.

It was the with-profits annuity about which Mr Andrews complained; he alleged that he was negligently advised by Barnett Waddingham in relation to the application of the Policyholders Protection Act 1975 to with-profits policies; he said that, if he had been properly advised, he would have taken a 5% fixed escalating annuity instead of the with-profits annuity.While he had not suffered any loss at the time of trial, it was accepted that, owing to the problems experienced by Equitable Life, the performance of his with-profits annuity (with the loss of terminal bonuses) would suffer, and that the 5% escalating annuity would produce a much better performance; he succeeded at trial and was awarded damages in excess of £1m, being the agreed quantum of the difference in performance for the future between the with profits and 5% fixed escalating annuities.

On appeal the Court of Appeal unanimously found in favour of Barnett Waddingham on causation grounds and set aside the judgment.

For more information see Cameron McKenna’s Law-Now at www.law-now.com.