The purpose of this paper is to provide an opportunity for discussion within our profession of ‘the use of an actuarial approach and actuarial evidence’ in the assessment of damages arising out of personal injury and fatal accident litigation. The need for such a paper was intimated in the pages of our Journal by William Phillips in his Review of Principles of the Law of Damages by Professor Harry Street. Since the publication of what Phillips described as ‘from the actuarial point of view…the most important legal textbook which has been published in the last 50 years’ the employment of actuaries in this field has been widely discussed within the legal profession. The most important recent development has been the inclusion of personal injury litigation as Item VI of the first programme of the Law Commission set up by the Law Commission Act, 1965. The words quoted in the first sentence above are taken from the list of ‘Questions for Examination’ under (b) of Item VI, ‘Assessment of Damages’. The current examination being conducted by the Law Commission makes this a particularly appropriate time for a sessional meeting on this subject. The writer has had the advantage of a sight of a preliminary Working Paper prepared by the Law Commission and will be quoting certain extracts from that paper below. It must however be stressed that the Working Paper is a preliminary one which attempts to do no more than canvass views: it in no way sets out the conclusions of the Law Commission on the matters discussed.

This paper is concerned with attempts that have been made to incorporate measures of risk in the selection of financial investments. The methodology that is developed here has been primarily aimed at the evaluation of capital investment projects, but the concepts and ideas are also relevant in the financial investment field. Implicit in all this discussion is the fact that when information is obtained in order to calculate an internal rate of return or a net present value, the figures put into the calculation are estimates rather than precise and exact quantities. In some instances the estimates may be felt to be very good, whilst in other cases it may be felt that there is a wide range of possible deviations. Hence the evaluation of any project or projects should, correctly, be described not by a single criterion but by a range of possible values, some of which are judged to be more likely than others. Having said this, there now comes the need to decide upon the method by which choice is to be exercised. Should it be by the choice of the highest average value of the criterion, or by choosing some more conservative rule?