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Settlors and Shareholders: Who Has Standing to Sue for Elder Abuse?

The Elder Abuse and Dependent Adult Civil Protection Act (EADACPA) (Welf & I C §§15600–15675) provides enhanced remedies for “financial abuse” that results in a loss of property of someone over age 65. This can get complicated because the property interests of elders may not be held in their own name; they often are held in a variety of ownership vehicles for estate planning or business reasons. This raises the question, may the elder sue under EADACPA for injury to those property interests? The answer is, it depends.

In Mahan v Chares W. Chan Ins. Agency (2017) 12 CA5th 442, the court held that elder settlors of an irrevocable life insurance trust used to pay premiums on life insurance policies for the benefit of their daughter sufficiently alleged financial elder abuse and other causes of action against insurance agents who persuaded them to exchange one of the policies actually owned by the daughter for a more expensive policy that required increased contributions to the trust. The court found that the value embodied in the policies was “intrinsically personal” to the settlors.

The Mahan court noted that liability may flow from a donative transfer and held that the losses claimed by the settlors may be considered “the property of an elder.”  These losses included:

  • Damage to their estate plan.
  • Loss of money they felt compelled to transfer to the trust to pay for insurance coverage.
  • Loss of money they felt compelled to transfer to the trust to pay for insurance commissions.

But another recent opinion came out on the other side. In Hilliard v Harbour (2017) 12 CA5th 1006, the majority shareholder of a corporation sought to sue a bank that loaned money to the corporation for financial elder abuse after the shareholder failed to pay the debt and the bank sold the loan to another lender that foreclosed on corporate assets pledged as security for the loan. The court held that the shareholder (age 78) lacked standing to sue individually for elder abuse because his claim didn’t originate in circumstances independent of his status as a shareholder.

But the Hilliard court also stated that the bank didn’t owe duties to a borrower who resides in this state and is over age 65 different from those it owes to other borrowers. In other words, the Hilliard court appears to say that the shareholder wasn’t the borrower and that the bank’s conduct with respect to the shareholder as a borrower wasn’t actionable without regard to his age and ownership status. So we don’t really know which reason was decisive.

Practitioners should take these cases with a grain of salt. The different result in Mahan and Hilliard may depend more on the egregiousness of the defendant’s conduct than the elder’s ownership status.

For more on litigating financial elder abuse actions, check out CEB’s California Elder Law Litigation: An Advocates Guide, chapters 6, 6A.

Other CEBblog™ posts you may find interesting:

© The Regents of the University of California, 2017. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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