As the U.S. population ages, financial elder abuse litigation is proliferating. These claims no longer affect only nursing homes, heirs, or caregivers. Potential exposure has become a reality for any business that transacts with "elders," including banks, investment funds and advisors, and insurance companies.
Meritorious or not, financial elder abuse lawsuits can be highly volatile and extraordinarily expensive to defend against because of the risk of a significant judgment. Even the specter of "elder abuse"-- whether well founded or not--can tarnish a business' reputation. Plaintiffs' attorneys know this. One article opines, "Want to stay busy as a lawyer? Consider serving the AARP population." Steven T. Taylor, Elder Law Continues to Grow as It Expands Its Scope, Of Counsel, Vol. 36, No. 5 (May 2017).
Similarly, lawmakers increasingly have focused on financial abuse of the elderly. Many states now have statutes that permit civil recovery for financial elder abuse. California's statute, for example, creates liability for any person or business that "takes" an elder's property for wrongful use, and it allows recovery for compensatory damages, emotional distress, punitive and treble damages, and attorney's fees. Not surprisingly, over half of the 6,000+ "elder abuse" cases brought nationwide in the last three years were filed in California.
Based on an analysis of life insurance and annuity cases involving claims of elder abuse, some common themes emerge: the cases are easy to plead and difficult to dismiss, the "type" of allegation might be outcome determinative at summary judgment, and claims of financial elder abuse add little to a court's analysis of class certification.
Common Factual Predicates
The factual backdrop for life insurance and annuity types of cases often pertains to the marketing, "targeting," and overall suitability of those products for seniors, and the cases typically involve one of three factual scenarios.
In the first, the insurer is alleged to have inappropriately targeted seniors as a group for the insurer's product. For example, in Negrete v. Fidelity and Guaranty Life Insurance Co., 444 F. Supp. 2d 998 (C.D. Cal. 2006), an elderly plaintiff brought a class action alleging, among other things, financial elder abuse. The plaintiff alleged that the insurer's disregard of an internal age- exemption practice pertaining to the sale of certain products by its agents constituted a wrongful taking under the act. The court held that the elder abuse claim was properly pleaded and denied the motion to dismiss, holding that the plaintiff 's allegation of the scheme was sufficient to state a claim for financial elder abuse.
The second type of claim is similar. Plaintiffs may argue that the features of a product itself render it unsuitable for seniors. For example, the existence of surrender charges or other features that restrict the liquidity of older purchasers may be characterized by plaintiffs as "onerous" or "burdensome" when sold to individuals with a shorter life expectancy.
In Migliaccio v. Midland National Life Insurance Co., 2007 WL 316873 (C.D. Cal. Jan. 30, 2007), for example, the court characterized the plaintiff 's allegations thus: "[The defendants] defrauded class representatives into purchasing various deferred annuities that matured after their actuarial life expectancies as part of a broad, decade- long scheme to bilk seniors of money." That claim was coupled with a "churning" scheme similar to the one in Negrete.
Finally, actions by an agent can also provide the factual backdrop for financial elder abuse allegations. For example, in Giorvas v. Grow, No. 2015-1-CV-285323 (Cal. Super. Ct. Feb. 2, 2016), an individual plaintiff sued an insurer for alleged recommendations that the plaintiff replace her existing annuities with two new annuities with surrender penalties and guaranteed minimum interest rates that the plaintiff alleged were not suitable for an annuitant of her age and financial situation. In denying the demurrer, the court held that the plaintiff 's allegations provided a sufficient factual basis for vicarious liability, and therefore,...