The Imperfect Bandage of Undue Influence

A rant this morning. Something to think about over your Sunday morning coffee (or tea).

Our firm starts lawsuits involving vulnerable adult exploitation as much as anyone I suppose. And we almost always plead two things: incapacity and undue influence.  While in some cases the evidence may support the proposition that the person really was so cognitively impaired that they didn’t know what they were doing, most often that is not the case.  Most often we plead incapacity in order to introduce the idea that this person’s capacity was impaired to the point that it reduced the level of persuasion that would be necessary to overcome their volition = undue influence.

For those who practice in this area, they know how difficult it is to win a case on undue influence. You have to show that the victim was essentially a conduit through which the bad actor achieved their objective – that the free will of the victim was completely overwhelmed by the power of the undue influencer.  The so-called “presumption of undue influence” can be a help, but most court cases hold that the presumption, even where it is established, can be rebutted with nominal evidence.  In any event, the presumption is not the topic today.

My point (or argument) today is that we rely on undue influence because we don’t have anything better. We don’t have law that reflects the reality of the aging process today.

I have discussed the research of Dr. Lichtenberg before (see Peter’s Principles and Our Evolving Understanding of Exploitation). His work, and the experience of those of us who handle these cases, informs us that older people can be exploited because of circumstances that have nothing to do with cognitive impairment – that exploitation can occur simply because an older person loses their sense of control, dignity and/or empowerment.

These cases don’t fit well into any current legal theory. But the best we have is undue influence. Other legal theories like unconscionability, mistake, fraud  and constructive trust are available, but like undue influence, these theories are imperfect for our purposes.

The most promising development is the concept of a “vulnerable adult,” which recently entered the legal lexicon. It now appears in the criminal code and in policy for adult protective services workers.  But it has yet to find its place in the civil and probate world. Perhaps the concept of vulnerable adult exploitation will lead to new civil theories and remedies.  But we have to be mindful of what that would mean.

If we move the goalpost, as it were, from incapacity to vulnerable adult, are we going too far? There are good reasons that incapacity has served as the bright line for (1) court jurisdiction to invade the rights of an individual through a guardianship or conservatorship, and (2) as grounds for setting aside estate planning documents, deeds, beneficiary designations and contracts entered into by adults who are presumed to have the ability to understand what they are giving up and what they are getting in return.  Is it a good idea to reduce the proofs necessary for either or both of these outcomes?

Societal changes triggered by modern medicine and the resulting explosion of people living to an advanced age have come upon us quickly. The law evolves slowly, but evolve it must.  Elder law attorneys and probate litigators are struggling to find legal theories to adequately address the civil injuries impacting our clients and their family members.  Undue influence is an imperfect bandage, but for now, it’s the best we’ve got.

 

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Practice Alert: Homeowner’s Coverage Doesn’t Extend to Trust

Floyd lived in a house owned by Floyd’s revocable trust. But the homeowner’s insurance policy was issued to Floyd individually.  After Floyd died, a family member was in the house removing personal property and was injured.  That injured person sued the Trust and was awarded $100,000.  Trustee submitted the award to the insurance company for payment, and the insurance company denied coverage, saying that no one told them that Floyd had died, and their policy was with Floyd, not the Trust.

The trial court noted that the insurance company had collected premiums for the period at issue, and said they were estopped from denying coverage. The Court of Appeals reversed, arriving at the conclusion:

The Trust was not an insured under a policy issued by Fremont. Fremont therefore was not obligated to provide coverage to the Trust for plaintiffs’ judgment and Fremont was entitled to summary disposition of plaintiffs’ claims.

With respect to the insurance premiums which were collected for the period after Floyd’s death, the COA seems to say that to the extent the acceptance of premiums created any contractual obligations, it would have been a contract with the estate, but the estate is not the trust.

To read Thompson v Fremont Insurance Co., click on the name. The case is unpublished.

The result seems harsh, but assuming it accurately states the law, this case serves as a warning that clients (and perhaps lawyers) need to let the homeowner’s insurance company know when they have placed their house in trust. Something to add to the checklist perhaps.

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