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, the plaintiff sufficiently had pleaded a claim for financial elder abuse. Id. at 9.

The Claims Are Relatively Easy to Plead and Difficult to Dismiss

One likely reason for the surge in litigation, in addition to the increasing number of states enacting financial elder abuse laws, is the nature of pleading requirements for these claims. Claims for financial elder abuse frequently require few additional alleged facts when they are asserted alongside related claims such as breach of contract, misrepresentation, breach of fiduciary duty, or state statutory claims. Often the only additional allegation necessary is that a plaintiff is an elder. But see Moorer v. Stemgenex Med. Grp., Inc., 2017 WL 1281882 (S.D. Cal. Apr. 6, 2017) (dismissal under Fed. R. Civ. P. 9 for failure to plead a claim). Therefore, the plaintiffs' bar, when weighing the cost-benefit analysis of asserting these claims, is faced with a fairly easy decision.

And the claims are hard to dismiss at the pleading stage. In California, courts have found that financial elder abuse claims may survive a motion to dismiss even without any requirement of physical harm or pain or mental suffering; instead, an allegation of a wrongful taking will suffice. This was the case in Davis v. Riversource Life Ins. Co., No.16-cv-02801-JSW (N.D. Cal. Feb. 21, 2017), in which the court also held that at the motion to dismiss stage a plaintiff need not allege recklessness, oppression, fraud, or malice as is ultimately required in obtaining any heightened remedies under the elder abuse statute. But see Derry v. Jackson Nat'l Life Ins. Co., 2011 WL 7110571 (C.D. Cal. Oct. 5, 2011) (granting motion to dismiss elder abuse claim where the plaintiffs failed to allege physical harm or pain or mental suffering).

Allegations of "wrongful use" are typically sufficient to defeat dismissal under California's law. For example, in Abbit v. ING USA Annuity and Life Insurance Co., 999 F. Supp. 2d 1189 (S.D. Cal. 2014), the plaintiff brought a class action, alleging false and misleading advertising of annuities, and financial elder abuse was just one of eight claims asserted against the insurer. Upon the insurer's motion to dismiss several of the claims, including financial elder abuse, the court stated that the plaintiff 's complaint "include[d] numerous allegations that plead 'wrongful use'" as defined by the financial elder abuse statute, and therefore, financial elder abuse was sufficiently pleaded as a result. Id. at 1200.

Similarly, in Harris v. Transamerica Life Insurance Co., 2013 WL 12136376 (C.D. Cal. July 9, 2013), the court concluded that the plaintiff 's sufficient pleading of the financial elder abuse claim was encompassed in allegations related to the plaintiff 's breach of contract claim. The court's discussion of the plaintiff 's financial elder abuse claim was fairly brief:

Plaintiff 's complaint states in relevant part that Defendant deprived Plaintiff "of her contractual rights to the benefits of her annuity policy, including, the return of her single premium deposit of $42,693.63 and her credited interest and the amendatory endorsement provisions." This allegation suggests that Defendant wrongfully deprived Plaintiff of her annuity and rights under the contract. Deeming the facts alleged as true, it is reasonable to infer that Defendant's acts were harmful to Plaintiff. Thus, Plaintiff sufficiently pleaded the elements of financial elder abuse.

Id. at *5.

As Harris indicates, insurers have not had much success arguing that the retention of premium payments or an annuity's accumulated value is a "taking." To the contrary, the alleged depletion of annuity values, or retention of premium, has often been held to qualify under the statute. See, e.g., Keshish v. Allstate Ins. Co., 2012 WL 12887077 (C.D. Cal. July 30, 2012); Negrete, 444 F. Supp. 2d at 998; Giorvas, No. 2015-1-CV-285323.

However, insurers have experienced some success in dismissing claims for financial elder abuse when a plaintiff has failed to allege properly that he or she qualifies for relief under the statute. For example, in Migliaccio, Florida's vulnerable adult statute, rather than protecting all adults over age 65, protected only those adults over 18 whose ability to perform the normal activities of daily living, or to provide for his or her own care, was compromised due to a physical or mental impairment. In that case, the court found that the plaintiff 's age alone was insufficient to establish standing under the statute, and the court dismissed his claim based on that ground. See also Tepper v. Wilkins, 2017 WL 1398496 (Cal. Ct. App. Apr. 19, 2017) (holding that the plaintiff was not of a class of persons that could sue for her mother's alleged financial abuse).

Summary Judgment Is Not Certain to Succeed, Either

When the financial elder abuse claims arise from fact-intensive queries, such as suitability, they may be difficult to defeat without a trial on the merits. In Wheeler v. Allianz Life Insurance Co. of North America, 2014 WL 619783 (Cal. Ct. App. Feb. 18, 2014), a plaintiff alleged that a third party conspired with an insurer's agent to defraud her, and an appellate court reversed the grant of summary judgment to the insurer in the case. Even though the appellate court acknowledged that the plaintiff had failed to produce evidence supporting the theory that the agent participated in the fraud, the Second Circuit still reversed, finding that there was conflicting evidence pertinent to whether the agent was aware that the annuity sold to the plaintiff was unsuitable for her needs.

Similarly, the Northern District of California found that declarations from a plaintiff's experts would "suffice to raise a triable issue with respect to whether [the plaintiff] suffered detrimental tax consequences and other financial detriment by reason of inappropriate recommendations made as a result of professional negligence or a conflict of interest on the part of [the agent]," thereby precluding summary judgment. Sakai v. Merrill Lynch Life Ins. Co., 2008 WL 4193058, at *5 (N.D. Cal. Sept. 10, 2008).

Conversely, when the claims arise from facts that can be objectively proved—such as whether a particular statement was a misrepresentation—summary judgment may be a useful tool. In Rowe v. Bankers Life and Casualty Co., 2013 WL 1245555 (N.D. Ill. Mar. 26, 2013), the plaintiffs brought a putative class action alleging financial elder abuse, due to the insurer's alleged failure to represent certain "loading charges" accurately in its disclosure, among other allegations. The court held that the "loading charges" theory failed because the plaintiffs did not submit evidence of the insurer's intent to defraud. Specifically, although the plaintiffs' expert specified in his opinion what he interpreted the disclosure to mean, the court heard no evidence that the disclosure was misleading to the typical annuitant or consumer.

Financial Elder Abuse Claims Do Not Add Much to Class Certification

Financial elder abuse claims are also becoming more commonly asserted in class actions, and in those cases, similar suitability and targeting themes emerge. For example, in Negrete v. Allianz Life Insurance Co. of North America, 927 F. Supp. 2d 870 (C.D. Cal. 2013), a class of 200,000 seniors alleged that the insurer issued deferred annuities by means of misleading statements regarding their value. In a motion for judgment on the pleadings, the insurer argued that with regard to the California class, the plaintiffs failed to allege experiencing any resulting physical harm or pain or mental suffering. However, the court disagreed and held that California's financial elder abuse statute only required a finding that "the defendant took the property for a 'wrongful use' or with intent to defraud or both." Id. at 892.

Similarly, in National Western Life Insurance Deferred Annuities Litigation, 268 F.R.D. 652, 669 (S.D. Cal. 2010), the plaintiffs alleged a churning scheme, and while the court tossed the class claim for fiduciary duty, it held that common issues predominated for the financial elder abuse claim because that claim was "premised on the same acts" as the California Unfair Competition Law claim, which the court had already certified.

One potential argument is that because these claims are so specifically based on state statutes, nationwide classes would be unmanageable. See Migliaccio, 2007 WL 316873 (recognizing the issue, but deferring it until class certification). Often the plaintiffs in a nationwide class will plead their financial elder abuse claims as state- only subclasses for that very reason.

How to Prevail—Generally

The above discussion might seem grim. There might appear to be little light at the end of the tunnel for a defendant facing elder abuse claims. Insurers and other business entities have been successful in defeating such allegations, however, if there is a statutory bar, such as a statute of limitations or preemption.

A statute of limitations is particularly useful in these cases because often the child or the beneficiary of an elder brings suit long after the alleged harm occurred. See, e.g., Harris, 2013 WL 12136376; Joseph v. Bernstein, 2014 WL 12600805 (S.D. Fla. Apr. 21, 2014); Schneidereit v. San Luis Cap., Inc., 2013 WL 12138726 (C.D. Cal. Apr. 16, 2013). But see Rand v. Am. Nat'l Ins. Co., 2009 WL 2252115 (N.D. Cal. July 28, 2009) (discovery of cause of action a factual issue inappropriate for motion to dismiss).

Preemption has proved to be less useful in the specific context of life insurance. See Negrete, 444 F. Supp. 2d at 998. But it has been efficacious in highly federally regulated spheres, such as banking. The Home Owners' Loan Act, for example, has been found to preempt claims of financial elder abuse. See, e.g., Houman v. Wells Fargo Bank, N.A., 2016 WL 7444869 (C.D. Cal. Feb. 5, 2016); Akopian v. JPMorgan Chase Bank, N.A., 2014 WL 12591623 (C.D. Cal. Sept. 24, 2014).

In each case, understanding the scope of the issue is critical. A number of insurers have specific task forces or studies on financial elder abuse. A company can use either its own study or the myriad others that are available to develop and implement internal procedures to guard against financial abuse. The company could then use this heightened awareness to provide disclosure and other materials to seniors. This has dual positive outcomes: it brings awareness to the company about which types of financial elder abuse might be perpetrated in its industry, and it also is beneficial in litigation to show that the company is being proactive.

How to Prevail Against "Targeting" and "Product" Claims

What does a company do when faced with allegations that it is "targeting" seniors, or that its products are per se unsuitable for the elderly population? These claims are likely fact intensive; thus, an insurer may not prevail based on a motion to dismiss. An insurer may, however, prevail if the insurer can show, based on a motion for summary judgment or in a trial, that either it (1) was not targeting or (2) was "targeting" for a legitimate and non-nefarious purpose.

To show that a company was not targeting seniors, it might be useful to provide data about sales to non-seniors and testimony from agents or non-seniors about sales to the non-senior demographics. The insurer can provide marketing materials and agent training geared to the non-senior population. It should provide testimony from company officials to this effect.

Certain financial products, such as annuities, are developed specifically for the post-retirement population. Providing income for life is less desirable when an individual is in his or her working years. Similarly, shielding assets from estate tax is often less of a concern for younger populations. Illustrating that a product was appropriately geared to seniors—offering them unique benefits that are not common to the whole population—may avoid a plaintiff 's intended inference that there is something inherently wrong with selling financial products to seniors.

This proof may also defeat a plaintiff 's punitive or enhanced damage claim, taking the teeth out of the plaintiff 's claim and giving him or her less of a motive to continue with the lawsuit. See, e.g., Sakai, 2008 WL 4193058.

How to Prevail Against Vicarious Liability Claims

A company might do everything right and still be faced with a lawsuit claiming that it is vicariously liable for the actions of an agent who sold an allegedly inappropriate product. This risk is inherent in any product sold by an intermediary, and while it can be minimized, it is unlikely that it can ever be completely eradicated.

As a first step to minimizing this risk, a business should be able to prove that it followed state, federal, and other guidance in this area. In the annuity context, for example, this means complying with state laws regarding disclosure and suitability. If an insurer complies with its legal obligations, it is less likely that the alleged bad acts of its agent will be imputed to it.

Companies may also wish to make training on identifying, preventing, and reporting elder financial abuse available to its employees and agents. On the other side, a business might consider offering specific materials, services, or programs for elderly customers about preventing elder financial abuse. Again, this both helps prevent actual elder financial abuse and may further shield a company from liability.

In a lawsuit involving agency, an insurer should provide clear evidence of the scope of the agency. When an agent has limited authority, he or she may be acting outside the scope of that authority in, for example, creating a fiduciary duty between the insurer and the insured, or in allegedly misrepresenting the policies. See Shackelford v. Ohio Nat'l Life Ins. Co., 2004 WL 2074411 (Cal. Ct. App. Sept. 16, 2004). This will obviously be easier in cases alleging fraud by the agent. See Wheeler, 2014 WL 619783.


It is undeniable that the legal landscape for financial elder abuse is expanding, and it is quickly becoming critical that defense counsel recognize the heightened risks involved. Understanding the legal landscape, educating your employees, agents, and clients about these types of claims, and thoughtfully planning out any litigation that a company faces are critical to success.

Originally published in DRI For the Defense (August, 2017).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.