Following up on the blog post from late June concerning the intersection of elder abuse laws and long-term care litigation, this post concerns an Alabama statute aiming to prevent financial abuse of elders in the financial advisory context: “Protection of Vulnerable Adults from Financial Exploitation Act,” Ala. Code § 8-7-170, et seq. (2016) (the “Act”). Specifically, section § 8-6-172 of the Act requires “qualified individuals” to “promptly notify” the Alabama Department of Human Resources and the Alabama Securities Commission if he or she “reasonably believes that the financial exploitation of a vulnerable adult may have occurred, may have been attempted, or is being attempted . . . .” The Act’s definition of a “vulnerable adult” includes persons 65 year of age or older, and the Act broadly defines “financial exploitation” to include the “wrongful or unauthorized taking, withholding, appropriation, or use of money, assets, or property of a vulnerable adult.” The definition of “financial exploitation” also includes using a power of attorney or guardianship to take advantage of a vulnerable adult’s property.
Notably, the Act currently only applies to “qualified individuals,” which it defines as any “agent, investment adviser representative, or person who serves in a supervisory, compliance, legal, or associated member capacity of a broker-dealer or investment adviser.” It gives such individuals that make a disclosure “in good faith and exercising reasonable care” immunity from administrative or civil liability as a result of making the disclosure. It also gives such individuals the authorization to delay a disbursement from an account of the vulnerable adult if there is a belief that such a disbursement “may result in financial exploitation of a vulnerable adult” and immunity for such delays, if such a delay is made based on a good faith belief.
Insurance agents and insurance companies are often in similar positions as financial advisors vis-à-vis their insureds, particularly with respect to changing beneficiaries (either at the request of the owner/insured or his or her power of attorney or guardian) and disbursing policy proceeds. So should the Act also cover insurance companies and insurance agents?
An argument can certainly be made that without this addition, the elderly could still fall victim to a whole segment of financial issues. The insurance industry frequently faces the challenges of a change in beneficiary, especially late in life for insureds. Sometimes such a change is unauthorized or results from undue influence on an elderly insured. While there is no one solution to combating such abuses, a long-term agent may have a close enough relationship to the policy owner to question or prevent such a change.
In any event, by expanding the Act in the future to include reporting obligations and accompanying immunity for insurance companies and agents that make such disclosures, the elderly might be better protected and insurance companies would have better direction and protection in these scenarios.
Full Article & Source:
Alabama’s Act Aimed at Prohibiting Financial Abuse of Elders - Should It Be Expanded to Cover Insurers and Insurance Agents?