Life Insurance Beneficiary Challenges | Fraud and Undue Influence

Life insurance beneficiary challenges occur with some regularity in California’s Superior Courts.
Timeliness is critical in contesting a life insurance beneficiary designation or life insurance beneficiary claim. If the life insurance payout is timely disputed life insurance companies will place the payout in a trust held by the Superior Court.

This is done in California by the way of the insurance company filing a complaint for declaratory relief and for interpleader. The complaint will name the parties who claim rights to the policy. The complaint will acknowledge that the life insurance company is liable for payment on a life insurance policy. The complaint will identify how the company has received communications from competing parties.

The life insurance company will ask the Superior Court for a judgment discharging it from any further liability, order its life policy cancelled, and requiring the named defendants to litigate the dispute between themselves. The dispute between the parties, the defendants in the interpleader action, will often revolve around claims that the current beneficiary used undue influence on the insured to change the originally intended beneficiary.

Litigation regularly involves policy owners who were diagnosed with dementia and in a precarious state of health. Their life at the time of the beneficiary change might be marked by confusion and cognitive decline. Particular cognitive decline often includes financial impairment.

Financial impairment is often one of the earliest clinical signs of an emerging dementia and, like loss of other capacities such as driving, can be psychologically distressing.
Such impairment often includes accusations that people are stealing their money, confusion about missing bank funds, failure to pay bills, and marked difficulty in executing financial skills (writing checks, managing assets, keeping records).

When we are considering a potential challenge, we’ll look at whether the policy holder (the decedent) relied on the new beneficiary for their daily living needs. And, whether the beneficiary took advantage of this reliance. Deathbed beneficiary changes are particularly suspect.

The California Elder Abuse Act protects elders by providing heightened remedies that encourage private enforcement of laws against abuse and neglect. Attorney’s fee and cost awards are available for ‘financial abuse’ claims proved by the preponderance of the evidence. The Act creates a new basis for liability, not too long-ago adding deprivation of property by undue influence as a separate ground for a lawsuit under the act. The California Statute – Welfare and Institutions Code Section 15610.30 provides:

“(a) “Financial abuse” of an elder or dependent adult occurs when a person or entity does any of the following:
(1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.
(2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.
(3) Takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence, as defined in Section 15610.70.
(b) A person or entity shall be deemed to have taken, secreted, appropriated, obtained, or retained property for a wrongful use if, among other things, the person or entity takes, secretes, appropriates, obtains, or retains the property and the person or entity knew or should have known that this conduct is likely to be harmful to the elder or dependent adult.
(c) For purposes of this section, a person or entity takes, secretes, appropriates, obtains, or retains real or personal property when an elder or dependent adult is deprived of any property right, including by means of an agreement, donative transfer, or testamentary bequest, regardless of whether the property is held directly or by a representative of an elder or dependent adult.”

Probate Code §86 and Welfare and Institutions Code §15410.70 define undue influence. “Undue influence” means excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will and results in inequity. The determination of undue influence includes a number of factors. The vulnerability of the victim is the initial factor.

Evidence of vulnerability may include, but is not limited to, incapacity, illness, disability, injury, age, education, impaired cognitive function, emotional distress, isolation, or dependency, and whether the influencer knew or should have known of the alleged victim’s vulnerability.

The next factor is whether the influencer had some kind of apparent authority over the victim. Evidence of apparent authority may include, but is not limited to, status as a fiduciary, family member, care provider, health care professional, legal professional, spiritual adviser, expert, or other qualification.

The next factor includes the consideration of the actions or tactics used by the undue influencer. Evidence of actions or tactics used may include, but is not limited to, all of the following:

a. Controlling necessaries of life, medication, the victim’s interactions with others, access to information, or sleep.
b. Use of affection, intimidation, or coercion.
c. Initiation of changes in personal or property rights, use of haste or secrecy in effecting those changes, effecting changes at inappropriate times and places, and claims of expertise in effecting changes.

California courts also look at the equity of the result. Evidence of the equity of the result may include, but is not limited to:

• The economic consequences to the victim
• Any divergence from the victim’s prior intent or course of conduct or dealing
• The relationship of the value conveyed to the appropriateness of the change in light of the length and nature of the relationship.

It is important to note that evidence of an inequitable result, without more, is not sufficient to prove undue influence. When an action is filed a great deal of procedural and discovery work ensues. Trial dates are likely set.

Mediations and mandatory settlement conferences often provide pre-trial resolutions – resolutions where the two parties negotiate an agreement and save time, emotions and additional financial expenditures.

At Hackard Law we litigate life insurance beneficiary disputes as a part of our trust, estate, probate and elder financial abuse litigation focus. We take significant cases where we think that we can make a substantial difference and there is a wrongdoer who can be made financially accountable for their wrongdoing or breach of duty.

We generally litigate in California’s largest urban counties, including Los Angeles, Orange, Santa Clara, San Mateo, Alameda, Contra Costa and Sacramento. If you would like to talk with us about your case – your story – then call us at 916 313-3030. We’re happy to discuss how we might help you.