Can a Breach of Contract Become Elder Abuse and Bad Faith?
A California Court of Appeals recently answered yes to this question, although finding that in the case at issue, the facts didn’t warrant a finding of actual elder abuse.
At bottom, the facts were as follows: an elderly couple – the wife was in her 80s – suffered rain damage to their house and claimed repair benefits under an insurance policy. The insurance company initiated investigations as to whether the damage was covered. The investigations were, among other things, hampered by the couple having discarded debris from the damaged room although the insurance company had requested an immediate investigation and announced its arrival two days later.
The couple first claimed bad faith in the insurance company subsequently denying part of the insurance claim. The court granted the insurance company’s motion for summary judgment in this respect, finding that a mere incorrect denial of insurance policy benefits does not constitute bad faith. Said the court: “[A]n insurer denying or delaying the payment of policy benefits due to the existence of a genuine dispute with its insured as to the existence of coverage liability or the amount of the insured’s coverage claim is not liable in bad faith even though it might be liable for breach of contract.”
The bad faith issue also came up in another case where a husband died from a lethal dose of a prescription drug, the insurer assigned an investigator, who unsuccessfully attempted to obtain information from the plaintiff wife regarding the husband’s state of mind before his death and the source of the fatal drugs. Where the insurer simply tried to “do all it reasonably could” to determine the cause of death, no bad faith was at issue in simply denying benefits.
California law broadly defines financial abuse of an elder as “occurring when a person or entity takes, secretes, appropriates, obtains, or retains real or personal property of an elder for a wrongful use or with intent to defraud, or both,” as well as “by undue influence.” See Elder Abuse and Dependent Adult Civil Protection Act (Welf. & Inst.Code, § 15610.30, subds. (a)(1), (a)(3).)). Additionally, the wrongdoer must have known or should have known that the conduct was likely to be harmful to the elder. In this case, however, the improper conduct was missing: there was no evidence that the insurance company acted in subjective bad faith or unreasonably denied policy benefits. This stands in contrast to cases where, for example, insurance companies have employed deceptive practices in executing contract such as annuity agreements with senior citizens.