Seven ways to protect contractors from potential financial elder abuse claims.
By James C. Earle
Financial elder abuse is a new area of potential civil and criminal liability for California contractors. This article outlines the relevant laws and the steps contractors can, and should take to mitigate the risks of liability.
In July 2015, The U.S. Census Bureau estimated the elderly population to be 47.8 million. California has one of the largest senior citizen populations in the United States with nearly 4.45 million. By 2020, it is estimated there will be 6.6 million senior citizens in California. The reality is that most California contractors will contract with senior citizens in the course of their business so knowing the potential risks involved is important.
In California and other states, an “elder” for purposes of the financial elder abuse statutes is a person aged 65 years or older. Specifically, contractors who enter into contracts with elders may be found to have created a fiduciary relationship with the elder party. Significantly, the contractor does not have to have specific knowledge that a person is over 65 years old to be held liable in either a civil or criminal proceeding. The standard used to hold a contractor liable is whether the contractor knew or should have known that the person was 65 or older.
Thus, contractors and other construction professionals may be liable in criminal and/or civil proceedings for conduct related to a construction contract with an elder for any attempt to bid a job at a premium price not warranted by the elder’s circumstances; extort extra money from the elder by informing the elder in the middle of a project that the price to complete the project has just escalated, without justification; abandon or fail to complete a project; and fail to protect the elder from subcontractors’ liens.
All of the above listed conduct may be characterized as financial elder abuse under both California criminal and civil statutes. Penal Code §368 states:
“Any person who is not a caretaker who violates any provision of law proscribing theft … or fraud … and who knows or reasonably should know that the victim is an elder … is punishable [with fines up to $10,000 and imprisonment up to 4 years, if the value of the property obtained is over $950.00].”
In addition, contractors may be subject to civil actions filed under statutes such as California Welfare and Institutions Code § 15610.30(a) which expresses a broad definition of financial elder abuse and states that a violation occurs when a “person or entity takes, secretes, appropriates, obtains or retains any interest in real or personal property, for a wrongful use, or with intent to defraud or both.” Thus, in some of the instances described above, the exchange of monetary payments between an elder and a contractor may constitute a taking of property.
Contractors, construction managers and other construction professionals may also be liable for aiding and abetting another in committing financial elder abuse.
Finally, elders are entitled to additional remedies provided by law, which may include the court’s award of attorney fees and costs to an elder who wins at trial. The court may also impose punitive damages, if warranted. There are seven considerations for contractors to protect themselves against potential financial elder abuse claims:
1. The most important consideration is to ensure the contractor’s contract and contract solicitation process is in full compliance with the Home Improvement Contract statute and the regulatory mandates associated with the registration laws for salesman solicitation. The contractor should have the contract vetted by a construction attorney to verify compliance with the applicable state laws.
2. The contractor should spend time in-person with the potential client in order to determine the client’s goals for the project. This in-person interview may provide the contractor with insight regarding the client’s age and whether to involve additional members of the client’s family, (such as adult children), in the process and/or recommend, in writing, that the client have the contract reviewed by an independent attorney.
3. During the meeting with the client and/or the client’s family members, the contractor should explain in detail the key contract provisions contract terms so the client understands all contract terms and the construction process. This can include the down payment, payment terms, time scheduled for commencement and completion, scope of the work and material costs, client’s right to terminate, exclusions to contract, mechanic’s liens and waivers, handling of punch list, warranties, final payment, notice of completion and the client’s responsibilities during construction.
4. The contractor may want to make it a requirement before entering into the contract that the client and family members agree to allowing a taping or videotaping of the discussion.
5. The contract should list the client’s children or other family members as the client’s representative for the project. This designation will ensure the contractor has a buffer to avoid any later claim of undue influence by the client and/or the adult children.
6. The contractor should make it a contractual requirement that the client’s children or family members participate in any meetings where additions to the contracted scope or cost of the work are discussed.
7. The value of the contractor’s work should pass the “reasonable person” test. What would a reasonable judge or jury believe is the reasonable value of the contract work to be performed, including any change orders? Contractors should also document the pre- and post-construction site conditions with photographs and videos to demonstrate the contract work was necessary and benefited the client.
The items outlined above are a few ways in which contractors can take reasonable steps to protect themselves from claims brought by senior citizens/elders on the basis of financial elder abuse.
James C. Earle is a member of Clark Hill LLP’s Construction Law practice based Los Angeles. He brings unique, practical experience to his litigation practice: he is one of the few attorneys with hands-on experience in construction as a licensed California general contractor (B) and subcontractor (C-36 Plumbing); he also served as a combat engineer, construction surveyor and soils analyst in the U.S. Army Corps of Engineers. Developers, contractors, municipalities and product manufacturers have utilized his skills on cases involving commercial, industrial, residential, hotels, apartments, condominiums and municipal projects. As lead counsel in more than 40 jury trials, bench trials and binding arbitrations, as well as over 700 mediations, his diverse experience has aided general contractors, subcontractors, municipalities, developers, hotel owners, homeowners and national construction product manufacturers. He is also an American Arbitration Association Arbitrator and Mediator. He can be reached at 213-417-5115 or firstname.lastname@example.org.