Daughter’s Breach of Fiduciary Duty to Mother Makes Daughter Liable to Nursing Home

Daughter, acting as Power of Attorney for her mother, breached fiduciary duty to her mother by refusing to surrender life insurance policy in order to qualify her mother for Medicaid.

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Shaw v. Covenant Care Waldron Home. (Ind. Ct. App., No. 73A04-1005-SC-317, March 2, 2011) (unpublished).

Facts.  Mrs. Shaw appointed her daughter, Joni, to serve as her attorney-in-fact.  As Ms. Shaw’s agent, Joni signed an admission agreement in order to have her mother admitted to a nursing home and submitted a Medicaid application so that her mother could receive medical benefits.  The Medicaid application was denied because Ms. Shaw had resources in excess of the Medicaid limit as she owned a life insurance policy with a cash surrender value.  Joni refused to surrender the policy and Mrs. Shaw was never approved for Medicaid benefits.  Joni also withdrew funds from her mother’s bank account and deposited them into her personal account.

After Mrs. Shaw passed away, Joni’s brother, who was the designated beneficiary of the life insurance policy, gave Joni $8,000 from the proceeds of the policy.  The estate owed an unpaid balance of $5,709.40 to Mrs. Shaw’s nursing home, which amount Joni refused to pay from her mother’s estate.  The nursing home sued for breach of contract and breach of fiduciary duty, arguing that an attorney-in-fact who breaches a duty to the principal is liable to third parties as though he or she were the principal.  The small claims court of Indiana held in favor of the nursing home, and Joni appealed the decision.

Court’s Ruling.  The Indiana Court of Appeals affirmed the decision of the small claims court.  Joni was found to have breached her fiduciary duty to her mother by refusing to surrender the life insurance policy in order to qualify her mother for Medicaid (and later personally benefiting from the same policy), transferring funds from her mother’s account into her personal account and refusing to pay the debts of her mother’s estate.  By electing to personally benefit from her mother’s assets, to the detriment of Mrs. Shaw, Joni did not uphold her fiduciary duty to her mother and was not able to disregard the debts of her mother’s estate.