Understanding Legal Liability of Agents: Actions that Can Lead to a Lawsuit Under the Florida Power of Attorney Act

Understanding Legal Liability of Agents: Actions that Can Lead to a Lawsuit Under the Florida Power of Attorney Act

The Florida Power of Attorney Act provides a framework for the delegation of authority through a power of attorney (POA) document. This legal tool allows an individual (the principal) to appoint another person (the agent) to make decisions on their behalf. While this arrangement offers convenience and flexibility, it also comes with significant responsibilities and legal obligations for the agent. Failure to adhere to these responsibilities can lead to legal consequences, including lawsuits. Here are some of the actions that an agent may be sued for under the Florida Power of Attorney Act.

1. Breach of Fiduciary Duty

An agent under a POA has a fiduciary duty to act in the best interests of the principal. This includes:

  • Loyalty: Acting solely for the benefit of the principal.

  • Care: Making decisions with the same care and prudence as one would for their own affairs.

  • Obedience: Following the terms and instructions outlined in the POA document.

According to Florida Statutes § 709.2114, the agent must act in accordance with the principal’s reasonable expectations to the extent known, and otherwise, in the principal’s best interest.

Example: If an agent uses the principal's funds for personal expenses or investments that are not in the principal’s best interest, this constitutes a breach of fiduciary duty.

2. Self-Dealing

Self-dealing occurs when an agent engages in transactions that benefit themselves at the expense of the principal. This is strictly prohibited unless explicitly authorized by the POA document.

Florida Statutes § 709.2114(2) specifies that an agent must act loyally for the sole benefit of the principal and avoid conflicts that could impair their ability to act impartially in the principal’s best interest.

Example: An agent sells the principal's property to themselves or a relative at a price below market value without the principal's consent.

3. Mismanagement of Principal’s Assets

Proper management of the principal’s assets is crucial. Mismanagement can include actions such as:

  • Negligence: Failing to maintain the principal’s property, resulting in its depreciation.

  • Poor Investment Choices: Investing the principal's money in high-risk ventures without proper consideration of the principal’s financial goals and risk tolerance.

Under Florida Statutes § 709.2114(3), an agent must act with the care, competence, and diligence ordinarily exercised by agents in similar circumstances.

Example: If an agent neglects to pay property taxes, leading to liens or foreclosure on the principal’s property, this can be considered mismanagement.

4. Unauthorized Actions

An agent must act within the scope of authority granted by the POA. Any action outside this scope can lead to legal repercussions.

According to Florida Statutes § 709.2106(3), the authority granted to an agent must be explicitly stated in the POA document .

Example: If the POA document only authorizes the agent to manage bank accounts, but the agent also attempts to sell the principal’s real estate, this exceeds the granted authority.

5. Failure to Act

In some cases, an agent's inaction can also be grounds for a lawsuit. The agent is expected to act when necessary to protect the principal’s interests.

Florida Statutes § 709.2114(4) requires an agent to act prudently and to use any special skills or expertise possessed by the agent .

Example: If the agent knows about a looming financial issue or legal deadline and fails to address it, leading to a loss or penalty for the principal, they may be held liable for failure to act.

6. Conflict of Interest

An agent must avoid situations where their personal interests conflict with those of the principal, unless the conflict is disclosed and consented to by the principal.

Florida Statutes § 709.2114(2)(b) mandates that an agent must not create conflicts of interest that impair the agent’s ability to act impartially .

Example: An agent who is also a business partner with the principal might face a conflict of interest if they make decisions that benefit their business rather than the principal.

Legal Recourse and Remedies

When an agent violates their duties under the Florida Power of Attorney Act, the principal, or someone acting on the principal’s behalf, can take legal action. Possible remedies include:

  • Revocation of the POA: The principal can revoke the power of attorney, terminating the agent’s authority (Florida Statutes § 709.2110) .

  • Financial Restitution: The agent may be required to reimburse the principal for any financial losses resulting from their actions.

  • Compensatory Damages: The principal may seek compensation for any additional harm caused by the agent’s misconduct.

  • Punitive Damages: In cases of egregious misconduct, the court may award punitive damages to deter similar behavior in the future.

Conclusion

Serving as an agent under a power of attorney is a position of great trust and responsibility. The Florida Power of Attorney Act outlines clear guidelines and expectations for agents, and violations of these can lead to serious legal consequences. Agents must always act in the best interest of the principal, avoid conflicts of interest, and operate within the bounds of their authority. By understanding and adhering to these legal duties, agents can protect themselves from potential lawsuits and ensure they are fulfilling their role effectively and ethically.

Joel Ewusiak assists clients in power of attorney disputes. Please contact Joel for help for your specific matter.