October 24, 2014

Written By: Laura R. Feitelson

 On July 2, 2014, Act 95 was passed into law and became effective immediately. The legislation amended Title 20 Chapter 56 of the Pennsylvania Code and made a number of changes which affect a third party’s liability when accepting a Power of Attorney, acting upon an Agent’s instructions, and rejecting a Power of Attorney.

The legislature enacted the new law in response to Teresa M. Vine v. Commonwealth of Pennsylvania, State Employees’ Retirement Board, 607 Pa. 648, 9 A.3d 1150 (2010). In Vine, the Pennsylvania Supreme Court found a third party liable for accepting and acting on the instructions of an Agent when a facially valid Power of Attorney was, in fact, invalid. In the case, Teresa Vine’s husband used a fraudulent Power of Attorney to change the disposition of her retirement benefits. Teresa Vine lacked sufficient capacity to execute the Power of Attorney and the Court found the State Employees’ Retirement Board liable for the invalid change in the disposition of her retirement benefits.

The new law now gives comfort to those who accept a Power of Attorney in good faith, even if the Power of Attorney turns out to be void, invalid or terminated. So long as a third party relies on a Power of Attorney in good faith and is not on notice of a problem with the Power of Attorney, they will be protected from liability. However, it is important for third parties to understand the scope of authority the Power of Attorney grants to the Agent. If a third party erroneously allows an Agent to act beyond the scope of powers granted in the Power of Attorney, there is no protection. Therefore, it is important for third parties to ensure they employ staff who are knowledgeable on Powers of Attorney.

Under the new law, third parties must accept a Power of Attorney when it is presented to them. If the third party suspects that there is something wrong with the Power of Attorney, they may request an Agent’s certification stating that the document is valid or for an opinion of counsel within seven days. If the third party requests an opinion of counsel within seven days, it shall be at the Principal's expense. A third party must accept the Power of Attorney within five days after receipt of Agent’s certification or opinion of counsel. However, acceptance is not required in certain cases which are listed in § 5608.1(b)

A third party who erroneously refuses to accept a Power of Attorney is subject to:

• Civil liability for pecuniary harm to the economic interests of the Principal proximately caused by the person's refusal to comply with the instructions of the Agent designated in the Power of Attorney.
• A court order mandating acceptance of the Power of Attorney.

If a third party has any doubts as to whether they should accept a Power of Attorney, reject a Power of Attorney, or whether an agent has the authority to exercise a specific power, the attorneys at Hill Wallack LLP are available to provide advice and guidance.


About Hill Wallack LLP

Founded in 1978, Hill Wallack LLP is a leading law firm with offices in Yardley, Pennsylvania and Princeton and Morristown, New Jersey. Our regional strength places us in an ideal position in today’s market. With over 70 lawyers, our mid-market size allows us to provide sophisticated, high-level service to clients in a cost-efficient, responsive manner.