What Is Breach of Fiduciary Duty?

Personal Injury Lawyer

An injured plaintiff can include a claim for breach of fiduciary duty in a personal injury action if they had a special relationship with the defendant, who therefore owed them a fiduciary duty. If the plaintiff and defendant did have a fiduciary relationship, and the defendant committed a tort in which they breached their fiduciary duty to the plaintiff, and the plaintiff is injured as a result of that breach, the plaintiff will be entitled to damages from the fiduciary defendant. Further, a person who assists a fiduciary in breaching his or her duty may also be liable for the fiduciary’s breach. 

Fiduciary Relationships

A fiduciary duty exists when one person places their trust, confidence, and reliance in another person to exercise discretion or expertise on their behalf. The fiduciary must consent to accepting that trust and confidence. The fiduciary is obligated to act solely in the interest of their client, or the principal, and owes a legal duty to the principal. There are two main aspects to a fiduciary duty: the duty of care and the duty of loyalty. The duty of care means that the fiduciary will exercise reasonable care in acting on behalf of the principal. The duty of loyalty means that the fiduciary will always act in the principal’s best interest and will avoid conflicts of interest.

A fiduciary breaches their duty if they fail to act in the best interests of the principal. Usually, the fiduciary does so to further their own interests or the interests of a third party whose interests are adverse to the principal’s. A breach can also occur if the fiduciary fails to provide material information to a client, thereby misleading them or giving them misguided advice. Fiduciaries should disclose all possible conflicts of interest to their principals, because conflicts of interest can be grounds for a breach of fiduciary duty. 

Examples of those who owe fiduciary duties are trustees to estate beneficiaries, guardians to their wards, financial advisors and accountants to investors, directors of companies to stockholders, and attorneys to clients. Further, an employee may have a fiduciary duty to act in his or her employer’s best interests by not sharing trade secrets, not misappropriating company equipment for private use, and not taking customers to a competitor. 

Elements of a Breach of Fiduciary Duty Claim 

There are four elements to a breach of fiduciary duty claim: (1) duty, (2) breach, (3) damages, and (4) causation. The plaintiff must prove that a fiduciary duty existed. A fiduciary duty is often accepted in writing and can also be proven by the existence of a fiduciary relationship. The plaintiff must next prove that the defendant breached their fiduciary duty to the plaintiff. Examples of breaches of fiduciary duties include a bank disclosing its customers’ financial information, a trustee mismanaging an estate, and an attorney revealing a client’s privileged information. Third, the plaintiff must show that the defendant’s breach caused them actual damage, such as a monetary loss. Fourth, the plaintiff must show that the defendant’s breach was the proximate cause of their damages. 

If a plaintiff is successful in proving a breach of fiduciary duty claim, they can recover monetary damages, and the court can also revoke the fiduciary’s license. 

Thanks to the personal injury lawyer at Eglet Adams for their insight on breach of fiduciary duty.