Powers Of Attorney Do Not Create Blanket Immunity For Banks

Because of a recent decision by the Tennessee Court of Appeals, a bank may not rely as heavily on a Power of Attorney ("POA") as much as it may have relied previously for immunity to claims brought against the bank by the Grantor of the POA. A bank may now be held liable for transactions made by the Agent, even when the POA grants broad and virtually unrestricted authority to the Agent.

Until recently, there appeared to be a conflict in the Tennessee Code. On the one hand, state law provides what appears to be unfettered immunity to banks for transactions involving a POA:  Banks "may recognize the authority of a power of attorney authorizing in writing an attorney-in-fact to operate . . . the account of a depositor . . . until the bank receives written notice of the revocation of the authority."  Further, "[n]o bank shall be liable for damages" for making payments in accordance with the terms of a POA. See TCA § 45-2-707.