Zukaitis v. Aetna Casualty and Surety Co. case brief summary

Zukaitis v. Aetna Casualty and Surety Co. case brief summary

FACTS
Insured doctor brought declaratory judgment action to determine whether insurer was obligated under its professional liability policy to defend insured in medical malpractice suit. 

 

-The District Court entered judgment for insurer, and insured appealed.

-The Supreme Court held that where insurance agency transferred insured's malpractice policy to different insurance company without notice to insured, notice given to agency by insured of malpractice suit against insured constituted notice to original insurer whose policy was still in effect at time of alleged malpractice, and insurer was thus obligated to carry out terms of insurance contract with insured.

 

Holding: Reversed and remanded with directions.

 

Rules:

 

                                                              i.       A revocation (by agreement of the principal and agent) of the agent’s authority does not become effective as between the principal and third persons until they receive (actual) notice of the termination.

                                                            ii.      When the insurer terminates the agency contract, it is the duty to notify third persons, such as the insureds with whom the agent dealt, and inform them of such termination. If it does not so notify and such third persons deal with agent without notice or knowledge of the termination, and in reliance on the apparently continuing authority of the agent, the insurer is bound by the acts of the former agent.