Killing the Goose That Laid the Golden Egg

In Basil v. Wolf, 193 N.J. 38 (2007), New Jersey's Supreme Court rejected a claim for imputed liability against an insurer that had hired a physician to perform an independent medical examination. In doing so, however, the court explained that apparent authority imposes liability on the principal “not as the result of the reality of a contractual relationship but rather because of the actions of a principal or employer in somehow misleading the public into believing that the relationship or the authority exists.” The key question is “whether the principal has by his voluntary act placed the agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the particular business, is justified in presuming that such agent has the authority to perform the particular act in question.” Thus, in the context of a hospital and its independent contractor physicians, there would be apparent authority “in those cases where it can be shown that a hospital, by its actions, has held out a particular physician as its agent and/or employee and that a patient has accepted treatment from that physician in the reasonable belief that it is being rendered in behalf of the hospital.” Basil, 193 N.J. at 67 (citations omitted).