Am. Cas. Co. v. Griffith - 107 Ga. App. 224, 129 S.E.2d 549 (1963)

Rule:

An insuring agreement is an agreement to pay on behalf of the insured only such sums as he shall become legally obligated to pay.

Facts:

The insured executed notes to the accident victims that stated that the insurer would pay the accident victims $ 7,500 in settlement of the accident victims' action against the insured, to be payable from any sums collected in an action against the insurer. The notes contained a provision that the accident victims would not enforce collection of the note against the insured personally. In the insured's action against the insurer, the insurer filed a general demurrer and alleged that the notes were not promissory notes because they were not unconditional promises to pay at a determinable future date. The insurer further argued that it was not liable because its liability was limited under the insurance agreement to amounts that the insured was legally obligated to pay. The trial court overruled the insurer's demurrer and the insurer appealed.

Issue:

Under the circumstances, could the insurer be held liable to the accident victims under the note executed by the insured? 

Answer:

No.

Conclusion:

The court reversed the judgment of the trial court and held that the insurer was not liable to the accident victims under the note executed by the insured. According to the court, the instrument was not a promissory note or any other obligation of the insured since it did not contain an unconditional promise to pay anything at any determinable future date. Furthermore, the principal amount of recovery sought was not recoverable because it was not shown to be an amount which the insured was legally obligated to pay, and the promise of the insurer was only to pay such sums as the insured would be legally obligated to pay in damages.