In Allstate v. Evans, 409 S.E.2d 273 (Ga. App. 1991), the Georgia Court of Appeals held that the defendant’s insurer has the right to pay to other claimants up to the policy limits (i.e, exhaust the policy) and, if this is done, they will not be liable to a subsequent claimant or judgment creditor.
In the Evans case, the Court noted that the case concerned the right of a casualty insurer to exhaust the policy coverage applicable to a common disaster or occurrence by selectively settling a portion of the claims against its insured arising from the accident, to the detriment of other claimants who are thereby denied the means to satisfy their claims against the insured. The Evans case was a case of first impression for the Georgia Court of Appeals, with the Court stating in the opinion, “there are no Georgia cases dealing with this particular issue. However, the courts of other jurisdictions which have confronted the issue appear to have held uniformly that “[a] liability insurer may, in good faith and without notification to others, settle part of multiple claims against its insured even though such settlements deplete or exhaust the policy limits so that remaining claimants have no recourse against [the] insurer. . . Were the rule otherwise, an insurer would be precluded from settling any claims against its insured in such a situation and would instead be required to await the reduction of all claims to judgment before paying any of them, no matter how favorable to its insured the terms of a proposed settlement might be. Such a policy would obviously promote litigation and would also increase the likelihood, in many cases, that the insured would be left with a total adjudicated liability in excess of his policy limits.”
The Court, did however note in dicta: “There is neither any evidence nor any allegation that the appellant in this case acted in bad faith in settling with the other claimants. Applying the foregoing rule adopted by other jurisdictions which have considered the issue, we consequently hold that the trial court erred in ruling that the appellant was liable to the appellees for the full amount of the judgments which they had obtained against its insured.”