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Terrell v. Lawyers Mutual Liability Insurance Co.12/15/1998
editious method of procuring a judicial decree construing . . . written instruments and declaring the rights and liabilities of parties thereunder").
In the instant action, plaintiff sought to have the trial court construe a contract to which she was not a party. Because the policy cannot be assigned, plaintiff is not a person who is or can be "interested . . . under contract." N.C. Gen. Stat. ยง 1-254 (1996).
Even if plaintiff had standing to seek a declaratory judgment, plaintiff's claim nonetheless fails because the confession of judgment obtained by plaintiff against Hockman is not a judgment that defendant is "legally obligated to pay" under the terms of the policy. The obligation of defendant is to pay "all sums which insured shall become legally obligated to pay." Because an insurance company's liability is derivative in nature, "its liability depends on whether or not its insured is liable to the plaintiff." Lida Manufacturing Co. v. U.S. Fire Ins. Co., 116 N.C. App. 592, 595, 448 S.E.2d 854, 856 (1994). As a result, "when an insurance policy contains language such as `legally obligated to pay,' an insurer has no obligation to an injured party where the insured is protected by a covenant not to execute." Id. at 596, 448 S.E.2d at 857.
In the instant case, plaintiff agreed to execute her judgment against the policy rather than against the insured, Hockman. Therefore, plaintiff's claim is barred because Hockman is not "legally obligated to pay" plaintiff for any damages based on breach of contract or otherwise. Defendant's obligations under the policy were extinguished by the execution of the Memorandum of Settlement, if not before.
In addition, in reviewing the policy, we note it provides " o action shall lie against the Company . . . until the amount of the Insured's obligation to pay shall have been finally determined either by final judgment against the Insured after actual trial or by written agreement of the Insured, the claimant and the Company." (emphasis added). Because Hockman's obligation to plaintiff was not determined after an actual trial and defendants were not a party to the memorandum of settlement in which Hockman agreed to execute a confession of judgment, defendants are not "legally obligated to pay" plaintiff any damages. Put simply, defendant's obligations under the policy do not extend to the execution of the memorandum of settlement and the subsequent confession of judgment. Accordingly, plaintiff's contentions are without merit.
After carefully reviewing plaintiff's remaining assignments of error, we determine they are without merit.
Affirmed.
Judges WALKER and MCGEE concur.
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