May v. Mid-Century Ins. Co.

• Decision Date: 19 December 2006
• Docket Number: No. 101,565.,101,565.
• Citation: 2006 OK 100,151 P.3d 132
• Parties: June C. MAY, M.D., Plaintiff/Appellant, v. MID-CENTURY INSURANCE COMPANY, a member of the Farmers Insurance Group of Companies, Defendant/Appellee, and Ray's Sewer Service, Inc., and The Waterford Homeowners Association, Inc., an Oklahoma nonprofit corporation, Defendants, v. Ray's Sewer Service, Inc., and Sine Construction, LLP, Third-Party Defendants.
• Court: Oklahoma Supreme Court

151 P.3d 132

2006 OK 100

June C. MAY, M.D., Plaintiff/Appellant, v. MID-CENTURY INSURANCE COMPANY, a member of the Farmers Insurance Group of Companies, Defendant/Appellee, and Ray's Sewer Service, Inc., and The Waterford Homeowners Association, Inc., an Oklahoma nonprofit corporation, Defendants, v. Ray's Sewer Service, Inc., and Sine Construction, LLP, Third-Party Defendants.

No. 101,565.

Supreme Court of Oklahoma.

December 19, 2006.

On Certiorari to the Court of Civil Appeals, Div. II.

¶ 0 A fire damaged the plaintiff's condominium unit as well as certain common elements of that property. The plaintiff brought a bad-faith tort action against the homeowners association's insurer. The District Court, Oklahoma County, Bryan C. Dixon, Judge, dismissed with prejudice the action against the insurer for failure to state a claim upon which relief may be granted. The Court of Civil Appeals affirmed the dismissal order. On certiorari granted upon the plaintiff's petition,

THE COURT OF CIVIL APPEALS' OPINION IS VACATED; THE TRIAL COURT'S DISMISSAL ORDER IS AFFIRMED.

Derek K. Burch, James A. Scimeca, Burch & George, P.C., Oklahoma City, OK, for Appellant.

Eric S. Eissenstat, Lance E. Leffel, Fellers, Snider, Blankenship, Bailey & Tippens, Oklahoma City, OK, for Appellee.

Rex Travis, Paul D. Kouri, Oklahoma City, OK, for Amicus Curiae, Oklahoma Trial Lawyers Association.¹

OPALA, J.

¶ 1 The dispositive issue on certiorari is whether the plaintiff (condominium unit owner) has a claim against the condominium association's insurer whose policy was issued to the (condominium owners') association. We answer in the negative and hold that the trial court's dismissal of the claim is error-free.

I THE ANATOMY OF LITIGATION

¶ 2 The plaintiff, Dr. June C. May (Owner), brought a claim against the Waterford Homeowners Association (condominium owners' association hereafter called Association), Ray's Sewer Service, Inc., and Mid-Century Insurance Company (Insurer) for acts or omissions arising out of a 12 November 2001 fire at the Waterford condominia. Owner alleges she owns an individual condominium unit that was substantially damaged by the fire. She initially sued the Association on 15 November 2002 for breach of its fiduciary duty to assure the timely repair and replacement of her damaged property.² In an amended petition filed 16 March 2004 she also sued (a) Ray's Sewer Service for negligently causing the fire that damaged her unit and (b) Insurer for its tortious bad-faith refusal to pay her the benefits due under Insurer's policy issued to Association.

¶ 3 According to Owner's petition, the insurance policy covered her individual unit (and all improvements to it), including property loss and damage caused by the fire. Owner claims Insurer breached its duty to deal fairly and act in good faith (a) by wrongly failing to pay benefits to which she is entitled under the policy and (b) by seeking recovery of expended indemnity (under the policy) through a subrogation action and settling that case without her knowledge and consent, thereby destroying her right of recovery for damages sustained in the fire directly against the negligent party.

¶ 4 Insurer moved to dismiss the action on the ground that the petition failed to state a claim upon which relief may be granted as well as because it was barred by the statute of limitations. According to Insurer, Owner is neither a named insured under the policy nor is identified therein as an additional insured. She stands as a stranger to the insurance contract and has no standing to bring a bad-faith tort claim. Insurer asserts that by the terms of the policy all benefits must be paid (and were paid) to the Association.

¶ 5 Owner countered that she is a third-party beneficiary of the coverage provided for her condominium unit. She rests her claim for relief on three factors—she paid a portion of the premiums used to maintain the policy in force; the policy was intended to insure against damage to (or loss of) property owned solely by her; and the policy allows Insurer to adjust her loss and to pay policy benefits directly to her. She also argued that Insurer utterly failed to show how her claim stood barred by the statute of limitations.

¶ 6 The trial court dismissed with prejudice Owner's action against Insurer for failure to state a claim upon which relief may be granted. It rejected Insurer's statute-of-limitations defense and concluded that (a) Association is the sole insured under the terms of the insurance policy and (b) under the policy's provisions Owner is neither an insured nor a third-party beneficiary with standing to bring a claim against Insurer for breach of the duty of good faith and fair dealing.³ Owner brought an appeal from the trial court's dismissal order.⁴

¶ 7 The Court of Civil Appeals (COCA) affirmed the trial court's dismissal of Owner's tort claim against Insurer for breach of its duty to deal fairly and act in good faith. According to COCA, Owner is precluded as a matter of law from recovering against Insurer on her bad-faith claim because she has not shown that any statutory or contractual relationship was in existence between her and Insurer which could give rise to tort liability.⁵

¶ 8 Every trial judge's decision comes to a court of review clothed with a presumption of correctness.⁶ Today we affirm the trial court's dismissal order on a theory different from that on which it was rested by the courts below. Although we let the nisi prius dismissal stand, we need not re-examine that decision here by applying exactly the same analysis as that which was used by the trial court. When supported by the record, a legally correct trial-court decision must be affirmed although it was anchored to a theory different from that on which it comes to be tested in appellate review.⁷

¶ 9 Although the conclusion we reach today is the same as that drawn by COCA, we granted certiorari to settle the law applicable to the case by crafting a precedential pronouncement.

II STANDARD OF REVIEW

¶ 10 In reviewing a nisi prius disposition by dismissal, this court examines the issues de novo.⁸ Motions to dismiss are generally viewed with disfavor.⁹ The purpose of a motion to dismiss is to test the law that governs the claim (in litigation), not the underlying facts.¹⁰ A motion to dismiss for failure to state a claim upon which relief may be granted will not be sustained unless it should appear without doubt that the plaintiff can prove no set of facts in support of the claim for relief.¹¹ The court, when considering a defendant's quest for dismissal, must take as true all of the challenged pleading's allegations together with all reasonable inferences that may be drawn from them.¹² A plaintiff is required neither to identify a specific theory of recovery nor to set out the correct remedy or relief to which he may be entitled.¹³ If relief is possible under any set of facts which can be established and is consistent with the allegations, a motion to dismiss should be denied.¹⁴ A petition can generally be dismissed only for lack of any cognizable legal theory to support the claim or for insufficient facts under a cognizable legal theory.¹⁵ Our recapitulation of the appellate standards for reviewing dismissals of claims will (and must) guide our decision in this case.

III THE PARTIES' ARGUMENTS ON CERTIORARI

¶ 11 Owner contends COCA erred in relying on Rednour v. JC & P Partnership¹⁶ and Anderson v. American Intern. Specialty Lines Ins. Co.¹⁷ for its analysis that she is not a third-party beneficiary of the condominium policy.¹⁸ She claims these cases are distinguishable in that they both deal with premises liability policies and the benefits thereunder were claimed by injured persons who might be able to assert liability claims against the insured¹⁹ Owner asserts Association purchased a property damage policy (rather than one for protection from liability) which insures the property of both the Association and the individual condominium owners. She claims the primary purpose of Association's policy is to protect all of the condominium property units regardless of ownership. According to Owner, Association holds the insurance policy as trustee for the benefit of all the unit owners.²⁰

¶ 12 Owner points out that another factor distinguishes this case from those of Rednour and Anderson. Insurer here brought a subrogation claim against the party that caused the fire and in it asserted claims belonging to Owner.²¹ Owner informs us that Insurer settled its subrogation claims without ever giving her notice of the lawsuit and obtaining her consent.²² According to Owner, if the policy does allow Insurer to pursue a lawsuit in her name she has standing in law as an express third-party beneficiary of the insurance policy to bring a bad-faith tort claim against the Insurer.²³

¶ 13 Owner claims a policy endorsement known as E3418²⁴ covered her property and allowed (if not required) the Insurer to make payment to her for the losses she sustained. According to Owner, this endorsement not only provides coverage for damage to various fixtures, improvements and alterations which were a part of the building structure within her condominium unit, but she was also an intended third-party beneficiary of that coverage. She claims that because the demonstrated indicia of her status qua third-party beneficiary of the policy are clear, COCA erroneously affirmed her claim's dismissal.

¶ 14 Insurer counters that Association purchased a common condominium policy as the sole named insured, while Owner secured no insurance of her own.²⁵ According to Insurer the insured structure in controversy here is part of the common structure for which Association is responsible. In contrast, Insurer claims Owner's sole responsibility is the airspace and personal property within her unit. Insurer asserts Owner is seeking to extend the breadth of Association's insurance policy's coverage to coincide with that...