Oklahoma Case Law


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,
Oklahoma nonprofit corporation, Defendants, v. RAY’S SEWER
Defendants. No 101565. Supreme Court Of Oklahoma.
Decided: December 19, 2006. DO NOT PUBLISH

[EDITOR’S NOTE: This case is unpublished as indicated by the

Derek K. Burch, James A. Scimeca, BURCH & GEORGE, P.C.,
Oklahoma City, Oklahoma, for Appellant.

Eric S. Eissenstat, Lance E. Leffel, FELLERS, SNIDER,
BLANKENSHIP, BAILEY & TIPPENS, Oklahoma City, Oklahoma, for
Appellee Rex Travis, Paul D. Kouri, Oklahoma City,
Oklahoma, for Amicus Curiae, Oklahoma Trial Lawyers

[fn1] Identified herein are only those counsel for the
parties whose names appear on the certiorari briefs.


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,



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.



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.[fn2] 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

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.[fn3] Owner
brought an appeal from the trial court’s dismissal

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.[fn5]

8 Every trial judge’s decision comes to a court of
review clothed with a presumption of correctness.[fn6]
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.[fn7]

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



10 In reviewing a nisi prius disposition by
dismissal, this court examines the issues de novo.[fn8]
Motions to dismiss are generally viewed with disfavor.[fn9]
The purpose of a motion to dismiss is to test the law that
governs the claim (in litigation), not the underlying
facts.[fn10] 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.[fn11] 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.[fn12] 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.[fn13] 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.[fn14] 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.[fn15] Our recapitulation of the appellate standards
for reviewing dismissals of claims will (and must) guide
our decision in this case.



11 Owner contends COCA erred in relying on Rednour
v. JC & P Partnership[fn16] and Anderson v. American
Intern. Specialty Lines Ins. Co.[fn17] for its analysis
that she is not a third-party beneficiary of the
condominium policy.[fn18] She claims these cases are
distinguishable in that they both deal with premises
liability policies and the benefits there under were
claimed by injured persons who might be able to assert
liability claims against the insured[fn19]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.[fn20]

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.[fn21] Owner informs us that Insurer settled its
subrogation claims without ever giving her notice of the
lawsuit and obtaining her consent.[fn22] 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.[fn23]

13 Owner claims a policy endorsement known as
E3418[fn24] 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.[fn25] 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 of a unit policy she chose not to

15 Insurer claims the plain language of the
policy, viewed in its totality, shows the contracting
parties’ primary purpose was to protect the interests and
property of the named insured (Association).[fn26]
According to Insurer, endorsement E3418[fn27] does not alter
or widen that object. The intent of E3418, Insurer asserts,
is to extend the Association’s coverage to property where a
certain fixture or appliance is a part of the common
structure and is therefore the Association’s

16 Insurer claims that rather than expressly
conferring a benefit, E3418 merely recognizes that property
covered thereunder may be owned by individual unit owners
rather than Association. According to Insurer, any benefit
to Owner which may be conferred by the endorsement is
incidental to the policy’s primary purpose and hence is
insufficient to confer standing upon her to sue Insurer for
breach of the implied duty of good faith and fair dealing.

17 Insurer argues that to confer standing to sue
an insurer in tort for breach of an implied duty of good
faith and fair dealing there must be either a statutory or
contractual basis. One’s mere entitlement to benefits paid
to the insured, Insurer claims, is not sufficient to confer
standing.[fn28] Insurer asserts COCA applied the correct
analytical framework for determining Owner’s lack of
standing to bring a bad-faith claim.

18 In response to Owner’s argument that Insurer
had pursued a subrogation claim on her behalf against the
tortfeasor, Insurer informs us that no such claim was in
fact made. Insurer assures us that it pursued a subrogation
action solely in the name of the named insured

19 Although neither the insurance policy here in
suit nor the declaration of ownership was affixed to the
second amended petition below, the insurance policy was
submitted as part of the Insurer’s dismissal quest and the
pertinent declaration provisions were affixed to Owner’s
response. They stand hence tendered for our consideration
here.[fn29] The parties must be deemed to have adopted these
documents as fit and proper for our analysis in
entertaining this cause.[fn30]



20 Owner’s bad-faith tort claim against Insurer
rests on her asserted status as an intended third-party
beneficiary for losses defined by the condominium policy.
The motion to dismiss was brought to test whether Owner had
a legal claim based on Insurer’s breach of any duty owed
her under the policy.

21 In this appeal our concern is solely with the
Insurer’s liability to the condominium unit owner. We make
no reference to Owner’s claim against Association. The
rights and duties, if any, owed by Association to unit
owners are clearly not at issue before us. Today’s opinion
stands confined solely to the rights between Owner and
Insurer inter se.


The Provisions of the Policy Give Owner No Enforceable
Contractual Rights To Any Indemnity That May Be Due for A
Covered Property Loss

22 To ascertain the nature of Insurer’s
contractual obligations to Owner, if any, we must examine
the provisions of the policy. An insurance policy is a
contract.[fn31] The rules of construction and analysis
applicable to contracts govern equally insurance
policies.[fn32] The primary goal of contract interpretation
is to determine and give effect to the intention of the
parties at the time the contract was made.[fn33] In
arriving at the parties’ intent, the terms of the
instrument are to be given their plain and ordinary
meaning.[fn34] Where the language of a contract is clear and
unambiguous on its face, that which stands expressed within
its four corners must be given effect.[fn35] A contract
should receive a construction that makes it reasonable,
lawful, definite and capable of being carried into effect
if it can be done without violating the intent of the
parties.[fn36] We review the meaning assigned by the trial
court to a contract as a legal question.[fn37] Questions of
law are reviewed by a de novo standard.

23 Association is the sole named insured upon the
condominium insurance policy issued by Insurer. The terms
of the endorsement known as E3418 provide coverage for
certain types of property that may belong to third-party
unit owners — i.e., fixtures, improvements, and
alterations that are a part of the building or structure as
well as appliances.[fn38] The loss payment provisions of
endorsement E3422[fn39] give Insurer the exclusive choice
to settle covered losses directly with the unit owners or
with Association “for the account” of the unit owners.

24 The contract’s expressed intent to confer
solely on Insurer the power to regard all contractual
obligations due under the policy as extending to the named
insured specifically negates the existence of any
enforceable obligation in favor of unit owners qua
third-party beneficiaries. No obligation may be imposed
upon a promissor in favor of a third party if the contract
expressly relieves that promissor of such liability to that
third party.[fn40] It is crystal-clear by the terms of the
policy in suit that the parties to the policy —
Insurer and Association — did not intend to confer
on any third-party unit owner a legally enforceable right
of recovery against Insurer.

Third-Party Beneficiary Status

25 A third-party beneficiary’s rights depend upon,
and are measured by, the terms of the contract between the
promissor and promisee.[fn41] One to whom, by the express
terms of a contract, no obligation is due from its
promissor, cannot qualify for the status of an intended or
implied third-party beneficiary. The express contractual
negation of the promissor’s duty to the third-party status
seeker operates to exclude that third party from legal
recognition as third-party promisee.[fn42]

26 Evident as it is that under the express terms
of the policy in suit Insurer is not obligated to pay
directly to Owner any part of the indemnity that may be due
for the loss she claims to have sustained, it would be
indeed utterly pointless to search further for support or
abnegation of her third-party beneficiary status. That
status, even if found, would be of no help to her recovery
quest. We hence refuse to engage in a vain and useless
analytical effort.

27 In sum, the policy in suit expressly withholds
from Owner any claim to an enforceable obligation against
Insurer. The policy’s exclusionary provisions specifically
bar unit owners from any direct contractual benefit from
Insurer. Owner was hence contractually deprived of any
right to assert a bad-faith tort claim against the insurer.

28 In the trial court Owner laid no claim to
reformation[fn43] or invalidation[fn44] of any exclusionary
clauses of the policy which are pertinent to our inquiry.
Nor does she here refer to a demand for that relief. We
must hence accept the policy’s exclusionary clauses as
valid. Owner is bound by those policy provisions. They
prevent her from laying a direct claim against Insurer.

Owner’s Lack of Financial-Interest Theory

29 Owner contends Association has no financial
interest in her separate property and is hence not entitled
to indemnity for the loss of covered property owned by her.
She directs us to policy language which states that Insurer
will not pay Association more than its “financial interest”
in the insured property.[fn45] We find no conflict between
this provision and the policy clause that allows Insurer to
pay Association directly for the covered loss of a unit
owner’s property. In the latter case, Association would
receive those funds for the benefit of the unit owner
rather than as indemnity for some covered losses of its

Owner’s Subrogation Theory

30 Owner contends that if the policy allows
Insurer to bring a subrogation claim in her name, she has
standing as an express third-party beneficiary of the
policy to bring a bad-faith claim against Insurer.

31 This argument is of no avail here. Under the policy in
suit Insurer owes no duty of any kind to Owner. Insurer’s
claim against a third-party tortfeasor would neither create
a contractual duty in favor of Owner nor invest her with a
right to claim against Insurer.



32 The condominium policy in suit gives only to
the Insurer the power to choose whether to settle for
covered losses with the insured or with the third-party
unit owner. Because the policy’s exclusionary provisions
expressly negate the existence of an insurer’s contractual
duty to pay directly to Owner, Insurer is not contractually
obligated to indemnify her directly for any losses to her
condominium unit.

33 Owner’s status as a third-party beneficiary,
even if found, would not be helpful to her recovery in a
bad-faith tort claim. This is so because under the policy
in suit she has no right to recover against Insurer. In the
trial court Owner has not challenged any of the key
exclusionary clauses by asserting her own claim for policy
reformation or for invalidation of the key offending
provisions. She is hence bound by those policy clauses
which operate today to defeat her claim for recovery
directly from Insurer.

34 On certiorari granted upon the plaintiff’s
petition the Court of Civil Appeals’ opinion is vacated and
the trial court’s dismissal order affirmed.

EDMONDSON, and TAYLOR, JJ., concur;

36 COLBERT, J., concurs in part and dissents in

37 WATT, C.J., dissents;

38 KAUGER, J., not participating.