Hearn Pacific Corp. v. Second Generation Roofing, Inc.

An insurer that was assigned its insured’s claim against its subcontractor could continue the suit in the insured’s name under CCP 368.5 after the assignment, but could not use that procedural convenience to avoid liability for the subcontractor’s attorney fees when it lost.  In multi-party construction defect litigation, Hearn, the general contractor, settled with the plaintiffs and assigned its rights against its subcontractors to its insurer which then pursued, in Hearn’s name, an indemnity and contribution cross-complaint against Second Generation, on which Second Generation prevailed and obtained an award of $200,000+ in attorney fees under the attorney fee clause in its subcontract with Hearn.  Held, the trial court erred in denying Second Generation’s motion to add Hearn’s insurer as a additional judgment debtor on the fee award order.  Under CCP 368.5, when a party assigns a chose in action, the assignee can continue the action in the assignor’s name, or the court may allow the assignee to be substituted in place of the assignor.  Here, no party minded that the cross-complaint was maintained in Hearn’s name even after its assignment of the claim to its insurer, but section 368.5 cannot be used as a shield to protect the insurer, which was the real party to the litigation, from liability for the opponent’s attorney fees when the insurer lost.

California Court of Appeal, First District, Division 2 (Stewart, J.); May 2, 2016; 2016 WL 1757290

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