Opinion ID: 2633535
Heading Depth: 2
Heading Rank: 3

Heading: Conflicting Court of Appeal Decisions

Text: In Xebec, supra, 12 Cal.App.4th 501, 15 Cal.Rptr.2d 726, Xebec Corporation entered into an agreement with Xebec Development Partners (XDP), whereby XDP would provide nearly $14 million to Xebec Corporation for research and development, and Xebec Corporation in exchange would assign to XDP the rights to new technology. ( Id. at p. 517, 15 Cal.Rptr.2d 726.) Later, XDP sued Xebec Corporation and two of its officers for misappropriating the funds earmarked for research and development. ( Ibid. ) National Union Fire Insurance Company (National Union) claimed it had not received timely notice of the lawsuit and on this basis declined to defend the Xebec Corporation officers in the suit, which resulted in a stipulated arbitration award against Xebec Corporation and the two officers, on which judgment was then entered, in excess of $9 million. ( Id. at pp. 521-523, 15 Cal.Rptr.2d 726.) The arbitration settlement agreement included provisions under which Xebec Corporation assigned to XDP its rights against National Union. ( Id. at p. 523, 15 Cal.Rptr.2d 726.) Under this assignment, XDP sued National Union for refusing in bad faith to defend the officers of Xebec Corporation in the original lawsuit. ( Id. at p. 524, 15 Cal. Rptr.2d 726.) The action was tried to a jury, which returned a general verdict against National Union for more than $7 million, and the trial court awarded XDP attorney fees under Brandt, supra, 37 Cal.3d 813, 210 Cal. Rptr. 211, 693 P.2d 796. ( Xebec, supra, 12 Cal.App.4th at pp. 526, 571, 15 Cal.Rptr.2d 726.) In a lengthy opinion dealing with a variety of issues arising from the complicated underlying factual situation, the Xebec Court of Appeal reversed the trial court's ruling as to the award of Brandt fees to XDP, devoting just over one page to that issue. ( Id. at pp. 571-572, 15 Cal. Rptr.2d 726.) The Court of Appeal in Xebec observed that XDP was a third party claimant and a stranger to the policy. ( Xebec, supra, 12 Cal.App.4th at p. 572, 15 Cal.Rptr.2d 726.) As an assignee of the insured, XDP could assert only those rights the insureds had had, and it could assert the rights only in the stead of the insureds. ( Ibid. ) Because none of the insureds had incurred attorney fees to compel payment of policy benefits, the Court of Appeal concluded that XDP could not assert their rights under Brandt, nor could it assert a right to Brandt fees on its own behalf because the fees it thus incurred cannot be construed as tort damages to XDP, because National Union had no duty to XDP to pay policy benefits to anyone. ( Ibid., italics in original.) In this case, the Court of Appeal expressly disagreed with that analysis. It focused on this court's language in Murphy, supra, 17 Cal.3d at page 942, 132 Cal.Rptr. 424, 553 P.2d 584, and in Reichert, supra, 68 Cal.2d at page 834, 69 Cal.Rptr. 321, 442 P.2d 377, articulating the principle that all tort claims are assignable under section 954 except those of a purely personal nature. The Court of Appeal here reasoned that Brandt fees constitute an economic loss and are not personal in nature, and therefore under section 954 the right to recover Brandt fees is assignable. It rejected Essex's argument that because Brandt fees are tort damages, only fees incurred by the insured are recoverable. It observed that the right assigned by Sanchez was the right to recover the policy benefits in full, undiminished by the attorney fees incurred in bringing the actions to recover those benefits, and that [t]he identity of the party incurring attorney fees to vindicate the insured's rights under the insurance policy is irrelevant....