Foran Glennon Palandech Ponzi & Rudloff

August 2014

Real Party in Interest: What’s in a Name

Diana Lotfi

Jurors inherently have preconceived notions and biases.  In a subrogation case, the concern is prejudice against insurance companies.  To avoid this, a Plaintiff may decide not to bring suit in the name of the insurer, but this warrants more than choosing whether to file suit in the insured’s name. Jurisdictions vary on whether an insurer can file suit in the name of a fully reimbursed insured, a partially reimbursed insured, or whether both the insurer and insured must be joined.  These considerations must be analyzed in determining the real party in interest.

Discussion.  While an insurer subrogee is the real party in interest and is generally entitled to commence a subrogation action in its own name, a subrogee may want to avoid jury bias against insurance companies by filing suit under the insured’s name.  Each state, as well as the federal system, have adopted rules or statutes which require that all actions be brought in the name of the “real party in interest”.

The function of Federal Rule of Civil Procedure 17(a), the real party in interest rule, is to require that the plaintiff be the person who, under the substantive law, has the right to bring and control the action.  The basic purpose of requiring real parties in interest to prosecute actions is to protect defendants from subsequent similar suits and to ensure that any judgment will be res judicata.

Under California law, the insurer subrogee is the real party in interest to the extent of its payment, on the claim against the responsible party.  As such, it is entitled to sue thereon in its own name.  Offer v. Sup.Ct., 194 Cal. 114, 121 (1924). Alternatively, the insurer may sue in the name of the insured with the latter’s consent.  Greco v. Oregon Mut. Fire Ins. Co., 191 Cal.App.2d 674, 687 (1961).  Should a defendant attempt to dismiss the action for failure to bring the suit in the name of the real party in interest, or seek joinder of the insurer subrogee, an assignment executed by the insured authorizing the insurer to sue in the insured’s name will overcome any concern the insured is not the proper party.  Lebet v. Cappobiacho, 38 Cal.App.2d Supp. 771 (1940).

In Rhoner, Gehrig & Co. v. Capital City Bank,applying New York substantive law, the court held that when part of a cause of action has been subrogated, the partial owners are real parties in interest to the extent of their claim. The court further suggested that either party may sue to protect its rights. The court did not indicate that joinder of both insured and insurer was mandatory.  Rohner, Gehrig & Co. v. Capital City Bank, 655 F.2d 571, 579 (5th Cir. 1981).

Under Ohio law, an insurer subrogee may sue in the name of the insured without joining the insurer, for whose benefit the action is brought.  Ohio Civil Rule 17.  However, a defendant can move to join the insurer as a co-plaintiff, invoking Ohio Civil Rule 19 which provides that the Court shall join a party to an action if the party has an interest relating to the subject of the action as an assignor, assignee, subrogor, or subrogee.  Ohio Civil Rule 19(a).

Conclusion.  While it may be to the insurer’s advantage to bring the action solely in the name of its insured, it is important to understand whether the jurisdiction allows a defendant to force joinder of a subrogated insurer or whether an assignment between the insured and insurer will prevent joinder.