Legal Question in Construction Law in California

I don't know of any such law, and the concept seems to be contrary to the principles of due process.

It is true that a homeowner who is uncertain as to which participant in the construction bears the responsibility may (and usually does) name the (known) general contractor and/or the developer as defendants, and also sue a bunch of so-called "John Doe" defendants without specifying each by name. As the suit progresses, if investigation or the discovery process turns up additional names of parties who should be defendants, these can be added to the case by a relatively simple process of amending the complaint to identify a "Doe" defendant as, for example, Jones Plumbing Company, LLC. Next, however, the homeowner plaintiff will have to serve Jones with the summons and complaint, and probably also all other papers on file in the case.

However, this process of identifying and adding Doe defendants is a far cry from automatic inclusion of all "outsourced contractors" as defendants in the case.

Another way that subcontractors can be hauled into court is by the initial defendant(s) bringing cross-complaints. Again, this is not automatic and requires complying with statutory procedures for filing the cross-complaint and serving the summons and cross-complaint on each cross-defendant.

There is no such law. It is common practice, but there is no law that requires it, much less makes it automatic. The first reason it is such common practice is a legal technicality. The developer and contractor generally do little or no actual work on a residential development. The general may do the rough carpentry, but that is rarely a source of construction defects worth of litigation. So if there is something wrong with the work, it was subcontractors who did it. But the homeowner only had a contract with either the builder or the developer (either a construction contract for a custom home, or a purchase contract for a developer-built subdivision). So the owner can only sue them for breach of contract. The owner has no contract with the subs. Sometimes, especially in a condo development, the homeowners association may sue the subcontractors directly on a negligence theory, to trigger insurance coverage. In any case, if the owners don't sue the subcontractors, the developer and general contractor will invariably cross-complain against the subcontractors for indemnity - meaning basically "we didn't do this - you did; so if we have to pay the owners' damages, you need to reimburse us." The reason everyone gets sued is two-fold. First, it is often very difficult if not impossible to determine before filing suit which trades are responsible for the defects. A leak in the plumbing may have caused water damage, but the drywall sub may have knocked it loose. Or the windows and doors may leak, and it may be due to bad flashing (sheet metal sub) or bad installation of the doors and windows (carpentry usually), or defective doors and windows (the supplier). Since you have strict time limits to bring parties into the case once a case starts, the practice is to sue everyone and sort it out later who is responsible. The second reason is that all the lawyers do their best to file claims that would be covered by insurance. Since insurance companies have a duty (and cost) to defend if there is ANY possibility of a covered loss, you bring more insurance money the more people you sue. Cases often settle when the really guilty parties and the owner agree on liability, but are at an impasse on the dollars. At that point everyone starts squeezing the marginally liable parties or the "maybe but not likely at all we'll be found liable" parties and their insurance companies to put up "cost of defense." The argument goes "sure you probably will win, but why spend $100,000 defending when we're only asking you to contribute $45,000?" So the more insurance companies tossing in "cost of defense" the easier it is to settle the case.