Ron Carlson v. Century Surety Company

MEMORANDUM

Marion and Ron Carlson sued Century Surety Company’s insured, Gold Mountain Investments dba Prudential California Realty, in state court, alleging claims based on a failed real estate transaction in which Gold Mountain represented the Carlsons. Century Surety declined to defend Gold Mountain on the ground that Gold Mountain first received notice of the Carlsons’ claim before the insurance policy incepted. The Carlsons and Gold Mountain ultimately settled the underlying lawsuit. Part of the settlement was Gold Mountain’s agreement to allow a default judgment to be entered against it and to assign any rights it might have against Century Surety to the Carlsons. The Carlsons agreed not to execute the default judgment against Gold Mountain. After settling the underlying case, the Carlsons sued Century Surety in federal court for its failure to defend and indemnify Gold Mountain in the state court lawsuit.

The district court made several rulings in a series of summary judgment orders. The parties cross appeal, challenging each of these rulings. We conclude that the district court erred in its first ruling by granting summary judgment to the Carl-sons on whether Century…