NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SAN JOAQUIN COUNTY EMPLOYEES' 

RETIREMENT ASSOCIATION, 

Plaintiff-Appellant, 

 v. 

TRAVELERS CASUALTY AND SURETY 

COMPANY OF AMERICA, 

Defendant-Appellee.

No. 20-15053 

D.C. No. 

2:18-cv-02042-JAM-CKD 

MEMORANDUM*

Appeal from the United States District Court

for the Eastern District of California

John A. Mendez, District Judge, Presiding

Argued and Submitted March 2, 2021

San Francisco, California

Before: BALDOCK,** WARDLAW, and BERZON, Circuit Judges.

San Joaquin County Employees’ Retirement Association (“SJCERA”) 

appeals the district court’s order granting summary judgment to Travelers Casualty 

and Surety Company of America (“Travelers”) on SJCERA’s claims for breach of 

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

** The Honorable Bobby R. Baldock, United States Circuit Judge for the 

U.S. Court of Appeals for the Tenth Circuit, sitting by designation.

FILED

APR 8 2021

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
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contract, breach of good faith and fair dealing, and declaratory relief. SJCERA’s

claims arise out of Travelers’ denial of coverage under the duty-to-defend clause in 

SCJERA’s fiduciary liability insurance policy. We reverse.

1. The policy’s Prior and Pending Proceeding Exclusion does not preclude 

coverage of SJCERA’s defense in the underlying case, Allum v. San Joaquin Cty. 

Employees’ Ret. Ass’n, No. STK-CV-UBC-2017-10696 (Cal. Super. Ct. filed Oct. 

13, 2017) (“Allum Litigation”). The exclusion reads as follows: “[Travelers] will 

not be liable for Loss for any Claim based upon or arising out of any fact, 

circumstance, situation, event or Wrongful Act underlying or alleged in any prior 

or pending civil, criminal, administrative or regulatory proceeding against 

[SJCERA].” The district court determined that the Allum Litigation arose out of 

and “has at least a slight connection with the allegations” in a 1998 lawsuit

involving SJCERA and its members.

We disagree. Travelers focuses on the phrase “arising out of,” and insists 

that the phrase must be read broadly to preclude coverage. Regardless of how 

broadly we read “arising out of,” however, a claim is not precluded by the Prior 

and Pending Proceeding Exclusion unless it arises out of some “fact, circumstance, 

situation, event or Wrongful Act underlying or alleged in a prior proceeding.” In 

the 1998 lawsuit, SJCERA members asserted that the California Supreme Court’s 

holding in Ventura Cty. Deputy Sheriffs’ Ass’n v. Bd. of Ret., 16 Cal. 4th 483 
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(1997), applied retroactively to require certain compensation—like vacation pay

and sick-leave pay—to qualify as “compensation earnable” for purposes of 

calculating retirement benefits. The 1998 action resulted in a settlement agreement 

in 2001 that addressed neither Ventura’s retroactivity nor the inclusion of vacation 

and sick-leave pay in calculating retirement benefits. Instead, SJCERA established 

a supplemental reserve fund to provide retirees with new supplemental benefits

based on agreed-upon formulas. 

In the Allum Litigation, the plaintiffs claimed that SJCERA failed to allocate

sufficient funds to the supplemental reserves created by the 2001 settlement 

agreement and improperly suspended the supplemental benefits. The Allum

Litigation did not concern the retroactivity issues or qualifying compensation

circumstances underlying and alleged in the 1998 suit. The “fact[s], 

circumstance[s], situation[s], event[s] or Wrongful Act[s]” the Allum Litigation is 

“based upon or aris[es] out of” concern the terms of the 2001 agreement and their 

implementation, nothing more. Notably, the facts and circumstances that gave rise 

to the Allum Litigation could not have underlain or been alleged in the 1998 action,

because the supplemental benefits did not exist in 1998. The supplemental benefits, 

and their related funding requirements, were not created until 2001. The district 

court therefore erred in granting summary judgment to Travelers on the basis of the 

Prior and Pending Proceeding Exclusion.
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2. Travelers asks us to affirm the grant of summary judgment on an 

alternative basis—that a separate exclusion, the Inadequate Funding Exclusion,

independently precludes coverage. The exclusion reads as follows: “[Travelers] 

will not be liable for Loss for any Claim based upon or arising out of . . . the 

inadequate funding of the Benefit Plan.” Travelers argues that the Allum Litigation 

alleged there were insufficient funds in the reserves established by the 2001 

settlement agreement and so comes within the exclusion.

We reject Travelers’ argument. The policy defines “Benefit Plan” to mean

SJCERA as a whole, not the individual reserves or accounts within the general 

fund. As the district court reasoned, the Allum Litigation plaintiffs alleged that 

SJCERA “mismanaged and misallocated” funds in the reserve established by the 

2001 settlement agreement, not that SCJERA’s entire system was inadequately 

funded. In fact, the Second Amended Complaint from the Allum Litigation 

explicitly states that SJCERA had sufficient “funds to continue to pay the benefit.” 

The Inadequate Funding Exclusion therefore does not apply here.

3. SJCERA waived any challenge to the district court’s alternative rulings on 

SJCERA’s bad faith claim and entitlement to punitive damages, and those issues 

therefore will not be open on remand. See United States v. Wahchumwah, 710 F.3d 

862, 868 n.2 (9th Cir. 2013).

REVERSED AND REMANDED.