Court Opinion

ID: 9474855
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:10:52.029617+00
Date Added: 2024-06-11T17:44:22.661071
License: Public Domain

NORRIS, Circuit Judge,
concurring in part and dissenting in part:
I concur in the majority’s opinion as it relates to Clause X of the insurance policy. I dissent, however, from the majority’s reversal of the summary judgment in favor of the insurer. I agree with the district court that the question whether plaintiffs satisfied the notice requirements of Clause VII of the insurance policy presents no genuine issue of material fact. Fed.R. Civ.P. 56.
Clause VII extends coverage to claims made after the policy expires if, during the policy period, “the insured shall first become aware of any wrongful act which may subsequently give rise to. a claim against any insured and shall during the policy period ... give written notice to the company of such wrongful acts____” The majority holds that the insurer is not entitled to summary judgment because there is a triable issue of fact as to whether the filing of a renewal application during the policy period constituted notice of a wrongful act within the meaning of Clause VII. The renewal application included two attachments, the 5500 form and the audit by Touche Ross & Co..
The critical determination made by the majority is as follows: “Both the audit and the 5500 form provided the information that became the issues in the Department of Labor suit, namely lack of diversification and an improper loan.” Majority Opinion at 3. I disagree for a number of reasons.
*1432With respect to diversification, I find nothing in the renewal application or attachments thereto that arguably puts the insurer on notice that the trustees may have failed to satisfy the diversification requirements of ERISA.1 The majority simply pronounces that the Touche Ross audit and 5500 form “provided the information” without telling us what that information was or where it is contained in the audit or 5500 form. The only evidence cited by the majority is a statement in the audit that in 1971 the Department of Labor selected the trust fund for audit to determine the fund’s compliance with applicable federal law. The majority is presumably referring to Note P in the Touche Ross audit, which states in its entirety:
In October 1971, the Trust Fund Administration, together with the U.A. Local 38 Trust Funds, was selected for audit by the U.S. Department of Labor. The purpose of this audit, in the opinion of the attorneys for the above entities, was to determine whether each of the trusts complies with provisions of the Labor Management Reporting and Disclosure Act, the Welfare Pension Disclosure Act, and the Labor Management Relations Act.
In the opinion of the management and of the attorneys for the trust funds (which opinion is subject to a lack of definitive precedents in the area of jointly administered trust funds of this type), no matters have been brought to their attention in connection with this audit that would be expected to result in any material liability to the trust funds. In addition, management and its attorneys believe that if any matters which could significantly affect the trust funds were disclosed as a result of this audit, corrective measures could be timely taken to relieve the trust funds of any material liability.
Note F says nothing about diversification. In fact, Note F nowhere discloses the focus of the Department of Labor’s audit. Thus, there is no basis for the majority’s summary determination that Note F somehow put the insurer on notice of a “wrongful act” by the trustees in failing to diversify.
The majority also refers to an “improper loan,” but fails to tell us what information in the Touche Ross audit or the 5500 form arguably put the insurer on notice that the trustees had made a loan that may have been improper. Note F is strikingly silent about loans, improper or otherwise, just as it is silent about diversification.
I find it remarkable that Note F is the only specific piece of evidence relied upon by the majority in reversing the summary judgment for the insurer. Yet Note F, standing alone, is singularly devoid of probative value on the question whether plaintiffs satisfied the requirement of Clause VII that the insurer be given notice of wrongful acts that may subsequently give rise to a claim of breach of fiduciary duty. Indeed, Note F has so little probative value that the plaintiffs themselves did not cite it in their briefs filed in this appeal.2
The real basis for the majority’s reversal of the summary judgment is hindsight. The majority reasons simplistically that since the insurer was put on notice by Note F that the Department of Labor was auditing the Pension Fund, and since the audit *1433later culminated in charges against the trustees for breach of fiduciary duty for making the loan to the Convalescent Fund, the insurer should have divined that the loan was a focus of the audit.
Not only is the majority’s reliance on Note F misplaced, but the majority also fails to mention that in the renewal application itself, plaintiffs expressly disclaimed any knowledge of facts that might give rise to a claim. In response to question nine in the renewal application — “Does anyone proposed for this insurance have knowledge of facts which might reasonably be expected to give rise to a claim or suit under the proposed policy?” — plaintiffs checked the “No” box. That is, plaintiffs gave notice to the insurer that they had no knowledge of any facts that might give rise to a claim of breach of fiduciary duty. Yet they now argue that the same renewal application contained information that should have alerted the insurer that such a claim might reasonably be expected.
Another aspect of the majority’s approach troubles me: it effectively blots out the distinction between occurrence and claims-made policies. A doctor could send all of his medical records to the insurer, and an attorney could send copies of all his memoranda, and if a claim arose relating to any of the information contained in these documents, under the majority’s reasoning, coverage would exist whether or not the documents provided any reasonable basis to expect such a claim. But if an insured can effectively convert a claims-made policy with an extension clause into an occurrence policy simply by submitting a wealth of documentation, insurers will either stop issuing such policies, or will raise the premiums accordingly.
The only beneficiaries of this lamentable result are the plaintiffs in this case. They had every opportunity to present notice to their insurer under Clause VII. They had every opportunity to present evidence of such notice in opposition to the motion for summary judgment. In my view, they did neither.

. ERISA states that fiduciaries must discharge their duties with respect to a plan solely in the interest of the participants and beneficiaries and, inter alia,
"(C) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so____" 29 U.S.C. § 1104(c) (1982).

. Hence, the majority’s reliance on Note F is not only unwarranted, it is also unfair. According to Ninth Circuit General Order 4.2, ”[i]f a panel determines to decide a case upon the basis of a significant point not raised by the parties in their briefs, it should give serious consideration to requesting additional briefing and oral argument before issuing a disposition predicated upon the particular point.” This order protects the integrity of the adversary process by ensuring that each party has a full and fair opportunity to address the relevant issues. And yet, the majority did not permit additional briefing or oral argument on the probative value of the audit, particularly Note F.