Pension Trust Fund for Operating Engineers, Plaintiff-Appellant-Cross-Appellee v. Federal Insurance Company, Defendant-Appellee-Cross-Appellant

This is an action alleging breach of a fiduciary responsibility insurance policy arising out of an insurance company’s refusal to defend its insured against a third party claim. The insured, Pension Trust Fund for Operating Engineers (“PTF”), appeals the district court’s grant of summary judgment in favor of Federal Insurance Company (“Federal”). PTF asserts that the district court erred in concluding that Federal had no duty to defend PTF against a claim brought by a third party, Winncrest Homes, Inc. (“Winncrest”), in an underlying action (“the Winncrest action”). At issue is whether the Winncrest action involves an alleged breach of fiduciary duty that triggers Federal’s obligation to defend under California law. Finding such an obligation, we reverse and remand.

BACKGROUND

I. Procedural History

PTF is an employee benefit trust that has a fiduciary responsibility insurance policy with Federal. The policy protects PTF in the event that a third party sues PTF for breach of fiduciary responsibilities. As an investment trust, PTF engages in commercial investments for the benefit of its pension participants. One of these transactions led to a lawsuit, in which a third party…