           United States Court of Appeals
                      For the First Circuit


Nos.   03-1691 and 03-1798


                PACIFIC INSURANCE COMPANY, LIMITED,

               Plaintiff, Appellant/Cross-Appellee,

                                  v.

                      EATON VANCE MANAGEMENT,

               Defendant, Appellee/Cross-Appellant.


           APPEAL FROM THE UNITED STATES DISTRICT COURT

                 FOR THE DISTRICT OF MASSACHUSETTS

            [Hon. Joseph L. Tauro, U.S. District Judge]


                                Before

                      Howard, Circuit Judge,

           Coffin and Campbell, Senior Circuit Judges.



     Harvey Weiner with whom Barry D. Ramsdell and Peabody & Arnold
LLP were on brief, for appellant.
     Jeffrey B. Maletta with whom Aimée E. Bierman and Kirkpatrick
& Lockhart LLP were on brief, for appellee.



                             May 27, 2004
             HOWARD, Circuit Judge.      These cross-appeals arise out of

an indemnification dispute between an employer and its insurer.

The principal issue is whether the employer must be indemnified for

certain   belated   contributions     it    made   to   the   profit-sharing

accounts of various subsidiary employees.           Upon determining that

these payments (and certain other amounts) were covered by the

relevant policy, the district court granted the employer's motion

for summary judgment in the amount of $1,015,138.94 and denied the

insurer's cross-motion for summary judgment seeking a declaration

of no coverage under the policy.           See Pacific Ins. Co. v. Eaton

Vance Mgmt., 260 F. Supp. 2d 236 (D. Mass. Aug. 14, 2002); Pacific

Ins. Co. v. Eaton Vance Mgmt., 260 F. Supp. 2d 334 (D. Mass. April

30, 2003).     We reverse in part, vacate in part, and remand.

                                    I.

           The relevant facts having been twice reported, see id.,

we confine ourselves to the essentials.

           A. The Plan

           Since the 1950s, Eaton Vance Management ("Eaton Vance")1

and its predecessors have operated a qualified profit-sharing plan

("Plan")2 for their employees.        Annual contributions to the Plan



     1
      Eaton Vance is a Massachusetts business trust, with its
principal place of business in Boston.
     2
      The Internal Revenue Service ("IRS") reviewed the Plan and
deemed it "qualified," with the result that Eaton Vance may deduct
any contributions made to it.

                                    -2-
are discretionary and, if made, are derived from Eaton Vance's

profits in a given fiscal year.     Of particular importance are the

Plan's employee-eligibility criteria.

          Prior   to   November   1984,   employees   of   Eaton   Vance's

subsidiaries were not included in the Plan unless the respective

subsidiary expressly adopted the Plan by written resolution.3           In

July 1986, Eaton Vance adopted new Plan documents –- effective

November 1, 1984 ("1984 documents") –- that allegedly broadened the

Plan's eligibility criteria to include automatically subsidiary

employees unless specifically excluded. Supplying our own emphasis

to language that significantly differs from, or adds to, language

in the prior governing documents, see supra n.3, the 1984 documents

provide in pertinent part:

          The term employee includes: (a) any common-law
          employee of the employer . . . .

          "Employer" means the employer named in the
          last section of the adoption agreement, any
          commonly controlled organization, and any
          predecessor organization . . . .

          An employee ordinarily becomes an active
          participant on his entry date. However, there
          are three exceptions: . . . (c) An employee is
          not an active participant during any period in
          which he is not an employee in an eligible
          class.


     3
      Specifically, the governing documents defined "employee" as
"any employee of the employer" and defined "employer" as "the
employer named in the Adoption Agreement" (i.e., Eaton Vance) and
"any predecessor organization." The documents also provided that
"a commonly controlled organization may join the employer in
adopting this plan . . . by [adopting] a written resolution."

                                  -3-
          An employee is in an eligible class unless:
          [he falls within one of four exceptions not
          germane to this appeal].

          Subject to the rules of this article, a
          commonly controlled organization may join the
          principal employer [Eaton Vance] in adopting
          this plan. A commonly controlled organization
          with any employees eligible must join the
          principal employer in adopting this plan. No
          other organization may do so.

          An   organization        joins      by      a        written
          resolution . . . .

It is uncontested that, despite its adoption of the 1984 documents,

Eaton Vance management was unaware of the change in language.

          Because   Eaton   Vance    did    not    intend       to   broaden   the

eligibility    criteria   (i.e.,    it    continued       to    believe   that   a

subsidiary's affirmative adoption of the Plan was a condition

precedent to the subsidiary's employees' eligibility), it continued

to operate the Plan as it had prior to the adoption of the 1984

documents and treated as participants only those employees of those

subsidiaries that had expressly adopted the Plan.                Accordingly, it

did not automatically establish accounts in the names of all

subsidiary employees.     Nor did it specifically exclude them from

the Plan or provide them with information regarding the Plan.

          B.    The Claim Against Eaton Vance

          On February 2, 1999, Wilfredo Hernandez, then an employee

of an Eaton Vance subsidiary (Compass Management, Inc.), sent to

Eaton Vance a letter indicating that money due him under the Plan

had not been deposited into his account.                  Upon receiving this

                                    -4-
letter, Eaton Vance contacted its outside ERISA counsel for an

evaluation of Hernandez's claim.            Although Compass had not adopted

the Plan by written resolution, outside counsel advised Eaton Vance

that, due to the plain language of the 1984 documents, Hernandez

likely would be successful if he chose to litigate.                        Further,

counsel      warned   Eaton   Vance    that     there    would    be   serious    tax

consequences if the IRS discovered that the Plan had not been

administered according to its terms.                    Eaton Vance thereafter

adopted counsel's advice and has since steadfastly maintained –-

both before the district court and on appeal –- that the 1984

documents were worded so as to cover Hernandez and other similarly

situated employees.

              On   April    28,   1999,    outside      ERISA    counsel   sent   to

Hernandez's attorney a letter acknowledging that Eaton Vance should

have       recognized      Hernandez      and   other     "similarly       affected

participants" as Plan participants.              The letter also stated that

Eaton Vance would fund those accounts at the level they would have

been funded had the employees been recognized as participants all

along.4




       4
      In October 1999, Eaton Vance revised the plan language
(effective November 1, 1998) to reaffirm its intention that
employees of subsidiaries are not included in the Plan unless the
Plan has been adopted by written resolution of the subsidiary.

                                          -5-
              C. The Insurance Policy

              Back in 1998, Pacific Insurance Company ("Pacific") had

issued to Eaton Vance a Mutual Fund Errors and Omission Policy

("Policy") effective from August 1, 1997, to August 1, 1999.              The

Policy provided coverage for

              [l]oss or liability incurred by [Eaton Vance],
              from any claim made against [Eaton Vance]
              during the Endorsement Period, by reason of
              any actual or alleged failure to discharge his
              or its duties or to act prudently within the
              meaning of the Employee Retirement Income
              Security Act of 1974 ["ERISA"] . . ., or by
              reason of any actual or alleged breach of
              fiduciary responsibility within the meaning of
              said Act . . . in [Eaton Vance's] capacity as
              a fiduciary with respect to any pension or
              employee plan or trust.

              D. The Notification & The Funding of Overdue Accounts

              By letter dated June 18, 1999, Eaton Vance notified

Pacific of the Hernandez claim.         Pacific thereafter responded with

a    letter    acknowledging    receipt       of   Eaton   Vance's   letter.

Subsequently, Eaton Vance asked Pacific to agree to a filing with

the IRS under the Voluntary Compliance Review ("VCR") program.

(This filing had been proposed by outside ERISA counsel as a means

to   end   Eaton   Vance's   exposure    to   governmental    penalties   for

noncompliance with the 1984 documents.)            Pacific acknowledged this

request but "before consenting to this action" urged Eaton Vance to

consider withholding any additional contributions to the Plan.

Pacific further stated that it was "reserv[ing] its rights" and



                                   -6-
advised Eaton Vance "to take whatever action [it] deems appropriate

to protect Eaton Vance including the filing of a VCR application."

            The   VCR   application    ultimately   was   filed   with,   and

approved by, the IRS.      Although Hernandez had been the only party

to make a claim under the Plan, Eaton Vance thereafter established

accounts for a total of forty-nine employees and contributed

$880,869.86 to those accounts (representing the amount -– principal

and interest –- needed to fund the accounts to the level they would

have attained had Eaton Vance timely contributed).

            E. The Litigation

            On June 8, 2000, Pacific filed a diversity action in the

District of Massachusetts seeking a declaratory judgment of no

coverage under the Policy.            See 28 U.S.C. §§ 1332 and 2201.

Specifically, Pacific alleged, inter alia, that (1) Eaton Vance did

not breach its fiduciary duties or fail to discharge its duties or

act prudently within the meaning of ERISA; (2) the obligation to

make payments is not due "by reason of" a breach of fiduciary

responsibility or "by reason of" a failure of Eaton Vance to

discharge its duties; and, (3) even if there is coverage under the

Policy, a $1,000 per claim deductible exists for each excluded

employee.    Eaton Vance counterclaimed, alleging that the Policy

covered its liabilities.         Eventually, both parties moved for

summary judgment.




                                      -7-
           On August 14, 2002, the district court entered summary

judgment   for   Eaton   Vance   upon   determining,     inter   alia,   that

(1) Eaton Vance had breached its fiduciary duty under ERISA; and

(2) Eaton Vance's liability to the excluded employees was caused by

this breach.     See Pacific Ins. Co., 260 F. Supp. 2d at 241-44.        The

court did find, however, that there existed a $1,000 deductible for

each employee's claim; accordingly, it granted summary judgment to

Pacific on this issue.     See id. at 247-48.      Finally, on April 30,

2003, Pacific was ordered to pay Eaton Vance $1,015,138.94.5             See

Pacific Ins. Co., 260 F. Supp. 2d at 346-47.

           These cross-appeals followed.

                                   II.

           A.    Standards of Review

           Summary    judgment    is     proper   when    "the   pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine

issue as to any material fact and that the moving party is entitled

to judgment as a matter of law."        Fed. R. Civ. P. 56(c).    In ruling


     5
      This amount was calculated as follows: $880,869.86 (the
amount –- principal and interest –- that Eaton Vance paid to fund
the employees' accounts) - $49,000 (the Policy's deductible) +
$148,876.28 (the prejudgment interest on the $880,869.86) +
$12,537.00 (the defense and investigation costs incurred prior to
the date on which Eaton Vance notified Pacific of Hernandez's
claim) + $5,787.16 (the prejudgment interest on the $12,537) +
$13,100.57 (the prejudgment interest on the post-notification costs
that belatedly were reimbursed by Pacific) + $2,968.07 (the costs
for deposition transcripts).

                                    -8-
on the motion, the district court must view "the facts in the light

most favorable to the non-moving party, drawing all reasonable

inferences in that party's favor."     Barbour v. Dynamics Research

Corp., 63 F.3d 32, 36 (1st Cir. 1995).      And, of course, "[t]he

standards are the same where, as here, both parties have moved for

summary judgment." Bienkowski v. Northeastern Univ., 285 F.3d 138,

140 (1st Cir. 2002) (citing 10A Charles Alan Wright, Arthur R.

Miller & Mary Kay Kane, Federal Practice and Procedure § 2720, at

335-36 (3d ed. 1998) ("The court must rule on each party's motion

on an individual and separate basis, determining, for each side,

whether a judgment may be entered in accordance with the Rule 56

standard.")).     The district court's rulings on the cross-motions

for summary judgment are reviewed de novo.     See Calero-Cerezo v.

U.S. Dept. of Justice, 355 F.3d 6, 19 (1st Cir. 2004) (citations

omitted).

            B.   Analysis

            In order for Pacific to be held liable under the Policy,

Eaton Vance must have incurred a (1) "loss or liability" (2) "by

reason of" (3) "any actual or alleged failure to discharge . . .

its duties or to act prudently within the meaning of . . .

ERISA . . . or by reason of any actual or alleged breach of

fiduciary responsibility within the meaning of [ERISA]."         As

already stated, the district court determined that coverage existed

under the Policy because each element was satisfied.        Without


                                 -9-
necessarily opining on whether the facts of this case implicate

either the first or third prong, we turn directly to a discussion

of the second.

           "[B]y   reason   of"   is   not   defined   in   the   Policy;

accordingly, if the language were ambiguous, we normally would

consider whether the phrase should be construed in favor of Eaton

Vance.   See Cody v. Conn. Gen. Life Ins. Co., 439 N.E.2d 234, 237

(Mass. 1982) ("[I]f the contract is ambiguous, doubts as to the

meaning of the words must be resolved against the insurance company

that employed them and in favor of the insured." (citations and

internal quotation marks omitted)); F.D.I.C. v. Ins. Co. of North

Am., 105 F.3d 778, 786-87 (1st Cir. 1997) (applying Massachusetts

law and noting that the presumption against the insurer does not

apply "where the policy language results from the bargaining

between sophisticated commercial parties of similar bargaining

power" (citation omitted)).

           Here, however, we need not reach the contra proferentem

issue because we consider the language unambiguous: "by reason of"

means "because of," Black's Law Dictionary 201 (6th ed. 1990), and

thus necessitates an analysis at least approximating a "but-for"

causation test.    Cf. United States v. Rosa-Ortiz, 348 F.3d 33, 38

(1st Cir. 2003) ("The statutory phrase 'by virtue of,' by its plain

meaning, suggests a but-for causation test." (citing Webster's

Third New Int'l Dictionary 307 (defining "by virtue of" to mean "by


                                  -10-
reason of"))); Three Sons, Inc. v. Phoenix Ins. Co., 257 N.E.2d

774, 776 (Mass. 1970) ("The words 'liability imposed . . . by

reason of any statute,' clearly imports a direct causal relation

between the fact of liability and the violation of a statute.   To

qualify for this exclusion, liability must directly result from the

violation of the statute . . . ." (emphases added)).   We therefore

reject Eaton Vance's assertion that "'by reason of' . . . is a more

generous standard that extends coverage beyond the strict 'but-for'

test Pacific seems to be applying."6   See Cody, 439 N.E.2d at 237

("A policy of insurance whose provisions are plainly and definitely

expressed in appropriate language must be enforced in accordance

with its terms." (citations and quotation marks omitted)).

          Having defined the relevant language, we next consider

whether Eaton Vance's liability to the employees falls within the

Policy's scope.   Eaton Vance argues that, even under a restrictive

reading of the Policy's causation element, coverage exists because

(1) the cause of Eaton Vance's liability was "its failure to

administer the Plan in accordance with the 1984 Plan Documents by

identifying the proper participants [i.e., Hernandez and other

similarly situated employees] and establishing and funding accounts

for them when contributions were made"; (2) "this failure was a


     6
      The authorities that Eaton Vance cites for support (a
Tennessee Supreme Court case and a piece in an insurance journal)
are not directly on point because they deal with construction of
the phrase "arising out of" rather than the "by-reason-of" language
at issue here.

                                -11-
breach of Eaton Vance's fiduciary obligations"; and that (3)

"[o]nce [this breach] occurred, no intervention from any other

force was required to bring about the liability."    Presented with

a similar argument,7 the district court agreed with Eaton Vance:

"[The] failure to read the 1984 Plan Documents closely enough to

see that the scope of the Plan had changed was . . . a breach of

fiduciary duty which resulted in Hernandez's account not being

funded."      Pacific Ins. Co., 260 F. Supp. 2d at 244 (emphasis

added).

             Having had the benefit of additional briefing and oral

argument on this tricky issue, we arrive at a different conclusion.

As we see it, the relevant liability for which Eaton Vance seeks

recovery from its insurer is not one for breach of fiduciary duty

relative to the belatedly funded employee accounts; rather, Eaton

Vance seeks reimbursement for amounts it paid -– principal and

interest –- in satisfaction of its Plan-created obligation to

establish and fund those accounts to the level they would have

attained had Eaton Vance initially complied with the Plan.       So



     7
         Specifically, Eaton Vance argued that

     simply signing the 1984 Plan documents did not
     proximately cause Hernandez's account to be unfunded[;]
     [r]ather, the cause of Hernandez's unfunded account was
     that Eaton Vance did not administer the Plan in
     accordance with its terms, which is a breach of fiduciary
     duty under ERISA that is covered by the Policy.

Pacific Ins. Co., 260 F. Supp. 2d at 243-44 (emphasis added).

                                 -12-
understood, the cause of this obligation cannot be the breach of

the obligation; instead, in our view, this obligation derived from

the broadened eligibility criteria in the 1984 documents themselves

(as now interpreted by Eaton Vance), management's discretionary

decision to fund, and the employees' concomitant entitlement to

interest that would have accrued in their profit-sharing accounts

had Eaton Vance acted in accordance with the Plan by establishing

and funding the accounts.8     See, e.g., American Cas. Co. of


     8
      The interest at issue here is, essentially, the prejudgment
interest that a court might have awarded Hernandez and others had
they elected to litigate their claims for payment of benefits due
under the Plan. Cf. Cottrill v. Sparrow, Johnson & Ursillo, Inc.,
100 F.3d 220, 223-24 (1st Cir. 1996) ("In ERISA cases the district
court may grant prejudgment interest in its discretion to
prevailing fiduciaries, beneficiaries, or plan participants. . . .
Ordinarily a cause of action under ERISA and prejudgment interest
on a plan participant's claim both accrue when a fiduciary denies
a participant's benefits. . . . Setting the accrual date in this
manner not only advances the general purposes of prejudgment
interest . . . but also serves ERISA's remedial objectives by
making a participant whole for the period during which the
fiduciary withholds money legally due. . . . Figuring the accrual
date in this way also prevents unjust enrichment." (citations
omitted)). Accordingly, as we see it, the interest portion of the
$880,869.86 is part and parcel of what is due the employees under
the Plan and, as such, is not a liability incurred by reason of a
breach of fiduciary duty.
     The result we reach makes sense from a policy perspective as
well. Because Eaton Vance wrongfully withheld the principal, it
presumably was able to earn interest on these monies –- interest
that otherwise would have been earned by the employees on their
accounts. As such, the interest represents benefits to Eaton Vance
on monies wrongfully withheld. If we were to hold that the Policy
covers these amounts, Eaton Vance would reap a substantial
windfall.    This result would create a perverse incentive for
employers negligently to delay contributions while retaining the
monies in an interest-earning account safe in the belief that any
interest earned would be theirs to keep.
     In any event, Eaton Vance made no significant effort –- either

                               -13-
Reading, Pa. v. Hotel & Rest. Employees & Bartenders Int'l Union

Welfare Fund, 942 P.2d 172, 176-77 (Nev. 1997) ("The refusal to pay

an obligation simply is not the cause of the obligation, and the

[insured's] wrongful act in this case did not result in their

obligation to pay; [its] contract imposed on [it] the obligation to

pay.").

           Whether or not Eaton Vance breached its fiduciary duties

under ERISA by initially failing to administer the Plan in timely

accordance with its terms is thus of no import to the relevant

causation inquiry because the underlying obligation for which

reimbursement is sought existed regardless of whether Eaton Vance

first   complied    with   its   fiduciary   duties   or   breached   them.

Accordingly, we must also reject Eaton Vance's alternative argument

that the asserted breach of fiduciary duty was a concurrent cause

of the obligation.    See 7 G. Couch, Couch on Insurance § 101:57 (3d

ed. 1997) ("The concurrent cause rule . . . takes the approach that

coverage   should    be    allowed   whenever   two   or   more   causes   do

appreciably contribute to the loss, and at least one of the causes

is an included risk under the policy.").




before us or before the district court –- to argue that, even if
the principal payments are not covered under the Policy, the
interest should be covered. Cf. United States v. Zannino, 895
F.2d 1, 17 (1st Cir. 1990) ("[W]e see no reason to abandon the
settled appellate rule that issues adverted to in a perfunctory
manner, unaccompanied by some effort at developed argumentation,
are deemed waived.").

                                     -14-
             As we understand the situation, the difference between

what did happen (the belated funding of the accounts) and what

should have happened (the timely funding of the accounts) is only

one of timing: because Eaton Vance's management failed to read the

1984 documents prior to receiving the Hernandez letter, management

became aware of the company's liability to the accounts later than

it otherwise would have.      Eaton Vance essentially argues this same

point   in   its   brief:   "Had   Eaton   Vance   administered   the   Plan

according to its terms during each affected year, the omitted

participants would have had funded accounts at the time they came

to seek benefits."

             But the fact that the alleged breach of fiduciary duty

resulted in the late payment of funds does not alter the essential

fact that the liability was "incurred . . . by reason of" the

adoption of the 1984 documents, management's discretionary decision

to fund the accounts of eligible employees, and the employees'

entitlement to the interest that would have accrued in their

profit-sharing accounts had Eaton Vance established and funded the

accounts as required by the Plan.          The insurance policy at issue

covers debts "incurred . . . by reason of," inter alia, a breach of

fiduciary duty; it does not cover debts that are "incurred" through

a contractual obligation although belatedly paid because of a

breach of fiduciary duty.




                                    -15-
            As indicated above, Eaton Vance admits that Hernandez and

other similarly situated employees were, pursuant to the 1984

documents, automatically covered unless specifically excluded.

Indeed, the company acknowledges as much in its brief to this

court. There, in arguing that it breached its fiduciary duty under

ERISA, Eaton Vance concedes that "[t]he governing Plan documents by

their terms made all employees of the 'employer' -- Eaton Vance and

its   commonly   controlled   organizations   –-   Plan   participants."

(emphasis added).    Effectively, then, Eaton Vance asserts that the

1984 documents established eligibility so as to render Eaton

Vance's failure to fund (in years in which funding was authorized)

a breach of fiduciary duty while at the same time arguing that, for

purposes of the Policy, the resulting obligation was incurred by

reasons other than the 1984 documents (and management's decision to

fund in the relevant years).    Eaton Vance cannot have it both ways.

            Would we have reached the same result had the employees'

claims wound up in litigation?    While not intuitively obvious, the

answer is yes.      This hypothetical lawsuit might have alleged

several theories of liability: for example, (1) breach of Plan

documents; (2) breach of fiduciary duties under ERISA; and (3)

failure to discharge duties or to act prudently within the meaning

of ERISA.    Perhaps Pacific would have associated with Eaton Vance




                                 -16-
in defending this lawsuit,9 which -– if Eaton Vance's outside ERISA

counsel is to be believed -- Hernandez might well have won.

             But, in this hypothetical situation, the possibility that

Hernandez could have prevailed on one or more of his theories does

not end our analysis.       Given the underlying facts surrounding the

Hernandez claim, any judgment for Hernandez for back-payment of

benefits wrongfully withheld under the Plan (and the hypothesized

amount-of-return thereon) necessarily would be derivative of a

finding     that   the   Plan   documents    themselves   (together   with

management's discretionary decision to fund) created the underlying

financial obligation on which Hernandez sought performance --

performance that was due Hernandez prior to, and irrespective of,

the lawsuit.       Accordingly, the Policy's causation requirement –-

"liability incurred . . . by reason of any actual or alleged



     9
         The Policy provides, in relevant part, as follows:

     Coverage hereunder is extended to pay on behalf of
     [Eaton Vance] . . . all: . . .

                         DEFENSE EXPENSES
     EE. Costs and expenses incurred in the investigation
     or defense of any claim for which coverage is provided
     hereunder.

                                CONDITIONS
     C-1.     SETTLEMENT:

     It shall be the duty of [Eaton Vance], and not
     [Pacific], to defend claims. [Pacific] may, at its own
     expense, but is not obligated to, associate with any
     Insured in the investigation, defense or settlement of
     any claim . . . .

                                    -17-
failure to discharge his or its duties or to act prudently within

the meaning of [ERISA] . . ., or by reason of any actual or alleged

breach of fiduciary responsibility within the meaning of said Act"

–- would remain unsatisfied because the at-issue liability10 would

have been incurred by reason of something other than the listed

contingencies.11

              The Seventh Circuit faced a similar situation in Baylor

Heating & Air Conditioning, Inc. v. Federated Mut. Ins. Co., 987

F.2d 415 (7th Cir. 1993).     There, mistakenly believing that it had

no liability under a collective bargaining agreement, the employer

intentionally decided not to make payments to an employee pension

fund.        After the fund was successful in its suit against the

employer for payment of the withheld benefits, the employer sued

its insurer for the value of the unpaid benefits, which allegedly

were insured under a liability policy.12     The Baylor court denied


     10
      The liability at issue would have been Eaton Vance's
liability to Hernandez for his share of the $880,869.86, which
represents the amount –- principal and interest -- that Eaton Vance
belatedly contributed to the accounts of the excluded employees.
     11
      However, if, for example, a group of hypothetical Plan
participants had been successful in a class action against Eaton
Vance (as trustee of the Plan) for damages stemming from the
trustee's failure prudently to invest the assets that properly had
been deposited into participants' accounts pursuant to the Plan,
Eaton Vance presumably would have had a claim under the Policy.
        12
      Despite Pacific's assertion that Baylor was "conceptually
identical" to this case, Eaton Vance makes no attempt meaningfully
to distinguish Baylor. In its brief, Eaton Vance says only that
"[t]he discretionary nature of contributions [in this case]
distinguishes [Baylor], which involved mandatory contributions

                                  -18-
coverage, explaining that the judgment against the employer for

pension-fund amounts due under a collective bargaining agreement

was not an "injury or damage caused by any negligent act, error, or

omission in the administration" of the program:

          [The employer's] liability to the pension fund
          is contractual. Although at the time [the
          employer] refused to make fund payments it did
          not believe it had any contractual obligation
          to do so, these beliefs do not change the
          contractual nature of the obligation.      The
          Fund was awarded amounts owed pursuant to the
          collective bargaining agreement, not damages
          for negligence, and these payments are not
          covered by [the employer's] policy.
          . . .

          Under [the employer's] logic, any default
          arising from a mistaken assumption regarding
          one's   contractual    liability   could    be
          transformed into an insured event.     Indeed,
          refusing to pay a debt in reliance upon
          erroneous advice of counsel would convert a
          contractual debt into damage arising from a
          negligent omission. We dare not imagine the
          creative legal theories treading just short of
          malpractice and frivolity that could seek to
          transform contractual obligations into insured
          events.

987 F.2d at 419-20.13



under a collective bargaining agreement."   We do not see why this
distinction should impact our analysis.
     13
      Similarly, in Oktibbeha County Sch. Dist. v. Corregis Ins.
Co., 173 F. Supp. 2d 541, 543 (N.D. Miss. 2001), the district court
reasoned as follows:

     The school district had a duty to pay overtime
     compensation because of the statutory requirements of the
     [Fair Labor Standards Act], not because of any wrongful
     act or omission of the school district.       The school

                               -19-
            We agree with the Seventh Circuit.   It makes no sense to

permit a dereliction in duty to transform an uninsured liability

into an insured event.    Cf. May Dept. Stores Co. v. Fed. Ins. Co.,

305 F.3d 597, 601 (7th Cir. 2002) (Posner, J.) ("It would be

passing strange for an insurance company to insure a pension plan

(and its sponsor) against an underpayment of benefits, not only

because of the enormous and unpredictable liability to which a

claim for benefits on behalf of participants in or beneficiaries of

a pension plan of a major employer could give rise, but also

because of the acute moral hazard problem that such coverage would

create. . . . Such insurance would give the plan and its sponsor an

incentive    to   adopt   aggressive   (just     short   of   willful)

interpretations of ERISA designed to minimize the benefits due,

safe in the belief that if, as would be likely, the interpretations

were rejected by the courts, the insurance company would pick up

the tab.    Heads I win, tails you lose.").14




     district had a pre-existing obligation to pay these
     employees for the overtime hours worked, an obligation
     that was created by the FLSA. The policy states that
     coverage will issue only if the school district suffered
     a loss by reason of a wrongful act.      The duty to pay
     overtime is a matter of statutory law, and the obligation
     to pay time and a half for every hour worked over a forty
     hour week arose when the employees worked overtime hours.
     14
      We are aware that the policy at issue in May Department
Stores specifically excluded from coverage "benefits due or to
become due under the [Plan]."      This fact, however, does not
undermine the persuasiveness of the analysis quoted in the text.

                                -20-
                               III.

          For these reasons, we conclude that the district court

erred (1) when -- based upon an incorrect finding that the Policy

covered Eaton Vance's obligation to fund the relevant profit-

sharing accounts -- it held that Eaton Vance was entitled to

summary judgment for indemnification of amounts contributed to

these accounts (and prejudgment interest thereon),15 and (2) when

it denied Pacific's cross-motion for a summary-judgment declaration

of no coverage for these amounts.16       The court's judgment is

therefore reversed in part.   Because we are unable to discern the

extent to which these errors influenced the district court's

determination that Pacific also was liable for certain amounts

peripheral to the funding of the accounts,17 the judgment is vacated

in part and remanded so that the court can determine, in the first




     15
      These amounts total $980,746.14: $880,869.86 + $148,876.28 -
$49,000. See supra n.5.
     16
      Because we conclude that no coverage exists under the Policy
for these amounts, we do not reach Eaton Vance's cross-appeal.
That appeal challenges the district court's grant of summary
judgment for Pacific on the separate issue of the Policy's
deductible, which became relevant as a result of the district
court's disposition of the coverage issue.
     17
      These amounts total $34,392.80: $12,537.00 (the defense and
investigation costs incurred prior to the date on which Eaton Vance
notified Pacific of Hernandez's claim) + $5,787.16 (the prejudgment
interest on the $12,537) + $13,100.57 (the prejudgment interest on
the post-notification costs that belatedly were reimbursed by
Pacific) + $2,968.07 (the costs for deposition transcripts). See
supra n.5.

                               -21-
instance, whether Eaton Vance remains entitled to these amounts in

light of this opinion.   Each party shall bear its own costs.

          It is so ordered.




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