A “prior publication” exclusion relieved a general liability insurer of any duty to defend an insured in a suit alleging trademark infringement, because the insured published at least one advertisement using the claimant’s advertising idea before the policy period, and the insured’s subsequent advertisements were substantially similar. ( Street Surfing, LLC v. Great American E & S Ins. Co. (9th Cir. 2014) 776 F.3d 603)
Facts
Around December 2004, Street Surfing, LLC began selling a skateboard called the “Wave.” In August 2005, Street Surfing applied for commercial general liability coverage with Great American E&S Insurance Company. In its application for insurance, Street Surfing represented that “all [of its] products display the Street Surfing Logo.” Great American approved Street Surfing’s application and provided general liability insurance to Street Surfing from August 2005 until September 2007.
Rhyn Noll owned the registered trademark “Streetsurfer.” In June 2008, Noll sued Street Surfing for trademark infringement, unfair competition and unfair trade practices. In his complaint, Noll alleged that Street Surfing used Noll’s advertising idea in Street Surfing’s advertisements “since at least on or about January of 2005, or such other date as may later be determined.” Relying on various policy provisions, Great American denied Street Surfing’s tender.
In July 2011, Street Surfing filed a federal court declaratory relief action against Great American, seeking a determination that Great American was obligated to defend and indemnify Street Surfing in the underlying action brought by Noll. Great American moved for summary judgment based on the policy’s “prior publication” exclusion, which barred coverage for personal and advertising injury “arising out of oral or written publication of material whose first publication took place before the beginning of the policy period.” The district court concluded that the Great American policy’s “prior publication” exclusion relieved Great American of any duty to defend Street Surfing against Noll’s lawsuit. Street Surfing appealed.
Holding
The Ninth Court of Appeals, applying California law, affirmed. The appellate court noted that the straightforward purpose of the “prior publication” exclusion is to “bar coverage when the wrongful behavior began prior to the effective date of the insurance policy.”
Here, Noll had alleged in the underlying action that Street Surfing used Noll’s advertising idea in advertisements “since at least on or about January of 2005, or such other date as may later be determined .” According to the appellate court, those allegations left open the possibility that Street Surfing’s conduct actually started after inception of the Great American policy in August 2005.
Nevertheless, the appellate court held that the undisputed extrinsic evidence conclusively showed that Street Surfing published at least one advertisement using Noll’s advertising idea before the Great American policy began in August 2005. Specifically, the court noted that in Street Surfing’s insurance application, submitted before the policy period, Street Surfing represented that “all [of its] products display the Street Surfing Logo.” Because Street Surfing’s logo advertisement predated the Great American policy period, the prior publication exclusion applied to any injuries arising from affixing the logo on the Wave skateboard during the policy period. The advertisements Street Surfing published during the policy period fell within the scope of the prior publication exclusion because they were “substantially similar” to the advertisements Street Surfing had published before the policy period.
In short, the prior publication exclusion relieved Great American of any duty to defend because Street Surfing’s post-coverage publications were part of a single, continuing wrong that began before Great American’s policy went into effect.
Comment
This case basically involved an insured who began engaging in wrongful conduct, obtained insurance coverage, continued its course of conduct, got sued for the conduct, and then sought defense and indemnification for the conduct from its insurer. Even giving the insurer’s “prior publication” exclusion a narrow construction, the exclusion defeated coverage in these circumstances.