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(Article from Insurance Law Alert, November 2015)

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Addressing a matter of first impression under Pennsylvania law, the Third Circuit clarified the scope of a “prior publication” exclusion to advertising injury coverage.  Hanover Ins. Co. v. Urban Outfitters, Inc., 2015 WL 6405763 (3d Cir. Oct. 23, 2015).

The Navajo Nation sued Urban Outfitters for trademark infringement and related common law and statutory violations.  The complaint alleged that the store advertised and sold goods under the “Navajo” name.  Urban Outfitters tendered the claims to its general liability and umbrella insurers.  The insurers sought a declaration that they had no duty to defend or indemnify based on a “prior publication” exclusion, which barred coverage for advertising injury liability “arising out of oral or written publication of material whose first publication took place before the beginning of the policy period.”  The insurers argued that because the underlying complaint alleged infringement beginning in March 2009, more than a year before the July 2010 inception of the policy period, the exclusion applied.  A Pennsylvania federal district court agreed and ruled in the insurers’ favor.  The Third Circuit affirmed.

First, the Third Circuit addressed the proper analysis for determining “whether Urban Outfitters’ liability-triggering conduct preceded or postdated [the] policy period’s inception.”  The court held that this determination must be made solely by reference to allegations in the underlying complaint, rejecting Navajo Nation’s attempt to use extrinsic evidence relating to the chronology of trademark infringement incidents.  Second, the court held that there is an exception to the prior publication exclusion if the underlying complaint alleges “fresh wrongs” during the policy period.  Noting a lack of precedent on this issue, the court defined “fresh wrongs” as advertisements with a “substantive difference” from the original infringing advertisements, as opposed to mere “variations, occurring within a common, clearly identifiable advertising objective.”  The court further explained that in deciding whether two or more sets of advertisements share a “common objective,” relevant factors include: whether the policyholder was charged with separate torts for each advertising incident; whether there was a “significant lull” between pre and post policy period advertising initiatives; and whether the advertisements share a common theme.  Applying these factors to the factual record, the court found no “fresh wrongs” during the relevant policy periods.  Therefore, the court concluded that the prior publication exclusion barred coverage for the underlying claims.