Hanover Ins. Co. v. Urban Outfitters, Inc.

Where an alleged trademark infringement began 16 months before an insurance policy took effect, the U.S. Court of Appeals for the Third Circuit affirmed the district court’s decision that the insurer had no duty to defend or indemnify pursuant to the “prior publication” exclusion which barred coverage for liability arising from materials first published before the policy began. Hanover Ins. Co. v. Urban Outfitters, Inc., Case No. 14-3705 (3d Cir., Oct. 23, 2015) (Roth, J.).

In February 2012, the Navajo Nation brought suit for trademark infringement and related statutory and common-law violations against Urban Outfitters and its affiliate companies. Urban Outfitters allegedly “advertised, promoted, and sold its goods under the ‘Navaho’ and ‘Navajo’ names and marks” both online and in stores “[s]ince at least March 16, 2009.”

Urban Outfitters gave notice of the complaint to insurers OneBeacon American Insurance Company and Hanover Insurance Company. Urban Outfitters’ coverage with OneBeacon was in effect until July 7, 2010, when a new “fronting policy” took effect that made Hanover the responsible insurer. Hanover later issued a separate commercial general liability and umbrella liability policy, effective July 7, 2011 to July 7, 2012. All the policies for which Hanover was the responsible insurer included an exclusion from coverage for “personal and advertising injury” liability “arising out of oral or written publication of material whose first publication took place before the beginning of the policy period,” i.e., prior to July 7, 2010.

The district court found that the “prior publication” exclusion applied, even as to certain new products using the “Navaho” or “Navajo” names that only became available after July 2010. Urban Outfitters appealed.

The 3d Circuit affirmed. Under the applicable state law, a court must examine the language of the policy and the allegations of the complaint to determine whether there is a duty to defend. Where the Navajo Nation had clearly alleged that Urban Outfitters’ infringement began no later than March 2009, Hanover owed no duty unless the complaint alleged “fresh wrongs” that occurred after Hanover’s policies became effective.

Acknowledging that this was an issue of first impression, the 3d Circuit examined the U.S. Court of Appeals Ninth Circuit’s recent analysis of “fresh wrongs” in Street Surfing v. Great American E & S Insurance. In Street Surfing, the 9th Circuit held that the post-coverage publications were not “fresh wrongs” because they were “substantially similar” to pre-coverage publications that carried out the same alleged wrong. Building on this analysis, the 3d Circuit articulated the standard that post-coverage advertisements that are mere “variations, occurring within a common, clearly identifiable advertising objective, do not give rise to ‘fresh wrongs.’” The Navajo Nation alleged a continuous pattern of infringement from 2009 and the filing of the complaint, and the post-coverage advertisements shared a common advertising objective with the pre-coverage advertisements: to use the goodwill or reputation associated with the “Navaho” and “Navajo” names for Urban Outfitters’ benefit. Thus, there was no “fresh wrong” triggering a duty on the part of Hanover.