As advertising injury coverage has become a standard in CGL policies, so have the exclusions modifying those types of coverages. One of those exclusions is known as the prior publication exclusion. The typical prior publication language excludes “‘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 result of the prior publication exclusion is to bar coverage for wrongful behavior that began prior to the effective date of the insurance policy, even if it continued into the policy period. The insurers’ justification for this exclusion is that if the harm or wrongful behavior has already manifested itself, the harm is not fortuitous and there is nothing to insure.
One of the most instructive cases on the application of the prior publication exclusion to an advertising injury claim is Taco Bell Corp. v. Cont’l Cas. Co., which comes out of the Seventh Circuit. This case involves a proposed marketing campaign called the “Psycho Chihuahua” which a design agency named Wrench, presented to Taco Bell. Taco Bell expressed interest in the Psycho Chihuahua idea and, without obtaining Wrench’s permission, started running commercials in 1997 about a Chihuahua that was obsessed with the thought of Taco Bell food to the exclusion of all else. The following year Taco Bell based its entire national marketing campaign around the Chihuahua. Wrench filed a complaint against Taco Bell alleging that it not only impermissibly used the general marketing gimmick, “Psycho Chihuahua,” that Wrench had presented, but it also used specific examples of their advertising ideas in commercials. Taco Bell tendered the matter to its insurer, Continental Casualty Company.
While the first of the Taco Bell Chihuahua commercials aired prior to the effective date of Taco Bell’s insurance policy, numerous versions of the Chihuahua commercial were created and aired during the policy period. Although the general theme of the commercials was the same, the commercials prior to the effective date of the policy and the commercials during the policy period included Wrench’s specific commercial ideas, such as having a male Chihuahua ignore a female Chihuahua for Taco Bell food and the idea of having a Chihuahua sticking his head through a hole at the end of the commercial.
Because Wrench’s complaint included specific examples of ideas that Taco Bell copied in addition to the broad idea of the “Psycho Chihuahua,” the court held that the misappropriation of each specific idea was a separate tort and some of those torts occurred during the insurance policy period in question. Since the duty of an insurance company to defend against a suit is determined by the allegations in the complaint, the court concluded the prior publication exclusion did not apply, at a minimum, to the insurer’s obligation to defend its policyholder.
While a CGL policy generally will provide coverage for advertising injury claims, the prior publication exception can limit this coverage in certain instances. Policyholders or their counsel should carefully review such a complaint to determine whether there are allegations from which one could infer that the wrongdoing occurring before the policy incepted is separate and distinct from the wrongs occurring during the policy period. In that case, the policyholder would have a strong argument that the prior publication exclusion would not apply. Policyholders who have similar advertising disputes should work with their insurance broker and/or coverage counsel to properly weigh any risks that they may be taking when prosecuting or defending advertising claims where insurance may provide coverage.