In Street Surfing, LLC v. Great American E&S Ins. Co., 752 F.3d 853 (9th Cir. 2014), the court held that the prior publication exclusion precluded coverage to Street Surfing, LLC (“Street Surfing”) for an underlying lawsuit alleging Street Surfing improperly used a third party’s advertising idea.
Great American E&S Insurance Company (“Great American”) issued two consecutive general liability policies to Street Surfing covering personal and advertising injury liability. The policies specifically excluded (i) prior publication, (ii) copyright and trademark infringement (the “IP Exclusion”) and (iii) advertising injury arising out of any actual or alleged infringement of intellectual property rights (the “AI Exclusion”).
In June 2008, Street Surfer was sued by Ryn Noll (“Noll”), who owned the registered trademark “Streetsurfer,” claiming trademark infringement, unfair competition and unfair trade practices under federal and California law. Street Surfer submitted a claim for coverage to Great American and tendered Noll’s complaint. Great American denied coverage, citing the IP Exclusion and the AI Exclusion.
Street Surfer brought a declaratory judgment against Great American seeking defense and indemnification for the Noll action. Affirming the district court, the Ninth Circuit held that the prior publication exclusion relieved Great American of its duty to defend Street Surfing in the Noll action because the extrinsic evidence available to Great American at the time of tender conclusively established: (1) that Street Surfing published at least one advertisement using Noll’s advertising idea before coverage began; and (2) that the new advertisements Street Surfing published during the coverage period were substantially similar to that pre-coverage advertisement.
The policies’ prior publication exclusion exempted from coverage “‘[p]ersonal 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 straightforward purpose of this exclusion, the court ruled, was to “bar coverage” when the “wrongful behavior . . . beg[a]n prior to the effective date of the insurance policy.”
In the context of advertising injury coverage, an allegedly wrongful advertisement published before the coverage period triggers application of the prior publication exclusion, barring coverage of injuries arising out of re-publication of that advertisement, or any substantially similar advertisement, during the policy period, because such later publications are part of a single, continuing wrong that began before the insurance policy went into effect.
The test, then, is whether reuse “of substantially the same material” occurred. In making this determination, the court focused on the relationship between the alleged wrongful acts “manifested by those publications,” holding that a “post-coverage publication is ‘substantially similar’ to a pre-coverage publication if both publications carry out the same alleged wrong.” Focusing on the alleged wrongful acts fulfills the prior publication exclusion’s purpose of barring coverage when “the wrongful behavior had begun prior to the effective date of the insurance policy.”