Third Circuit Narrows Coverage with Over-Inclusive Construction of “First Publication” Exclusion

Finding the “prior publication” exclusion precluded a defense for trademark infringement and related common-law and statutory violations brought by the Navajo Nation in a suit filed in federal court in Pennsylvania by Hanover Ins. Co. v. Urban Outfitters, Inc., No. 14-3705, 2015 U.S. App. LEXIS 18459 (3d Cir. Oct. 23, 2015), the court noted that Hanover had no duty to defend because the alleged infringement began 16 months before insurance coverage incepted. Acknowledging that the “personal and advertising injury” provisions unambiguously covered Urban Outfitters’ alleged trademark infringement and related common-law and statutory violations, the court concluded that the “first publication” exclusion barred a defense. The complaint lacked chronological detail and was cryptic. The absence of such clarity favored the insurer.

The Third Circuit in Hanover Ins. Co. v. Urban Outfitters, Inc., 806 F.3d 761 (3d Cir. 2015) focused on specific complaint allegations of wrongful acts “at least as early as March 16, 2009” and “since March 16, 2009.” Rejecting Urban Outfitters’ argument that a “fresh wrong” occurred post-policy inception and citing Street Surfing, LLC v. Great Am. E&S Ins. Co., 776 F.3d 603, 612 (9th Cir. 2014), the court redefined a “fresh wrong” as new matter, both material and not “substantially similar” to material published before the coverage period:

[p]ost-coverage ads were not “fresh wrongs” because (1) the underlying plaintiff did not “allege that the post-coverage advertisements were separate torts occurring during the policy period” and (2) the advertisements “arose out of each term’s similarity to [plaintiff’s] advertising idea.”

Urban Outfitters, 806 F.3d at 768.

The Third Circuit’s “separate torts” analysis is not supported by any authority. In effect, it articulates a narrower standard, barring a defense under the “prior acts” exclusion where the claims arose where a common, clearly identifiable advertising objective arose because it did not give rise to “fresh wrongs.”  Id.

In determining whether two or more sets of advertisements share a common objective, courts may look to whether the plaintiff charged the insured with separate torts or an agglomeration. Other significant factors include whether the complaint describes a significant lull between pre- and post-coverage advertising initiatives and whether the advertisements share a common theme relating to the alleged violation.


The court acknowledged, but failed to adopt, as every other forum to address this issue has the analytical identity demanded by Taco Bell Corp. v. Cont’l Cas. Co., 388 F.3d 1069, 1072-04 (7th Cir. 2004), stating:

Navajo Nation did not charge Urban Outfitters with committing separate torts before and during Hanover’s coverage period. Nor did it hint at a hiatus in Urban Outfitters’ tortious pursuits between March 2009 and the complaint’s filing. Navajo Nation alleged that Urban Outfitters “started using the ‘Navajo’ and ‘Navaho’ names” via all relevant instrumentalities of infringement (use “in its product line, or in connection with the sale of its goods, online, in its catalogs, and in its physical stores”) well before Hanover’s coverage period commenced.

Urban Outfitters, Inc., 806 F.3d at 769.

Narrowly reiterating the “fresh wrong” doctrine based on a “substantially similarity” test, which was adopted by Street Surfing, LLC, 776 F.3d 603, the court concluded that a line of products used the “Navajo” name post-policy inception, which were “variations occurring within a common, clearly identifiable advertising objective.”

This “separate torts” approach is especially problematic where the outside contours of the tort are unclear as was the case in Taco Bell Corp., 388 F.3d at 1072. It determined that an advertising campaign to promote a feisty barking Chihuahua by Taco Bell did not preclude coverage where one episode that had a Chihuahua pop its head out of a cardboard box had not been within the scope of the original idea presented to Taco Bell. That case analyzed coverage under the common law misappropriation offense for claims that included the ambiguous “misappropriation of advertising ideas” offense covered by the policy’s 1986 ISO CGL provision. Lebas Fashion Imports of USA, Inc., 50 Cal. App. 4th at 564 (“Hartford’s contention that the phrase ‘misappropriation of an advertising idea or style of doing business’ is necessarily limited to a common law tort, which excludes a claim for trademark infringement, depends upon an unreasonably narrow construction of the single word, ‘misappropriation.’”).

Notably, the Hanover Ins. Co. v. Urban Outfitters, Inc., 806 F.3d 761 (3d Cir. 2015) case does not describe with specificity what coverage arose in light of the particular fact allegations that evidence coverage which also fell outside the exclusion. The court substituted its conclusion that there was thematic consistency between the post policy inception advertising examples following the Navajo Nations theme, focusing on their common objective (just as Taco Bell noted all the advertisements shared a common theme) but parted company with Taco Bell in not finding a distinct episode that fell outside the scope of the exclusion to evidence a “fresh wrong.”

The “common advertising objective” test muddies the waters interminably because it does not provide any precise delineation of how the interaction between the covered offense and the exclusion arises. The Third Circuit Panel’s departure from proper analysis is characteristic of appellate decisions that jump to exclusionary language without carefully evaluating what covered conduct might exist that potentially gave rise to a defense. But, see Waller v. Truck Ins. Exch., 11 Cal. 4th 1, 44 Cal. Rptr. 2d 370, 900 P.2d 619 (1995) This approach is especially problematic (as here) where the predicate defined phrase required identification of the operative offense (here, privacy invasion) was incorporated into the “first publication” exclusion as the predicate conduct to which the exclusion could only apply—“personal and advertising injury.”


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