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Media Alerts - The Hanover Insurance Company v. Urban Outfitters, Inc.; U.O.Com, LLC; Urban Outfitters Wholesales, Inc.; Anthropologie,
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October 26, 2015
  The Hanover Insurance Company v. Urban Outfitters, Inc.; U.O.Com, LLC; Urban Outfitters Wholesales, Inc.; Anthropologie,
Headline: Third Circuit Holds "Prior Publication" Exclusion Applies When Advertisements are Sufficiently Similar

Area of Law: Liability Insurance; "Prior Publication" Exclusion

Issues Presented: Did the District Court err in determining that the "prior publication" exclusion applies if the information shows the advertisements are not "fresh wrongs" because they are sufficiently similar?

Brief Summary:

The Navajo Nation sued Urban Outfitters for trademark infringement. Urban Outfitters tendered the complaint to OneBeacon and Hanover Insurance companies. In 2010, OneBeacon issued a fronting policy to Hanover, making Hanover the reinsurer. Hanover issued a separate commercial general liability and umbrella policy which excluded coverage for "personal and advertising injury" liability arising from oral or written publication material which took place before the beginning of the policy. The Third Circuit first looked to the timeline and determined that the complaint does not list a date with complete certainty, but mentions March 16, 2009, multiple times. This date is sixteen months before Hanover took over the insurance responsibilities. The Third Circuit then looked to the exception for "fresh wrongs" finding that in order to qualify the act must be filed as a separate tort or substantially different. The Third Circuit found that the advertisements that were issued by Urban Outfitters were within a common theme and therefore not "fresh wrongs." Ultimately, the Court found that the "prior publication" exclusion applies because the advertisements at issue were originally placed before Hanover was responsible for Urban Outfitter's liability insurance.

Extended Summary:

The "prior publication" exclusion of liability insurance contracts prevents a company from obtaining ongoing insurance coverage for a continuing course of tortious conduct. The Third Circuit considered the scope of the "prior publication" exclusion. In 2012, the Navajo Nation sued Urban Outfitters and its affiliates for trademark infringement. Navajo Nation alleged that Urban Outfitters advertised, promoted, and sold its goods under the 'Navaho' and 'Navajo' names and marks on the internet and in stores. Urban Outfitters tendered the complaint to OneBeacon America Insurance Company and Hanover Insurance Company. OneBeacon provided commercial general liability and umbrella liability coverage to Urban Outfitters prior to 2010. In 2010, OneBeacon issued a fronting policy to Urban Outfitters providing identical coverage with Hanover as the responsible insurer. A fronting policy is a risk management technique in which an insurer underwrites a policy to cover a specific risk but then cedes the risk to a reinsurer. In this case, the fronting company is OneBeacon and the reinsurer is Hanover. Hanover issued separate commercial general liability and umbrella policies to Urban Outfitters. Hanover issued policies that excluded coverage for "personal and advertising injury" liability arising from oral or written publication material which took place before the beginning of the policy. Hanover sought a judicial declaration that is was not responsible for Urban Outfitters' defense or indemnification and the District Court granted the motion in 2013. The District Court held that Hanover had no duty to defend or indemnify since Hanover did not begin insurance coverage until sixteen months after the alleged infringement began. Urban Outfitters and OneBeacon appealed the District Court's judgment for Hanover.

Both sides acknowledge an absence of binding authority. In interpreting an insurance contract, the Third Circuit looked first to the terms of the policy which are a manifestation of the intent of the parties. Second, the Third Circuit looked to the the terms and compared those terms to the allegations in the claim. Hanover contends that it has no duty to defend since its policies specifically excluded coverage for personal and advertising injury liability arising from oral or written publication of material whose first publication took place before the policy period. Thus, the Third Circuit must determine whether Urban Outfitters' liability-triggering conduct preceded or postdated that policy period's inception. The complaint does not specifically state when the offensive conduct occurred. It uses phrases like, "as early as" and "at least since." Urban Outfitters urged the Third Circuit to use extrinsic evidence to determine whether Hanover owes a duty to defend. The Third Circuit declined because Pennsylvania law provides that the determination of a duty to defend depends on the language of the policy and allegations of complaint. Additionally, the advocacy of extrinsic evidence is misguided. To abandon a complaint because the plaintiff neglects to provide a date-certain timeline would undermine disputes by eroding the predictability of reliance that a single pleading ensures.

Based on the contents of the complaint, Navajo Nation's description of Urban Outfitter's conduct is remarkedly consistent. Thus, Urban Outfitters advertised goods in a manner in violation of its trademark with the fixed date of at least March 16, 2009. Hanover was not responsible for Urban Outfitters' liability insurance coverage until sixteen months later, unless the underlying complaint contains allegations of "fresh wrongs" that occurred during Hanover's policy periods. There is no binding authority in this Court as to what constitutes a "fresh wrong." The Ninth Circuit recently defined "fresh wrongs" as new matter which is not substantially similar to the material published before the coverage period. In the Ninth Circuit case, the insurer was excused of its duty to defend, even with differences in pre and post coverage advertisements. Additionally, the Court found that post coverage ads were not "fresh wrongs" because the plaintiff did not allege that the advertisements were separate torts and they arose out of similarity of the advertising idea of the plaintiff.

In Pennsylvania, an insurer's duty to defend is broader than its duty to indemnify, although there may be reasonable limits imposed. Variations occurring within a common, clearly identifiable advertising objective do not give rise to "fresh wrongs," unless there is a substantive difference between the advertisements. The "prior publication" exclusion applies to an insurer from its duty to defend if that insurer has assumed coverage responsibility after the liability-triggered conduct. In order to determine if the two or more sets of advertisements share a common objective, courts may look to whether the plaintiff charged the insured with separate torts. Other determinative factors include whether there is a lull between pre and post coverage advertising initiatives and whether there is a common theme relating to the violation. In this case, Urban Outfitters is accused of an apparently continuous string of trademark infringement and related violations. In the complaint, Navajo Nation listed the dates accompanied by a qualifier denoting continuity, such as "since" and "at least." Navajo Nation did not charge Urban Outfitters with committing separate torts before and during Hanover's coverage period. In fact, Navajo Nation alleged that Urban Outfitters started using the Navajo name with all relevant instrumentalities of infringement well before Hanover's coverage period commenced.

The Third Circuit determined that the latter ads were not "fresh wrongs" and therefore the "prior publication" exclusions apply. Hanover has no duty to defend Urban Outfitters in this action. The purpose of insurance is to disperse the risk but an insurer cannot insure against something that has already begun. The "prior publication" exclusion prevents a continuing tortfeasor from passing the risk for its misconduct on to an unwriting insurer. Urban Outfitters engaged in similar liability-triggering behavior both before and during Hanover's coverage period and therefore the exclusion applies. The Third Circuit affirmed the District Court's judgment granting Hanover's motion.

Find the full opinion at:

http://www2.ca3.uscourts.gov/opinarch/143705p.pdf

Panel: Ambro, Scirica, and Roth, Circuit Judges

Argument Date: March 3, 2015

Date of Issued Opinion: October 23, 2015

Docket Number: No. 14-3705

Decided: Affirmed

Case Alert Author: Jessica Wood

Counsel:

Ilan Rosenberg, Esq., Jacob C. Cohn, Esq., Dorothy A. Hickok, Esq. Counsel for Appellants

Andrew J. Gallogly, Esq. Counsel for Appellee

Author of Opinion: Roth, Circuit Judge

Circuit: Third Circuit

Case Alert Supervisor: Prof. Mary Levy

    Posted By: Susan DeJarnatt @ 10/26/2015 01:51 PM     3rd Circuit  

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