Street Surfing, LLC v. Great American E&S Insurance

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
STREET SURFING, LLC, a Nevada No. 12-55351
limited liability company,
Plaintiff-Appellant, D.C. No.
8:11-cv-01027-
v. AG-MLG
GREAT AMERICAN E&S INSURANCE
COMPANY, a Delaware corporation, ORDER AND
Defendant-Appellee. AMENDED
OPINION
Appeal from the United States District Court
for the Central District of California
Andrew J. Guilford, District Judge, Presiding
Argued and Submitted
November 7, 2013—Pasadena, California
Filed June 10, 2014
Amended November 14, 2014
Before: Alfred T. Goodwin, Raymond C. Fisher and
Richard R. Clifton, Circuit Judges.
Order;
Opinion by Judge Fisher
2 STREET SURFING V. GREAT AM. E&S INS. CO.
SUMMARY*
California Insurance Law
The panel filed an order amending its previous opinion,
and in the amended opinion the panel affirmed the district
court’s summary judgment in favor of Great American E&S
Insurance Company in a diversity insurance coverage action.
Great American’s insured was sued in an underlying
action alleging trademark infringement, unfair competition
and unfair business practices under federal and California
law. The insurance policies at issue covered, among other
things, personal and advertising liability. The coverage was
limited by several exclusions including a prior publication
exclusion which disclaimed coverage for “‘[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 panel held that the underlying action potentially fell
within the policies’ coverage, triggering Great American’s
duty to defend under the advertising injury provision, but not
under the slogan infringement provision. The panel
concluded that the prior publication exclusion in the
insurance policies relieved Great American of any duty to
defend its insured in the underlying action.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
STREET SURFING V. GREAT AM. E&S INS. CO. 3
COUNSEL
David A. Gauntlett (argued), James A. Lowe, Gauntlett &
Associates, Irvine, California, for Plaintiff-Appellant.
Linda Bondi Morrison (argued), Ryan B. Luther, Tressler
LLP, Irvine, California, for Defendant-Appellee.
ORDER
The opinion filed June 10, 2014, and reported at 752 F.3d
853 (9th Cir. 2014), is AMENDED. An amended opinion is
filed concurrently with this order.
With these amendments, the panel has voted to deny the
petition for rehearing. Judge Clifton has voted to deny the
suggestion for rehearing en banc and Judges Goodwin and
Fisher so recommend.
The full court has been advised of the suggestion for
rehearing en banc and no judge has requested a vote on
whether to rehear the matter en banc. Fed. R. App. P. 35.
The petition for rehearing and suggestion for rehearing en
banc, filed June 24, 2014, is DENIED.
Subsequent petitions for rehearing or rehearing en banc
may not be filed.
4 STREET SURFING V. GREAT AM. E&S INS. CO.
OPINION
FISHER, Circuit Judge:
This case arises from general liability insurance policies,
including advertising injury coverage, that defendant Great
American E&S Insurance Company issued to plaintiff Street
Surfing, LLC. The parties dispute whether those policies
obligated Great American to defend Street Surfing in an
action alleging trademark infringement, unfair competition
and unfair business practices under federal and California
law. The district court granted summary judgment in favor
of Great American, concluding that the prior publication
exclusion in the policies relieved Great American of any duty
to defend. We affirm.
BACKGROUND
Street Surfing began selling a two-wheeled, inline
skateboard called the “Wave” to retail stores around
December 2004. Less than a year after Street Surfing began
doing business, it had already earned about $600,000 in sales.
By 2007, Street Surfing also sold and advertised accessories
for the Wave, such as “Lime Green Street Surfing Wheels for
The Wave,” and the “New Ultimate Street Surfer Wheel Set.”
In August 2005, Street Surfing applied for general
liability insurance coverage from Great American. Street
Surfing’s application certified that its website address was
“www.streetsurfing.com” and that the Wave displayed the
Street Surfing logo. The application did not include a picture
or any description of the logo. Great American granted the
application and provided general liability insurance to Street
Surfing from August 2005 until September 2007. This period
STREET SURFING V. GREAT AM. E&S INS. CO. 5
spanned two policies, the 2005 policy (August 2005 until
September 2006), and the 2006 policy (September 2006 until
September 2007).1 In September 2006, before it issued the
2006 policy, Great American captured a screenshot of Street
Surfing’s website and saved a copy in its underwriting file.
The policies covered, among other things, personal and
advertising injury liability.2 That coverage was limited by
several exclusions, including: (1) a prior publication
exclusion, which disclaimed coverage for “‘[p]ersonal and
advertising injury’ arising out of oral or written publication
1
The provisions at issue in this litigation are identical in both policies.
2
Specifically, the insurance policies provided:
We will pay those sums that the Insured becomes
legally obligated to pay as damages because of
“personal and advertising injury” to which this
insurance applies. We will have the right and duty to
defend the Insured against any “suit” seeking those
damages. However, we will have no duty to defend the
insured against any “suit” seeking damages for
“personal and advertising injury” to which this
insurance does not apply.
In relevant part, “personal and advertising injury” was defined as:
[I]njury including consequential “bodily injury” arising
out of one or more of the following offenses:
....
f. The use of another’s advertising idea in your
“advertisement”; or
g. infringing upon another’s copyright, trade dress or
slogan in your “advertisement”.
6 STREET SURFING V. GREAT AM. E&S INS. CO.
of material whose first publication took place before the
beginning of the policy period”; (2) an intellectual property
exclusion (IP exclusion), which barred coverage for
“‘[p]ersonal and advertising injury’ arising out of the
infringement of copyright, patent, trademark, trade secret or
other intellectual property rights,” though it did not apply to
“infringement, in your ‘advertisement,’ of copyright, trade
dress or slogan”; and (3) an advertising injury amendment
(AI amendment), which further clarified that “[t]his insurance
does not apply to ‘advertising injury’ arising out of any actual
or alleged infringement of intellectual property rights or
violation of laws relating to patents, trademarks, trade dress,
trade names, trade secrets and know-how.”
Rhyn Noll, who owned the registered trademark
“Streetsurfer,” sued Street Surfing in June 2008, claiming
trademark infringement, unfair competition and unfair trade
practices under federal and California law. Street Surfing had
known that Noll owned the “Streetsurfer” trademark since
early 2005, and had unsuccessfully attempted to purchase the
trademark around that time. In September 2008, Street
Surfing submitted a claim for coverage to Great American
and tendered Noll’s complaint. Great American denied Street
Surfing’s claim, citing the IP exclusion and the AI
amendment. The letter did not mention the prior publication
exclusion, but it did reserve to Great American “the right to
assert any and all other terms, provisions, conditions and/or
exclusions set forth in its policy which may be applicable to
the Noll action.” Street Surfing responded, arguing that none
of the “intellectual property, prior publication, knowing
violation of the rights of another, [or] breach of contract
exclusions” applied. Nevertheless, Great American again
denied coverage based on the IP exclusion and AI
amendment, noting that discussion of the other issues raised
STREET SURFING V. GREAT AM. E&S INS. CO. 7
by Street Surfing, including the prior publication exclusion,
would be irrelevant because Great American “did not cite or
rely upon [those] policy provisions for its denial of
coverage.”
Street Surfing settled with Noll in December 2009. Its
only response to Great American’s second denial was to file
this action in July 2011, seeking a declaration that Great
American was obligated to defend and to settle the Noll
action. When the parties filed cross-motions for summary
judgment, the district court concluded that the prior
publication exclusion relieved Great American of any duty to
defend Street Surfing in the Noll action. It accordingly
granted Great American’s motion for summary judgment,
denied Street Surfing’s motion for partial summary judgment
and entered judgment in favor of Great American.3 Street
Surfing timely appealed.
STANDARD OF REVIEW
We review de novo a district court’s rulings on cross-
motions for summary judgment. See Rocky Mountain
Farmers Union v. Corey, 730 F.3d 1070, 1086 (9th Cir.
2013). A motion for summary judgment should be granted
when “the movant shows that there is no genuine dispute as
to any material fact and the movant is entitled to judgment as
a matter of law.” Id. at 1086–87 (quoting Fed. R. Civ. P.
56(a)) (internal quotation marks omitted). As both sides
agree, we apply California insurance law.
3
If Great American has no duty to defend the Noll action, it also has no
duty to settle that action. See Peerless Lighting Corp. v. Am. Motorists
Ins. Co., 98 Cal. Rptr. 2d 753, 766 (Ct. App. 2000).
8 STREET SURFING V. GREAT AM. E&S INS. CO.
DISCUSSION
The parties dispute whether Great American was
obligated to defend Street Surfing in the Noll action. Under
California law, a general liability insurer “has a duty to
defend an insured if it becomes aware of, or if the third party
lawsuit pleads, facts giving rise to the potential for coverage
under the insuring agreement.” Waller v. Truck Ins. Exch.,
Inc., 900 P.2d 619, 627 (Cal. 1995). The duty to defend is
therefore “broader than the duty to indemnify; an insurer may
owe a duty to defend its insured in an action in which no
damages ultimately are awarded.” Montrose Chem. Corp. v.
Superior Court, 861 P.2d 1153, 1157 (Cal. 1993) (quoting
Horace Mann Ins. Co. v. Barbara B., 846 P.2d 792, 795 (Cal.
1993)). The duty continues “until the underlying lawsuit is
concluded or until it has been shown that there is no potential
for coverage.” Id. (citation omitted).
To prevail, “the insured need only show that the
underlying claim may fall within policy coverage,” whereas
“the insurer must prove it cannot.” Id. at 1161. That is,
“[a]ny doubt as to whether the facts establish the existence of
the defense duty must be resolved in the insured’s favor.” Id.
at 1160. These principles apply only to facts potentially
“giv[ing] rise to a duty to defend,” however, not to “doubts
regarding the legal interpretation of policy terms.” Indus.
Indem. Co. v. Apple Computer, Inc., 95 Cal. Rptr. 2d 528, 533
(Ct. App. 1999); see also Mirpad, LLC v. Cal. Ins. Guarantee
Ass’n, 34 Cal. Rptr. 3d 136, 143 (Ct. App. 2005) (“If
coverage depends on an unresolved dispute over a factual
question, the very existence of that dispute would establish a
possibility of coverage and thus a duty to defend.”); Lebas
Fashion Imps. of USA, Inc. v. ITT Hartford Ins. Grp., 59 Cal.
Rptr. 2d 36, 40 (Ct. App. 1996) (“[I]t is settled that a potential
STREET SURFING V. GREAT AM. E&S INS. CO. 9
for coverage cannot be based on an unresolved legal dispute
concerning policy interpretation which is ultimately resolved
in favor of the insurer.”).
In this duty to defend case, we first address the scope of
potential coverage, accepting Great American’s concession
that the Noll action potentially falls within coverage for use
of another’s advertising idea, but rejecting Street Surfing’s
argument that the action would also fall within the policies’
coverage for slogan infringement. Next, we hold that the
prior publication exclusion relieves 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 establishes: (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. Accordingly, we affirm the district court’s
grant of summary judgment to Great American.
A. The Noll action potentially falls within the policies’
coverage.
In resolving insurance coverage disputes, before
“considering exclusions, a court must examine the coverage
provisions to determine whether a claim falls within [the
policy terms].” Waller, 900 P.2d at 625 (alteration in
original) (quoting Hallmark Ins. Co. v. Superior Court,
247 Cal. Rptr. 638, 639 (Ct. App. 1998)) (internal quotation
marks omitted). We accept Great American’s concession, for
purposes of summary judgment, that the Noll action
potentially falls within the policies’ coverage of injuries
10 STREET SURFING V. GREAT AM. E&S INS. CO.
arising from “[t]he use of another’s advertising idea in [Street
Surfing’s] ‘advertisement.’”
We reject Street Surfing’s contention that the Noll action
also falls within the policies’ slogan infringement liability
coverage, which extends to injuries arising out of “infringing
upon another’s . . . slogan in [Street Surfing’s]
‘advertisement.’”4 Interpreting a similar provision, the
California Supreme Court defined a “slogan” as “‘a brief
attention-getting phrase used in advertising or promotion’ or
‘[a] phrase used repeatedly, as in promotion,’” but recognized
that “there may be instances where the name of a business,
product or service, by itself, is also used as a slogan.” Palmer
v. Truck Ins. Exch., 988 P.2d 568, 576 & n.9 (Cal. 1999)
(quoting Webster’s Collegiate Dictionary 1105 (10th ed.
1993); American Heritage College Dictionary 1282 (3d ed.
1993)).
Although “Streetsurfer” arguably could be used as such
a slogan, Street Surfing has not identified “any instance of
such a use that would have been readily ascertainable by
[Great American] at the time the claim was filed,” and
specifically, nothing in the complaint or in the extrinsic
evidence suggests that Noll ever used “Streetsurfer” as a
slogan. Interstate Bakeries Corp. v. OneBeacon Ins. Co.,
686 F.3d 539, 546 (8th Cir. 2012). Street Surfing’s
circumstances are distinguishable from Hudson Insurance
Co. v. Colony Insurance Co., 624 F.3d 1264 (9th Cir. 2010),
4
We address this argument despite Great American’s concession
because we interpret the prior publication exclusion in light of the nature
of potential coverage. See infra p. 14–15 (citing Ringler Assocs., Inc. v.
Md. Cas. Co., 96 Cal. Rptr. 2d 136, 147–48 (Ct. App. 2000)) and p. 23
note 10.
STREET SURFING V. GREAT AM. E&S INS. CO. 11
where the third party’s complaint alleged infringing use of the
phrase “Steel Curtain,” which we readily recognized as a
slogan, “a brief attention-getting phrase,” that was used to
promote fan loyalty in pro football’s Pittsburgh Steelers. Id.
at 1268. In contrast, when Great American reviewed the
allegations in Noll’s complaint, it would have ascertained
only that Noll used “Streetsurfer” as a recognizable brand
name to identify his products, not as a phrase promoting that
brand.5 Because Street Surfing points to no facts alleged in
the complaint or otherwise that would have given rise to an
inference that slogan infringement would be at issue in the
Noll action, its claim for coverage under that provision fails.
See Interstate Bakeries, 686 F.3d at 546 (holding that the
third-party complaint did not fall within the policy’s slogan
infringement coverage because, although “it is conceivable
that ‘Nature’s Own’ could serve as a slogan,” the complaint
made no “specific allegation relating to such a use” and the
insured had not shown that the insurer otherwise knew of
such a use). Street Surfing’s purported use of “Street
Surfing” as a slogan in its own advertising is irrelevant. The
policies’ coverage extends only to Street Surfing’s
infringement of another’s slogan.
5
The only allegations concerning Noll’s use of his trademark in his
complaint were:
13. Plaintiff is a skateboard manufacturer who, since at least
1994, has manufactured and sold skateboards, and skateboard
accessories, including riser pads, wheels and clothing, under the
trademark STREETSURFER.
....
17. Plaintiff’s STREETSURFER mark is well-known as
designating Plaintiff’s goods and is a valuable asset of Plaintiff.
12 STREET SURFING V. GREAT AM. E&S INS. CO.
We therefore conclude that the Noll action potentially fell
within the policies’ coverage, triggering Great American’s
duty to defend under the advertising injury provision, but not
under the slogan infringement provision.
B. The prior publication exclusion applies to the Noll
action.
We must next consider whether the district court correctly
concluded that the prior publication exclusion relieves Great
American of its duty to defend.6 The policies’ prior
6
Equitable estoppel does not bar Great American from raising this
defense even though it neither cited the exclusion when it denied coverage
nor specifically refuted Street Surfing’s argument that the exclusion did
not apply. “An insurer can be estopped from raising coverage defenses if,
knowing of the grounds of non-coverage, it provides a defense under the
policy without a reservation of rights, and the insured reasonably relies on
this apparently unconditional defense to [its] detriment.” State Farm Fire
& Cas. Co. v. Jioras, 29 Cal. Rptr. 2d 840, 844 (Ct. App. 1994). At a
minimum, the insured must show that the insurer’s conduct caused both
(1) a reasonable belief that the insurer would provide coverage and
(2) detrimental reliance on that conduct. See id. at 845. There is no
evidence that either of these conditions was met with respect to Great
American ultimately asserting the prior publication exclusion.
Significantly, Great American’s letters explicitly reserved its rights to
“assert any and all other terms, provisions, conditions and/or exclusions
set forth in its policies which may be applicable to the Noll action.”
Street Surfing contends its argument is supported by City of Hollister
v. Monterey Insurance Co., 81 Cal. Rptr. 3d 72 (Ct. App. 2008), but that
case is inapposite. There, the California Court of Appeal held the
evidence supported a finding that the insurer “actively interfered” with the
insured’s ability to comply with the very condition asserted by the insurer
as a basis for denying coverage. Id. at 101. Here, the insurer did not
engage in similarly “blameworthy or inequitable conduct” when it denied
coverage on certain grounds, reserved its rights and relied on additional
grounds during litigation. Id. at 98.
 STREET SURFING V. GREAT AM. E&S INS. CO. 13
publication exclusion exempts 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 is to “bar coverage”
when the “wrongful behavior . . . beg[a]n prior to the
effective date of the insurance policy.” Taco Bell Corp. v.
Cont’l Cas. Co., 388 F.3d 1069, 1072 (7th Cir. 2004); see
also Kim Seng Co. v. Great Am. Ins. Co., 101 Cal. Rptr. 3d
537, 548 (Ct. App. 2009) (“The purpose of the prior
publication exclusion is to preclude coverage for risks that
have already materialized . . . .”).
In the context of advertising injury coverage, an allegedly
wrongful advertisement published before the coverage period
triggers application of the prior publication exclusion. See
infra section B.1. If this threshold showing is made, the
exclusion bars coverage of injuries arising out of
republication 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. Cf.
Ringler Assocs., Inc. v. Md. Cas. Co., 96 Cal. Rptr. 2d 136,
150 (Ct. App. 2000). If a later advertisement is not
substantially similar to the pre-coverage advertisement,
however, it constitutes a distinct, or “fresh,” wrong that does
not fall within the prior publication exclusion’s scope. See
Kim Seng, 101 Cal. Rptr. 3d at 546–48.
We also decline Street Surfing’s invitation to apply Illinois’ “mend
the hold” doctrine, see Harbor Ins. Co. v. Cont’l Bank Corp., 922 F.2d
357, 362-65 (7th Cir. 1990) (describing the doctrine and its history),
because California law has never incorporated it or applied the doctrines
of waiver or estoppel to achieve functionally equivalent results.
14 STREET SURFING V. GREAT AM. E&S INS. CO.
Street Surfing argues that Great American has not met its
burden of proving that the prior publication exclusion applies
for two reasons. First, Street Surfing argues that the prior
publication exclusion does not apply at all because neither
the Noll complaint nor the extrinsic evidence available to
Great American at the time of tender conclusively established
that Street Surfing used Noll’s advertising idea in its own
advertisements before coverage began in August 2005. Street
Surfing further contends that even if it published such pre-
coverage advertisements, Great American’s duty to defend
was separately triggered by new Street Surfing
advertisements published during the policy period using
Noll’s advertising idea, because the advertisements were not
substantially similar to any pre-coverage advertisements. We
address these two arguments in turn.
1. Street Surfing published at least one advertisement
using Noll’s advertising idea before coverage
began.
The policies’ prior publication exclusion is triggered only
if the insured published allegedly injurious material before
the beginning of the policy period. The California Court of
Appeal interpreted the scope of an identical exclusion in
Ringler by looking to the nature of the potential coverage.
See 96 Cal. Rptr. 2d at 147–48 (interpreting the exclusion “in
the context of the law of defamation” because “[o]nly the
underlying lawsuits’ ancillary claims of defamation
potentially fell within the Policy’s ‘personal’ or ‘advertising’
injury coverage”). In this case, the potential coverage is for
injuries arising out of “[t]he use of another’s advertising idea
in [Street Surfing’s] ‘advertisement.’” Because this provision
specifies the covered injuries in the policies’ own terms, we
STREET SURFING V. GREAT AM. E&S INS. CO. 15
can interpret the policies’ prior publication exclusion without
looking to underlying principles of substantive law.
Here, the Noll action is potentially covered because it
alleged that Street Surfing’s advertisements using its “Street
Surfing” logo and brand name were wrongful uses of
“Streetsurfer” – Noll’s advertising idea. Accordingly, if
Street Surfing used its brand name or logo in an
advertisement (as defined by the policy) before August 2005,
the prior publication exclusion would bar coverage of injuries
from the republication of that advertisement after August
2005.7
To determine whether Street Surfing used Noll’s
advertising idea in its own advertisements before coverage
began, the district court looked to the Noll complaint and
three items of extrinsic evidence: the affixation of the Street
Surfing logo to the Wave, Street Surfing’s website address
and the screenshot of Street Surfing’s website content. We
7
The policies define an “advertisement” as:
[A] notice that is broadcast or published to the general
public or specific market segments about your goods,
products or services for the purpose of attracting
customers or supporters. For the purposes of this
definition:
a. notices that are published include material placed
on the Internet or on similar electronic means of
communication; and
b. regarding websites, only that part of a website that
is about your goods, products or services for the
purposes of attracting customers or supporters is
considered an advertisement.
16 STREET SURFING V. GREAT AM. E&S INS. CO.
conclude that affixing the Street Surfing logo to the Wave
was an advertisement using Street Surfing’s brand name and
logo. Because the Street Surfing logo was published on the
Wave before coverage began, the prior publication exclusion
bars coverage of injuries caused by that affixation during the
policies’ coverage periods. Accordingly, we need not decide
whether Street Surfing’s website address and content also
constituted advertisements under the policy.
a. Noll Complaint
We agree with Street Surfing that the Noll complaint
itself does not establish that Street Surfing used Noll’s
advertising idea in advertisements that were published before
August 2005. The complaint alleged that the challenged
conduct occurred “since at least on or about January of 2005,
or such other date as may later be determined.” These
allegations explicitly leave open the possibility that the
challenged conduct occurred at “such other date as may later
be determined.” After discovery, the evidence could have
established that the challenged conduct actually started after
coverage began in August 2005. See CNA Cas. of Cal. v.
Seabord Sur. Co., 222 Cal. Rptr. 276, 284–85 (Ct. App. 1986)
(holding that there was a potential for coverage when the
policy period began in November 1969 and the underlying
complaint challenged a course of conduct beginning in 1966,
because no dates were alleged for the specifically listed
wrongful acts). Thus, the Noll complaint on its face does not
prove that Street Surfing used Noll’s advertising idea before
the coverage period began.
STREET SURFING V. GREAT AM. E&S INS. CO. 17
b. Logo on the Wave
We therefore turn to whether extrinsic evidence “presents
undisputed facts which conclusively eliminate a potential for
liability,” Montrose, 861 P.2d at 1159–60 (internal quotation
marks omitted), and conclude that it does. Specifically,
extrinsic evidence shows that Street Surfing affixed its logo
to the Wave before August 2005, constituting “a notice that
is broadcast or published to the general public . . . about your
goods, products or services for the purpose of attracting
customers or supporters,” the policies’ definition of an
advertisement.8
Street Surfing’s insurance application, filed before
coverage began, certified that “[a]ll products display the
Street Surfing Logo.” At the time, its only product was the
Wave, although new products were in progress, and it had
earned about $600,000 in sales of the Wave, primarily to
retailers. Affixing the Street Surfing logo to the Wave
thereby “published” that logo to the general public through
displays of the Wave in retail stores. See Rombe Corp. v
Allied Ins. Co., 27 Cal. Rptr. 3d 99, 106 n.4 (Ct. App. 2005)
(interpreting an identical definition of “advertising” and
defining “publish” as “to call to the attention of the public”
(citing WEBSTER’S THIRD NEW INTERNATIONAL
DICTIONARY 1837 (1981)). Because the record does not
include a description or depiction of the logo affixed to the
Wave, we cannot draw any conclusions about what that logo,
standing alone, may have communicated to the public.
Nevertheless, we agree with the district court that affixing
8
Street Surfing does not dispute that using a logo in this fashion
constitutes a “notice” under the policies. We therefore assume without
deciding that it does.
18 STREET SURFING V. GREAT AM. E&S INS. CO.
Street Surfing’s logo to the Wave published information about
Street Surfing’s products by informing the public of the
Wave’s origin for the purpose of attracting future customers
who might like what they saw. Accordingly, the logo
constituted an “advertisement” under the policies. Because
the logo advertisement predated coverage and used the term
“Street Surfing,” which the underlying complaint alleged was
a wrongful use of Noll’s advertising idea, “Streetsurfer,” the
prior publication exclusion applies to any injuries arising
from affixing the logo on the Wave during the coverage
period.
2. The advertisements Street Surfing published
during the coverage period fall within the scope of
the prior publication exclusion because they are
substantially similar to its pre-coverage affixation
of its logo to the Wave.
Street Surfing contends that even if the prior publication
exclusion bars coverage of liability for pre-coverage
advertisements using Noll’s advertising idea, Great American
was still obligated to defend the Noll action because Street
Surfing published new, post-coverage advertisements using
Noll’s advertising idea that were not substantially similar to
any advertisements published before the policy period. Even
assuming that affixing the Street Surfing logo to the Wave
was the only pre-coverage advertisement, we are not
convinced.
The Ringler court explained that the prior publication
exclusion “bar[s] coverage of republication of any
identifiably defamatory ‘material’ whenever the first
publication of substantially the same material occurred before
the inception of the policy period, without regard to whether
STREET SURFING V. GREAT AM. E&S INS. CO. 19
or not the defamatory material is literally restated in precisely
the same words.” 96 Cal. Rptr. 2d at 150. This concept was
further explained in Kim Seng, which held that the prior
publication exclusion does not preclude coverage if, during
the coverage period, the insured publishes “new matter”
constituting “fresh wrongs” in the underlying liability suit.
See 101 Cal. Rptr. 3d at 547. That is, “new matter” is
material that is not “substantially similar” to the material
published before the coverage period. See id.
To assess substantial similarity, courts have not
considered all differences between pre-coverage and post-
coverage publications, but have focused on the relationship
between the alleged wrongful acts manifested by those
publications. A post-coverage publication is “substantially
similar” to a pre-coverage publication if both publications
carry out the same alleged wrong. See, e.g., Taco Bell,
388 F.3d at 1073 (explaining that if an article infringing a
copyright was published before coverage, but was
republished during the coverage period as part of an
anthology, “[t]he anthology would be a different . . . work
from the magazine, but the wrongful act – the copying of the
copyrighted article without authorization – would be the same
and so the prior-publication exclusion would . . . click in”).
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.” Id. at 1072.
In Kim Seng, the California Court of Appeal applied this
framework when it considered whether the insurer was
obligated to defend and indemnify the insured in an action
alleging infringement of the trademark “Que Huong.” See
101 Cal. Rptr. 3d at 541–42. The infringement allegations in
20 STREET SURFING V. GREAT AM. E&S INS. CO.
the complaint were based on the insured’s pre-coverage use
of the marks “Que Huong” and “Old Man Que Huong
Brand.” See id. at 541, 545. The insured argued that the
prior publication exclusion did not relieve the insurer of its
duty to defend because the underlying action sought to enjoin
new marks introduced during the policy period – including
“‘Bun Tuoi Hieu Que Huong Brand,’ ‘Bun Que Huong Dac
Biet,’ and a trademarked logo that included a water buffalo
and the words ‘Que Huong,’” id. at 540 – that differed from
those it used before coverage began. See id. at 545. The
court rejected that argument because “[t]he alleged wrongs
before and during the policy period were the use of the words
‘Que Huong,’” noting that “[t]he words added by [the
insured] to ‘Que Huong’ during the policy period [were]
merely product description.” Id. at 547.
In contrast, the Seventh Circuit held in Taco Bell that the
insurer had a duty to defend the insured’s publication of “new
matter that the plaintiff in the liability suit against the insured
allege[d] as fresh wrongs.” 388 F.3d at 1073. The plaintiff
in the underlying suit alleged that it had “developed a
marketing gimmick that it called ‘Psycho Chihuahua,’” as
well as several specific examples of that advertising idea –
e.g., “the idea of a Chihuahua popping his head out through
a hole at the end of a commercial.” Id. at 1072. The insured,
Taco Bell, developed a national advertising campaign based
on the “Psycho Chihuahua” idea, airing some commercials
for the first time before the coverage period, and others for
the first time during the coverage period. See id. at 1072–73.
The insurer argued that, although the post-coverage
commercials were different from the pre-coverage
commercials, the prior publication exclusion applied because
all of the commercials used the same misappropriated
“Psycho Chihuahua” idea. See id. at 1073.
 STREET SURFING V. GREAT AM. E&S INS. CO. 21
The Seventh Circuit rejected the insurer’s argument. See
id. It acknowledged that if broadly construed, the “Psycho
Chihuahua” idea would “encompass[] all the subordinate
ideas embodied in the later commercials.” Id. at 1074.
Nevertheless, the court looked to the allegations in the
underlying complaint “that those later commercials
appropriated not only the ‘basic idea’ (‘Psycho Chihuahua’)
but other ideas as well that are protected by Michigan’s
common law of misappropriation, like the idea of the
Chihuahua’s poking its head through a hole at the end of a
commercial.” Id. at 1073 (emphasis added). Because the
underlying complaint “charge[d] the misappropriation of the
subordinate ideas as separate torts, and those torts occurred
during the period covered by [the insurer]’s policy,” the court
held that the prior publication exclusion did not bar coverage
of the underlying action. Id. at 1074.
Street Surfing argues that this case is analogous to Taco
Bell because, during the coverage period, it published
advertisements for “Lime Green Street Surfing Wheels for the
Wave” and the “New Ultimate Street Surfer Wheel Set,” and
these advertisements differed from any pre-coverage
advertisements.9 Conversely, Great American contends that
this case is indistinguishable from Kim Seng. We conclude
9
Street Surfing sent Great American these post-coverage advertisements
with its letter contesting Great American’s first denial of coverage,
making Great American aware of these advertisements even though they
were extrinsic to the complaint. Accordingly, if the advertisements
created a potential for coverage, Great American would be obligated to
defend the Noll complaint. See Waller v. Truck Ins. Exch., 900 P.2d 619,
627 (Cal. 1995) (“It has long been a fundamental rule of law that an
insurer has a duty to defend an insured if it becomes aware of, or if the
third party lawsuit pleads, facts giving rise to the potential for coverage
under the insuring agreement.”).
22 STREET SURFING V. GREAT AM. E&S INS. CO.
that Street Surfing’s post-coverage advertisements are
substantially similar to its pre-coverage advertisement and
therefore that the prior publication exclusion precludes
coverage of the Noll action.
Unlike the underlying complaint in Taco Bell, the Noll
complaint does not mention any specific advertisements.
Instead, it makes general allegations that Street Surfing
injured Noll by using the Street Surfing name and logo on the
Wave and in its advertisements. In particular, the Noll
complaint does not allege that the post-coverage
advertisements were separate torts occurring during the
policy period. One of the primary grounds for the Seventh
Circuit’s decision in Taco Bell is therefore not applicable
here. See 388 F.3d at 1073–74.
More importantly, if Street Surfing’s post-coverage
publications were wrongful, that would be so for the same
reason its pre-coverage advertisement was allegedly
wrongful: they used Noll’s advertising idea in an
advertisement. Whether that idea was manifested specifically
as “Street Surfing” or as “Street Surfer” is not a meaningful
differentiation, because the alleged wrong arose out of each
term’s similarity to Noll’s advertising idea, “Streetsurfer.”
Arguably, “Street Surfer” and “Street Surfing” could each be
viewed as a separate, subordinate version of the basic
“Streetsurfer” idea. The extreme similarity between all these
terms, however, convinces us otherwise. Rather, we are
persuaded this is an instance where “a difference between the
republished version of an unlawful work and the original
version [is] so slight as to be immaterial.” Taco Bell,
388 F.3d at 1073.
STREET SURFING V. GREAT AM. E&S INS. CO. 23
That the advertisements were for different products is also
not a material distinction, because the advertising idea being
used was the same regardless of the product. In Taco Bell,
the material distinction was not between commercials for
tacos and commercials for burritos, but between commercials
that infringed one general idea allegedly protected by
misappropriation law (“Psycho Chihuahua”) and a separate,
more specific idea that was also allegedly protected by
misappropriation law (a Chihuahua poking its head through
a hole). See id. at 1073. The distinct products being
promoted in Street Surfing’s post-coverage advertisements
are more akin to the words of product description added to
the marks during the policy period in Kim Seng; they
differentiate the publications, but not the alleged wrongs,
which were the same before and during the policy period.
See 101 Cal. Rptr. 3d at 547. The difference in products is
therefore also not material for purposes of the “fresh wrongs”
analysis.
Accordingly, we conclude that Street Surfing’s post-
coverage advertisements are not fresh wrongs that escape
application of the prior publication exclusion.10
CONCLUSION
At its core, this case involves a company that began a
wrongful course of conduct, obtained insurance coverage,
continued its course of conduct, then sought a defense from
its insurer when the injured party sued. Although “a liability
10
Street Surfing’s additional contention that it began using “Street
Surfing” as a slogan only after coverage began is not convincing, because
there is no potential coverage under the slogan infringement provision.
See supra Part A.
24 STREET SURFING V. GREAT AM. E&S INS. CO.
insurer owes a broad duty to defend its insured against claims
that create a potential for indemnity,” Horace Mann Ins. Co.
v. Barbara B., 846 P.2d 792, 795 (Cal. 1993), the prior
publication exclusion, strictly construed, serves to place
reasonable limits on that broad duty. We therefore affirm the
district court’s grant of summary judgment in favor of Great
American. We do not reach Great American’s alternate
arguments based on the IP exclusion and the AI amendment.
AFFIRMED.