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.
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
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 spanned two policies, the 2005 policy (August 2005 until September 2006), and the 2006 policy (September 2006 until September 2007).
The policies covered, among other things, personal and advertising injury liability.
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,
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.
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.
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., 11 Cal.4th 1, 44 Cal.Rptr.2d 370, 900 P.2d 619, 627 (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, 6 Cal.4th 287, 24 Cal.Rptr.2d 467, 861 P.2d 1153, 1157 (1993) (quoting Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076, 17 Cal.Rptr.2d 210, 846 P.2d 792, 795 (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., 24 Cal.Rptr.2d 467, 861 P.2d 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., 24 Cal.Rptr.2d 467, 861 P.2d 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., 79 Cal.App.4th 817,
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.
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, 44 Cal.Rptr.2d 370, 900 P.2d at 625 (alteration in original) (quoting Hallmark Ins. Co. v. Superior Court, 201 Cal.App.3d 1014, 247 Cal.Rptr. 638, 639 (1988)) (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 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.'"
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
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.
We must next consider whether the district court correctly concluded that the prior publication exclusion relieves Great American of its duty to defend.
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., 80 Cal.App.4th 1165,
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.
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 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.
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
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. Seaboard Sur. Co., 176 Cal.App.3d 598, 222 Cal.Rptr. 276, 284-85 (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.
We therefore turn to whether extrinsic evidence "presents undisputed facts which conclusively eliminate a potential for liability," Montrose, 24 Cal.Rptr.2d 467, 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.
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 "broadcast or published" that logo to the general public through displays of the Wave in retail stores. 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 or broadcast to the public. Nevertheless, we agree with the district court that affixing Street Surfing's logo to the Wave broadcast 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
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 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 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
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.
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.
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
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.
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.
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 insurer owes a broad duty to defend its insured against claims that create a potential for indemnity," Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076, 17 Cal.Rptr.2d 210, 846 P.2d 792, 795 (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.
In relevant part, "personal and advertising injury" was defined as:
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.
