Ninth Circuit Affirms Broad Scope Of “In Your ‘Advertisement’” Element Of Offense (f)

Ninth Circuit Affirms Broad Scope Of “In Your ‘Advertisement’” Element Of Offense (f) In Enforcing “First Publication” Exclusion

Street Surfing, LLC v. Great Am. E&S Ins. Co., 752 F.3d 853 (9th Cir. 2014) was published June 10, 2014.  That Order was amended on November 14, 2014, after the Panel solicited Opposition to the Petition for Rehearing of its prior ruling and permitting an amicus brief to be filed in support of that Petition.  See Street Surfing, LLC v. Great Am. E&S Ins. Co., --- F.3d ----, 2014 U.S. App. LEXIS 21804 (9th Cir. (Cal.) Nov. 14, 2014).

The Panel modified its Order in several key respects:

First, the court independently analyzed and confirmed that the term “Street Surfer” was an “advertising idea” as used by Street Surfing such that the alleged injury potentially fell within the coverage for offense (f): “injury arising out of . . . ‘use of another’s advertising idea in your “advertisement.” ’ ”  The court concluded, however, that the “first publication” exclusion barred a defense for such otherwise covered claims because, as the court stated, Id. at *27-28, “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.” 

Second, the Panel conceded, Id. at *27, that a different result might have arisen if the first use of Street Surfer (allegedly infringed by use of the phrase “Street Surfing”) as a slogan commenced after policy inception.  It determined, Id. at *10, that the term “Street Surfing” did not qualify as a slogan because

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.  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.

Third, turning to the “in your ‘advertisement’” component of offense (f), which must arise before policy inception to implicate the “first publication” exclusion, the Panel acknowledged that the pertinent use must first fall within offense (f) prior to policy inception since the exclusion cannot apply absent coverage.  Indeed, the exclusionary language is preceded by the phrase “personal and advertising injury,” so only qualifying conduct that falls within that offense before the policy issued can be subject to any pertinent exclusion. 

Critically, the court found that the “in your ‘advertisement’” element could be satisfied while the advertiser was not the insured but a retailer who promoted the product by simply displaying it in a retail store.  The court noted, “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.” Street Surfing, 752 F.3d at 861.  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)).

The court at 752 F.3d at 861-62 concluded that:

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 logo on the Wave during the coverage period.

The court’s analysis focused solely on the “advertisement” component, but necessarily addressed that the “in your” element was met by the manufacturing display of the alleged improper Street Surfing logo on its wide range of skateboard products.  It did find the specific conduct of retailers displaying the products in their stores insufficient in this context to meet the “in your ‘advertisement’” element.  The Panel also reasoned that the “in your” element was satisfied by conduct of others, such as those distributors and retailers that sold Street Surfing’s products.  Since Street Surfing affixed its logo to the Wave, the manufacturer’s conduct sufficed for the court’s analysis.

Prior cases that have more narrowly construed the “in your ‘advertisement’” requirement in distinct contexts should therefore be revisited as a broader range of conduct by distributors and retailers may suffice to trigger coverage under the “in your ‘advertisement’” component of offense (f).