With social media use on the rise, insurers and insureds alike should be mindful of posts that can implicate the prior publication exclusion to coverage. In Scout, LLC v. Truck Ins. Exchange, 2019 WL 347471 — P.3d —- (Idaho Jan. 29, 2019), the Idaho Supreme Court addressed this issue in a trademark infringement case that began with what seemed like a simple Facebook post.
Scout involved an Idaho LLC that purchased and renovated a downtown restaurant in Boise, turned it into a pub and began using the brand name Gone Rogue Pub. On October 10, 2012 Scout shared a public picture of the pub’s new Gone Rogue logo on Facebook to share the news of the renovation. On November 7, 2012, Scout purchased a commercial business insurance policy through Truck Insurance (“Truck”). Scout obtained all of its licenses, merchandise and signs to open the pub around November 21, 2012. However, in January 2013, Oregon Brewing Company (“OBC”) notified Scout that it had federally registered ROGUE trademarks, and Scout was infringing on five of its trademarks, including (1) beer and ale; (2) restaurant, pub and catering services; (3) beverage glassware; (4) beer; and (5) clothing. OBC filed suit in October 2014 against Scout alleging trademark infringement and citing to Scout’s October 2012 Facebook post. Scout provided notice to Truck which denied coverage under the liability policy based on an exclusion for “‘advertising injury’ [a]rising out of oral or written publication of material whose first publication took place before the beginning of the policy period” because OBC’s complaint indicated the infringement began in October 2012, and identified the Facebook post, which was placed one month before Scout’s lability coverage with Truck began. Scout settled the case, and then filed a suit against Truck alleging breach of contract, breach of the covenant of good faith and faith dealing, and bad faith failure to defend.
Scout initially argued the district court erred by limiting its review of the allegations to those found in the OBC complaint and asserted that while OBC’s complaint alleged that Scout began using the ROGUE mark in October 2012, Scout did not have its business permits just yet, so the mark was not being used in connection with a restaurant. However, the Supreme Court of Idaho rejected this argument and noted “an insurer does not have to look beyond the words in the complaint to determine if a possibility of coverage exists.” Instead, if “an exclusion in a business liability policy clearly and unambiguously excludes certain injuries, an insurer’s duty to defend is not triggered.” The court found that because the OBC complaint alleged the ROGUE mark was first published before the Truck policy was issued and was supported by an exhibit showing the use, the prior publication exclusion applied.
Scout then argued the prior publication exclusion’s use of “arising out of” is ambiguous as courts have interpreted the term to mean “a prior publication must cause an injury when initially published and/or cause the same or substantially the same injury as any later injuries.” The Idaho Supreme Court disagreed, noting that the use of the term “arising out of” generally “does not require a direct proximate causal connection but instead merely requires some causal relation or connection.” The court indicated the exclusion plainly read, clearly indicates that if any injury arises after coverage is purchased, it will not be covered if the material was published prior to coverage. While the ‘arising out of’ language necessitates a causal connection with the later advertising injury, so long as the connection exists the prior publication exclusion precludes coverage. The court applied the landmark view in reaching its decision and noted the “the first publication date is a landmark” and “if the injurious advertisement was ‘first published’ before the policy began, then coverage for the ‘advertising injury’ is excluded.” The court noted the logo in Scout’s October posting only featured the words GONE ROGUE but did not include the additional word PUB as all of its other logos feature after it purchased insurance. Additionally, the court stated the October posting “was similar in every way to the later logos but for the PUB addition.” Also, the court found that it was apparent the Facebook post was for a restaurant. Finally, even OBC’s complaint identified the October posting as injurious in its infringement allegation. As such, the court found the “October posting was the landmark for Scout’s continuous acts that ultimately resulted in an infringement suit.”
Finally, Scout argued that even if the October posting is considered a prior publication under the Truck policy, OBC’s allegations in the complaint also identify trademark infringement after the October 2012 post that are distinct, fresh wrongs, that should not be excluded under the prior publication exclusion. The Idaho Supreme Court noted “that post-coverage advertisements that are sufficiently distinct from pre-coverage advertisements constitute ‘fresh wrongs’ that trigger an insurer’s duty to defend, regardless of prior publication exclusion.” Put plainly, “a complaint alleging new injuries independent of prior injuries will trigger an insurer’s duty to defend, regardless of other allegations in a complaint being excluded under a prior publication exclusion.” Scout claimed the prior publication exclusion should only be applied to the ROGUE marked used in connection with the restaurant, pub and catering services, and not to OBC’s allegations of infringement in connection with goods such as beer and ale, beverage glassware, beer, and clothing as they are fresh wrongs. However, the court rejected this argument and found that while OBC’s complaint alleges separate torts, each claim refers back to the October 2012 infringement. Additionally, there “are no allegations of new content being taken from OBC” in its complaint. Instead the allegations are “a continuing harm stemming from the use of the ROGUE mark beginning a month before Scout’s insurance coverage.” Finally, the court found advertising a logo for a restaurant and then featuring an almost identical logo using the word ROGUE on glassware, clothing, beer and ale create substantially the same wrong. As such, the court found there were no fresh wrongs alleged and the prior publication exclusion applied.