Although the sale of its Navajo product line constituted “personal and advertising injury” within the meaning of its liability insurance policies, Urban Outfitters was not entitled to defense or indemnity for claims brought by the Navajo Nation Indian tribe because of the policies’ “prior publication” or “first publication” exclusions.  Hanover Insurance Co. v. Urban Outfitters, 2:12-cv-03961-TON (E.D. PA. August 19, 2013).

Insurance Policies

Pursuant to an agreement with a fronting insurer, Hanover Insurance Co. (Hanover) was responsible for primary and umbrella liability coverage issued to Urban Outfitters for a one year period commencing on July 7, 2010. Hanover then issued primary and umbrella coverage for the following year.  All policies provided coverage for a “personal and advertising injury” offense committed “during the policy period.”

“Personal and advertising injury” was defined as injury arising out of:

Oral or written publication, in any manner, of material…that disparages a person’s or organization’s goods, products or services.  This does not include any disparagement related to the actual or alleged infringement or violation of any intellectual property rights or laws; Oral or written publication, in any manner, of material that violates a person’s right of privacy; The use of another’s advertising idea in your ‘advertisement;” or Infringement upon another’s copyright, trade dress or slogan in your ‘advertisement’.”  The primary and umbrella policies contained “prior publication” or “first publication” exclusions, which preclude coverage for personal and advertising injury “arising out of oral or written publication of material whose first publication took place before the beginning of the policy period.

(collectively, the Prior Publication exclusions).

Underlying Claim

Beginning at least by March 2009, Urban Outfitters advertised and sold goods under the Navaho and Navajo names.  The Navajo tribe sued Urban Outfitters, alleging that its display and sale of Navajo goods in its stores and online falsely suggested that they were products of the Navajo Nation.  The Navajo Nation alleged that Urban Outfitters thereby infringed on the Navajo Nation’s trademarks.

Coverage Issues

Hanover defended Urban Outfitters under a reservation of rights.  Hanover then filed a declaratory judgment action in the U.S. District Court in the Eastern District of Pennsylvania, seeking a ruling that it had no duty to defend or indemnify Urban Outfitters because of the Prior Publications exclusions.

Ruling on Hanover’s motion on the pleadings, the court held that the Navajo Nation’s claims against Urban Outfitters “clearly” alleged “personal and advertising injury” under the policies.  However, the court held that the Prior Publication exclusions applied because Urban Outfitters started using the “Navajo” and “Navaho” names in its product line at least since March 2009.  Noting that “Navajo” had been trademarked by the Navajo Nation, the court held that Urban Outfitter’s use of the trademark “allegedly falsely suggests Urban Outfitters products are Indian products of the Navajo Nation….when in fact they are not.”

The court’s decision was not affected by the fact that Urban Outfitters advertised additional allegedly infringing products at a later date.  “Unless later publications contained ‘new matter’ – i.e. substantively different content – that the underlying complaint alleged were fresh wrongs,’ the ‘prior publication’ exclusion applies.”  Because the purpose of insurance is to spread risk, “if the risk has already materialized, what is there to insure?  The risk has become a certainty.” (internal citations omitted).

The court ruled that the advertising injury was identical, even though additional products were being advertised at a later date.  “Other products that alleged violate the Navajo Nation’s trademark on the word ‘Navajo’ by using that term …. may cause separate injuries, but they infringe upon the same trademarked work and thus cause advertising injury to the Navajo Nation in the same way.”