November 2015 PDF

November 2015
Volume 6
Issue 11
COMMERCIAL
GENERAL
LIABILITY
D I S PAT C H
MEET OUR EDITORS
JOANNA L. CROSBY, Partner
New Jersey Office | jcrosby@tresslerllp.com
TOP STORIES
>>3RD CIRCUIT WEIGHS IN ON WHAT CONSTITUTES A “FRESH WRONG”
FOR PURPOSES OF EVALUATING THE APPLICATION OF
THE PRIOR PUBLICATION EXCLUSION
By: Ryan Luther, Associate in the Orange County Office............................................. P2
LINDA TAI HOSHIDE, Partner
Los Angeles Office | lhoshide@tresslerllp.com
>>INTELLECTUAL PROPERTY EXCLUSION MEANS WHAT IT SAYS:
NO CAUSAL CONNECTION BETWEEN ALLEGED INTELLECTUAL PROPERTY
VIOLATION AND OTHER CLAIMED INJURIES NEEDED TO PRECLUDE
DUTY TO DEFEND
By: Mary E. McPherson, Partner in the Orange County Office................................... P3
>>WHEN EVEN THE BEST-LAID PLANS OF OWNERS AND CONTRACTORS GO AWRY:
OWNER-CONTROLLED INSURANCE PROGRAM POTENTIALLY LEAVES
OWNER WITHOUT ADDITIONAL INSURANCE COVERAGE
FOR CONSTRUCTION WORKPLACE INJURY CLAIM
By: Kevin Sullivan, Associate in the Newark Office..................................................... P5
JAMES A. PINDERSKI, Partner
Chicago Office | jpinderski@tresslerllp.com
>>FIRM NEWS .............................................................................................................. P6
>>FIRM EVENTS ............................................................................................................ P7
CALIFORNIA | ILLINOIS | NEW JERSEY | NEW YORK
CONTRIBUTING EDITOR
Yvonne Schulte
3rd Circuit Weighs In on What Constitutes a
“Fresh Wrong” for Purposes of Evaluating the
Application of the Prior Publication Exclusion
In Hanover Ins. Co. v. Urban Outfitters, Inc., 2015 WL 6405763 (3rd Cir. October 23, 2015), the U.S. Court of Appeals
for the 3rd Circuit affirmed judgment on the pleadings, finding that Hanover properly denied a duty to defend
Urban Outfitters in an underlying trademark infringement lawsuit based on an exclusion barring coverage for Prior
Publication Exclusion defined as, “‘personal and advertising injury’ liability ‘arising out of oral or written publication
of material whose first publication took place before the beginning of the policy period.’”
Ryan Luther
Associate in the
Orange County Office
In the underlying action, the Navajo Nation sued Urban
Outfitters for trademark infringement based on its
advertisement and sale of products bearing the names
“Navaho” and “Navajo,” both before and after Hanover
issued a CGL policy to Urban Outfitters. In evaluating the
application of the Prior Publication Exclusion, the court
cited Street Surfing, LLC v. Great American E & S Ins. Co., 776
F.3d 603 (9th Cir. 2014), as persuasive authority. In Street
Surfing, a case successfully argued by Tressler LLP, the U.S.
Court of Appeals for the 9th Circuit held an insured’s alleged
infringement of the same trademark in its advertisements,
both before and after policy inception, constitutes the same
alleged “wrong,” such that the Prior Publication Exclusion
barred a defense obligation.
In an “attempt to build on” the approach in Street Surfing,
the court articulated its own standard for evaluating the
application of the Prior Publication Exclusion. According
to the 3rd Circuit, “[w]here a plaintiff alleges a substantive
difference between allegedly infringing advertisements,
published before and during the relevant policy period, the
later advertisements are ‘fresh wrongs’ that fall outside the
‘prior publication’ exclusion.” However, “variations, occurring
within a common, clearly identifiable advertising objective,
do not give rise to ‘fresh wrongs.’” The court identified the
following as “significant factors” in determining whether
the exclusion applies to bar a defense obligation: “whether
the plaintiff charged the insured with separate torts or an
agglomeration; whether the complaint describes a significant
lull between pre- and post-coverage advertising initiatives;
and whether the advertisements share a common theme
relating to the alleged violation.”
Based on the allegations of the underlying complaint, the
court concluded that the pre- and post-policy inception
infringement was “thematically consistent” and shared
a common objective, such that Urban Outfitters’ actions
during the policy period were not “fresh wrongs,” rendering
the exclusion inapplicable. Concluding that “Urban Outfitters
engaged in similar liability-triggering behavior both before
and during Hanover’s coverage period,” the court held that
the Prior Publication Exclusion barred a defense obligation.
Tressler Comments
The Urban Outfitters decision arguably leaves room for factual distinctions to be drawn based on the “theme” or
“objective” of the insured’s pre- and post-inception advertisements, even where they involve the alleged infringement of
the same trademark. The court’s reading of the Prior Publication Exclusion appears more restrictive than the 9th Circuit’s
approach in Street Surfing, which focused on whether the same “advertising idea” (the “Streetsurfer” trademark) was
infringed before and during the policy period, rather than the manner in which it was infringed. To the extent policyholder
counsel can point to differences between the advertisements at issue, or even “lulls” between such advertisements, they
may contend that the Prior Publication Exclusion does not apply, even if the identical trademark was first alleged to have
been infringed in an advertisement prior to the inception of the policy.
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Happy Holidays
Thank you for your interest in reading our
Commercial General Liability Dispatch.
Tressler wishes you and your family
a happy and healthy 2016.
Intellectual Property Exclusion Means What It
Says: No Causal Connection Between Alleged
Intellectual Property Violation and Other
Claimed Injuries Needed to Preclude Duty to
Defend
Mary E. McPherson
Partner in the
Orange County Office
The U.S. District Court for the Northern District of California summarily dismissed a policyholder’s efforts to nullify
the plain language of the Intellectual Property Exclusion and granted the insurer’s motion to dismiss. In doing so, the
court soundly rejected the policyholder’s arguments that the exclusion did not apply to preclude coverage because
there were claims in addition to those for infringement of trade secrets, and that the exclusion was not “conspicuous,
plain and clear” because it was added by an endorsement. It applied the exclusion to preclude a duty to defend for
the entire complaint as it was broadly written and required no causal connection between the alleged trade secret
violation and the other claimed injuries in order for it to apply. Pinnacle Brokers Insurance Solutions LLC v. Sentinel
Insurance Co, Ltd., No. 15-cv-02976-JST, 2015 U.S. Dist. LEXIS 117299 (N.D. Cal. Sept. 2, 2015).
This coverage dispute arose out of a lawsuit filed by Granite
Professional Insurance Brokerage, Inc. (Granite) against
Pinnacle Brokers Insurance Solutions LLC and employees
of Pinnacle (collectively, Pinnacle). Granite alleged that
Pinnacle conspired to steal its customers and prospective
customers by carrying out a series of misleading tactics and by
misappropriating confidential and trade secret information.
The underlying complaint included 16 counts, including causes
of action for misappropriation of trade secrets, as well as
trade libel and business tort claims, and claims for injunctive
relief and monetary damages.
Sentinel Insurance Company, Ltd.’s (Sentinel) disclaimed an
obligation to defend Pinnacle as its policy was subject to an
Intellectual Property Exclusion (IP Exclusion) that precluded a
duty to defend Personal and Advertising Injury for “Any injury
or damage alleged in any claim or suit that also alleges an
infringement or violation of any intellectual property right.”
The exclusion identified trade secrets as one of the excluded
intellectual property rights. Pinnacle sued Sentinel for breach
of contract and the covenant of good faith and fair dealing.
Sentinel moved to dismiss the complaint on the basis that the
IP Exclusion barred coverage entirely because of the cause of
action for trade secret infringement. While Pinnacle admitted
that the IP Exclusion applied to the intellectual property
claims, it maintained that Sentinel still had a duty to defend
for three reasons: (1) the IP Exclusion did not apply to claims
unrelated to intellectual property; (2) the IP Exclusion was
unclear and unenforceable; and (3) even if the some claims
were not covered, the “mixed” nature of the claims triggered
Sentinel’s duty to defend.
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The court soundly rejected all of Pinnacle’s arguments and
held that Sentinel did not have a duty to defend because:
»» The IP Exclusion did not require a causal connection
between the alleged intellectual property violation and
other claimed injury in order to preclude a duty to defend
the entire suit. The language of the IP Exclusion makes
clear that there is no coverage for other claimed injuries or
damage in a claim or suit that also alleges infringement of
an intellectual property right. As the lawsuit filed against
Pinnacle alleged infringement of trade secrets, there was
no duty to defend even if, arguendo, other claims in the
lawsuit may have given rise to a potential for coverage.
»» The language of the IP Exclusion was conspicuous and
The IP Exclusion was located on a page of the policy titled
in bold capitalized letters advising the insured that the
endorsement changed the policy. Further, the language of
the exclusion itself was clear and unambiguous.
»» The underlying lawsuit was not a “mixed” action subject
to Buss v. Superior Court because the IP Exclusion
unambiguously foreclosed the potential for coverage
based on there being at least one claim for infringement
of an intellectual property right.
This ruling adds to what is becoming a long line of federal
court decisions upholding these broadly written Intellectual
Property Exclusions and applying them to negate a duty to
defend.
plain even though it was contained in an endorsement.
Tressler Comments
Besides upholding the application of the Intellectual Property Exclusion itself, this decision is important for two other reasons.
First, the court specifically states that even though it was added by endorsement, the IP Exclusion met the “conspicuous, plain
and clear” test under California law, and thus, was valid and enforceable. This decision helps insurers combat the renewed
effort we have recently seen by policyholders to raise this argument as a means of getting around policy provisions unfavorable
to their position. Second, the court also shut down the policy holder’s effort to amend the complaint to find some way to
try to keep the suit alive. The court is sending a message to all policyholders that efforts to get around this exclusion will be
carefully scrutinized from the outset of all coverage litigation. Thus, motions to dismiss should be considered in lieu of summary
judgment motions when supported by the facts and law, as was the case here.
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When Even the Best-Laid Plans of Owners and
Contractors Go Awry
Owner-Controlled Insurance Program Potentially
Leaves Owner Without Additional Insurance Coverage
for Construction Workplace Injury Claim
In Muss Development, LLC v. Nationwide Insurance Co., Case No. 13-CV 4848, 2015 WL 6160240 (E.D.N.Y. Oct. 20,
2015), the U.S. District Court for the Eastern District of New York held that the commercial general liability insurer of
a subcontractor excluded from an owner-controlled insurance program (OCIP) had a duty to provide primary and noncontributory additional insured coverage to the construction manager for a workplace injury suit, but issues of fact
precluded a declaration that the insurer owed the same duty to the construction project’s owner.
Kevin Sullivan
Associate in the
Newark Office
In 2007, Urban Power & Lighting, Inc. (Urban) entered into
a subcontract with Muss Development Corp. (Muss) to
provide electrical work in connection with the construction
of a condominium complex (the Project). The subcontract’s
indemnity provision required Urban to defend and
indemnify Muss and Flushing Town Center III, L.P. (Flushing),
the Project’s owner. In lieu of an insurance provision, the
subcontract incorporated the insurance manual for an OCIP
issued by Illinois National Insurance Company (AIG). That
manual required Urban to maintain insurance to protect
Flushing and name Flushing as an additional insured (AI).
It also included a sample Certificate of Insurance (COI) that
listed Flushing as an AI. After entering into the contract,
Urban’s insurance broker provided COIs listing Muss and
Flushing as additional insureds.
In February 2010, an Urban employee sustained an injury
during the Project’s construction, and he sued Flushing,
Muss and Tishman Construction Corp. of New York
(Tishman), another construction manager that started
after the injury. Flushing, Muss and Tishman were all
covered under the AIG OCIP. Urban was not covered under
the AIG OCIP, but did maintain its own CGL policy with
Nationwide Insurance Company (Nationwide). Flushing,
Muss and Tishman sued Nationwide seeking a declaration
that they were entitled to AI coverage. The Nationwide
AI endorsement provided such coverage to organizations
with whom Urban had entered into a contract, provided
the contract required AI coverage, and provided that the
bodily injury arose out of Urban’s acts or omissions in
the performance of its ongoing operations. Nationwide
disputed any obligation to provide AI coverage, and also
asserted that even if any entity qualified as an AI, the AIG
OCIP provided primary coverage.
Applying New York law, the District Court held Nationwide
was required to provide Muss with AI coverage because
it met the AI endorsement’s conditions. But the District
Court held that Flushing and Tishman did not meet the
endorsement’s contractual privity condition, and therefore,
did not qualify for AI coverage. Nonetheless, the District
Court found that there were issues of fact with regard
to whether Nationwide was estopped from denying AI
coverage to Flushing because the contracts and certificates
of insurance clearly demonstrated an intent to provide AI
coverage to Flushing. Since there was no evidence that
Urban’s insurance broker was acting under Nationwide’s
authority when it issued the COIs, a declaration of
coverage or non-coverage for Flushing could not be made.
Addressing the priority of coverage, the District Court
noted the Nationwide policy provided primary and noncontributory coverage based on the holding in Pecker Iron
Works of New York, Inc. that AI coverage is primary unless
unambiguously stated otherwise.
Tressler Comments
This case exemplifies the hiccups that seem to appear when insuring construction projects. Generally, the certainty of OCIP
coverage is intended to drive down the administrative costs of insuring construction projects. But this case demonstrates
that when an OCIP excludes subcontractors, owners and contractors still have to ensure that all of their bases are covered to
obtain the additional insured coverage they expect.
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FIRM NEWS
Nov. 5, 2015
New Tressler Attorneys Featured in Law360
New attorneys Diana Winfrey, Ed Langhammer, Cole Heggi and Leslie Simoneu were featured in the
Law360 article, “Tressler Adds Employment, Insurance Pros In LA.”
Nov. 3, 2015
Tressler LLP Continues to Expand California Presence
with the Addition of Two Partners in Los Angeles and
Two Associates in Orange County
Tressler LLP continues to grow its presence in California with the addition of two partners in its Los Angeles
office, Diana L. Winfrey, an insurance coverage attorney, and C. Edward Langhammer, Jr., an employment
litigator; and two associates in its Orange County office, Coleman D. Heggi, an insurance coverage attorney,
and Leslie E. Simoneau, an employment attorney.
Oct. 22, 2015
E&O Weekly Prevention Publishes Formeller Article on
TCPA Exclusions
Tressler Chicago associate Kathryn Formeller’s article, “No Coverage for Violations of the TCPA or
Consumer Fraud Act Under Cyber Claims Endorsement,” was republished by E&O Weekly Prevention for
AgentsofAmerica.org. The article, first published in Tressler’s Specialty Lines Advisory covers the Doctors
Direct Insurance, Inc. v. David Bochenek case.
ANNOUNCING TRESSLER LLP’S BLOG:
www.PrivacyRiskReport.com
It is virtually impossible to look at the news today without seeing a story involving cyber security and data breaches.
For that reason, Tressler developed the Privacy Risk Report blog. >> CLICK HERE TO VISIT OUR BLOG.
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FIRM EVENTS
Dec. 12, 2015
Real World Considerations in Searching For, Selecting
and Retaining Expert Witnesses
Forensic Expert Witness Association Chicago Regional Workshop | Illini Center, Chicago, IL
Tressler Senior Chairman Dan Formeller will speak on a panel for the topic, “Real World Considerations
in Searching for, Selecting and Retaining Expert Witnesses,” at the Forensic Expert Witness Association
(FEWA) Chicago Regional Workshop on Saturday, December 12, 2015.
Feb. 24, 2016
Emerging & Complex Insurance Claims Forum
HB Litigation Conferences | The Los Angeles Athletic Club, Los Angeles, CA
Tressler Orange County partner Linda Bondi Morrison is Co-Chair for the Emerging & Complex Insurance
Claims Forum that will be held in Los Angeles on February 24-26, 2016.
Apr. 17, 2016
Navigating Other Insurance Disputes
2016 PLRB National Claims Conference | Henry B. Gonzalez Convention Center, San Antonio, TX
Tressler Orange County partner Linda Bondi Morrison will speak on the topic of, “Navigating Other
Insurance Disputes,” at the 2016 PLRB National Claims Conference in San Antonio, Texas. The session runs
twice, first Monday, April 18 at 1:30 p.m. and then Wednesday, April 20 at 8:30 a.m.
Insurance Covered.
The Claims Handling and Extracontractual Liability Practice Group counsels insurers on proper claims handling
practices and represents insurers in bad faith litigation throughout the country. This includes pursuing
extracontractual liability recoveries from other insurance companies and, in certain situations, the insured itself.
Our Claims Handling and Extracontractual Liability team is experienced in: Appeals, Arbitration, Claims Training,
File Audits, Interpretation and Coverage Analysis, Litigation, Mediation and Trial.
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DISCOVER TRESSLER.
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AUTHORS
Ryan Luther
Associate
Orange County Offic
rluther@tresslerllp.com
LOCATIONS
>> CHICAGO (HEADQUARTERS)
Willis Tower: 233 South Wacker Drive, 22nd Floor, Chicago, IL 60606
312.627.4000 | Fax: 312.627.1717
Mary E. McPherson
Partner
Orange County Office
mmcpherson@tresslerllp.com
Kevin Sullivan
Associate
Newark Office
ksullivan@tresslerllp.com
>> CALIFORNIA
Orange County: Jamboree Center, 2 Park Plaza, Suite 1050, Irvine, CA 92614
949.336.1200 | Fax: 949.752.0645
Los Angeles: 1901 Avenue of the Stars, Suite 450, Los Angeles, CA 90067
310.203.4800 | Fax: 310.203.4850
>> NEW JERSEY
Newark: 744 Broad Street, Suite 1510, Newark, NJ 07102
973.848.2900 | Fax: 973.623.0405
>> NEW YORK
One Penn Plaza, Suite 4701, New York, NY 10119
646.833.0900 | Fax: 646.833.0877
>> OTHER ILLINOIS
Bolingbrook: 305 West Briarcliff Road, Suite 201, Bolingbrook, IL 60440
630.759.0800 | Fax: 630.759.8504
This newsletter is for general information only and is not intended to provide and should not be relied upon
for legal advice in any particular circumstance or fact situation. The reader is advised to consult with an
attorney to address any particular circumstance or fact situation. The opinions expressed in this newsletter
are those of the author and not necessarily those of Tressler LLP or its clients. This bulletin or some of its
content may be considered advertising under the applicable rules of the Supreme Court of Illinois, the courts
in New York and those in certain other states. For purposes of compliance with New York State Bar rules,
our headquarters are Tressler LLP, 233 S Wacker Drive, 22nd Floor, Chicago, IL 60606, 312.627.4000. Prior
results described herein do not guarantee a similar outcome. The information contained in this newsletter
may or may not reflect the most current legal developments. The articles are not updated subsequent to their
inclusion in the newsletter when published. | Copyright © 2015
CALIFORNIA | ILLINOIS | NEW JERSEY | NEW YORK
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