the Hanover Insurance Company v. Urban Outfitters, Inc.

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________________
No. 14-3705
________________
THE HANOVER INSURANCE COMPANY
v.
URBAN OUTFITTERS, INC.; U.O.COM, LLC;
URBAN OUTFITTERS WHOLESALE, INC.;
ANTHROPOLOGIE, INC; ANTHROPOLOGIE.COM, LP;
FREE PEOPLE OF PA, LLC; FREEPEOPLE.COM, LLC,
v.
ONEBEACON AMERICA INSURANCE COMPANY
Urban Outfitters, Inc.; UO.com, LLC; Urban Outfitters
Wholesale, Inc.; Anthropologie, Inc.; Anthropologie.com,
L.P.; Free People of PA, LLC; Freepeople.com, LLC;
OneBeacon America Insurance Company,
Appellants
________________
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 2-12-cv-03961)

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District Judge: Honorable Thomas N. O’Neill, Jr.
________________
Argued March 3, 2015
Before: AMBRO, SCIRICA and ROTH, Circuit Judges
(Opinion filed: October 23, 2015)
Ilan Rosenberg, Esq. (ARGUED)
Jacob C. Cohn, Esq.
Gordon & Rees
2005 Market Street
Suite 2900
Philadelphia, PA 19103
Dorothy A. Hickok, Esq.
Drinker, Biddle & Reath
18th & Cherry Streets
One Logan Square
Suite 2000
Philadelphia, PA 19103
Counsel for Appellants
Andrew J. Gallogly, Esq. (ARGUED)
Margolis Edelstein
170 South Independence Mall West
The Curtis Center
Suite 400E
Philadelphia, PA 19106
Counsel for Appellee

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________________
OPINION
________________
ROTH, Circuit Judge
The “prior publication” exclusion of liability insurance
contracts prevents a company from obtaining ongoing
insurance coverage for a continuing course of tortious
conduct. In this appeal, we consider the scope of the “prior
publication” exclusion.
I.
On February 28, 2012, in the U.S. District Court in
New Mexico, the Navajo Nation and its affiliates (collectively
Navajo Nation) sued Urban Outfitters and its affiliates
(collectively Urban Outfitters) for trademark infringement
and related common law and statutory violations. Navajo
Nation’s central allegation was that Urban Outfitters
“advertised, promoted, and sold its goods under the ‘Navaho’
and ‘Navajo’ names and marks” on the Internet and in retail

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stores “[s]ince at least March 16, 2009.”1 Urban Outfitters
tendered the complaint to OneBeacon America Insurance
Company and Hanover Insurance Company.
OneBeacon provided commercial general liability and
umbrella liability coverage to Urban Outfitters prior to July 7,
2010. The Insuring Agreement specifically included
“personal and advertising injury” coverage.2 On July 7, 2010,
1 On September 19, 2014, after years of discovery and three
amended complaints, the District Court in New Mexico
dismissed Urban Outfitters’ counterclaim seeking a judicial
declaration that Navajo Nation’s federally registered
NAVAJO trademarks are invalid and therefore subject to
cancellation. On March 23, 2015, the U.S. Court of Appeals
for the Tenth Circuit denied permission for interlocutory
appeal. Currently pending before the District Court in New
Mexico are various motions and cross-motions, including
motions for summary judgment.
2 “Personal and advertising injury” was defined in the policy,
in pertinent part, as
(2) 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;
e. Oral or written publication of material that
violates a person’s right of privacy;
f. The use of another’s advertising idea in your
“advertisement”; or

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OneBeacon issued a “fronting policy”3 to Urban Outfitters
providing identical coverage for which Hanover served as the
responsible insurer. The policy was in effect from July 7,
2010, to July 7, 2011. Hanover subsequently issued separate
commercial general liability and umbrella liability policies to
Urban Outfitters, which were effective from July 7, 2011, to
July 7, 2012. The “fronting policy” and Hanover-issued
policies excluded coverage for “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.”4
On April 26, 2012, two months after Navajo Nation
filed the trademark infringement suit, Hanover provided a
reservation of rights letter, informing Urban Outfitters of
Hanover and OneBeacon’s joint retention of defense counsel.
On July 12, 2012, Hanover sought a judicial declaration in the
U.S. District Court for the Eastern District of Pennsylvania
that it was not responsible for Urban Outfitters’ defense or
indemnification. On August 19, 2013, the District Court
granted Hanover’s motion for judgment on the pleadings,
pursuant to Federal Rule of Civil Procedure 12(c).
g. Infringing upon another’s copyright, trade
dress or slogan in your “advertisement”.
3 A “fronting policy” is a risk management technique in
which an insurer underwrites a policy to cover a specific risk
but then cedes the risk to a reinsurer. See Douglas R.
Richmond, Getting a Fix on Fronting Policies, 31 No. 19 Ins.
Litig. Rep. 629 (2009). Here, the fronting company is One
Beacon and the reinsurer is Hanover.
4 See J.A. at 198, 224.

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The District Court held that Hanover had no duty to
defend or indemnify since Hanover did not begin insurance
coverage of Urban Outfitters until sixteen months after the
alleged infringement began. The District Court found that,
because the claims in the underlying action alleged injuries
stemming from advertisements published prior to the policy
inception date, any resulting injury fell within the Hanover
policies’ “prior publication” exclusions.5 We dismissed an
initial appeal for lack of appellate jurisdiction.6 However, the
District Court has since addressed our jurisdictional concern
by entering final judgment for Hanover on its August 19,
2013, Order, pursuant to Rule 54(b). Urban Outfitters and
Third Party Defendant, OneBeacon, now appeal that order.
II.7
“We review de novo an order granting judgment on the
pleadings pursuant to Rule 12(c) of the Federal Rules of Civil
Procedure.”8 “[I]n reviewing the grant of a Rule 12(c)
motion, we must view the facts presented in the pleadings and
the inferences to be drawn therefrom in the light most
favorable to the nonmoving party.”9 Under Pennsylvania
law, which Hanover and Urban Outfitters agree governs,
5 Hanover Ins. Co. v. Urban Outfitters, No. 12-cv-3961, 2013
WL 4433440, at *5 (E.D. Pa. Aug. 19, 2013).
6 Hanover Ins. Co. v. Urban Outfitters Inc., 572 F. App’x 91,
93 (3d Cir. 2014).
7 The District Court had subject matter jurisdiction under 28
U.S.C. § 1332. We have jurisdiction under 28 U.S.C. § 1291.
8 In re Fosamax (Alendronate Sodium) Prods. Liab. Litig.
(No. II), 751 F.3d 150, 156 n.11 (3d Cir. 2014).
9 Id. at 154 n.4 (quotation marks omitted).

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“[t]he interpretation of an insurance policy is a question of
law that we will review de novo.”10
III.
Urban Outfitters contends that the District Court erred
in finding that Navajo Nation’s trademark infringement
allegations fall under the Hanover policies’ “prior
publication” exclusions. Both sides acknowledge an absence
of binding authority, and urge us to derive antithetical lessons
from the few cases on point. For the reasons which follow,
we will affirm the District Court’s decision.
A.
In interpreting an insurance contract,
[o]ur inquiry is straightforward. We look first
to the terms of the policy which are a
manifestation of the “intent of the parties.”
[Donegal Mut. Ins. Co. v.] Baumhammers, 938
A.2d [286,] 290 [(Pa. 2007)]. “When the
language of the policy is clear and
unambiguous, we must give effect to that
language.” Id. . . . Next, we compare the terms
of the policy to the allegations in the underlying
claim. “It is well established that an insurer’s
duties under an insurance policy are triggered
by the language of the complaint against the
insured.” Kvaerner, 908 A.2d at 896. In
10 Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial
Union Ins. Co., 908 A.2d 888, 897 (Pa. 2006).

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determining the existence of a duty to defend,
the factual allegations of the underlying
complaint against the insured are to be taken as
true and liberally construed in favor of the
insured.11
An insurer that disavows its duty to defend by reference to a
policy exclusion effectively “assert[s] an affirmative defense
and, accordingly, bears the burden of proving such
defense.”12
The Hanover policies’ “personal and advertising
injury” provisions clearly and unambiguously cover Urban
Outfitters’ alleged trademark infringement and related
common law and statutory violations.13 Nonetheless,
Hanover contends that it has no duty to defend since its
policies specifically excluded coverage for “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.” The “fronting
policy” under which Hanover first assumed responsibility for
Urban Outfitters’ liability coverage became effective on July
7, 2010. Thus, we must determine whether Urban Outfitters’
liability-triggering conduct preceded or postdated that policy
period’s inception.
11 Nationwide Mut. Ins. Co. v. CPB Int’l, Inc., 562 F.3d 591,
595-96 (3d Cir. 2009) (footnote and, in final sentence only,
citation and quotation marks omitted).
12 Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735
A.2d 100, 106 (Pa. 1999).
13 See supra note 2.

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The answer lies entirely within the four corners of the
underlying complaint.14 There Navajo Nation alleged that
Urban Outfitters engaged in “trademark infringement,
trademark dilution, unfair competition, false advertising,
commercial practices laws violations, and [] violation of the
Indian Arts and Crafts Act,”15 but offered little specificity as
to when the offensive conduct occurred. Navajo Nation’s
relevant allegations are as follows:
2. Since at least March 16, 2009,
Urban Outfitters has advertised, promoted, and
sold its goods under the “Navaho” and
“Navajo” names and marks. Urban Outfitters
offers these goods on the Internet and in stores
across the United States, and they compete
directly with the Navajo Nation’s goods.16
***
37. At least as early as March 16,
2009, Urban Outfitters started using the
14 See Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286,
290-91 (Pa. 2007); Erie Ins. Exch. v. Fidler, 808 A.2d 587,
590 (Pa. Super. Ct. 2002) (“The obligation of an insurer to
defend an action against the insured is fixed solely by the
allegations in the underlying complaint.”).
15 J.A. at 748. All citations to Navajo Nation’s complaint
refer to the First Amended Complaint, which governed when
Hanover filed the declaratory judgment action presently on
appeal. Subsequent amendments do not substantively alter
any relevant allegations.
16 J.A. at 749.

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“Navajo” and “Navaho” names in its product
line, or in connection with the sale of its goods,
online, in its catalogs, and in its physical stores.
Defendant’s use has included, and includes (but
is not limited to): clothing, jewelry, footwear,
handbags, caps, scarves, gloves, undergarments,
and flasks. Defendant’s items sold under the
“Navajo” and “Navaho” names and marks
evoke the Navajo Nation’s tribal patterns,
including geometric prints and designs
fashioned to mimic and resemble Navajo
Indian-made patterned clothing, jewelry and
accessories. Urban Outfitters has sold and is
selling over 20 products using the “Navajo” and
“Navaho” trademarks in its retail stores, its
catalogs, and its online stores.17
***
41. Urban Outfitters began offering
retail clothing and accessories as early as March
2009 with the “Navajo” and “Navaho” as
trademarks to label or describe its products. For
example, a “Leather Navajo cuff” was offered
on Urban Outfitters’ website in January 2010.
Sometime in early 2011, and possibly earlier,
Urban Outfitters started a product line of 20 or
more items containing the NAVAJO trademark,
which Defendant sold on its website and in
retail stores. True and correct copies of
Defendants’ more than 20 items comprising the
17 J.A. at 759.

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“Navajo Collection” sold at Urban Outfitters, as
they are or have been displayed for online
marketing and retailing at Defendant’s website,
are attached hereto collectively as Exhibit A.
[FN 5] Exhibit A is an illustrative, and not
exhaustive, list of Urban Outfitters infringing
activity. Indeed, Exhibit A only includes screen
shots from online shopping websites. Urban
Outfitters sold its goods in physical stores and
in catalogs, and this has also infringed on the
Navajo Nation’s marks.
[FN 5] These PDF images were copied from
Defendant’s website on October 16, 2011. 18
***
78. At least since March 16, 2009,
and possibly earlier as discovery will confirm,
and continuously thereafter to the present date,
Defendant has advertised, marketed, offered,
displayed for sale, and sold goods in manners
that falsely suggested they are Indian-made, an
Indian product, a product of an Indian Tribe, or
the product of an Indian arts and crafts
organization resident within the United States,
including Indian products consisting of jewelry
and clothing in a traditional Indian style, printed
design, or medium.19
18 J.A. at 760-61.
19 J.A. at 772.

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Citing a lack of chronological specificity in Navajo
Nation’s allegations, Urban Outfitters urges us to use
extrinsic evidence to determine whether Hanover owes a duty
to defend. We decline for two reasons. First, and most
importantly, Pennsylvania law provides that the determination
of a duty to defend depends on the language of the policy and
the allegations of the complaint20 -- not on extrinsic evidence.
Second, the premise underpinning Urban Outfitters’
advocacy of extrinsic evidence is misguided. A complaint
that features few details as to when the plaintiff was wronged
is far from exceptional. On the contrary, allegations more
chronologically cryptic than Navajo Nation’s frequently form
the basis of advertising injury claims.21 To abandon the
underlying complaint whenever a plaintiff neglects to provide
a date-certain tortious conduct timeline would occasion more
protracted disputes by eroding the predictability that reliance
on a single pleading ensures.22
Confining our review to the contents of the underlying
complaint, we find Navajo Nation’s description of Urban
Outfitters’ allegedly infringing conduct remarkably
20 See Baumhammers, 938 A.2d at 290-91.
21 See, e.g., Transp. Ins. Co. v. Pa. Mfrs.’ Ass’n Ins. Co., 346
F. App’x 862, 863 (3d Cir. 2009); Maddox v. St. Paul Fire &
Marine Ins., 179 F. Supp. 2d 527, 528-29 (W.D. Pa. 2001);
Applied Bolting Tech. Prods., Inc. v. U.S. Fidelity & Guar.
Co., 942 F. Supp. 1029, 1031-32 (E.D. Pa. 1996).
22 It might be another matter if the facts known to the insurer
and those alleged in the complaint were in conflict. But since
neither insurer alleges such a factual conflict here, we decline
to opine on that decidedly more difficult scenario.

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consistent. Thus, according to Navajo Nation, Urban
Outfitters advertised goods in a manner violative of its
trademark
 “[s]ince at least March 16, 2009” (¶ 2);
 “[a]t least as early as March 16, 2009” (¶ 37);
 “as early as March 2009” (¶ 41); and
 “[a]t least since March 16, 2009, and possibly earlier
as discovery will confirm, and continuously thereafter
to the present date” (¶ 78).
In each instance, Navajo Nation fixed March 16, 2009 (if not
earlier) as a start date for Urban Outfitters’ alleged
misconduct. Under the terms of the Hanover policies’ “prior
publication” exclusions, we must treat this date of “first
publication” as a landmark.23 Because Hanover was not
responsible for Urban Outfitters’ liability insurance coverage
until sixteen months thereafter, the exclusions apply—that is,
unless the underlying complaint contains allegations of “fresh
wrongs” that occurred during Hanover’s policy periods.
B.
There is no binding authority in this Court on what
constitutes a “fresh wrong.” The Ninth Circuit Court of
Appeals, however, recently considered the question on
analogous facts. In Street Surfing, LLC v. Great American E
& S Insurance Co., the court defined “fresh wrongs” as “new
matter,” which in turn “is material not ‘substantially similar’
23 See, e.g., Applied Bolting, 942 F. Supp. at 1036.

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to the material published before the coverage period.”24 The
court emphasized that “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.”25
The insurer in Street Surfing was excused from its duty
to defend despite differences in pre- and post-coverage
advertisements. Although the ads featured different products,
the advertising idea was the same regardless of the product:
the products all used the allegedly infringing identification
“Street Surfing.” The Ninth Circuit held that the post-
coverage ads were not “fresh wrongs” because (1) the
underlying plaintiff did not “allege that the post-coverage
advertisements were separate torts occurring during the policy
period” and (2) the advertisements “arose out of each term’s
similarity to [plaintiff’s] advertising idea.”26
We find this approach persuasive but we will attempt
to build on it. Under Pennsylvania law, “[a]n insurer’s duty
to defend is broader than its duty to indemnify.”27 However,
reasonable limits may be imposed on that broad duty, as for
instance in cases of alleged advertising harm. There, the prior
24 See Street Surfing, LLC v. Great Am. E & S Ins. Co., 776
F.3d 603, 612 (9th Cir. 2014).
25 Id. at 612-13.
26 Id. at 614.
27 Am. & Foreign Ins. Co. v. Jerry’s Sport Ctr., Inc., 2 A.3d
526, 540 (Pa. 2010).

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publication exclusion serves to limit the coverage for an
ongoing course of wrongful conduct. Nevertheless, if a new
infringement has superseded the original infraction, the
insurers (and courts) must distinguish between “fresh
wrongs” and mere variations on a theme.
As with the duty to defend, the allegations in the
underlying complaint control.28 Where 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. But variations,
occurring within a common, clearly identifiable advertising
objective, do not give rise to “fresh wrongs.”
When a purported advertising violation stems from
such common, clearly identifiable objectives, the “prior
publication” exclusion applies to excuse an insurer from its
duty to defend if that insurer has assumed coverage
responsibility after the insured has commenced the liability-
triggering conduct. In determining whether two or more sets
of advertisements share a common objective, courts may look
to whether the plaintiff charged the insured with separate torts
or an agglomeration.29 Other significant, factors include
whether the complaint describes a significant lull between
pre- and post-coverage advertising initiatives and whether the
28 See Baumhammers, 938 A.2d at 290-91.
29 See Street Surfing, 776 F.3d at 614.

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advertisements share a common theme relating to the alleged
violation.30
Urban Outfitters stands accused of an apparently
continuous string of trademark infringement and related
violations. In the underlying complaint, where Navajo Nation
affixed dates to Urban Outfitters’ purported misconduct, the
dates were generally accompanied by qualifiers denoting
continuity (e.g., Urban Outfitters has infringed “since” or
“[a]t least as early as” March 2009). Navajo Nation provided
more chronological specificity only in describing particular
Urban Outfitters advertisements which fit the alleged pattern
of infringement. Thus, it alleged, “[f]or example,” that Urban
Outfitters offered certain infringing products on its website in
January 2010 and in retail stores as well “[s]ometime in early
2011, and possibly earlier.”31 Navajo Nation attached screen
shots of the later product line as an exhibit to its complaint,
but cautioned that it was “an illustrative, and not exhaustive,
list of Urban Outfitters infringing activity.”32
We may not infer from Navajo Nation’s attachment of
only post-coverage advertisements as exhibits that those
advertisements substantively differed from pre-coverage ads.
30 The Seventh Circuit has analyzed the “prior publication”
exclusion under a different framework. See Taco Bell Corp.
v. Cont’l Cas. Co., 388 F.3d 1069, 1072-74 (2004). To the
extent Taco Bell requires that pre- and post-coverage
advertisements be identical (or nearly identical) for the “prior
publication” exclusion to apply, we disagree that the
exclusion demands such rigor.
31 See supra note 17.
32 Id.

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In fact, taking Navajo Nation’s complaint as true compels the
opposite conclusion.33 Navajo Nation did not charge Urban
Outfitters with committing separate torts before and during
Hanover’s coverage period. Nor did it hint at a hiatus in
Urban Outfitters’ tortious pursuits between March 2009 and
the complaint’s filing. Navajo Nation alleged that Urban
Outfitters “started using the ‘Navajo’ and ‘Navaho’ names”
via all relevant instrumentalities of infringement (use “in its
product line, or in connection with the sale of its goods,
online, in its catalogs, and in its physical stores”) well before
Hanover’s coverage period commenced.34 Moreover, the
“Leather Navajo cuff” offered on Urban Outfitters’ website in
January 2010 (six months before Hanover’s coverage period
33 Similarly, we reject Urban Outfitters’ suggestion that,
because Navajo Nation’s allegations “lump defendants
together and are insufficiently specific to determine the
precise allegations directed against each individual
defendant,” the court must inquire further as to “the precise
claims against each insured.” In the very first sentence of its
complaint, Navajo Nation alleges that it “brings this
Amended Complaint against Urban Outfitters, Inc., and its
wholly-owned and controlled subsidiaries, entities, and retail
brands (collectively ‘Urban Outfitters’ or ‘Defendant’).” J.A.
at 748. Urban Outfitters accurately contends that Navajo
Nation did not distinguish thereafter between the various
defendants, but that is precisely the point: Navajo alleged
that each Urban Outfitters affiliate engaged in the same
course of wrongful conduct. It is not our task to discern the
plausibility of Navajo Nation’s allegations. On the contrary,
we are required to take them at face value. See
Baumhammers, 938 A.2d at 290-91.
34 See supra note 16.

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began) appears thematically consistent with the more than
twenty post-coverage advertising examples Navajo Nation
identified.35
It is apparent from Navajo Nation’s complaint that
Urban Outfitters’ advertisements, which predated Hanover’s
coverage period, share a common objective with those that
followed. Thus, we conclude that the latter ads are not “fresh
wrongs.” The “prior publication” exclusions apply, and
Hanover has no duty to defend Urban Outfitters in the
underlying action.
IV.
Risk is a concept with which we are intimately
acquainted.36 Those who wager correctly are rewarded and
those who guess wrong suffer losses. The purpose of
insurance is to disperse that risk. But “[a]n insured cannot
insure against something that has already begun and which is
known to have begun.”37 The “prior publication” exclusion
prevents a continuing tortfeasor from passing the risk for its
misconduct on to an unwitting insurer. Taking Navajo
Nation’s underlying allegations as true, Urban Outfitters
engaged in similar liability-triggering behavior both before
35 See J.A. at 786-809.
36 As early as the sixteenth century, popular English proverbs
cautioned of risk and its vagaries in terms familiar to present
usage. See, e.g., Adam Fox, Oral and Literate Culture in
England, 1500-1700, 140-41 (2000).
37 See Matagorda Ventures, Inc. v. Travelers Lloyds Ins. Co.,
203 F. Supp. 2d 704, 716 (S.D. Tex. 2000) (citation and
quotation marks omitted).

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and during Hanover’s coverage period. We therefore hold
that the exclusion applies.
For the foregoing reasons, we will affirm the District
Court’s order granting Hanover’s motion for judgment on the
pleadings.

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