St. Surfing, LLC v. Great Am. E&S Ins. Co.
| Decision Date | 14 November 2014 |
| Docket Number | No. 12–55351.,12–55351. |
| Citation | 776 F.3d 603 |
| Parties | STREET SURFING, LLC, a Nevada limited liability company, Plaintiff–Appellant, v. GREAT AMERICAN E & S INSURANCE COMPANY, a Delaware corporation, Defendant–Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
OPINION TEXT STARTS HERE
David A. Gauntlett (argued), James A. Lowe, Gauntlett & Associates, Irvine, CA, for Plaintiff–Appellant.
Linda Bondi Morrison (argued), Ryan B. Luther, Tressler LLP, Irvine, CA, for Defendant–Appellee.
Appeal from the United States District Court for the Central District of California, Andrew J. Guilford, District Judge, Presiding.
Before: ALFRED T. GOODWIN, RAYMOND C. FISHER and RICHARD R. CLIFTON, Circuit Judges.
ORDER
The opinion filed June 10, 2014, and reported at 752 F.3d 853 (9th Cir.2014), is AMENDED. An amended opinion is filed concurrently with this order.
With these amendments, the panel has voted to deny the petition for rehearing. Judge Clifton has voted to deny the suggestion for rehearing en banc and Judges Goodwin and Fisher so recommend.
The full court has been advised of the suggestion for rehearing en banc and no judge has requested a vote on whether to rehear the matter en banc. Fed. R.App. P. 35.
The petition for rehearing and suggestion for rehearing en banc, filed June 24, 2014, is DENIED.
Subsequent petitions for rehearing or rehearing en banc may not be filed.
OPINIONThis case arises from general liability insurance policies, including advertising injury coverage, that defendant Great American E & S Insurance Company issued to plaintiff Street Surfing, LLC. The parties dispute whether those policies obligated Great American to defend Street Surfing in an action alleging trademark infringement, unfair competition and unfair business practices under federal and California law. The district court granted summary judgment in favor of Great American, concluding that the prior publication exclusion in the policies relieved Great American of any duty to defend. We affirm.
Street Surfing began selling a two-wheeled, inline skateboard called the “Wave” to retail stores around December 2004. Less than a year after Street Surfing began doing business, it had already earned about $600,000 in sales. By 2007, Street Surfing also sold and advertised accessories for the Wave, such as “Lime Green Street Surfing Wheels for The Wave,” and the “New Ultimate Street Surfer Wheel Set.”
In August 2005, Street Surfing applied for general liability insurance coverage from Great American. Street Surfing's application certified that its website address was “www. streetsurfing. com” and that the Wave displayed the Street Surfing logo. The application did not include a picture or any description of the logo. Great American granted the application and provided general liability insurance to Street Surfing from August 2005 until September 2007. This period spanned two policies, the 2005 policy (August 2005 until September 2006), and the 2006 policy (September 2006 until September 2007). 1 In September 2006, before it issued the 2006 policy, Great American captured a screenshot of Street Surfing's website and saved a copy in its underwriting file.
The policies covered, among other things, personal and advertising injury liability.2 That coverage was limited by several exclusions, including: (1) a prior publication exclusion, which disclaimed coverage for “ ‘[p]ersonal and advertising injury’ arising out of oral or written publication of material whose first publication took place before the beginning of the policy period”; (2) an intellectual property exclusion (IP exclusion), which barred coverage for “ ‘[p]ersonal and advertising injury’ arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights,” though it did not apply to “infringement, in your ‘advertisement,’ of copyright, trade dress or slogan”; and (3) an advertising injury amendment (AI amendment), which further clarified that “[t]his insurance does not apply to ‘advertising injury’ arising out of any actual or alleged infringement of intellectual property rights or violation of laws relating to patents, trademarks, trade dress, trade names, trade secrets and know-how.”
Rhyn Noll, who owned the registered trademark “Streetsurfer,” sued Street Surfing in June 2008, claiming trademark infringement, unfair competition and unfair trade practices under federal and California law. Street Surfing had known that Noll owned the “Streetsurfer” trademark since early 2005, and had unsuccessfully attempted to purchase the trademark around that time. In September 2008, Street Surfing submitted a claim for coverage to Great American and tendered Noll's complaint. Great American denied Street Surfing's claim, citing the IP exclusion and the AI amendment. The letter did not mention the prior publication exclusion, but it did reserve to Great American “the right to assert any and all other terms, provisions, conditions and/or exclusions set forth in its policy which may be applicable to the Noll action.” Street Surfing responded, arguing that none of the “intellectual property, prior publication, knowingviolation of the rights of another, [or] breach of contract exclusions” applied. Nevertheless, Great American again denied coverage based on the IP exclusion and AI amendment, noting that discussion of the other issues raised by Street Surfing, including the prior publication exclusion, would be irrelevant because Great American “did not cite or rely upon [those] policy provisions for its denial of coverage.”
Street Surfing settled with Noll in December 2009. Its only response to Great American's second denial was to file this action in July 2011, seeking a declaration that Great American was obligated to defend and to settle the Noll action. When the parties filed cross-motions for summary judgment, the district court concluded that the prior publication exclusion relieved Great American of any duty to defend Street Surfing in the Noll action. It accordingly granted Great American's motion for summary judgment, denied Street Surfing's motion for partial summary judgment and entered judgment in favor of Great American.3 Street Surfing timely appealed.
We review de novo a district court's rulings on cross-motions for summary judgment. See Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070, 1086 (9th Cir.2013). A motion for summary judgment should be granted when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Id. at 1086–87 (quoting Fed.R.Civ.P. 56(a)) (internal quotation marks omitted). As both sides agree, we apply California insurance law.
The parties dispute whether Great American was obligated to defend Street Surfing in the Noll action. Under California law, a general liability insurer “has a duty to defend an insured if it becomes aware of, or if the third party lawsuit pleads, facts giving rise to the potential for coverage under the insuring agreement.” Waller v. Truck Ins. Exch., Inc., 11 Cal.4th 1, 44 Cal.Rptr.2d 370, 900 P.2d 619, 627 (1995). The duty to defend is therefore “broader than the duty to indemnify; an insurer may owe a duty to defend its insured in an action in which no damages ultimately are awarded.” Montrose Chem. Corp. v. Superior Court, 6 Cal.4th 287, 24 Cal.Rptr.2d 467, 861 P.2d 1153, 1157 (1993) (quoting Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076, 17 Cal.Rptr.2d 210, 846 P.2d 792, 795 (1993)). The duty continues “until the underlying lawsuit is concluded or until it has been shown that there is no potential for coverage.” Id. (citation omitted).
To prevail, “the insured need only show that the underlying claim may fall within policy coverage,” whereas “the insurer must prove it cannot.” Id., 24 Cal.Rptr.2d 467, 861 P.2d at 1161. That is, “[a]ny doubt as to whether the facts establish the existence of the defense duty must be resolved in the insured's favor.” Id., 24 Cal.Rptr.2d 467, 861 P.2d at 1160. These principles apply only to facts potentially “giv[ing] rise to a duty to defend,” however, not to “doubts regarding the legal interpretation of policy terms.” Indus. Indem. Co. v. Apple Computer, Inc., 79 Cal.App.4th 817, 95 Cal.Rptr.2d 528, 533 (1999); see also Mirpad, LLC v. Cal. Ins. Guarantee Ass'n, 132 Cal.App.4th 1058, 34 Cal.Rptr.3d 136, 143 (2005) (); Lebas Fashion Imps. of USA, Inc. v. ITT Hartford Ins. Grp., 50 Cal.App.4th 548, 59 Cal.Rptr.2d 36, 40 (1996) ().
In this duty to defend case, we first address the scope of potential coverage, accepting Great American's concession that the Noll action potentially falls within coverage for use of another's advertising idea, but rejecting Street Surfing's argument that the action would also fall within the policies' coverage for slogan infringement. Next, we hold that the prior publication exclusion relieves Great American of its duty to defend Street Surfing in the Noll action because the extrinsic evidence available to Great American at the time of tender conclusively establishes: (1) that Street Surfing published at least one advertisement using Noll's advertising idea before coverage began; and (2) that the new advertisements Street Surfing published during the coverage period were substantially similar to that pre-coverage advertisement. Accordingly, we affirm the district court's grant of summary judgment to Great American.
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