Supreme Court of the State of Idaho, Scout LLC v. Truck Insurance Exchange, Docket No. 45349

Insurance Law

Advertising Injury

Trademark Infringement

Prior Publication Exclusion

Fresh Wrongs

Facebook Post

Duty to Defend

Duty to Indemnify

Idaho Law

California Law (for a “Fresh Wrong” Example)

Business Name, State Registration

Summary:

This case stems from Truck Insurance’s refusal to defend its insured, Scout, LLC, in a trademark infringement action brought over Scout’s use of the trademark ROGUE in the advertisement of its restaurant, Gone Rogue Pub. Scout claims that its use of ROGUE constituted an advertising injury that was covered by the insurance it purchased from Truck Insurance. Truck Insurance does not dispute that ordinarily Scout’s advertising injury would be covered and it would accordingly have a duty to defend, but contends that in this situation coverage was properly declined based on a prior publication exclusion found in the policy. The district court granted summary judgment to Truck Insurance after determining that a Facebook post of Scout’s Gone Rogue Pub logo before insurance coverage began triggered the prior publication exclusion, thereby relieving Truck Insurance of the duty to defend Scout. Scout appeals the district court’s decision granting Truck Insurance summary judgment. We affirm the judgment of the district court.

(…) On October 10, Scout posted a public picture of the Gone Rogue logo on Facebook, accompanied by the words, “Here is our new logo! Signs are going up today and tomorrow! Hope everyone likes it! Let us know what you guys think!” In the same month, Scout registered Gone Rogue Pub as an assumed business name with the Idaho Secretary of State.

(…) All was well with Gone Rogue Pub until the Oregon Brewing Company (OBC) noticed Gone Rogue’s similarity to its federally registered ROGUE trademarks.

(…) OBC asserted six different claims against Scout: (1) trademark counterfeiting under the Lanham Act; (2) trademark infringement; (3) unfair competition and false designation of origin under the Lanham Act; (4) cybersquatting under the Lanham Act; (5) unfair business practices under Idaho law; and, (5) common law trademark infringement (…) OBC sought injunctive relief, attorney fees and costs, and treble damages.

(…) A suit was thereafter brought by Scout against Truck Insurance alleging breach of contract, breach of the covenant of good faith and fair dealing, and bad faith failure to defend.

(…) “The duty to defend and duty to indemnify are separate, independent duties.” Deluna v. State Farm Fire and Cas. Co., 149 Idaho 81, 85, 233 P.3d 12, 16 (2008). The duty of an insurer to defend its insured is much broader than its duty to indemnify and “arises upon the filing of a complaint whose allegations, in whole or in part, read broadly, reveal a potential for liability that would be covered by the insured’s policy.” Hoyle v. Utica Mut. Ins. Co., 137 Idaho 367, 371– 72, 48 P.3d 1256, 1260–61 (2002). “Where there is doubt as to whether a theory of recovery within the policy coverage has been pled in the underlying complaint, the insurer must defend regardless of possible defenses arising under the policy or potential defenses arising under substantive law governing the claim against the insured.” Construction Mgmt. Sys., Inc. v. Assurance Co. of America, 135 Idaho 680, 682–83, 23 P.3d 142, 144–45 (2001). So long as there exists a genuine dispute over facts bearing on coverage under the policy or over the application of the policy’s language to the facts, the insurer has a duty to defend. Id. at 683, 23 P.3d at 145.

(…) In this case, Scout published a Gone Rogue logo on its Facebook page a month before purchasing business liability coverage. The screenshot, found in the exhibits of the OBC complaint, features the Facebook page “Gone Rogue Pub.” However, Scout claims that the page was entitled Casa del Sol until it was changed to Gone Rogue Pub after purchasing liability insurance. The logo in the October-posting only features the words GONE ROGUE, and does not contain the additional word PUB as all Scout’s other logos feature after purchasing insurance. The posting is accompanied by Scout stating that it is “our new logo,” and a user comment states, “all you need is your very own ‘Gone Rogue’ house brew.”

(…) Various courts have held 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 other advertisements excluded under a prior publication exclusion. An example of an application of the fresh wrong approach is found in Street Surfing, LLC, v. Great American E & S Ins. Co.. 776 F.3d 603 (9th Cir. 2014) (applying California law). The company Street Surfing began selling skateboards using its company name in violation of the owner’s registered trademark “Streetsurfer.” Id. at 605–06. After obtaining a business liability policy, Street Surfing began also selling skateboard accessories with its company name. Id. After the inevitable trademark infringement action was brought, Street Surfer’s insurer refused to defend the suit because of a prior publication exclusion found in its policy. Id. at 606–07. Street Surfer sued its insurer, arguing that even if the initial infringement actions were excluded under the prior publication exclusion, the trademark infringement allegations arising from the sale of skateboard accessories were fresh wrongs that triggered the insurer’s duty to defend. Id. at 612. The court held that the difference in products was not material in determining a fresh wrong (i.e., skateboards v. skateboard accessories), “because the alleged wrong arose out of each term’s similarity” to the advertising idea. Id. at 614. Therefore, to assess substantial similarity, courts should not consider all differences between pre- and post-coverage publications, but should instead focus on the relationship between the alleged wrongful acts manifested by the publications. Id. at 613–14.

(…) We repeat that the duty to defend is determined by what is charged in the complaint. The marketer’s complaint charges the misappropriation of the subordinate ideas as separate torts, and those torts occurred during the period covered by the insurer’s policy. Fresh wrongs were found in the Taco Bell case because of allegations present in the complaint alleging the taking of additional material from the marketer and using it in commercials after the insurer’s policy was in effect. Thus, allegations found within the four corners of 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.

(…) The third factor, whether a common theme is present, demonstrates the absence of fresh wrongs. It is true that Scout was not alleged to yet be violating the ROGUE trademark in connection with glassware or clothing when it posted its October Facebook logo, but it was the use of the ROGUE mark that was alleged to be the common infringement across all products. Much like in Street Surfer, where placing a mark on different products post-coverage did not produce fresh wrongs, Scout placing the ROGUE mark on other products or on its Facebook page does not make the post-coverage wrongs “fresh.” Advertising a logo featuring the word ROGUE in connection with a restaurant about to open and thereafter placing an almost identical logo featuring the word ROGUE on glassware, clothing, beer and ale, and Facebook creates substantially similar wrongs. Thus, the OBC complaint did not allege any fresh wrongs that triggered Truck Insurance’s duty to defend.

Secondary authorities: COUCH ON INS. § 101:52 (3rd ed. 2018).

(Supreme Court of the State of Idaho, January 29, 2019, Scout LLC v. Truck Insurance Exchange, Docket No. 45349, Justice Brody)