The prior-publication exclusion imposes a limitation on coverage for advertising injury under a CGL policy. In Indemnity Corp. v. Elston Self-Service Wholesale Groceries, Inc., 559 F.3d 616 (7th Cir. 2009), the court held that the exclusion did not relieve Indemnity of its obligation to defend Elston against a trademark-infringement suit arising out of the sale of counterfeit cigarettes.

The court rejected Indemnity’s argument that the exclusion abrogated Indemnity’s duty to defend because, prior to the issuance of the policy, Elston sold cigarettes that contained packaging and wrapping that was identical to the alleged counterfeit cigarettes. The court held that “the term ‘material’ in the exclusion . . . refers to ‘injurious’ material.” 559 F.3d at 620. “By its terms, the prior-publication exclusion abrogates the insurer’s duty to defend only where it can prove that the insured’s prior publication of the same actionable, injurious material alleged in the underlying complaint occurred prior to the beginning of its policy.” Id.  “This interpretation is logical because the exclusion exists to prevent an insured from purchasing an insurance policy to cover liability for illegal acts which it has undertaken prior to purchasing the policy.” Id. That is, “the purpose of the exclusion is to prevent an individual who has caused an injury from buying insurance so he can continue his injurious behavior.” Id.

What is more, the court rejected the notion that the exclusion was ambiguous: “It seems clear that the exclusion only abrogates the duty to defend where the insured’s first publication of actionable material occurred prior to the beginning of its policy.” Id.