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Schaefer/Karpf Productions v. CNA Insurance Companies6/18/1998
CERTIFIED FOR PARTIAL PUBLICATION *
(Super. Ct. No. SC038792)
APPEAL from a judgment of the Superior Court of Los Angeles County. Richard Neidorf, Judge. Affirmed.
Plaintiff Schaefer/Karpf Productions (Schaefer) appeals from the judgment in favor of defendant CNA Insurance Companies (CNA) determining Schaefer did not suffer "property damage" within the terms of the comprehensive general liability policies CNA issued to its insureds. We affirm.
FACTS AND PROCEEDINGS BELOW
Schaefer produced a television special for children entitled "The Best Christmas Pageant Ever." After the show was aired on network television it was released on videotape for sales to schools, religious and civic organizations and the general public.
In 1992, Scholastic, Inc., a leading marketer of children's educational materials, ordered 32,500 videotapes of the "The Best Christmas Pageant Ever." Schaefer contracted with The Video Company (TVC) to duplicate the show onto videotapes. TVC duplicated the show on tapes it purchased from the Matrix Video Duplication Corporation (Matrix). Some of the tapes Matrix sold to TVC were used tapes returned to Matrix by Cinderella Distributors, Inc., a distributor of pornographic films. TVC proceeded to produce the 32,500 videotapes of "The Best Christmas Pageant Ever" on the stock provided by Matrix and shipped the tapes to Scholastic. Scholastic in turn sold approximately 25,000 tapes of the show before Christmas 1992.
A few days before Christmas 1992, in Salt Lake City, Ms. Natay's fourth graders were enjoying a Christmas party in their classroom. As part of the festivities, Ms. Natay showed the children a videotape of "The Best Christmas Pageant Ever" which she had obtained from Scholastic. Because she was trying to serve refreshments to 38 nine-year olds and things were "chaotic," Ms. Natay did not stop and rewind the tape when the program ended. "All of a sudden the class got quiet" and "the kids were nudging each other." When she looked up Ms. Natay saw to her shock her students were watching a graphically explicit scene in which a couple was engaged in sexual intercourse. Students and teachers had similar experiences at the Moline Christian School in Moline, Michigan, the second grade at Rocky Branch School in Walland, Tennessee, and the Manchester Elementary School in Perry, Ohio, to name a few. In Philadelphia, Mississippi, Ms. Cheeks left to run an errand while her young children remained at home watching "The Best Christmas Pageant Ever." When she returned she was "horrified" to find her children were watching not a Christmas movie but "a hard-core pornography scene" in which a couple was engaged in oral sex. The sexually explicit material at the end of the videotapes was seen by other children across America that Christmas, giving a new meaning to the term "kiddie-porn."
While the students who watched the videotape may have been confused by this "best Christmas pageant ever," parents, teachers and principals were not. Nor were they amused. Scholastic recalled all the videotapes of the show and refused to pay Schaefer.
Schaefer brought an action against TVC and Matrix for breach of contract, negligence and breach of warranty seeking damages for lost profits and loss of goodwill (the underlying action). Both companies were insured by CNA under standard comprehensive general liability (CGL). Both companies tendered defense of Schaefer's action to CNA. CNA disclaimed any obligation to defend or indemnify the companies on the ground Schaefer's claims were not covered by the policies.
TVC did not defend the underlying action. Matrix retained counsel and provided its
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