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Schaefer/Karpf Productions v. CNA Insurance Companies6/18/1998
tted for determination and determined and that contrary evidence on the issue was not restricted. (Barker v. Hull (1987) 191 Cal.App.3d 221, 226.)
We have reviewed the complaint in the underlying action, the trial transcript, the court's written ruling following trial and the judgment and have found nothing to support Schaefer's contention the court in the underlying action adjudicated the issue of insurance coverage. For example, we note the judgment recites the property damaged was the videotapes of "The Best Christmas Pageant Ever." As we explain below, the videotapes themselves cannot be the property damaged, for coverage purposes, because the damaging pornographic material was already on the tapes when they were sold to Matrix which in turn sold them to Schaefer. Schaefer may have suffered property damage for purposes of establishing liability but whether that property damage is covered by CNA's policies was not decided in the underlying action.
III. THE PREMIUM SCHEDULE OF AN INSURANCE POLICY DESCRIBING THE INSURED'S BUSINESS ACTIVITIES DOES NOT CONFER COVERAGE FOR ALL INJURIES RESULTING FROM THOSE ACTIVITIES.
In the premium schedules of the policies issued to Matrix and TVC, under the heading "Description of Hazards," are descriptions of the insureds' businesses. Matrix's business is described as "motion pictures-production-in studios or outside-all operations prior to the development of negatives including products and completed operations." TVC's business is described as "records or tape mfg.-prerecorded."
Schaefer argues these descriptions of the insureds' businesses in the premium schedules mean that by paying the premiums the insureds are entitled to indemnity for any losses of any kind arising out of the conduct of those businesses. We do not accept this argument.
The purpose of the declaration of hazards is to identify the activities to which the policy relates, e.g., motion picture production and tape manufacturing, as opposed to scuba diving instruction or transmission repairing. (American Policyholders' Ins. Co. v. Smith (N.H. 1980) 410.2d 749, 750-751; Robinson, Insurance Coverage Of Intellectual Property Lawsuits, (1989) 17 AIPLA Q. J. 122, 125.) The declaration of hazards does not expand the coverage of the policy from indemnity for physical injury and property damage to coverage for any and all loss no matter how caused.
IV. THE INCORPORATION OF A DEFECTIVE OR HARMFUL PRODUCT INTO THE PRODUCT OF ANOTHER CAUSES "PHYSICAL INJURY " TO THE LATTER WITHIN THE MEANING OF THE PROPERTY DAMAGE COVERAGE IN THE STANDARD COMPREHENSIVE GENERAL LIABILITY POLICY.
As previously noted, the CGL policies obligate CNA to pay "those sums that the insured becomes legally obligated to pay as damages because of . . . `property damage' to which this insurance applies." "Property damage" is defined as: "Physical injury to tangible property, including all resulting loss of use of that property; or loss of use of tangible property that is not physically injured." Thus, to establish the insurer's obligation to pay for property damage under the standard CGL policy the claimant first must show a "physical injury" to property or loss of its use. If the claimant satisfies either of these requirements, then it must show the physical injury or loss of use involved tangible property.
CNA contends Schaefer cannot show a "physical injury" to its property because, at most, Schaefer suffered injury to its reputation and goodwill which are intangible assets not compensible under a CGL policy. Schaefer contends the incorporation of a defective or harmful product, i.e., a pornographic movie, into the product of another, i.e., Schaefer
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