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Schaefer/Karpf Productions v. CNA Insurance Companies6/18/1998
nding to the insurers' argument the mere presence of ACBM results only in economic losses, not physical injury, the court stated:
"In our view, however, the damages allegedly suffered by the building owners from the presence of ACBM cannot be considered solely economic losses. Diminished market value or abatement costs or costs of inspecting, assessing and maintaining the in-place ACBM are not the `property damage.' They are `damages because of property damage.' That is, they are the alternative measures of the physical injury to the building. [Citations.] The fact that the measure of damages is economic does not preclude a physical injury. [Citations.]" (45 Cal.App.4th at p. 93.)
(See also Economy Lumber Co. v. Insurance Co. of North America (1984) 157 Cal.App.3d 641, 648 [finding coverage under the 1973 definition where application of mismilled siding resulted in physical injury ("very unsightly appearance") to houses].)
Armstrong is significant in two ways. It not only held incorporation-related injuries are property damage under the 1973 definition, it did so on facts which emphasize it is the incorporation of the defective or harmful product itself which causes the injury , not the diminution of market value. Diminution of market value is one measure of damages in the case of an incorporation-related injury.
CNA attempts to distinguish Armstrong on its facts. Armstrong is factually different from the present case, CNA points out, because it dealt with damage to property due to ACBM which could release fibers and contaminate the buildings.
CNA does not explain why the difference in the harmful products-asbestos containing building materials versus pornography containing videotapes-should affect the outcome of the present case except to suggest that because of societal concern over the health hazards of asbestos the Armstrong court "departed from long-standing California case precedent in order to reach the result it did." We reject this reasoning.
As we explained above, Armstrong is entirely consistent with the long-standing California Supreme Court precedent found in Geddes I and II. Furthermore, the present case is factually stronger than Armstrong on the injury aspect. As CNA correctly points out, the injury in Armstrong was the incorporation into buildings of harmful material which could release and cause harm to humans. In our case, the incorporated harmful material was released in classrooms and children's homes across America.
CNA also argues Armstrong is factually distinguishable because it dealt with the physical linkage of a harmful product with another product in such a manner the harmful product could not be unlinked without damaging the other product and the products must be delinked in order to prevent property damage in the future. In our case, CNA maintains, "there was no bonding or physical linkage" of the pornographic movie and "The Best Christmas Pageant Ever." Reaching back to Judge Posner's distinction between a product incorporated into a house which cannot be removed without damage to the house and a product merely contained in a house which can be removed without damage to the house, CNA argues " t is a simple matter to remove, or `unlink,' offending recorded material from videotapes. This can be done quickly, inexpensively and in such a manner as to not even touch the programming of the Pageant. It is simply a matter of erasing the offending material which appears after the credits."
Again, we disagree with CNA's analysis. Neither Armstrong, Geddes I nor II, nor Eljer for that matter, held incorporation-related injury only occurs when the harmful product cannot be delinked without dam
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