State Farm Fire & Casualty Co. v. Hague Quality Water
2013 WI App 10
| Wis. Ct. App. | 2012Background
- Krueger bought a Hague water softener for home use under a limited warranty that excludes incidental damages.
- Two years later the unit leaked, causing about $45,000 in damage to drywall, flooring, and woodwork.
- State Farm insured Krueger and paid for the repairs, then sued Hague and its insurer for tort damages.
- The circuit court dismissed based on the economic loss doctrine, deeming all damages economic.
- The issue is whether tort recovery is barred when the damaged property is not part of an integrated system or a disappointed expectation arises.
- The court reverses, holding the economic loss doctrine does not bar tort claims here and remands for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the economic loss doctrine bars tort claims for damage to other property | State Farm argues damages are not economic losses to a product; there is damage to “other property.” | Hague contends all damages are economic and within the product’s market risk. | No; damages to drywall and related property are not barred under the doctrine. |
| Whether the damaged property is part of an integrated system with the水 softener | If integrated, damages are product-related and not recoverable in tort. | If not integrated, tort recovery remains possible for other-property damages. | Damaged drywall, flooring, and woodwork are not an integrated system with the water softener. |
| Whether the water softener’s failure constitutes a disappointed expectation that precludes tort recovery | Krueger did not purchase the softener to interact with drywall or woodwork; the failure was not tied to the product’s purpose. | Foreseeable interaction or failure within product function could foreclose tort recovery. | No; the loss did not arise from the product’s intended function, so disappointed expectations do not bar tort claims. |
| Whether the water softener’s leak relates to the product’s purpose or function | The leak is not a failure of softening; damages arose from a defect independent of the softening function. | Leakage reflects a defect that could have been foreseeable in use. | Not related to the water-softening purpose, so does not trigger the doctrine. |
Key Cases Cited
- Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235 (Wis. 1999) (integrated system analysis for ‘other property’)
- Foremost Farms USA Coop. v. Performance Process, Inc. (Foremost I), 297 Wis. 2d 724 (Wis. Ct. App. 2006) (two-part test for whether damaged property is ‘other property’)
- Grams v. Milk Prods., Inc., 283 Wis. 2d 511 (Wis. 2005) (disappointed expectations framework)
- Selzer v. Brunsell Bros., 257 Wis. 2d 809 (Wis. Ct. App. 2002) (foreseeable interaction not enough for exclusion)
- Bay Breeze Condo. Ass’n v. Norco Windows, Inc., 257 Wis. 2d 511 (Wis. Ct. App. 2002) (windows case—interaction not automatically ‘other property’)
- State Farm Mut. Auto. Ins. Co. v. Ford Motor Co., 225 Wis. 2d 305 (Wis. 1999) (economic loss doctrine framework governing product-related losses)