Bad day for Mud Dog
Wisconsin Utility Exposure, Inc. (WUE), purchased an excavator called a Mud Dog from Super Products pursuant to a contract with a limited warranty. The Mud Dog was comprised of a truck chassis and cab on which Super Products installed the Mud Dog heavy excavation equipment. The Mud Dog was the source of a fire that damaged the unit.
WUE was compensated by its insurer, Secura Insurance, for property damage it sustained in the fire. Secura then filed suit against Super Products, asserting a claim for negligence and seeking recovery for the payments to WUE. Secura alleged that Super Products was negligent in its design of and modifications to the Mud Dog.
Secura sought three categories of damages based on its payments to WUE.
First, a variety of items, including stepladders, a trash can, a wheelbarrow, boots, hoses, tools, and other equipment stored in or around the Mud Dog, were physically damaged. Super Products conceded that Secura’s negligence claim was available under the economic loss doctrine’s “other property” exception for the physical damage to the other property.
Second, Secura sought damages for the total loss of the Mud Dog.
Third, expenses were incurred to clean up the Mud Dog and debris from the fire. The invoice for the cleanup identified services for “Removal, Analytical, Profiling, Transportation and Disposal of Liquid Wastes Generated from Hydro Excavator Involved in a Fire.” The detail included vacuums, roll-off boxes and trucks, drums, disposal of water, and waste analysis and disposal.
In October 2016, Super Products moved for partial summary judgment, contending that the economic loss doctrine precluded recovery in tort (in civil law) for damage to the product and the cleanup expenses.
In response, Secura conceded that the damage to the product and the cleanup costs ordinarily would be subject to the economic loss doctrine’s bar, but it argued that because there was physical damage to other property (stepladders, etc.), the economic loss doctrine did not apply.
The court agreed with Secura, holding that when there is damage to both the product and other property, the economic loss doctrine permits a negligence claim seeking recovery for both, despite the parties’ contractual remedies.
The parties entered into a consent judgment in which they agreed to settle for a certain amount in the event Super Product’s challenge to the circuit court’s summary judgment ruling was unsuccessful on appeal.
On appeal, Secura argued that because there was damage to other property, recovery for the defective product and its cleanup became available in tort.
The court explained that the purpose of the economic loss doctrine is to hold the parties to their contractual remedies when a product is inferior and fails to work for the purposes for which it was manufactured and sold.Losses subject to the doctrine include direct economic loss, such as damage to, or loss in the value of, the product itself, and consequential economic loss attributable to the product defect, such as repair and replacement expenses, and loss of profits resulting from the inability to make use of the product.
By precluding tort claims, the doctrine aims to protect commercial parties’ freedom to allocate economic risk by contract, and “to encourage the party best situated to assess the risk [of] economic loss, the commercial purchaser, to assume, allocate, or insure against that risk.”
The court noted that both parties agreed that the tort claim seeking recovery for physical damage to the other property at the site was not precluded by the economic loss doctrine. Neither party contended that the damage to the stepladders, wheelbarrow, etc., was anticipated in the event the Mud Dog failed to perform as expected.
The court held that the damage to the Mud Dog was barred by the economic loss doctrine, and that the same held true for the damage to the other property and the costs of cleanup.
Secura Insurance v. Super Products, LLC-Court of Appeals of Wisconsin-July 31, 2019-2019 WL 3432520.
