Case Title: State Farm Mutual Automobile Insurance Company v. Ford Motor Company

Citation: 

Docket Number: 1997AP002594

State: wisconsin

Court: Wisconsin Supreme Court

Date: 1999-05-04T00:00:00Z

Document:
SUPREME COURT OF WISCONSIN 
 
 
Case No.: 
97-2594 
 
 
Complete Title 
of Case: 
 
 
State Farm Mutual Automobile Insurance Company,  
 
Plaintiff-Appellant, 
 
v. 
Ford Motor Company,  
 
Defendant-Respondent, 
Neenah Menasha Ford, ABC Company, a fictitious 
company, and ABC Insurance Company, a fictitious 
insurance company,  
 
Defendants.  
 
ON CERTIFICATION FROM THE COURT OF APPEALS 
 
 
Opinion Filed: 
May 4, 1999 
Submitted on Briefs: 
 
Oral Argument: 
November 11, 1998 
 
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Outagamie  
 
JUDGE: 
Dee R. Dyer 
 
 
JUSTICES: 
 
Concurred: 
 
 
Dissented: 
Abrahamson, C.J., dissents (opinion filed) 
 
 
Bradley, J., joins 
 
Not Participating:  
 
 
ATTORNEYS: 
For the plaintiff there were briefs by Patrick J. 
Coffey and Menn, Nelson, Sharratt, Teetaert & Beisenstein, Ltd., 
Appleton and oral argument by Patrick J. Coffey. 
 
 
 
 
For the defendant respondent there was a brief by 
Peter J. Hickey, Jeffrey T. DeMeuse and Everson, Whitney, Everson 
& Brehm, Green Bay and Karen Kies DeGrand, Mark M. Burden and 
Donohue, Brown, Mathewson & Smyth, Chicago, IL and oral argument 
by Terry E. Johnson of Peterson, Johnson & Murray, S.C., 
Milwaukee. 
 
 
1 
 
NOTICE 
This opinion is subject to further editing and 
modification.  The final version will appear in 
the bound volume of the official reports. 
 
 
No. 97-2594 
 
STATE OF WISCONSIN               :        
        
 
 
 
 
IN SUPREME COURT 
 
 
State Farm Mutual Automobile Insurance  
Company,  
 
          Plaintiff-Appellant, 
 
     v. 
 
Ford Motor Company,  
 
          Defendant-Respondent, 
 
Neenah Menasha Ford, ABC Company, a  
fictitious company, and ABC Insurance  
Company, a fictitious insurance company,  
 
          Defendants.  
FILED 
 
MAY 4, 1999 
 
Marilyn L. Graves 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
APPEAL from an order of the Circuit Court for Outagamie 
County, Dee R. Dyer, Circuit Court Judge.  Affirmed. 
¶1 
WILLIAM A. BABLITCH, J.   It is established law in 
Wisconsin that the economic loss doctrine bars tort recovery for 
economic loss suffered by commercial entities.  This case 
requires us to determine whether the economic loss doctrine also 
applies to consumer transactions.  The circuit court concluded 
that the economic loss doctrine bars tort damages for purely 
economic losses in consumer transactions.  State Farm Mutual 
Automobile Insurance Company (State Farm) requests that this 
court reverse the order of the circuit court entering summary 
judgment in favor of Ford Motor Company (Ford) on State Farm’s 
negligence and strict liability claims to recover payments it 
No. 97-2594 
 
2 
made to its insured for an economic loss.  Because we conclude 
that the same policies that justify applying the economic loss 
doctrine to commercial transactions apply with equal force to 
consumer transactions, we hold that the economic loss doctrine 
applies to consumer transactions and bars State Farm’s tort 
claims for purely economic loss.  Therefore, we affirm the 
circuit court’s order entering summary judgment in favor of 
Ford. 
¶2 
For purposes of this appeal, the facts are not in 
dispute.  In 1992 James Renberg (Renberg) purchased a used 1990 
Ford Bronco 4x4 “as is” from Neenah-Menasha Ford, a Ford 
dealership.  Along with the vehicle, Renberg purchased an 
extended service warranty from Ford for the vehicle.  Renberg 
also insured the vehicle with State Farm.  
¶3 
On July 31, 1996, Renberg drove his 1990 Ford Bronco 
to work.  At the end of his shift, Renberg approached his 
vehicle to find that a fire had occurred within the vehicle 
although the vehicle was still locked and the windows were 
rolled up.  Unfortunately for Renberg, his extended service 
warranty had expired.  Renberg filed a claim with his insurance 
company, State Farm.  State Farm conducted an investigation of 
Renberg’s claim and concluded that the fire in Renberg’s vehicle 
was caused by a defective ignition switch.  On August 8, 1996, 
State Farm paid $11,602.40 pursuant to its contract of insurance 
with Renberg, an amount which represented the fair market value 
of the vehicle.   
No. 97-2594 
 
3 
¶4 
In September 1996, Renberg received a recall notice 
from Ford stating that 1988 through 1991 model Bronco and F-
series trucks could develop a short circuit in the ignition 
switch, causing overheating, smoke and possibly fire in the 
steering column.  The recall notice stated that the short 
circuit could develop when the vehicle was in use or unattended. 
  
¶5 
State Farm was notified of this recall notice and 
thereafter initiated this subrogation action against Ford to 
recover money it had paid to its insured, Renberg.  State Farm 
based its action on theories of negligence, strict liability and 
breach of contractual duties including express and implied 
warranties. 
 
State 
Farm 
later 
voluntarily 
dismissed 
its 
contractual causes of action because the sales contract for the 
vehicle was “as is” and the extended service warranty had 
expired at the time of the fire. 
¶6 
In its answer Ford raised the economic loss doctrine 
as an affirmative defense, asserting that the doctrine bars 
State Farm’s tort claims of negligence and strict liability.  
Ford also moved for summary judgment. 
¶7 
The Outagamie County Circuit Court, the Honorable Dee 
R. Dyer presiding, granted Ford’s motion for summary judgment, 
agreeing that the economic loss doctrine barred State Farm’s 
tort claims.   
No. 97-2594 
 
4 
¶8 
State Farm appealed.  The court of appeals certified 
the appeal to this court pursuant to Wis. Stat. § (Rule) 809.61 
(1993-94),1 and this court accepted the certification. 
¶9 
State Farm’s claim to recover the payment it made for 
damage only to the Ford Bronco was based on theories of 
negligence and strict liability.  The issue presented by this 
case, and as certified by the court of appeals, is whether the 
economic loss doctrine applies to consumer transactions2 to bar 
tort recovery for purely economic loss.  In other words, we must 
determine whether State Farm may rely on tort theories to 
recover damages resulting from a defect that causes harm only to 
the product itself.  We conclude that the economic loss doctrine 
applies to consumer transactions.  Therefore, State Farm’s tort 
claims for purely economic loss are barred.   
¶10 The question of whether the economic loss doctrine 
applies to consumer transactions, given the undisputed facts 
presented by this case, is a question of law that this court 
reviews de novo.  Sunnyslope Grading v. Miller, Bradford & 
Risberg, Inc., 148 Wis. 2d 910, 915, 437 N.W.2d 213 (1989) 
                     
1 All references to the Wisconsin Statutes are to the 1993-
94 version unless otherwise indicated.  
2 Neither party argues that the transaction at issue in this 
case is not a consumer transaction.  “Consumer transaction” is 
defined as “a transaction in which one or more of the parties is 
a customer for purposes of that transaction.”  Wis. Stat. 
§ 421.301(13).  “Customer” in turn is defined as “a person other 
than an organization (s. 421.301(28)) who seeks or acquires real 
or personal property, services, money or credit for personal, 
family, household or agricultural purposes.”  Wis. Stat. 
§ 421.301(17). 
No. 97-2594 
 
5 
(citing First Nat. Leasing Corp. v. Madison, 81 Wis. 2d 205, 
208, 260 N.W.2d 251 (1977)).   
¶11 Economic loss is “the diminution in the value of the 
product because it is inferior in quality and does not work for 
the general purposes for which it was manufactured and sold.”  
Northridge Co. v. W.R. Grace & Co., 162 Wis. 2d 918, 925-26, 471 
N.W.2d 171 (1991) (citing Comment, Manufacturers’ Liability to 
Remote Purchasers for “Economic Loss” DamagesTort or Contract?, 
114 U. Pa. L. Rev. 539, 541 (1966)).  See also, Daanen & 
Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 401, 573 
N.W.2d 842 (1998).  Economic loss has also been defined as 
“damages for inadequate value, costs of repair and replacement 
of the defective product, or consequent loss of profitswithout 
any claim of personal injury or damage to other property . . ..” 
Note, Economic Loss in Products Liability Jurisprudence, 66 
Colum. L. Rev. 917, 918 (1966).  See also Daanen, 216 Wis. 2d at 
401.   
¶12 Because economic losses are those associated with a 
defective product or a product that does not meet a purchaser’s 
expectations, causing damages that are meant to be addressed 
through the law of contract and warranties, Wisconsin has joined 
a majority of jurisdictions which have held that in the 
commercial transaction setting, damages for economic losses are 
recoverable only in contract and not in tort.  See Sunnyslope, 
148 Wis. 2d at 921.  This rule has become known as the “economic 
loss doctrine.”  “The economic loss doctrine is a judicially 
created doctrine providing that a commercial purchaser of a 
No. 97-2594 
 
6 
product cannot recover from a manufacturer, under tort theories 
of negligence or strict products liability, damages that are 
solely ‘economic’ in nature.”  Daanen, 216 Wis. 2d at 400.   
¶13 Three policies support applying the economic loss 
doctrine to commercial transactions: 1) it maintains the 
historical distinction between tort and contract law; 2) it 
protects parties’ freedom to allocate economic risk by contract; 
and 3) it encourages the party best situated to assess the risk 
of economic loss, usually the purchaser, to assume, allocate or 
insure against that risk.  Daanen, 216 Wis. 2d at 403.  Our 
review of these policies convinces us that each policy applies 
with equal force to consumer transactions.  
¶14 The 
first 
and 
most 
compelling policy 
supporting 
application 
of 
the 
economic 
loss 
doctrine 
to 
commercial 
transactions is that it maintains the distinction between tort 
and contract law.  Daanen, 216 Wis. 2d at 403.  It is important 
to maintain this distinction because the two theories serve very 
different purposes.   
¶15 “Tort law is rooted in the concept of protecting 
society as a whole from physical harm to person or property.”  
Daanen, 216 Wis. 2d at 405 (citing East River S.S. Corp. v. 
Transamerica Delaval, 476 U.S. 858, 866 (1986), and Keeton, 
Prosser and Keeton on Torts § 1 (5th ed. 1984)).  See also 
Northridge, 162 Wis. 2d at 933.  “It is society’s interest in 
human life, health, and safety that demands protection against 
defective products, and imposes a duty upon manufacturers of 
those products.”  Daanen, 216 Wis. 2d at 405 (citing Northridge, 
No. 97-2594 
 
7 
162 Wis. 2d at 933).  Tort law was designed to protect people 
from unexpected losses that amount to an overwhelming misfortune 
that a person may be unprepared to meet.  East River, 476 U.S. 
at 871 (citing Escola v. Coca Cola Bottling Co., 150 P.2d 436, 
441 (Cal. 1944) (concurring op.)).  See also Christopher Scott 
D’Angelo, The Economic Loss Doctrine: Saving Contract Warranty 
Law from Drowning in a See of Torts, 26 U. Tol. L. Rev. 591, 594 
(1995).  “The manufacturer is deemed best able to bear the cost 
of such unexpected personal injury or property damage since, at 
least in theory, it can spread its loss throughout society in 
the form of higher prices.”  26 U. Tol. L. Rev. at 594 
(referring to East River, 476 U.S. at 872).  Tort extends to all 
reasonably foreseeable parties; it may encompass unforeseen 
damages as well as those reasonably contemplated because it is 
circumscribed only by proximate cause.  Note, 66 Colum. L. Rev. 
at 947.  Tort law provides redress for safety hazards, 
Northridge, 162 Wis. 2d at 934, and embodies risk sharing, id. 
at 938.   
¶16 Contract 
law, 
on 
the 
other 
hand, 
is 
based 
on 
obligations imposed by bargain, and it allows parties to protect 
themselves through bargaining.  Daanen, 216 Wis. 2d at 403; 
Northridge, 162 Wis. 2d at 938; David B. Gaebler, Negligence, 
Economic Loss, and the U.C.C., 61 Ind. L.J. 593, 593 (Fall 1986) 
(referring to Tort Theories in Computer Litigation, 38 Rec. A.B. 
City N.Y. 426, 437 (1983); Keeton, Prosser and Keeton on Torts 
655, 656; J. Dooley, Modern Tort Law § 2.06, at 13-14 (1977); G. 
Gilmore, The Death of Contract 87-90 (1974); S. Speiser, C. 
No. 97-2594 
 
8 
Krause & A. Gans, The American Law of Torts § 1.20 (1983); 
Bertschy, Negligent Performance of Service Contracts and the 
Economic Loss Doctrine, 17 J. Mar. L. Rev. 249 (1984)).  “The 
law of contracts is designed to effectuate exchanges and to 
protect the expectancy interest of parties to private bargained-
for agreements.”  Daanen, 216 Wis. 2d at 404 (citing 1 E. Allen 
Farnsworth, Contracts § 1.3 at 10-11 (1990)).  A party to a 
contract voluntarily assumes a duty to perform a promise.  
Daanen, 216 Wis. 2d at 404 n.4 (quoting 1 Thomas M. Cooley, A 
Treatise on the Law of Torts, § 2 (4th ed. 1932)).  The law of 
contracts seeks to hold parties to their promises, ensuring that 
each party receives the benefit of his or her bargain.  Daanen, 
216 Wis. 2d at 404.  
¶17 Recovery under contract is limited to the parties to 
the contract or those for whose benefit the contract was made.  
Note, 66 Colum. L. Rev. at 947.  Damages are limited to those 
reasonably contemplated by the parties when the contract was 
made.  Id.  Contract law provides redress for defects in 
suitability and quality of a product.  Northridge, 162 Wis. 2d 
at 934.  “Warranty law permits recovery of economic damages and 
makes the plaintiff whole by providing recovery for the costs of 
repair and/or replacement of the product and any consequent loss 
of profits, thus putting the plaintiff into the position he 
would have been in had the product functioned properly.”  26 U. 
Tol. L. Rev. at 594 (referring to East River, 476 U.S. at 872-
73) (footnotes omitted).   
No. 97-2594 
 
9 
¶18 Throughout legal history, courts have struggled to 
find the appropriate boundary between tort and contract.  See 
generally William Lloyd Prosser, The Borderland of Tort and 
Contract, in SELECTED TOPICS ON THE LAW OF TORTS 380, 380 (The Thomas 
M. Cooley Lectures, Fourth Series, University of Michigan 1953). 
 This boundary has fluctuated with societal pressures.  For 
example, early in legal history, parties relied on the strict 
“forms of action” rather than a distinction between tort and 
contract.  Id. at 380-81; Prosser & Keeton on Torts § 6 at 28.  
However, there were occasions where the gravamen of the action 
prevailed over the form of the action.  Prosser at 437.  This 
“gravamen of the action” approach led to the modern distinction 
between tort and contract law. 
¶19 As society became more industrial, it needed to 
address the influx of mass-produced products reaching the market 
place, some of which were defective.  Initially it was thought 
“necessary to protect struggling and unstable industry against 
an onslaught of disastrous claims.”  Dippel v. Sciano, 37 
Wis. 2d 443, 450, 155 N.W.2d 55 (1967).  Courts protected 
manufacturers from liability by requiring privity of contract 
between the manufacturer and ultimate purchaser.  See id.  
Protecting the development of industry took precedence over 
protecting injured plaintiffs.  Id. (referring to Winterbottom 
v. Wright, 10 M. & W. 109, 152 Eng. Rep. 402 (1842)).   
¶20 However, at least by the mid-1960’s society had “long 
since passed from the unsure days of industrial revolution to a 
settled and affluent society where we must be concerned about 
No. 97-2594 
 
10
the just claims of the injured and hapless user or consumer of 
industrial products.”  Dippel, 37 Wis. 2d at 450.  Thus the 
boundary between tort and contract law began to move in the 
direction of protecting purchasers.  Strict liability developed 
as a totally separate area of recovery for such injured 
purchasers, aimed at recovery for physical injury to both person 
and other property.  Seely v. White Motor Company, 403 P.2d 145, 
149, 152 (Cal. 1965) (citations omitted).  Imposing strict 
liability on manufacturers for defective products grew out of a 
“public policy judgment that people needed more protection from 
dangerous products than is afforded by the law of warranty.”  
East River, 476 U.S. at 866 (citing Seely, 403 P.2d at 149).    
¶21 Wisconsin first adopted the rule of strict products 
tort liability in 1967, specifically adopting the Restatement 
(Second) Torts § 402A.  Dippel, 37 Wis. 2d at 459.  “‘One who 
sells 
any 
product 
in 
a 
defective 
condition 
unreasonably 
dangerous to the user or consumer or to his property is subject 
to liability for physical harm thereby caused to the ultimate 
user or consumer, or to his property . . ..’”  Id. (quoting 
Restatement (Second) Torts § 402A).  Strict liability law rests 
on the idea that the cost of physical injury to person or other 
property may be an “‘overwhelming misfortune to the person 
injured, and a needless one, for the risk of injury can be 
insured by the manufacturer and distributed among the public as 
a cost of doing business.’”  Seely, 403 P.2d at 151 (quoting 
Escola, 150 P.2d at 436 (concurring op.)). 
No. 97-2594 
 
11
¶22 Products liability law was designed to govern the 
distinct problem of physical injuries resulting from a defective 
product; it was not designed to undermine contract law or the 
warranty provisions of the Uniform Commercial Code (U.C.C.).  
Seely, 403 P.2d at 149.  The law of contract and warranty has 
its own function.  “The law of warranty ‘grew as a branch of the 
law of commercial transactions and was primarily aimed at 
controlling the commercial aspects of these transactions.’”  
Seely, 403 P.2d at 150 (citing James, Products Liability, 34 
Tex. L. Rev. 192; Llewellyn, On Warranty of Quality, and 
Society, 36 Colum. L. Rev. 341).  The rules of warranty 
determine 
the 
quality 
of 
the 
product 
promised 
by 
the 
manufacturer and the quality it must deliver.  Seely, 403 P.2d 
at 150.  When a product does not function as warranted by the 
manufacturer, that is the manufacturer fails in its end of the 
bargain, the purchaser may recover contract damages.   
¶23 With 
the 
acceptance 
of 
products 
liability 
law, 
commercial plaintiffs, appreciating the advantages provided by 
tort law, continued to push the boundary between tort and 
contract law by filing claims under tort theories of products 
liability and negligence where their only damages were economic 
loss; that is, where the defective product caused no personal 
injury or damage to other property but only damage to itself.  
See, e.g., Sunnyslope, 148 Wis. 2d at 914-15; East River, 476 
U.S. at 861.   
¶24 “It is clear . . . that if [strict products liability 
law] development were allowed to progress too far, contract law 
No. 97-2594 
 
12
would drown in a sea of tort.”  East River, 476 U.S. at 866 
(citing G. Gilmore, The Death of Contract 87-94 (1974)).  It was 
perceived that plaintiffs were attempting to move the boundary 
between tort and contract too far.  Thus, the dawn of the 
economic loss doctrine.  The economic loss doctrine was 
developed and applied largely as a response to attempts to 
extend products liability law too far and into the unintended 
realm of economic loss.   
¶25 The economic loss doctrine maintains the distinction 
between tort and contract.  It recognizes that whether a product 
meets 
a 
certain 
level 
of 
performance 
or 
a 
purchaser’s 
expectations is not a matter of societal interest.  Rather, the 
specific functions of a product are a matter of contract.  A 
manufacturer “cannot be held for the level of performance of his 
products in the consumer’s business unless he agrees that the 
product was designed to meet the consumer’s demands.”  Seely, 
403 P.2d at 151.  Therefore, “contract law . . . is better 
suited than tort law for dealing with purely economic loss in 
the commercial arena.”  Daanen, 216 Wis. 2d at 404 (citations 
omitted).   Contract law permits the parties to specify the 
terms of their bargain and to protect themselves from commercial 
risk.  Parties use the rules of warranty and contract to 
“determine the quality of the product the manufacturer promises 
and thereby determine the quality [the manufacturer] must 
deliver.”  Seely, 403 P.2d at 150. 
¶26 If a plaintiff could recover tort damages for purely 
economic loss, “the manufacturer would be liable even though it 
No. 97-2594 
 
13
did not agree that [the product] would perform as plaintiff 
wished or expected it to do.”  Seely, 403 P.2d at 150.  
Society’s interest in tort law in protecting purchasers from the 
overwhelming misfortune attendant with physical injury does not 
justify “requiring the consuming public to pay more for their 
products 
so 
that 
a 
manufacturer 
can 
insure 
against 
the 
possibility that some of his products will not meet the business 
needs of some of his [or her] customers.”  Id. at 151. 
¶27 The United States Supreme Court, along with a majority 
of other courts readily adopted the economic loss doctrine for 
commercial transactions to bar tort recovery for purely economic 
loss.  See East River, 476 U.S. at 868 (citing Seely, 403 P.2d 
at 145; Jones & Laughlin Steel Corp. v. Johns-Manville Sales 
Corp., 626 F.2d, 280, 287 and n.13 (3rd Cir. 1980) (citing 
No. 97-2594 
 
14
cases)).3  “[A] commercial buyer seeking damages for economic 
loss resulting from the purchase of defective goods may recover 
                     
3 See also Exxon Shipping Co. v. Pacific Resources, Inc., 
835 F. Supp. 1195 (D. Haw. 1993) (doctrine precluded tort 
recovery for damage to bus caused by fire); Bowling Green Mun. 
Utils. V. Thomasson Lumber Co., 902 F. Supp. 134 (W.D. Ky. 1995) 
(applying Kentucky law) (doctrine barred tort recovery for 
damage to utility poles); ERA Helicopters, Inc. v. Bell 
Helicopter Textron, Inc., 696 F. Supp. 1096 (E.D. La. 1987) 
(applying Louisiana law) (doctrine precluded recovery for damage 
resulting from helicopter’s defective engine component); Nelson 
v. Todd’s Ltd., 426 N.W.2d 120 (Iowa 1988) (doctrine applied to 
preclude tort recovery to butcher for spoiled meat caused by 
defective 
meat 
curing 
agent); 
Oceanside 
at 
Pine 
Point 
Condominium Owners Ass’n v. Peachtree Coors, Inc., 659 A.2d 267 
(Me. 1995) (doctrine precluded recovery for water damage caused 
by allegedly defective windows); FMR Corp. v. Boston Edison Co., 
613 N.E.2d 902 (Mass. 1993) (doctrine precluded tort recovery 
when power outages caused economic losses); National Union Fire 
Ins. Co. of Pittsburgh, Pa. V. Pratt & Whitney Canada, 815 P.2d 
601 (Nev. 1991) (doctrine precluded tort recovery when airplane 
engine failed and destroyed entire airplane (may be sudden and 
calamitous case); Lempke v. Dagenais, 547 A.2d 290 (N.H. 1988) 
(doctrine precluded recovery for damages to garage);  Chemtrol 
Adhesives, Inc. v. American Mfrs. Mut. Ins. Co., 537 N.E.2d 624 
(Ohio 1989) (economic loss doctrine barred tort recovery where 
dryer, used in manufacturing setting, malfunctioned and damaged 
only the dryer); Waggoner v. Town & Country Mobile Homes, Inc., 
808 P.2d 649 (Okla. 1990) (doctrine applied to bar tort recovery 
where defect to mobile home caused damage to only the home 
itself); Boston Inv. Property v. E.W. Burman, Inc., 658 A.2d 515 
(R.I. 1995) (doctrine barred recovery for economic damage caused 
by general contractor); City of Lennox v. Mitek Indus., Inc., 
519 N.W.2d 330 (S.D. 1994) (doctrine barred tort recovery for 
losses caused by defective building trusses); Mid-Continent 
Aircraft Corp. v. Curry County Spraying Serv., Inc., 572 S.W.2d 
308 (Tex. 1978) (doctrine applied to bar tort recovery where 
defective crankshaft forced airplane to land on rough road, 
causing damage to its fuselage and wings; implied doctrine is 
limited to transactions between commercial entities); Maack v. 
Resource Design & Constr., 875 P.2d 570 (Utah Ct. App. 1994) 
(doctrine barred tort recovery damage to residence caused by 
water 
leakage); 
Sensenbrenner 
v. 
Rust, 
Orling 
& 
Neale, 
Architects, Inc., 374 S.E.2d 55 (Va. 1988) (doctrine barred tort 
No. 97-2594 
 
15
. . . under the U.C.C., but not in strict liability or 
negligence.”  Spring Motors Distributors v. Ford Motor Co., 489 
A.2d 660, 663, 672 (N.J. 1985). 
¶28 Wisconsin has similarly followed East River and the 
majority of courts across the country in applying the economic 
loss doctrine to commercial transactions and barring tort 
recovery for purely economic loss in commercial transactions.  
See Daanen, 216 Wis. 2d at 400 (“even in the absence of privity, 
the economic loss doctrine bars a remote commercial purchaser 
from recovering economic losses from a manufacturer under tort 
theories of strict liability and negligence.”); Northridge, 162 
Wis. 2d at 938 (court recognized economic loss doctrine but 
allowed plaintiffs to recover tort damages for harm caused by 
asbestos); Sunnyslope, 148 Wis. 2d at 921 (“a commercial 
purchaser of a product cannot recover solely economic losses 
from the manufacturer under negligence or strict liability 
theories, particularly, as here, where the warranty given by the 
manufacturer 
specifically 
precludes 
the 
recovery 
of 
such 
damages.”); D’Huyvetter v. A.O. Smith Harvestore, 164 Wis. 2d 
306, 328, 330, 475 N.W.2d 587 (Ct. App. 1991) (affirmed summary 
judgment for defendants on strict liability and negligence 
claims because the plaintiff’s damages stemmed from the failure 
of the product to perform as expected); and Spychalla Farms v. 
Hopkins Agr. Chem., 151 Wis. 2d 431, 444 N.W.2d 743 (Ct. App. 
                                                                  
recovery for damage to foundation of house caused by leaking 
swimming pool).  
No. 97-2594 
 
16
1989) (allowed tort damages because the defective product caused 
physical damage to other property).   
 
Recovery for economic loss is intended to protect 
purchasers from losses suffered because a product 
failed in its intended [or expected] use.  Recovery 
for economic loss necessarily focuses on the bargain 
struck between the parties; warranty law is premised 
on protection of the bargain.  Economic loss is 
defined, as we stated previously, as damages for 
inadequate value, because the product is inferior and 
does not work for the general purpose for which it was 
manufactured or sold.  Liability for economic loss is 
based 
on 
express 
or 
implied 
representations 
manifesting the manufacturer’s or seller’s intent to 
guarantee the product.  Prosser and Keeton on Torts, 
secs. 95-95A, p. 677 (5th ed. 1984). 
Northridge, 162 Wis. 2d at 933-34.  See also Sunnyslope, 148 
Wis. 2d at 920-21. 
¶29 We conclude that the policy of maintaining the 
distinction between tort and contract applies with equal force 
to consumer transactions.  As discussed above, it is well-
established 
that 
a 
manufacturer 
has 
no 
duty 
to 
another 
commercial entity to prevent a product from injuring itself.  
Daanen, 216 Wis. 2d at 406.  See also East River, 476 U.S. at 
871.  However, there is no principled reason to hold that same 
manufacturer to a different standard when it sells its product 
to an individual consumer.  Whether the purchase is a commercial 
or consumer transaction, the specific functions of the product 
are a matter of contract.  Whether a commercial or consumer 
transaction, the specific functions of the product and the 
purchaser’s expectations are “the meat and drink of contract 
law.”  Edward T. O’Donnell, et al., On the Differences Between 
No. 97-2594 
 
17
Blood and Red Ink: A Second Look at the Policy Arguments for the 
Abrogation of the Economic Loss Rule in Consumer Litigation, 19 
Nova L. Rev. 923, 944 (Spring, 1995).  Just as contract law 
allows commercial parties to bargain and protect themselves from 
risk, so too does contract law allow consumer parties to protect 
themselves.  Contract law most appropriately enforces the duties 
that the parties imposed upon themselves by entering into 
contracts.  Whether in a commercial or consumer context, the 
distinction between tort and contract should not be eroded.   
¶30 In this case, Renberg purchased the Bronco “as is,” an 
agreement which likely affected the price of the vehicle.  Ford 
did not warrant that it would be free from defects, such as a 
faulty ignition switch.  Renberg also purchased an extended 
service warranty which provided certain protections for a 
certain price.  Were Renberg or State Farm, as his insurer, 
allowed to recover tort damages for purely economic lossthe 
very type of loss meant to be covered by these contractsthe 
contracts would be rendered meaningless.  Ford would be liable 
though it did not agree that the Bronco would perform as Renberg 
expected or wished, and though the service warranty had expired. 
 “The manufacturer would be liable for damages of unknown and 
unlimited scope.”  Seely, 403 P.2d at 150-51.   
¶31 This 
case 
illustrates 
that 
plaintiffs, 
still 
appreciating the “more congenial environment,” provided to 
consumers by tort law, Spring Motors, 489 A.2d at 668, continue 
to push the boundary between tort and contract by filing tort 
actions for purely economic loss.  However, whether a consumer 
No. 97-2594 
 
18
or commercial plaintiff, if tort law were allowed to provide 
tort relief for purely economic loss, contract law would drown 
in a sea of tort.  See East River, 476 U.S. at 866.  Because 
tort and contract serve entirely different purposes, maintaining 
the distinction between the two theories is important, whether 
in commercial or consumer transactions.4 
                     
4 The dissent argues that the economic loss doctrine should 
not apply in this case because the defective product, the Ford 
Bronco, posed an unreasonable danger to person and property.  
Dissent at 2-3.  The dissent asserts that society should be 
protected from the risk of such defective products through 
strict products liability law even when the loss is only 
economic.   
We respectfully disagree. 
The 
dissent’s 
concern 
regarding 
safety 
was 
recently 
addressed by the Illinois Supreme Court.  Trans States Airlines 
v. Pratt & Whitney Canada, 682 N.E.2d 45, 53 (Ill. 1997).  The 
Trans State court applied the economic loss doctrine over 
concerns regarding safety for two reasons.  First, when a 
product damages only itself, the very harm meant to be addressed 
by products liability law is not realized.  Id.  “Thus, products 
liability safety concerns are not compromised.”  Id.  Second, 
despite applying the economic loss doctrine to situations in 
which there is damage only to the product itself, strict 
liability and negligence law nonetheless continue to adequately 
protect damage to other property and personal injury.  Id.   
Where the product causes personal injury or other 
property damage, the manufacturer may yet be subject 
to liability in tort.  Because no manufacturer can 
predict with any certainty that the damage his unsafe 
product causes will be confined to the product itself, 
tort liability will continue to loom as a possibility. 
 Therefore, in our view, the incentive to build safe 
products is not diminished. 
 
No. 97-2594 
 
19
¶32 The 
second policy 
supporting application of the 
economic loss doctrine in the commercial setting is that it 
protects parties’ freedom to allocate economic risk by contract. 
 Daanen, 216 Wis. 2d at 403.  As we stated earlier, economic 
loss is loss suffered in the value of a product because it is 
defective; that is, it is of inferior quality and it does not 
work for the purposes for which it was manufactured and sold.  
Northridge, 162 Wis. 2d at 925-26.  Economic risk is the risk 
that such a loss might occur.   
¶33 “Contract law, the law of warranty and the Uniform 
Commercial Code are designed to allow the parties to allocate 
the risk of product failure.”  Sunnyslope, 148 Wis. 2d at 920-
21. Parties can set the terms of their agreements, East River, 
476 U.S. at 872-73, and thereby contract regarding product 
performance and the purchaser’s expectations.  The U.C.C. allows 
manufacturers to limit liability by disclaiming warranties or 
restricting remedies, in which case the purchaser pays less for 
the product.  East River, 476 U.S. at 873.  Contract law also 
provides 
built-in 
limitations, 
derived 
from 
the 
parties’ 
bargain.  Id. at 874.  For example, consequential damages such 
as lost profits, must be a foreseeable result of a breach of the 
contract.  Id. (citing Hadley v. Baxendale, 9 Ex. 341, 156 Eng. 
Rep. 145 (1854)).  “Courts should assume that parties factor 
                                                                  
Id.  We agree with the reasoning of the Illinois Supreme Court. 
 The looming and unpredictable threat of tort liability for 
personal injury and damage to other property caused by a 
defective product continues as an incentive to manufacturers to 
produce safe products.  
No. 97-2594 
 
20
risk allocation into their agreements . . ..”  Daanen, 216 
Wis. 2d at 408 (citation omitted). 
¶34 Although society, through products liability law, has 
imposed a duty on manufacturers to protect against the risk of 
foreseeable personal injury or property damage, “it is more 
difficult 
for 
that 
manufacturer 
to 
assess 
a 
commercial 
purchaser’s disappointed economic expectations.”  Daanen, 216 
Wis. 2d at 410.  This is particularly true when the purchaser 
does not inform the manufacturer of his or her specific 
expectations.  See Seely, 403 P.2d at 150.  Although a 
manufacturer cannot predict failures as its product is used by a 
purchaser, it is able to limit risk by contract.  Daanen, 216 
Wis. 2d at 411-12.  “Forcing commercial parties to negotiate and 
allocate risk gives manufacturers certainty in pricing goods, 
since they can more reliably predict future liability and 
potential damages.”  Id. at 412 (citing East River, 476 U.S. 
873).   
¶35 Allowing tort recovery for economic loss would render 
contractual protections a nullity and destroy any freedom to 
allocate economic risk by contract.  “[M]anufacturers, in 
effect, would be deprived of their freedom to negotiate, 
allocate, and limit liability.”  Daanen, 216 Wis. 2d at 408 
(citing Note, 66 Colum. L. Rev. at 962).  Purchasers would 
essentially receive full warranty protections against economic 
risk without ever having to negotiate or pay for such warranty. 
 See Daanen, 216 Wis. 2d at 410.  Purchasers would be encouraged 
to forego purchasing a warranty or insurance and would instead 
No. 97-2594 
 
21
rely on tort remedies for their “warranty” protection against 
economic risk.  Daanen, 216 Wis. 2d at 408 (citing Dakota 
Gasification Co. v. Pascoe Bldg. Sys., 91 F.3d 1094, 1100 (8th 
Cir. 1996)).  Purchasers would gain much more than that for 
which they bargained or paid in the purchase price.  Daanen, 216 
Wis. 2d at 409. 
¶36 If tort damages were allowed for economic loss the 
manufacturer would be liable for risks for which it neither 
bargained nor expected.  Daanen, 216 Wis. 2d at 410-11.  See 
also Sunnyslope, 148 Wis. 2d at 921; Seely, 403 P.2d at 150-51. 
 Manufacturers could not invoke any contractual disclaimer or 
limitation of liability against the purchaser, as bargained.  
For example, in Seely, the manufacturer, White Motor Company, 
could have sold the truck “as is” and accordingly, not made any 
promises regarding the function of the truck.  If tort law 
applied to economic loss, such an attempt to limit liability 
(for which the purchaser would probably pay a lower price), 
would be meaningless.  If tort damages were allowed for the 
purchaser’s economic loss, though the manufacturer sold the 
product “as is,” the purchaser would recover anyway; the 
manufacturer would bear the entire risk of economic loss.  See 
Daanen, 216 Wis. 2d at 407 (citing Note, 66 Colum. L. Rev. at 
965).   
¶37 Reliance on the economic loss doctrine, however, 
allows and protects both the manufacturer’s and purchaser’s 
freedom to allocate economic risk by contract.  See Daanen, 216 
Wis. 2d at 407.  The economic loss doctrine encourages parties 
No. 97-2594 
 
22
“to negotiate for warranty protection or to take steps, such as 
purchasing 
insurance, 
to 
protect 
their 
purely 
economic 
interests.”  Id. at 413.  It is more appropriate to enforce a 
bargain than to allow an end run around a contract by using tort 
principles.  Id. at 407.  Subject to requirements of good faith 
and conscionability, manufacturers can include disclaimers and 
limit their liability.  In exchange, purchasers might pay a 
lower price.  See id. at 407-08; Wis. Stat. § 402.719(3).  The 
economic loss doctrine holds parties to their bargain.  There is 
“no reason to intrude into the parties’ allocations of the risk 
of economic loss and to extricate the parties from their 
bargains.”  Daanen, 216 Wis. 2d at 410. 
¶38 The policy of protecting commercial parties’ freedom 
to allocate economic risk by contract applies with equal force 
to consumer transactions.  In the present case the parties 
allocated the risk of product failure.  Renberg purchased the 
Ford Bronco “as is” according to the contract of sale.  Ford 
made no promises regarding the vehicle’s performance and Renberg 
likely paid less than he would have were it guaranteed.  Renberg 
also purchased an extended warranty.  He paid a certain price in 
exchange for the protections provided by the warranty.  With 
both the contract of sale and the extended service warranty, 
Renberg received a certain level of protection against economic 
loss in exchange for a certain price.  He also assumed some 
amount of economic risk.  Had he been willing to pay more, he 
could have received additional protections. 
No. 97-2594 
 
23
¶39 Were Renberg or State Farm, as his insurer, allowed to 
recover tort damages for purely economic lossthe very type of 
loss meant to be covered by contractsthe contracts would be 
meaningless.  Renberg and his insurer would receive full 
warranty protection against purely economic risk in the form of 
tort damages without having negotiated or paid for that 
warranty.  Renberg would gain much more than that for which he 
bargained or paid in the purchase price.  If Renberg were 
allowed to recover tort damages for his purely economic loss, 
Ford would be stripped of its ability to limit liability by 
contract.  Ford, which thought it limited its liability for 
economic losses by means of the contract of sale and the 
extended warranty, would be liable for damages for which it 
neither bargained nor expected.   
¶40 State Farm argues that the economic loss doctrine 
should not apply to consumers because consumers do not have 
equal bargaining power with manufacturers.  However, “[t]he 
buyer who is not a corporation is not necessarily so poor or 
unsophisticated as the sacred texts of products liability 
suggest.”  19 Nova L. Rev. at 935.  Although there may be 
situations where the parties’ bargaining power is extremely 
disparate, “relative bargaining power is not the touchstone of 
the economic loss rule, nor even an element.”  Id. at 957 (in 
footnote citing Spring Motors, 489 A.2d at 670-71; Greenman v. 
Yuba Power Products, Inc., 377 P.2d 897 (Cal. 1963)).  “Perfect 
parity is not required for a finding of substantially equal 
bargaining power.”  Alloway v. General Marine Ind., 695 A.2d 
No. 97-2594 
 
24
264, 268 (N.J. 1997).  In fact, the law of warranty and the 
U.C.C. are not limited to parties with equal bargaining power.  
See Seely, 403 P.2d at 151.  “Such a limitation is not supported 
by the language or history of the sales act and is unworkable.” 
 Id. 
¶41 To apply the economic loss doctrine to commercial 
entities but not to consumers “would mean one rule for 
businesses and another for those who buy products from these 
businesses.  The equilibrium could not be stable.”  19 Nova L. 
Rev. at 944 (footnote omitted).  Such a rule would assume that 
commercial entities always have equal bargaining power with each 
other and that consumers never have equal bargaining power with 
the manufacturer or producer of the good.  This is a naïve and 
over-simplified approach.   
¶42 In the case before the court, the consumer, Renberg, 
purchased the vehicle for his personal use.  He could have just 
as easily purchased the same vehicle for his small painting or 
heavy-duty hauling business, as in Seely.  Whether the truck was 
for individual use or for a business, the same scenario could 
have occurredRenberg returning to his locked vehicle after 
completing a job, and finding that a fire had occurred in his 
truck.  Under the approach advocated by State Farm, Renberg as 
an consumer purchaser, would not be barred by the economic loss 
doctrine from recovering tort damages.  However, Renberg as a 
small business owner, that is, as a commercial purchaser, would 
not be able to recover in tort because of the economic loss 
doctrine.  In reality, Renberg as a small business owner has no 
No. 97-2594 
 
25
more equality in bargaining power than does Renberg as an 
individual.  
¶43 We recognize that there may be some situations in 
which the disparate bargaining position between the parties is 
so great that it would be unconscionable to hold a party to such 
a contract.  This, however, is not one of those cases.  There is 
nothing in the record to indicate that Renberg was forced to 
purchase the vehicle “as is.”  He could have purchased another 
vehicle that came with warranties.  It is also likely that he 
had several options in extended warranties available to him. 
¶44 Whether in a commercial or consumer setting, there is 
“no reason to intrude into the parties’ allocations of the risk 
of economic loss and to extricate the parties from their 
bargains.”  Daanen, 216 Wis. 2d at 410.  Because the consumer 
can allocate his or her economic risk by contract, the policy of 
protecting parties’ freedom to allocate risk through contract 
applies equally to consumers as to commercial parties. 
¶45 The third policy that supports applying the economic 
loss doctrine to commercial transactions is that it encourages 
the party best situated, usually the purchaser, to assume, 
allocate or insure against economic risk.  Daanen, 216 Wis. 2d 
at 403.  The purchaser is in the best position to plan for 
economic loss because when a defective product injures only 
itself, the purchaser, not the manufacturer, “stands to lose the 
value of the product, risks the displeasure of its customers who 
find that the product does not meet their needs, or . . . 
experiences increased costs in performing a service.  Losses 
No. 97-2594 
 
26
like these can be insured.”  East River, 476 U.S. at 871-72 
(citing 10A G. Couch, Cyclopedia of Insurance Law §§ 42:385-
42:401, 42:414-417 (2d ed. 1982); 7 E. Benedict, Admiralty, Form 
No. 1.16-7, p. 1-239 (7th Ed. 1985); 5A J. Appleman & J. 
Appleman, Insurance Law and Practice § 3252 (1970)). 
¶46 Only the buyer knows how and where the product will be 
used and whether it will be used in conjunction with other 
devices or components.  19 Nova L. Rev. at 939.  Because 
purchasers know their own needs and expectations, they are best 
suited to protect themselves against economic loss.  The 
manufacturer or intermediate seller usually does not know these 
things and if it does, its information will come from the buyer. 
 Id.  As a result, the seller is unable to predict and protect 
against the severity of economic loss to a particular purchaser. 
 Id.  The purchaser is in a better position to understand the 
impact of disappointed economic expectations caused by a 
defective product.  Daanen, 216 Wis. 2d at 411.  A purchaser can 
anticipate and assume, allocate, or insure against this risk by 
agreeing to a certain contract of sale, contracting through 
warranties or purchasing insurance.  Id. at 412.   
¶47 This policy of encouraging purchasers to assume, 
allocate or insure against economic loss really “distills to 
whether the consuming public as a whole should bear the cost of 
economic losses sustained by those commercial purchasers who 
failed to bargain for adequate contract remedies.”  Daanen, 216 
Wis. 2d at 412 (citing Casa Clara v. Charley Toppino and Sons, 
620 So.2d 1244, 1246 (Fla. 1993)).  If a purchaser could recover 
No. 97-2594 
 
27
tort damages for purely economic loss, regardless of any 
contractual arrangements between the parties, the manufacturer 
would be liable in tort and therefore forced to assume, allocate 
or insure against economic risk.  A manufacturer would pass this 
cost on, “forcing the consuming public to bear the very cost the 
commercial purchaser contractually agreed to forego in exchange 
for a lower price.”  Daanen, 216 Wis. 2d at 412.  Allowing tort 
damages for purely economic loss  
 
would transform all manufacturers into insurers with 
seemingly unlimited tort liability.  Consumers would 
then be forced to subsidize or pay premiums for 
commercial 
purchasers 
who 
choose 
not 
to 
assume, 
allocate, or insure against their risk of economic 
loss.  The cost of tort protection for economic 
expectations ultimately would be borne by society.  We 
do not think that the consuming public as a whole 
should bear the cost of economic losses sustained by 
those commercial purchasers who fail to bargain for 
adequate contract remedies. 
Id. at 412-13.  See also East River, 476 U.S. at 872, 874. 
¶48 In Daanen, the plaintiff could have requested an 
express 
warranty 
or 
that 
the 
distributor 
extend 
the 
manufacturer’s warranty.  Daanen, 216 Wis. 2d at 409.  It failed 
to do so.  The plaintiff also could have purchased insurance to 
guard against equipment failure.  Id. at 412.  It apparently 
failed to do so.  Therefore, this court concluded that Daanen 
could not now benefit from recovering tort damages when it had 
foregone these contractual protections, probably in exchange for 
a lower price.   
¶49 The policy of encouraging the party best situated, 
usually the purchaser, to assume, allocate or insure against 
No. 97-2594 
 
28
economic loss applies with equal force to consumer transactions. 
 Whether in commercial or consumer transactions, if tort damages 
were allowed for purely economic losses, manufacturers would 
become insurers with seemingly unlimited tort liability.  See 
Daanen, 216 Wis. 2d at 412.  As discussed at oral argument in 
this case, if tort damages were recoverable for purely economic 
loss, warranties if offered at all, would have to provide 
protection to the full extent of tort law.  Manufacturers would 
likely add the increased cost of providing such expansive 
protection to their product, thereby causing society as a whole 
to pay for the economic losses of a handful who chose not to 
bargain for adequate contract remedies.  See id.  “[T]he 
consuming public [should not have] to pay more for their 
products 
so 
that 
a 
manufacturer 
can 
insure 
against 
the 
possibility that some of his products will not meet the business 
needs of some of his customers.”  Seely, 403 P.2d at 151.  
Purchasers, whether commercial entities or consumers, are in a 
better position to assess and protect themselves against 
disappointed 
economic 
expectations, 
and 
therefore 
purchase 
warranties or insurance accordingly. 
¶50 In the present case, Renberg purchased the Ford Bronco 
“as is” though it is likely he could have purchased a different 
vehicle with warranties.  As we have noted several times, it is 
likely that this contract of sale affected the purchase price.  
Renberg also purchased an extended service warranty.  Again, 
there were likely several options available, some providing more 
coverage, or for a longer period of time.  Finally, Renberg 
No. 97-2594 
 
29
entered into an insurance contract with State Farm, for which he 
paid a premium in exchange for a certain level of protection 
from damages.  It is likely that he could have received greater 
protection had he been willing to pay a higher premium.  Renberg 
made his decisions based on his personal knowledge regarding the 
use of his vehicle and his comfort level with risk.  Renberg 
fulfilled his end of the insurance contract by paying his 
premiums, and State Farm fulfilled its end of the bargain by 
paying Renberg’s claim regarding the damages to his Ford Bronco. 
  
¶51 In sum, Renberg was able to contractually protect 
himself.  As illustrated by this case, the third policy that 
justifies applying the economic loss doctrine to commercial 
transactions, that it encourages the party best situated, 
usually the purchaser, to assume, allocate, or insure against 
economic 
risk, 
applies 
with 
equal 
force 
to 
consumer 
transactions.   
¶52 For the reasons stated above, the policies that 
justify applying the economic loss doctrine to commercial 
transactions apply with equal force to consumer transactions.  
Whether a commercial or consumer transaction, it is important to 
maintain the distinction between tort and contract because the 
two theories serve very different purposes: tort law to protect 
societal interests in human life, health and safety, and 
contract law to protect the parties’ bargain.  Second, whether a 
commercial or consumer transaction, it is important to protect 
the parties’ freedom to allocate economic risk by contract.  
No. 97-2594 
 
30
Allowing tort recovery for economic loss would allow an end run 
around the bargain and provide recovery for which the parties 
neither bargained nor expected.  Finally, whether a commercial 
or consumer transaction, it is important to encourage the party 
best situated, usually the purchaser, to assume, allocate, or 
insure against economic risk.  Only the purchaser, not the 
manufacturer, can appreciate the severity of the consequences of 
an economic loss and thereby contract accordingly.  Our review 
of the three policies that justify applying the economic loss 
doctrine to commercial transactions convinces us that these 
policies apply with equal force to consumer transactions. 
¶53 A majority of courts in other jurisdictions have also 
applied the economic loss doctrine to consumer transactions by 
relying on the same polices used by this court to apply the 
No. 97-2594 
 
31
economic loss doctrine to commercial transactions.5  For example, 
like this court in Sunnyslope and Daanen and the United States 
                     
5 See Wellcraft Marine v. Zarzour, 577 So.2d 414 (Ala. 1990) 
(under Alabama's extended manufacturer's liability doctrine, no 
recovery for damage to product itself regardless of whether 
product is sold to consumer or commercial buyer); Pratt & 
Whitney Canada, Inc. v. Sheehan, 852 P.2d 1173 (Alaska 1993) 
(distinguishing between consumers and commercial buyers is 
problematic and this court rejected such distinction); Danforth 
v. Acorn Structures, Inc., 608 A.2d 1194 (Del. 1992) (rejected 
homeowner’s contention that economic loss doctrine should not 
apply 
to 
consumers 
purchasers 
as 
opposed 
to 
commercial 
purchasers.  Such a rule would defeat the legislative intent in 
enacting the Uniform Commercial Code); Casa Clara Condominium 
Assoc., Inc. v. Charley Toppino and Sons, Inc., 620 So.2d 1244 
(Fla. 1993); Chrysler Corp. v. Taylor, 234 S.E.2d 123 (Ga. Ct. 
App. 1977) (purchaser of car must sue under warranty law, not 
strict liability or negligence, for loss of benefit of the 
bargain); State Farm Mutual Automobile Ins. Co. v. Ford Motor 
Company, 572 N.W.2d 321 (Minn. Ct. App. 1997) (economic loss 
doctrine applies to consumers; fire damage to automobile 
resulted in purely economic loss and recoverable only in 
contract); Alloway v. General Marine Industries, 695 A.2d 264, 
270-71 (N.J. 1997); Jandreau v. Sheesley Plumbing & Heating Co., 
324 N.W.2d 266 (S.D. 1982) (regarding privity, absent the 
commercial or consumer purchaser’s ability to show reliance on 
express representations by the remote seller, most courts hold 
that a non-privity buyer cannot recover for direct economic loss 
on either an express or an implied warranty theory); Ritter v. 
Custom Chemicides, Inc., 912 S.W.2d 128 (Tenn. 1995) (the 
consumer does not have an action in tort for economic damages 
caused by product’s failure to protect tomato crop from frost 
damage as promised on the label); Nobility Homes of Texas, Inc. 
v. Shivers, 557 S.W.2d 77 (Tex. 1977) (strict liability 
inapplicable to action by purchaser of mobile home to recover 
economic losses); Paquette v. Deer & Co., 719 A.2d 410 (Vt. 
1998) (no distinction in application of economic loss doctrine 
between consumers and commercial entities; reduced value in 
motor home because of defective wiring and related problems is 
purely 
economic 
loss 
and 
recoverable 
only 
in 
contract); 
Berschauer/Phillips Construction Co. v. Seattle School District 
No. 1, 881 P.2d 986 (Wash. 1994) (applied the economic loss 
doctrine to a general contractor, a “sophisticated consumer,” 
because the legislature deprived the unsophisticated consumer of 
economic damages under the WPLA).  
No. 97-2594 
 
32
Supreme Court in East River, the Delaware Supreme Court relied 
on the first policy, the distinction between tort and contract 
law, to reject an exception to the economic loss doctrine for 
consumers.   
 
The rationale underlying the economic loss doctrine is 
best understood by considering the distinct functions 
served by tort law and contract law.  . . .  Products-
liability 
tort 
law 
has 
evolved 
to 
protect 
the 
individual and his property from the risk of physical 
harm posed by dangerous products.  Contract-warranty 
law has evolved to protect a different interest: viz., 
the “bargained for expectations” of both contracting 
parties and other foreseeable users who suffer loss 
when 
a 
product 
fails 
to 
meet 
the 
qualitative 
expectations of a consumer, i.e., when a product is 
unfit for its intended use.   
Danforth v. Acorn Structures, Inc., 608 A.2d 1194, 1195-96 (Del. 
1992) (citations and footnotes omitted).  See also Casa Clara, 
620 So.2d at 1246-47. 
¶54 Courts in other jurisdictions have also relied on the 
second policy, recognizing 
that, 
like 
commercial parties, 
consumers must be free to allocate risk by contract.  “The 
[economic loss] rule remains the same, regardless of the nature 
of the customer: ‘A defective product is a loss of the benefit 
of the bargain which is a contract rather than a tort action.’” 
 Wellcraft Marine v. Zarzour, 577 So.2d 414, 418 (Ala. 1990) 
(quoting Dairyland Ins. Co. v. General Motors Corp., 549 So.2d 
44, 46 (Ala. 1989)).  The availability of warranties, statutory 
duties imposed on sellers, the consumer’s ability to inspect 
goods before purchase and to bargain over price all provide 
protections to the consumer.  See Casa Clara, 620 So.2d at 1247. 
No. 97-2594 
 
33
 “[T]hese protections must be viewed as sufficient when compared 
with the mischief that could be caused by allowing tort recovery 
for purely economic losses.”  Id. (footnote omitted).  
¶55 Other jurisdictions have also applied the economic 
loss doctrine to consumer transactions because, like the third 
policy, the party best situated to assess the risk of economic 
loss, usually the purchaser, should be encouraged to assume, 
allocate or insure against that risk.  “[M]any buyers insure 
against the risk of the purchase of defective goods either 
directly through the purchase of an insurance policy, . . . or 
through insurance provided indirectly through many credit card 
purchases.”  Alloway, 695 A.2d at 275.   
¶56 State Farm points to jurisdictions where the court did 
not apply the economic loss doctrine to consumer transactions.  
We are not persuaded by these cases.  First, the courts which 
have held the economic loss doctrine does not apply to consumers 
are in the minority.  See Alloway, 695 A.2d at 271 (referring to 
Sharon Steel Corp. v. Lakeshore, Inc., 753 F.2d 851, 855-56 (10th 
Cir. 1985) (regarding New Mexico law); Cova v. Harley Davidson 
Motor Co., 182 N.W.2d 800, 804 (Mich. App. 1970); City of 
LaCrosse v. Schubert, Schroeder & Assoc., 72 Wis. 2d 38, 240 
N.W.2d 124, 127 (1976) [overruled by Daanen, 216 Wis. 2d at 
416]; Lloyd F. Smith Co. v. Den-Tal-Ez, Inc., 491 N.W.2d 11, 17 
(Minn. 1992)).   
¶57 Also, the strength of this minority group of cases is 
questionable because many of the cases on which they relied to 
not apply the economic loss doctrine to consumers have since 
No. 97-2594 
 
34
been overruled or questioned.  For example, in Thompson v. 
Nebraska Mobile Homes Corp., 647 P.2d 334 (Mont. 1982) the court 
did not apply the economic loss doctrine to a consumer 
transaction, 
reasoning 
that 
the 
consumer 
had 
an 
unfair 
bargaining position with respect to the manufacturer.  Thompson, 
647 P.2d at 337.  The court noted that its holding was 
consistent 
with 
cases 
in 
several 
other 
states 
including 
Wisconsin, relying on City of LaCrosse, 72 Wis. 2d at 38.  
However, LaCrosse was first limited by this court in Sunnyslope, 
148 Wis. 2d at 917, in 1989, and then expressly overruled in 
1998 in Daanen, 216 Wis. 2d at 416.  Similarly, State Farm and 
the dissent’s reliance on Thompson stands on shaky ground 
because most of the cases relied on by the Thompson court have 
been questioned or limited in some fashion.6     
¶58 Further support for our holding is found in the 
Restatement (Third) of Torts: Products Liability § 21 (1998) 
                     
6 Following is the history of cases relied on in Thompson v. 
Nebraska Mobile Homes, Corp., 647 P.2d 334, 337 (Mont. 1982): 
Hiigel v. General Motors Corp., 544 P.2d 983 (Colo. 1975) was 
limited by Richard O’Brien Cos. V. Challenge-Cook Bros. Inc., 
672 F. Supp. 466 (D. Colo. 1987); Santor v. A and M 
Karagheusian, Inc., 207 A.2d 305 (N.J. 1965) was questioned in 
East River Steamship Corp v. Transamerica Delaval, Inc., 476 
U.S. 858, 870 (1986); City of La Crosse v. Schubert, Schroeder 
and Associates, 72 Wis. 2d 38, 240 N.W.2d 124 (1976) was 
overruled by Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 
Wis. 2d 394, 416, 573 N.W.2d 842 (1998); Superwood Corp. v. 
Siempelkamp Corp., 311 N.W.2d 159 (Minn. 1981) was overruled by 
Hapka v. Paquin Farms, 458 N.W.2d 683 (Minn. 1990).  Only 
Gautheir v. Mayo, 258 N.W.2d 748 (Mich. App. 1977) and C&S Fuel, 
Inc. v. Clark Equipment Co., 524 F. Supp. 949 (E.D. Ky. 1981), 
both cited in Thompson as support for not extending the economic 
loss doctrine to consumers, have no negative history. 
No. 97-2594 
 
35
which follows the majority of jurisdictions and excludes tort 
recovery for damage only to the defective product itself.  When 
a 
party 
suffers 
“pure 
economic 
loss” 
recovery 
is 
more 
appropriately determined by contract law and the remedies set 
forth in the U.C.C..  Restatement (Third) Torts: Products 
Liability § 21 cmt. a.  “When a product defect results in harm 
to the product itself, the law governing commercial transactions 
sets forth a comprehensive scheme governing the rights of the 
buyer and seller.”  Id. cmt. d.7  
¶59 Additional support for our holding is found in the 
protections afforded consumers under the U.C.C., the lemon law, 
warranties, and insurance.   
¶60 The legislature adopted the U.C.C. in 1963, effective 
July 1, 1965.  See Ch. 158, Laws of 1963.  “Once the Legislature 
acts, respect for it as a co-equal branch of government requires 
courts to consider the legislation in determining the limits of 
judicial action.”  Alloway, 695 A.2d at 268 (citing Spring 
Motors, 489 A.2d at 671; see also Danforth, 608 A.2d at 1200-01 
(declining to displace provisions of the U.C.C. with tort 
actions)).  “[T]he legislative protections granted by the 
                     
7 The dissent argues that an argument can be made for 
applying products liability law in this case.  Dissent at 4. 
Although the Restatement recognizes that there is a “plausible 
argument” for relying on strict products liability law when a 
product poses a danger, contrary to the dissent’s implication, 
dissent at 4, the Restatement nonetheless concludes that the 
Uniform Commercial Code provides the appropriate remedy when a 
plaintiff suffers only economic loss.  Restatement (Third) 
Torts: Products Liability § 21 cmt. d at 295, cmt. a at 293.  
No. 97-2594 
 
36
Uniform Commercial Code are not to be buttressed by tort 
principles and recovery.”  Sunnyslope, 148 Wis. 2d at 916 
(citing Spring Motors, 489 A.2d at 673).  The U.C.C. provides a 
 “comprehensive system for compensating consumers for economic 
loss arising from the purchase of defective products.”  Alloway, 
695 A.2d at 268. 
¶61 Protection against damages caused by a defective 
product injuring only itself is the purpose of express and 
implied warranties provided for in the U.C.C.  See East River, 
476 U.S. at 872.  When a product fails to operate as warranted 
or as a consumer expected, the proper avenue for relief is a 
breach-of-warranty claim.  Id.  “Or, if the customer prefers, it 
can reject the product or revoke its acceptance and sue for 
breach of contract.”  Id. (citing U.C.C. §§ 2-601, 2-608, 2-
612).  Regardless, the U.C.C. has built-in protections for both 
the purchaser and manufacturer.   
¶62 Purchasers are able to recover repair costs and lost 
profits, thus putting the purchaser in the same position as if 
the product functioned properly.  See East River, 476 U.S. at 
873.  “The expectation damages available in warranty for purely 
economic loss give a plaintiff the full benefit of its bargain 
by compensating for forgone business opportunities.”  Id. 
(citing Fuller & Perdue, The Reliance Interest in Contract 
Damages: 1, 46 Yale L.J. 52, 60-63 (1936); R. Posner, Economic 
Analysis of Law § 4.8 (3d ed. 1986)).   
¶63 The 
U.C.C. 
also 
provides 
protections 
for 
manufacturers.  By terms of a contract, a manufacturer can 
No. 97-2594 
 
37
restrict its liability, within reason, by disclaiming warranties 
or limiting remedies.  See East River, 476 U.S. at 873.  In 
exchange, the purchaser likely pays a lower price.  Id.  “The 
limitation in a contract action comes from the agreement of the 
parties and the requirement that consequential damages, such as 
lost profits, be a foreseeable result of the breach.”  Id. at 
874 (referring to Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep. 
145 (1854)).   
¶64 State Farm cites Wis. Stat. § 401.102 for its argument 
that the U.C.C. applies only to commercial transactions.  The 
statute provides that the underlying purposes of the U.C.C. are 
“(a) To simplify, clarify and modernize the law governing 
commercial transactions; (b) To permit the continued expansion 
of commercial practices through custom, usage and agreement of 
the parties . . ..”  Wis. Stat. § 401.102.  Despite these 
references 
to 
“commercial 
transactions” 
and 
“commercial 
practices,” nowhere does the U.C.C. indicate that “consumers as 
a group are to be excluded from the class of buyers whose rights 
may be limited under that section.”  Note, 66 Colum. L. Rev. at 
961 (referring to U.C.C. § 2-316).  Although a court may 
invalidate a manufacturer’s disclaimer as unconscionable, the 
U.C.C. does not purport to hold that disclaimers directed to 
consumers are unconscionable per se.  Note, 66 Colum. L. Rev. at 
961; 19 Nova L. Rev. at 943; U.C.C. § 2-302.   
¶65 Furthermore, the U.C.C. “devotes explicit attention to 
the subject of sales to ultimate consumers.  [footnote referring 
to U.C.C. § 2-318, comments 2 and 3].  This renders feeble any 
No. 97-2594 
 
38
argument that the Code’s drafters intended to deal only with 
businessmen and to leave ultimate consumers to be regulated by 
tort law.”  Marc A. Franklin, When Worlds Collide: Liability 
Theories and Disclaimers in Defective-Product Cases, 18 Stan. L. 
Rev. 974, 995 (1966) (footnote omitted).  “The U.C.C. governs 
the allocation of risk between the consumer purchaser and the 
seller just as it does between the commercial purchaser and the 
seller, and it imposes warranties upon the transaction even 
where 
the 
transaction 
is 
devoid 
of 
expressed 
warranty 
provisions.”  26 U. Tol. L. Rev. at 598 (citing U.C.C. §§ 2-314, 
2-315 (1977)). 
¶66 Some consumer transactions may be governed by the 
Wisconsin Consumer Act contained in Wis. Stat. chs. 421 to 427. 
 Wis. Stat. § 421.101.  However, “[u]nless superseded by the 
particular provisions of chs. 421 to 427 parties to a consumer 
transaction have all of the obligations, duties, rights and 
remedies provided in chs. 401 to 411 [the U.C.C.] which apply to 
the transaction.”  Wis. Stat. § 421.103(3).  The parties have 
not argued nor can we discern any provision of the Consumer Act 
that would supersede the obligations, duties, rights and 
remedies applicable to the purchase of an automobile provided in 
the U.C.C.   
¶67 State Farm also ignores the many cases that have 
applied the U.C.C. to consumer transactions.  See, e.g., Ewers 
v. Eisenzopf, 88 Wis. 2d 482, 276 N.W.2d 802 (1979); Murray v. 
Holiday Rambler, Inc., 83 Wis. 2d 406, 265 N.W.2d 513 (1978); 
Gerner v. Vasby, 75 Wis. 2d 660, 250 N.W.2d 319 (1977).  See 
No. 97-2594 
 
39
also Daniel E. Murray, The Consumer and the Code: A Cross-
Sectional View, 23 U. Miami L. Rev. 11 (1968); Orrin L. Helstad, 
The Impact of the Uniform Commercial Code on Wisconsin Law, 1964 
Wis. L. Rev. 355, 364 (1964).  In fact, the U.C.C. has 
specifically been applied to the purchase of motor vehicles made 
by individual consumers. See Hughes v. Chrysler Motors Corp., 
197 Wis. 2d 973, 979, 542 N.W.2d 148 (1996) (“Prior to the 
enactment of lemon laws, the only kinds of remedial relief 
available to consumers were the statutory remedies of revocation 
of 
acceptance 
and 
breach 
of 
warranty 
under 
the 
Uniform 
Commercial Code.”); Taterka v. Ford Motor Co., 86 Wis. 2d 140, 
271 N.W.2d 653 (1978) (applying several U.C.C. provisions to 
consumer’s demand to Ford to repair latent defect in the 
taillight assembly gaskets); and Northwestern Motor Car, Inc. v. 
Pope, 
51 
Wis. 2d 
292, 
187 
N.W.2d 
200 
(1971) 
(regarding 
liquidated damages under Wis. Stat. § 402.718(1) in automobile 
purchase contract).   
¶68 In addition to the legislative protections afforded 
consumers by the U.C.C., the legislature enacted the lemon law 
to provide further protections from economic loss.  Wisconsin’s 
lemon law, Wis. Stat. § 218.015, was enacted “to ‘improve auto 
manufacturers’ 
quality 
control 
. 
. 
. 
[and] 
reduce 
the 
inconvenience, the expense, the frustration, the fear and [the] 
emotional trauma that lemon owners endure.’”  Hughes, 197 
Wis. 2d at 982 (quoting Statement by Vernon Holschbach, co-
sponsor of the bill, “Lemon” Car Bill Has Sweet, Sour Sides, 
Wisconsin State Journal, March 2, 1983).  If a consumer has 
No. 97-2594 
 
40
purchased a vehicle that does not function properly and the 
seller is unwilling or unable to remedy the situation, the 
consumer has recourse under the lemon law.  Hughes, 197 Wis. 2d 
at 979-80.   
 
Wisconsin’s lemon law provides that if a new motor 
vehicle does not conform to an applicable express 
warranty, the nonconformity shall be repaired before 
the expiration of the warranty or one year after 
delivery of the vehicle, whichever is sooner.  Section 
218.015(2)(a).  If the nonconformity is not repaired 
after a reasonable attempt to repair, the manufacturer 
must accept return of the vehicle, and at the 
direction of the consumer, either replace the vehicle 
or refund to the consumer the full purchase price plus 
any 
sales 
tax, 
finance 
charge, 
costs, 
less 
a 
reasonable allowance for use.  Section 218.015(2)(b)1 
and 2.  A reasonable attempt to repair means either 
that the nonconformity is subject to repair four times 
and the nonconformity continues or that the vehicle is 
out of service for an aggregate of at least 30 days 
because 
of 
warranty 
nonconformities. 
 
Section 
218.015(1)(h)1 and 2. 
Id. at 981.  If the automobile manufacturer refuses to 
voluntarily replace or repurchase a lemon vehicle as demanded by 
the consumer, the manufacturer violates the lemon law, and the 
remedies of § 218.015(7) are available.  Id.   
¶69 In addition to the legislative protections of the 
U.C.C. and the lemon law afforded consumers, a consumer 
purchaser, just as a commercial purchaser, can usually choose 
whether to purchase a product on the terms offered.  Consumers 
are also able to inspect goods before purchase, negotiate over 
the price of a product, and “shop around” for the best deal.  
“The consumer is just as free to find a seller willing to 
provide greater warranties, and to decide whether he or she 
No. 97-2594 
 
41
wishes to pay for greater warranties.”  26 U. Tol. L. Rev. at 
599.  The consumer is free to accept the basic warranty, or pay 
the price of an extended warranty to avoid the risk of product 
failure for an extended period.  Id.  
¶70 “In short, a seller simply does not owe a tort duty to 
supply 
a 
product 
that 
will 
meet 
the 
buyer’s 
economic 
expectations.”  26 U. Tol. L. Rev. at 599.  Express and implied 
warranties in contract law and the U.C.C. provide the exclusive 
remedy 
for 
disappointed 
purchasers, 
whether 
consumers 
or 
commercial entities.  Id.  Consumers also have protections under 
the lemon law, insurance and the ability to inspect goods, 
negotiate over price and “shop around.”  If consumers were 
allowed tort recovery for purely economic loss, “tort law would 
forever be used to trump contract law and render the parties’ 
bargains and the careful allocation of duties and risks in the 
U.C.C. meaningless.  Contract lawnot tort lawgoverns a 
plaintiff’s claims for solely economic losses.”  Id. 
¶71 State Farm finally argues that the fact that Renberg 
purchased an insurance policy should make no difference in our 
analysis or treatment of this case.  State Farm argues that this 
is a subrogation action, and therefore State Farm stands in the 
shoes of Renberg.  State Farm also asserts that subrogation is 
an equitable doctrine whereby the party liable for a defective 
product should pay the debt satisfied by another in order to 
avoid unjust enrichment.  We are not persuaded by State Farm’s 
subrogation argument. 
No. 97-2594 
 
42
¶72 Subrogation rights derive from the injured party’s 
right to recover from the wrong-doer.  American Standard Ins. 
Co. v. Cleveland, 124 Wis. 2d 258, 262, 369 N.W.2d 168 (Ct. App. 
1985).  See also Cunningham v. Metropolitan Life Ins. Co., 121 
Wis. 2d 437, 443-44, 360 N.W.2d 33 (1985) (citing 1 G.E. Palmer, 
Law of Restitution sec. 1.5(b) (1978)).  “The original right of 
the [injured party] measures the extent of the subrogated 
party’s right.  [citation omitted]  Unless the [injured party] 
has a right to recover from the tortfeasor, no issue of 
subrogation arises.”  American Standard, 124 Wis. 2d at 262 
(citation omitted).    
¶73 Because we have determined that the injured party, in 
this case Renberg, does not have a legal right against Ford for 
his purely economic loss because his damages are barred by the 
economic loss doctrine, neither does State Farm have a legal 
right of recovery as a subrogated party.  No issue of 
subrogation arises because the injured party, Renberg, has no 
right to recover tort damages from Ford.  
¶74 In sum, we hold that the economic loss doctrine 
applies to consumer transactions to bar tort recovery for purely 
economic loss.  The same policies that justify applying the 
economic loss doctrine to commercial transactions apply with 
equal force to consumer transactions.  Additionally, like 
commercial entities, consumers have many protections available 
against economic loss.  Therefore, State Farm’s tort claims for 
purely economic loss are barred.  We make one note of caution.  
Like the New Jersey Supreme Court, “we do not reach the issue of 
No. 97-2594 
 
43
the preclusion of a strict-liability claim when the parties are 
of unequal bargaining power, the product is a necessity, no 
alternative source for the product is readily available, and the 
purchaser 
cannot 
reasonably 
insure 
against 
consequential 
damages.”  Alloway, 695 A.2d at 273.  None of these concerns are 
present in this case.  That is a different case for a different 
time. 
By the Court.—The order of the circuit court is affirmed. 
  
 
No. 97-2594.ssa 
 
1 
 
¶75 SHIRLEY 
S. 
ABRAHAMSON, 
CHIEF 
JUSTICE 
(dissenting).   In this case the consumer bought a Ford Bronco 
"as is" and also entered into a warranty contract with Ford 
Motor Company, the manufacturer.  After the warranty ended, the 
Bronco caught on fire, allegedly because of a manufacturing 
defect in the ignition switch.  Subsequently, the consumer's 
insurer, State Farm, paid the fair market value of the Bronco 
and brought this subrogation suit in which it "stepped into the 
shoes" of the consumer for purposes of seeking reimbursement.  
The majority opinion, however, does not limit its holding to the 
circumstances presented in this case, but instead broadly holds 
"that 
the 
economic 
loss 
doctrine 
applies 
to 
consumer 
transactions and bars State Farm's tort claims for purely 
economic loss."  Majority op. at 2. 
¶76 After an extensive discussion attempting to justify 
its holding that the economic loss doctrine applies to all 
consumer transactions, the majority opinion itself admits that 
its holding is too broad.  In the final paragraph of this 
lengthy decision, the majority quotes Alloway v. General Marine 
Industries, 695 A. 2d 264, 273 (N.J. 1997), in cautioning that 
"we do not reach the issue of the preclusion of a strict-
liability claim when the parties are of unequal bargaining 
power, the product is a necessity, no alternative source for the 
product 
is 
readily 
available, 
and 
the 
purchaser 
cannot 
reasonably insure against consequential damages."  A reader can 
only conclude that the majority opinion is not really holding 
No. 97-2594.ssa 
 
2 
that the economic loss doctrine applies to all consumer 
transactions.  Yet the reader does not know which consumer 
transactions are excepted from the new rule because the very 
factors about which the majority opinion cautions are present in 
this case. 
¶77 Although the majority opinion relies heavily on the 
Alloway case, the New Jersey Supreme Court in Alloway expressly 
refused to resolve the issue presented by the facts of this 
case.  The New Jersey Supreme Court stated: 
 
An unresolved issue is whether the U.C.C. or tort law 
should apply when a defective product poses a serious 
risk to other property or persons, but has caused only 
economic loss to the product itself.  In the present 
case, plaintiffs have not alleged that the defective 
seam in the boat posed such a risk.  Hence we do not 
resolve the issue. 
Alloway, 695 A.2d at 273.   
¶78 The majority opinion also relies on Trans States 
Airlines v. Pratt & Whitney Canada, 682 N.E.2d 45 (Ill. 1997), 
which like Alloway, involves a commercial transaction, not a 
consumer transaction as in this case.  Trans States, like 
Alloway, 
expressed 
no 
opinion 
on 
whether 
"the 
consumer/commercial transaction distinction makes any difference 
when the product damages only itself."  See Trans States, 682 
N.E.2d at 54. 
¶79 I would allow the consumer in this case to proceed to 
trial under the doctrine of strict product liability for the 
damage claimed, that is, the injury to the defective product 
itself.  This case involves an allegedly defective product that 
No. 97-2594.ssa 
 
3 
poses an unreasonable risk of harm to person and property.  
Strict product liability law is grounded on policies of safety 
and risk-spreading.  The theory is that manufacturers will use 
greater care if they are liable for defective products.  Safety 
concerns are not reduced when the injury is only to the product 
itself. 
¶80 A manufacturer's duty to market safe products should 
not depend on whether the full extent of personal or property 
injury actually happens.  When defective products present a risk 
of harm, it is purely fortuitous that the resulting damage is 
only to the product itself.  I can find no distinction for 
imposing different liability upon a manufacturer whose defective 
product causes a consumer to suffer personal injury or property 
damage and a manufacturer whose defective product presents an 
identical safety risk to the consumer but happens by chance to 
result only in damage to the product itself.  The manufacturer 
remains in the best position to avoid injury to the product 
itself and to absorb the damage to the product itself.  
¶81 In this case, I would adopt the reasoning of the 
Supreme Court of Montana in a case similar to the case at bar: 
 
The public remains in an unfair bargaining position as 
compared to the manufacturer.  In the case of damage 
arising only out of loss of the product, this 
inequality 
in 
bargaining 
position 
becomes 
more 
pronounced. 
 
Warranties 
are 
easily 
disclaimed.  
Negligence is difficult, if not impossible, to prove. 
 The consumer does not generally have large damages to 
attract the attention of lawyers who must handle these 
cases on a contingent fee.  We feel that the consumer 
should be protected by affording a legal remedy which 
No. 97-2594.ssa 
 
4 
causes the manufacturer to bear the cost of its own 
defective products. 
Thompson v. Nebraska Mobile Homes Corp., 647 P.2d 334, 337 
(Mont. 1982).  See also Oklahoma Gas & Elec. Co., 834 P.2d 980, 
982-85 (Okla. 1992) (Wilson, Opala and Kauger, JJ., dissenting). 
¶82 The Restatement similarly recognizes that under the 
circumstances presented in this case a good argument can be made 
for applying products liability law.  See Restatement (Third) of 
Torts: Products Liability § 21 (1997) (regarding harm to the 
defective product itself, "a plausible argument can be made that 
products that are dangerous, rather than merely ineffectual, 
should be governed by the rules governing products liability 
law," comment d. to § 21 at p. 294) (Reporters' Note and 
numerous cases cited at § 21 at p. 304). 
¶83 I need not decide in this case any other issues 
presented under the economic loss doctrine. 
¶84 For the reasons set forth, I dissent. 
¶85 I am authorized to state that JUSTICE ANN WALSH 
BRADLEY joins this dissent. 
 
No. 97-2594.ssa 
5