Case Title: General Casualty Company of Wisconsin v. Ford Motor Company

Citation: 

Docket Number: 1997AP003607

State: wisconsin

Court: Wisconsin Supreme Court

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

Document:
SUPREME COURT OF WISCONSIN 
 
 
Case No.: 
97-3607 
 
 
Complete Title 
of Case: 
 
 
General Casualty Company of Wisconsin, Charles 
Willard and Kay Willard,  
 
Plaintiffs-Appellants, 
 
v. 
Ford Motor Company,  
 
Defendant-Respondent.  
 
ON BYPASS FROM THE COURT OF APPEALS 
 
 
Opinion Filed: 
May 4, 1999 
Submitted on Briefs: 
November 12, 1998 
Oral Argument: 
 
 
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Columbia 
 
JUDGE: 
Daniel George 
 
 
JUSTICES: 
 
Concurred: 
 
 
Dissented: 
Abrahamson, C.J., dissents (opinion filed) 
 
 
Bradley, J., joins 
 
Not Participating:  
 
 
ATTORNEYS: 
For the plaintiffs-appellants there were briefs 
by Stephen E. Ehlke, David J. Pliner and Bell, Metzner, Gierhart 
& Moore, S.C., Madison. 
 
 
For the defendant-respondent there was a brief by 
Kristin Houtari and Winner, Wixson & Pernitz, Madison and John T. 
Coleman, Virginia C. Leete and Donohue, Brown, Mathewson & Smyth, 
Chicago, IL. 
 
No. 
97-3607 
 
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. 97-3607 
 
STATE OF WISCONSIN               :        
        
 
 
 
 
IN SUPREME COURT 
 
 
General Casualty Company of Wisconsin,  
Charles Willard and Kay Willard,  
 
          Plaintiffs-Appellants, 
 
     v. 
 
Ford Motor Company,  
 
          Defendant-Respondent.  
FILED 
 
MAY 4, 1999 
 
Marilyn L. Graves 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
APPEAL from an order of the Circuit Court for Columbia 
County, Daniel S. George, Circuit Court Judge.  Affirmed. 
¶1 
WILLIAM A. BABLITCH, J.   In Wisconsin, the economic 
loss doctrine bars tort recovery for economic loss suffered by 
commercial entities.  This case requires that we determine 
whether the economic loss doctrine also applies to consumer 
transactions, even when a product is damaged under “sudden and 
calamitous” conditions.  General Casualty Insurance Company of 
Wisconsin (General Casualty) and Charles and Kay Willard (the 
Willards) (collectively “plaintiffs”), request that this court 
reverse the circuit court’s order granting Ford Motor Company’s 
(Ford) motion to dismiss plaintiffs’ subrogation action for 
damages arising from an economic loss pursuant to theories of 
negligence, strict liability and breach of express and implied 
warranties of merchantability.  The circuit court reasoned that 
the tort claims were barred by the economic loss doctrine, and 
No. 
97-3607 
 
2 
the contract claims were barred by the statute of limitations.  
Because we conclude that the same policies that justify applying 
the economic loss doctrine to commercial transactions apply with 
equal force to consumer transactions, even when the economic 
loss is caused by a “sudden and calamitous” condition, we hold 
that the economic loss doctrine applies to consumer transactions 
and bars the plaintiffs’ tort claims for purely economic loss.  
Therefore, we affirm the order of the circuit court granting 
Ford’s motion to dismiss. 
¶2 
In May 1996 the Willards’ 1989 Lincoln Town Car, a 
vehicle designed and manufactured by Ford, burst into flames as 
it was sitting in front of their home.  The fire apparently 
started in the steering column.  The Willards’ insurer, General 
Casualty, paid the Willards $1880.97 for the fire damage to 
their car, pursuant to their contract of insurance.   
¶3 
On July 2, 1997, General Casualty commenced this 
subrogation action against Ford in small claims court, seeking 
to recover the money it had paid to the Willards.  The Willards 
joined the suit to recover the $50 deductible they had paid.  
Together, General Casualty and the Willards sued Ford under 
theories of negligence, strict liability and breach of express 
and implied warranties of merchantability.  They alleged damage 
only to the vehicle and did not allege personal injury or damage 
to any other property. 
¶4 
In its answer, Ford asserted that the plaintiffs’ 
claims for recovery under tort theories were barred by the 
economic loss doctrine and that their contract claims were 
No. 
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3 
barred by the statute of limitations.  Ford also moved to 
dismiss the action pursuant to Wis. Stat. § 802.06(2)(a)6 (1995-
96)1 for failure to state a claim upon which relief can be 
granted.  The Columbia County Circuit Court, the Honorable 
Daniel S. George, accepted Ford’s arguments and granted its 
motion to dismiss.   
¶5 
The 
plaintiffs 
appealed the 
circuit 
court 
order 
granting Ford’s motion to dismiss.  Ford petitioned to bypass 
the court of appeals pursuant to Wis. Stat. § (Rule) 809.60 and 
the plaintiffs joined Ford’s petition.  This court granted the 
petition.  
¶6 
The issue presented by this case is whether the 
economic loss doctrine applies to consumer transactions to bar 
tort recovery for purely economic loss.2 
¶7 
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 & 
                     
1 All references to the Wisconsin Statutes are to the 1995-
96 version unless otherwise noted.  
2 The plaintiffs’ notice of appeal states that it is 
appealing from the order granting Ford Motor Company’s motion to 
dismiss entered on October 13, 1997.  This order dismissed both 
plaintiffs’ tort and breach of warranty claims.  However, 
plaintiffs do not argue before this court that the circuit court 
erred in granting Ford’s motion to dismiss its breach of 
warranty claims as barred by the statute of limitations.  
Therefore, we do not address plaintiffs breach of warranty 
claims or whether the circuit court properly dismissed this 
claim as barred by the statute of limitations. 
No. 
97-3607 
 
4 
Risberg, Inc., 148 Wis. 2d 910, 915, 437 N.W.2d 213 (1989) 
(citing First Nat. Leasing Corp. v. Madison, 81 Wis. 2d 205, 
208, 260 N.W.2d 251 (1977)).   
¶8 
We considered the same issue presented by this case in 
State Farm Mutual Automobile Ins. Co. v. Ford Motor Company, No. 
97-2594 (S. Ct.   (date)  ), decided this same day.  For the 
same reasons set forth in State Farm, No. 97-2594, we conclude 
that the economic loss doctrine applies to consumer transactions 
and therefore, the plaintiffs’ tort claims for purely economic 
loss are barred.  Accordingly, we affirm the circuit court order 
dismissing plaintiffs’ complaint for failure to state a claim.   
¶9 
General Casualty’s arguments to not apply the economic 
loss doctrine to consumer transactions mirror the arguments made 
by State Farm in the companion case, State Farm, No. 97-2594.  
General Casualty makes an additional argument that tort remedies 
are appropriate because the vehicle damage occurred under 
“sudden and calamitous” conditions.   
¶10 General Casualty relies primarily on Pennsylvania 
Glass Sand v. Caterpillar Tractor Co., 652 F.2d 1165 (3rd Cir. 
1981) and Cloud v. Kit Mfg. Co., 563 P.2d 248 (Alaska 1977), 
cited within Pennsylvania Glass, to support its argument that 
tort remedies are appropriate in this case because the vehicle 
damage occurred under “sudden and calamitous” conditions.  The 
court in Pennsylvania Glass determined that “deterioration and 
other defects of poor quality should be considered economic 
loss, whereas ‘sudden and calamitous damage will almost always 
result 
in 
direct 
property 
damage’ 
recoverable 
in 
tort.”  
No. 
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Pennsylvania Glass, 652 F.2d at 1172 (quoting Cloud, 563 P.2d at 
251).   
¶11 The Pennsylvania Glass court held that the guiding 
factors to determine whether tort or contract law should apply 
are “the nature of the defect and the type of risk it poses . . 
..”  652 F.2d at 1174.  In that case, the damage to the product 
resulted from a fire, “a sudden and highly dangerous occurrence. 
 . . .  [T]he alleged defect . . . constitutes a safety hazard 
that posed a serious risk of harm to people and property.  Thus, 
the complaint . . . appears to fall within the policy of tort 
law that the manufacturer should bear the risk of hazardous 
products.”  Id. at 1174-75.  We are not persuaded by the holding 
or rationale of Pennsylvania Glass.   
¶12 The United States Supreme Court rejected the analysis 
of Pennsylvania Glass and other cases like it which allow tort 
recovery when “the defective product creates a situation 
potentially dangerous to persons or other property . . . .”  
East River S.S. Corp. v. Transamerica Delaval, 476 U.S. 858, 870 
(1986) (citing Northern Power & Engineering Corp. v. Caterpillar 
Tractor Co. 623 P.2d 324, 329 (Alaska 1981)).  The Court stated 
that this “intermediate” position was “unsatisfactory” and “too 
indeterminate to enable manufacturers easily to structure their 
business behavior.”  East River, 476 U.S. at 870.  Whether 
damage 
to 
the 
product 
itself 
occurs 
through 
gradual 
deterioration or by some sudden and calamitous event, the 
resulting loss is purely economic.  Id.  Even if the loss is 
caused by a sudden and calamitous event, the economic loss “is 
No. 
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essentially the failure of the purchaser to receive the benefit 
of its bargaintraditionally the core concern of contract law.” 
 Id. (citing E. Farnsworth, Contracts § 12.8, pp. 839-840 
(1982)).  “East River eliminates the conceptually difficult 
problem of distinguishing damage caused by an accident to the 
product itself from that caused by ordinary wear and tear.”  
Trans States Airlines v. Pratt & Whitney Canada, Inc., 682 
N.E.2d 45, 54 (Ill. 1997). 
¶13 We agree with the rationale of the United States 
Supreme Court in rejecting the “sudden and calamitous” basis for 
not applying the economic loss doctrine where the damage is only 
to the defective product.  The Court rejected the distinction 
between disappointed users of a defective product and endangered 
users.  East River, 476 U.S. at 870.  Regardless of whether the 
loss occurs by gradual deterioration or a sudden and calamitous 
event, if there is no physical injury to persons or other 
property, the resulting loss is purely economic“traditionally 
the core concern of contract law.”  Id.     
¶14 In addition, Pennsylvania Glass no longer has any 
precedential 
value 
in 
either 
the 
Third 
Circuit 
or 
in 
Pennsylvania.  After the United States Supreme Court decision in 
East River, the United States Court of Appeals for the Third 
Circuit acknowledged that decision and refused to allow tort 
damages for a purely economic loss even though the damage 
resulted from a firea sudden and calamitous event.  Aloe Coal 
Co. v. Clark Equipment Co., 816 F.2d 110, 119 (3rd Cir. 1987).  
The Pennsylvania Superior Court also adopted the holding of East 
No. 
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7 
River.  See REM Coal Co., Inc. v. Clark Equipment Co., 563 A.2d 
128, 132 (Pa. Super. Ct. 1989).  Accordingly, Pennsylvania Glass 
is no longer good law in either the Third Circuit or in 
Pennsylvania.  A case with no value in its own jurisdiction is 
not the proper foundation on which this court should build an 
exception to the economic loss doctrine. 
¶15 We are also persuaded by the fact that many of the 
jurisdictions that have considered a “sudden and calamitous” 
exception to the economic loss doctrine have rejected it.  See 
Airport Rent-a-Car, Inc. v. Prevost Car, Inc., 788 F. Supp. 
1203, 1205-06 (S.D. Fla. 1992) (applying Florida law); Sharp 
Bros. v. American Hoist & Derrick Co., 703 S.W.2d 901 (Mo. 
1986); Utah Intern. v. Caterpillar Tractor, 775 P.2d 741 (N.M. 
Ct. App. 1989), cert. denied, 772 P.2d 884 (1989); Cooperative 
Power v. Westinghouse Elec., 493 N.W.2d 661 (N.D. 1992); REM 
Coal Co., 563 A.2d at 128; Continental Ins. v. Page Engineering 
Co., 783 P.2d 641 (Wyo. 1989). 
¶16 Safety concerns are adequately protected by holding 
manufacturers liable for personal injury and damage to other 
property.  Christopher Scott D’Angelo, The Economic Loss 
Doctrine: Saving Contract Warranty Law from Drowning in a Sea of 
Torts, 26 U. Toledo L. Rev. 591, 602 (1995).  “‘Since any 
product put into the stream of commerce has the theoretical 
potential to injure persons and property, the incentive to 
provide safe products is always present.’”  Id. (quoting Bocre 
Leasing Corp. v. General Motors Corp., 84 N.Y.2d 685, 691 
(1995)).  The “sudden and calamitous” exception to the economic 
No. 
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8 
loss doctrine is counter to the majority rule and “destroys the 
certainty and risk allocation sought to be established by the 
U.C.C. and contract law, and the exception will cause the ‘law 
of contract to drown in a sea of tort.’”  26 U. Toledo L. Rev. 
at 607 (quoting East River, 476 U.S. at 866).   
¶17 In the present case, damage to the Willards’ vehicle 
could have occurred through gradual deterioration and internal 
breakage.  Or the damage could have occurred as a result of 
sudden and calamitous conditions.  Regardless of the origin of 
the damage, the loss was purely economic.  No person or other 
property was damaged.  The Willards lost the benefit of their 
bargain to purchase a vehicle that meets certain standards of 
merchantability.  Like the Court in East River, we determine 
that this is the core concern of contract law and damages for 
purely economic loss can only be pursued through contract 
theories of law. 
¶18 In sum, for the reasons set forth herein and in State 
Farm, No. 97-2594, we hold that the economic loss doctrine 
applies to consumer transactions and bars the plaintiffs’ tort 
claims for purely economic loss.  Accordingly, we affirm the 
order of the circuit court granting Ford’s motion to dismiss. 
By the Court.—The order of the circuit court is affirmed. 
  
 
No. 97-3607.ssa 
 
1 
¶19 SHIRLEY S. ABRAHAMSON, CHIEF JUSTICE (dissenting).   I 
dissent for the reasons set forth in my dissent in State Farm 
Mutual Automobile Ins. Co. v. Ford Motor Co., ___ Wis. 2d ___, 
___N.W.2d ___ (1999), of even date. 
¶20 I am authorized to state that JUSTICE ANN WALSH 
BRADLEY joins this dissent. 
 
No. 97-3607.ssa 
 
1