Title: 5 Walworth, LLC v. Engerman Contracting, Inc.

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2023 WI 51 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2019AP1085 & 2019AP1086 
 
 
 
COMPLETE TITLE: 
5 Walworth, LLC, 
          Plaintiff, 
     v. 
Engerman Contracting, Inc., 
          Defendant, 
Downes Swimming Pool Co., Inc. and The 
Cincinnati Insurance Company, 
          Defendants-Third-Party Plaintiffs, 
West Bend Mutual Insurance Company and General 
Casualty Company of Wisconsin, 
          Defendants-Petitioners, 
     v. 
Otto Jacobs Company, LLC, 
          Third-Party Defendant-Appellant, 
Acuity, A Mutual Insurance Company, 
          Third-Party  
          Defendant-Respondent-Petitioner. 
 
 
 
5 Walworth, LLC, 
          Plaintiff, 
     v. 
Engerman Contracting, Inc., 
          Defendant-Appellant, 
Downes Swimming Pool Co., Inc. and The 
Cincinnati Insurance Company, 
          Defendants-Third-Party Plaintiffs, 
West Bend Mutual Insurance Company and General 
Casualty Company of Wisconsin, 
          Defendants-Respondents-Petitioners, 
     v. 
Otto Jacobs Company, LLC, 
          Third-Party Defendant, 
Acuity, A Mutual Insurance Company, 
          Third-Party Defendant-Petitioner. 
 
 
 
 
REVIEW OF DECISION OF THE COURT OF APPEALS  
Reported at 399 Wis. 2d 240, 963 N.W.2d 779 
PDC No: 2021 WI App 51 - Published  
 
 
OPINION FILED: 
June 20, 2023   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
September 12, 2022   
 
 
 
 
2 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Walworth   
 
JUDGE: 
Daniel Steven Johnson   
 
 
 
JUSTICES: 
HAGEDORN, J., delivered the majority opinion of the Court, in 
which ANN WALSH BRADLEY, DALLET, and KAROFSKY, JJ., joined, and 
in which ZIEGLER, C.J., joined except for ¶¶5, 7, 39-42, and 49. 
ROGGENSACK, filed a concurring opinion. ZIEGLER, C.J., filed an 
opinion concurring in part and dissenting in part, in which 
REBECCA GRASSL BRADLEY, J., joined.  
   
NOT PARTICIPATING: 
        
 
 
 
ATTORNEYS: 
 
 
For 
defendants-petitioners 
and 
defendants-respondents-
petitioners, there were briefs filed by Henry E. Koltz, Robert 
F. Johnson, Douglas M. Raines, and Schmidt, Darling & Erwin, 
Milwaukee, and von Briesen & Roper, S.C., Milwaukee. There was 
an oral argument by Henry E. Koltz.  
 
For third-party defendant-respondent-petitioner and third-
party defendant-petitioner, there were briefs filed by Joseph M. 
Mirabella and Simpson & Deardorff, S.C. There was an oral 
argument by Joseph M. Mirabella.  
 
For 
third-party 
defendant-appellant 
and 
third-party 
defendant, there was a brief filed by Sheila L. Shadman Emerson, 
Scott R. Halloin, and Halloin Law Group, S.C., Milwaukee. There 
was an oral argument by Sheila L. Shadman Emerson.   
 
For defendant and defendant-appellant, there was a brief 
filed by Thomas G. Gardiner and Gardiner, Koch, Weisberg & 
Wrona, Lake Geneva. There was an oral argument by Michelle 
LaGrota and Douglas M. Raines.  
 
 
2023 WI 51 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
Nos.  2019AP1085 & 2019AP1086 
(L.C. No. 
2018CV319) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
5 Walworth, LLC, 
 
          Plaintiff, 
 
     v. 
 
Engerman Contracting, Inc., 
 
          Defendant, 
 
Downes Swimming Pool Co., Inc. and The 
Cincinnati Insurance Company, 
 
          Defendants-Third-Party Plaintiffs, 
 
West Bend Mutual Insurance Company and General 
Casualty Company of Wisconsin, 
 
          Defendants-Petitioners, 
 
     v. 
 
Otto Jacobs Company, LLC, 
 
          Third-Party Defendant-Appellant, 
 
Acuity, A Mutual Insurance Company, 
 
          Third-Party  
          Defendant-Respondent-Petitioner. 
 
FILED 
 
JUN 20, 2023 
 
Sheila T. Reiff 
Clerk of Supreme Court 
 
 
 
5 Walworth, LLC, 
 
          Plaintiff, 
 
     v. 
 
 
 
 
 
Engerman Contracting, Inc., 
 
          Defendant-Appellant, 
 
Downes Swimming Pool Co., Inc. and The 
Cincinnati Insurance Company, 
 
          Defendants-Third-Party Plaintiffs, 
 
West Bend Mutual Insurance Company and General 
Casualty Company of Wisconsin, 
 
          Defendants-Respondents-Petitioners, 
 
     v. 
 
Otto Jacobs Company, LLC, 
 
          Third-Party Defendant, 
 
Acuity, A Mutual Insurance Company, 
 
          Third-Party Defendant-Petitioner. 
 
 
 
 
HAGEDORN, J., delivered the majority opinion of the Court, in 
which ANN WALSH BRADLEY, DALLET, and KAROFSKY, JJ., joined, and 
in which ZIEGLER, C.J., joined except for ¶¶5, 7, 39-42, and 49. 
ROGGENSACK, filed a concurring opinion. ZIEGLER, C.J., filed an 
opinion concurring in part and dissenting in part, in which 
REBECCA GRASSL BRADLEY, J., joined.  
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
BRIAN HAGEDORN, J.   This is an insurance dispute over 
damages allegedly caused by the deficient construction of an in-
ground pool.  The pool cracked and caused vast amounts of water 
to leak into the surrounding soil.  In the end, the homeowner 
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2019AP1085 & 2019AP1086   
 
2 
 
had to demolish the entire pool structure and construct a new 
one.  Two of the insurers in this case issued commercial general 
liability (CGL) polices to the general contractor, and the other 
issued a CGL policy to the supplier of the shotcrete pump mix 
used to construct the pool.  In this suit by the homeowner, all 
three insurers seek summary judgement declaring that their 
policies do not provide coverage to their insureds.   
¶2 
A threshold question in this case concerns how to 
analyze whether there has been "property damage" caused by an 
"occurrence" under the three CGL policies.  The argument centers 
around our decision in Wisconsin Pharmacal Co., LLC v. Nebraska 
Cultures of California, Inc., where we stated that "property 
damage" under a CGL policy requires damage to "other property" 
and utilized the "integrated systems analysis"——a test derived 
from tort law——to assess whether other property was damaged.  
2016 WI 14, ¶28, 367 Wis. 2d 221, 876 N.W.2d 72.  At a basic 
level, the integrated systems analysis asks whether the product 
is part of an integrated whole such that any damage can be 
ascribed only to the product itself, rather than to other 
property.  Wausau Tile, Inc. v. Cnty. Concrete Corp., 226 
Wis. 2d 235, 249-50, 593 N.W.2d 445 (1999).  The insurers here 
argue we must first undertake this analysis to determine whether 
any "property damage" occurred for purposes of determining an 
initial grant of coverage under their policies.   
¶3 
We do not see it the same way.  With the benefit of 
hindsight, we conclude our approach in Pharmacal was a departure 
from our well-established law.  The decision flatly contradicted 
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2019AP1085 & 2019AP1086   
 
3 
 
prior cases without addressing those conflicts head on.  See, 
e.g., Am. Fam. Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶¶6, 
24, 35, 268 Wis. 2d 16, 673 N.W.2d 65.  Pharmacal wrongly stated 
that "property damage" must be to "other property" for purposes 
of determining an initial grant of coverage in a CGL policy.  It 
then improperly imported the integrated systems analysis to 
determine if "other property" was damaged.  Accordingly, we 
overrule these portions of Pharmacal, and affirm, as we have 
repeatedly said, that our task in insurance coverage disputes is 
to read the policy and give effect to the parties' agreement.  
Therefore, we return to that contract-focused analysis here.   
¶4 
General Casualty Company of Wisconsin, the insurer for 
general contractor Engerman Contracting, Inc., contends that its 
policy does not provide an initial grant of coverage because the 
issues related to the pool did not constitute "property damage" 
caused by an "occurrence" as those terms are defined in the 
policy.  We disagree.  Reviewing the record before us on summary 
judgment, we conclude that a trier of fact could conclude that 
the water leakage and consequent cracks in the pool and damage 
to the surrounding soil constituted property damage caused by an 
occurrence.  Accordingly, General Casualty is not entitled to 
summary judgment. 
¶5 
West Bend Mutual Insurance Company, which also insures 
Engerman, asserts that its policy does not provide an initial 
grant of coverage for two reasons.  First, it likewise contends 
there was no "property damage" caused by an "occurrence" under 
its policy.  In this regard, West Bend's policy is materially 
No. 
2019AP1085 & 2019AP1086   
 
4 
 
identical to General Casualty's policy, and West Bend is not 
entitled to summary judgment on this argument for the same 
reasons.  Alternatively, West Bend claims Engerman knew that the 
property damage occurred before the policy period began and 
therefore the policy does not provide coverage.  We disagree.  
The record before us does not conclusively establish that the 
property damage here was a continuation, change, or resumption 
of the damage Engerman knew about before the policy began.  
Therefore, West Bend is not entitled to summary judgment. 
¶6 
Finally, Acuity, A Mutual Insurance Company is the 
insurer for Otto Jacobs Company, the entity that provided the 
shotcrete used to construct the floor and walls of the pool.  
Acuity argues that its policy does not provide an initial grant 
of coverage and that, even if there is an initial grant of 
coverage, the "your product" exclusion precludes coverage.  We 
see it differently.  Acuity's policy likewise provides coverage 
when "property damage" is caused by an "occurrence."  If Otto 
Jacobs supplied defective shotcrete, a trier of fact could 
determine that it caused the water leakage——an occurrence——and 
damaged the surrounding soil and pool structure.  Moreover, a 
trier of fact could conclude based on this record that the "your 
product" exclusion in Acuity's policy does not apply here when 
the property damage is to the surrounding soil and pool complex—
—more than just Otto Jacobs' product or arising from the 
product.  Therefore, Acuity is not entitled to summary judgment. 
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2019AP1085 & 2019AP1086   
 
5 
 
¶7 
Accordingly, we affirm the decision of the court of 
appeals and remand back to the circuit court for further 
proceedings. 
I.  BACKGROUND 
¶8 
5 Walworth LLC owns lakeshore property in Lake Geneva 
and hired Engerman to serve as the general contractor for 
construction of an in-ground swimming pool complex.  Engerman 
subcontracted with Downes Swimming Pool Co., Inc. to construct 
the pool complex, which included both a main pool and a 
children's pool.  Otto Jacobs supplied Downes with a ready-mixed 
concrete called shotcrete commonly used in swimming pool 
construction.  Construction began in June 2012 and finished that 
August.   
¶9 
Shortly after the contractors finished the project, 5 
Walworth noticed a leak in the main pool and in the children's 
pool.  The leaking persisted in the summers of 2013, 2014, and 
2015, with Downes attempting to repair the leaks each year.  In 
2015, 5 Walworth commissioned a report from engineering firm 
Wiss, Janney, Elstner Associates, Inc. (WJE).  WJE's final 
report, which is part of the summary judgment record, concluded 
that the pool walls cracked because of less than optimal 
installation, moist conditions due to significant water leakage, 
and the placement of steel reinforcing bars.  It determined that 
the cracking would continue, with either new cracks forming or 
existing cracks worsening.  While the report took samples from 
the main pool, WJE concluded that the children's pool faced the 
No. 
2019AP1085 & 2019AP1086   
 
6 
 
same probable cause of cracking.  The report also mentioned the 
findings of soil reports from neighboring properties which 
indicated that water existed at levels above the normal water 
table.  The report recommended removing unsuitable soils from 
one of the neighboring properties.  Ultimately, 5 Walworth hired 
a new contractor to demolish the old pool and construct a new 
one, which was completed in October 2017. 
¶10 In 2018, six years after the initial construction, 5 
Walworth sought damages for demolition of the old pool and 
construction of a new one.  It brought a complaint against 
subcontractor Downes and its insurer, and against general 
contractor Engerman and its insurers——West Bend and General 
Casualty.  The complaint alleged negligence against Downes, and 
breach 
of 
contract, 
breach 
of 
implied 
warranty 
of 
merchantability and fitness, negligence, and violation of Wis. 
Stat. § 100.18(1) (2021-22) against Engerman.1  Downes filed a 
third-party complaint against shotcrete provider Otto Jacobs and 
its insurer Acuity, alleging Otto Jacobs was negligent in 
providing Downes inferior shotcrete.2  Engerman and West Bend 
then brought a cross-claim against Downes (and its insurer) and 
Otto Jacobs for contribution and/or indemnification.   
                                                 
1 On appeal, Engerman does not challenge the circuit court's 
ruling that there was no coverage arising out of 5 Walworth's 
Wis. Stat. § 100.18 claim.  Accordingly, we do not address this. 
All subsequent references to the Wisconsin Statutes are to 
the 2021-22 version. 
2 Downes did not originally name Acuity in this complaint; 
Acuity intervened. 
No. 
2019AP1085 & 2019AP1086   
 
7 
 
¶11 General Casualty, West Bend, and Acuity tendered a 
defense of their respective insureds.  They all moved to 
bifurcate and litigate coverage.  Each moved for summary 
judgment and requested declarations that they did not have a 
duty to indemnify or further defend under their policies.  With 
respect to General Casualty and West Bend's motions, the circuit 
court3 concluded that there was no property damage caused by an 
occurrence——only faulty workmanship——and therefore the insurers 
owed no coverage.  And when analyzing Acuity's motion against 
shotcrete provider Otto Jacobs, the court applied the integrated 
systems analysis we utilized in Pharmacal to conclude there was 
no property damage caused by an occurrence and therefore no 
coverage.  Accordingly, the circuit court granted all three 
motions for summary judgment and dismissed the three insurers 
from the action. 
¶12 The two insureds, Engerman and Otto Jacobs, appealed 
the grant of summary judgment against them.  The court of 
appeals consolidated the appeals and reversed.  5 Walworth, LLC 
v. Engerman Contracting, Inc., 2021 WI App 51, 399 Wis. 2d 240, 
963 N.W.2d 779.  All three insurers then filed separate 
petitions for review which we granted. 
                                                 
3 The Honorable Daniel S. Johnson of the Walworth County 
Circuit Court presided. 
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2019AP1085 & 2019AP1086   
 
8 
 
II.  ANALYSIS 
¶13 This case comes before us on motions for summary 
judgment by the insurers seeking a declaration that their 
policies do not provide coverage to their insureds.  All three 
insurers tendered a defense, so we are analyzing if they are 
entitled to summary judgment on the question of coverage based 
on the full record, not just the complaint.  See Est. of 
Sustache v. Am. Fam. Mut. Ins. Co., 2008 WI 87, ¶29, 311 
Wis. 2d 548, 751 N.W.2d 845.  "Summary judgment is appropriate 
when there is no genuine issue of material fact and 'the moving 
party is entitled to judgment as a matter of law.'"  Quick 
Charge Kiosk LLC v. Kaul, 2020 WI 54, ¶9, 392 Wis. 2d 35, 944 
N.W.2d 598 (quoting Wis. Stat. § 802.08(2)).  We review motions 
for summary judgment independently, without deference to the 
lower courts.  Id.  The legal issues in this case require us to 
interpret the terms of three insurance contracts.  This also 
presents questions of law we review independently.  Am. Girl, 
268 Wis. 2d 16, ¶23.  
¶14 We begin our analysis by clearing up confusion 
engendered by our decision in Pharmacal regarding how to analyze 
whether a CGL policy provides an initial grant of coverage.  We 
then apply the proper framework to this case based on the facts 
presented in the summary judgment record, examining the three 
policies in turn.   
No. 
2019AP1085 & 2019AP1086   
 
9 
 
A.  Pharmacal 
¶15 Before we explain Pharmacal's errors, we begin by 
outlining our standard approach to these kinds of cases.  CGL 
policies, like those here, are a particular type of insurance 
contract that protect "the insured against liability for damages 
the insured's negligence causes to third parties."  Wis. Label 
Corp. v. Northbrook Prop. & Cas. Ins. Co., 2000 WI 26, ¶27, 233 
Wis. 2d 314, 607 N.W.2d 276.  This kind of policy is designed to 
insure against "the possibility that the goods, products or work 
of the insured, once relinquished or completed, will cause 
bodily injury or damage to property other than to the product or 
completed work itself, and for which the insured may be found 
liable."  Id. (quoting another source). 
¶16 When analyzing whether an insurance policy provides 
coverage, we examine the terms of the policy and compare it to 
the facts in the record.  See, e.g., Am. Girl, 268 Wis. 2d 16, 
¶32 ("[W]hether the insuring agreement confers coverage depends 
upon whether there has been 'property damage' resulting from an 
'occurrence' within the meaning of the CGL policy language.").4  
                                                 
4 See also Day v. Allstate Indem. Co., 2011 WI 24, ¶36, 332 
Wis. 2d 571, 798 N.W.2d 199 (noting that a claim fell within a 
policy's initial grant of coverage because there was bodily 
injury); Everson v. Lorenz, 2005 WI 51, ¶27, 280 Wis. 2d 1, 695 
N.W.2d 298 (explaining that the complaint did not allege 
property 
damage 
and 
therefore 
did 
not 
trigger 
insurance 
coverage); Wis. Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 
2000 WI 26, ¶¶28-32, 233 Wis. 2d 314, 607 N.W.2d 276 (concluding 
the facts in the record did not satisfy the policy definition of 
property damage); Acuity v. Soc'y Ins., 2012 WI App 13, ¶15, 339 
Wis. 2d 217, 810 N.W.2d 812 (stating "[w]e begin with the policy 
language and then examine the factual pleadings to determine 
whether there is an initial grant of coverage."); United Co-op. 
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2019AP1085 & 2019AP1086   
 
10 
 
We conduct this analysis in three stages.  Id., ¶24.  First, we 
determine if the policy "makes an initial grant of coverage."  
Id.  If so, we "examine the various exclusions to see whether 
any of them preclude coverage."  Id.  Finally, should any 
exclusion apply, we "look to see whether any exception to that 
exclusion reinstates coverage."  Id.   
¶17 In American Girl, this court was faced with several 
issues germane to the issues before us today.  By way of 
background, American Girl involved "a construction project gone 
awry."  Id., ¶3.  A soil engineer had given faulty advice to the 
general contractor, leading to problematic soil settlement 
underneath the completed warehouse.  Id.  This then damaged the 
building's foundation, which eventually led to the building 
being declared unsafe and torn down.  Id., ¶¶3, 5. 
¶18 The CGL insurer in that case argued that the economic 
loss doctrine should bar coverage under the CGL policy.  Id., 
¶34.  Not so, we concluded.  Id., ¶¶34-36.  "The economic loss 
doctrine operates to restrict contracting parties to contract 
rather than tort remedies for recovery of economic losses 
associated with the contract relationship."  Id., ¶35.  It is a 
remedies principle applicable in tort cases, and "does not 
determine whether an insurance policy covers a claim, which 
depends instead upon the policy language."  Id.  Thus, while the 
economic loss doctrine may preclude recovery in tort, it should 
                                                                                                                                                             
v. Frontier FS Co-op., 2007 WI App 197, ¶13, 304 Wis. 2d 750, 
738 N.W.2d 578 (indicating that the record established an 
occurrence as that term is defined in the policy). 
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2019AP1085 & 2019AP1086   
 
11 
 
not be used to ascertain if a CGL policy——a contract——provides 
coverage.  Id., ¶36.   
¶19 Turning then to the contract language, we examined 
whether there was an initial grant of coverage, which (as is the 
case here) required an inquiry into whether an "occurrence," 
defined as an "accident," caused "property damage."  Id., ¶37.  
The insurer argued that the defective work could not constitute 
an "occurrence" because CGL policies are not meant to cover an 
insured's defective work or product.  Id., ¶39.  That general 
principle is correct, we explained, but not because it is not an 
"occurrence" under the policy.  Id.  Rather, the reason an 
insured's defective work or product is generally not covered by 
a CGL policy is due to the business risk exclusions in the CGL 
policy.  Id.  This exclusions analysis only comes into play in 
the second stage after a determination of an initial grant of 
coverage——that an "occurrence" caused "property damage."  Id., 
¶47.  As such, the insurer incorrectly tried to incorporate the 
exclusions analysis into the initial coverage determination.  
Id.   
¶20 After clarifying these issues, we concluded there was 
an accident, i.e., an occurrence, which caused property damage, 
thus providing an initial grant of coverage.  Id., ¶49.  We then 
considered the exclusions——step two of the analysis——along with 
other issues in the case, the details of which are unnecessary 
here.  Id., ¶¶50-86.  With this background in place, we turn to 
Pharmacal.   
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12 
 
¶21 In Pharmacal, the supplier of a supplement tablet sued 
two companies that provided an improper species of bacteria.  
Pharmacal, 367 Wis. 2d 221, ¶¶4-7.  The incorrect bacteria was 
blended with the other ingredients of the supplement and 
compressed into tablet form; none of the ingredients could be 
separated.  Id., ¶5.  We then considered whether there was 
"property damage" caused by an "occurrence" under the terms of 
the CGL policies for the insurers of the companies that supplied 
the wrong bacteria.  Id., ¶¶8-9, 23.  Our analysis went wayward 
in two respects.   
¶22 First, in conducting the initial grant of coverage 
analysis, Pharmacal reasoned that to constitute "property 
damage" under the CGL policy, the damage must be to "other 
property."  Id., ¶¶24-27.  The policy language in Pharmacal, 
however, made no mention of an "other property" requirement.  
Like the three policies at issue here, property damage was 
defined as, "Physical injury to tangible property, including all 
resulting loss of use of that property."  Id., ¶23. 
¶23 Rather than relying on the language in the CGL policy, 
Pharmacal supported this "other property" requirement by citing 
two prior opinions:  Wisconsin Label Corp., 233 Wis. 2d 314 and 
Vogel v. Russo, 2000 WI 85, 236 Wis. 2d 504, 613 N.W.2d 177.  
Both were discussed in American Girl, however, and neither 
contains such a requirement as part of the initial grant of 
coverage analysis.  The portions cited in Pharmacal were not in 
the initial grant of coverage discussions; they were general 
comments on the purpose of a CGL policy.  See Wis. Label Corp., 
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2019AP1085 & 2019AP1086   
 
13 
 
233 Wis. 2d 314, ¶27; Vogel, 236 Wis. 2d 504, ¶17.  The cited 
language simply explains that the risk insured in a CGL policy 
includes "damage to property other than to the product or 
completed work itself."  Wis. Label Corp., 233 Wis. 2d 314, ¶27 
(quoting another source).  But as American Girl explains in 
depth, this is true because of the business risk exclusions, not 
the initial coverage determination.  See 268 Wis. 2d 16, ¶¶39, 
43 (discussing Vogel, 236 Wis. 2d 504).  In effect, then, 
Pharmacal incorporated an "other property" analysis that may be 
relevant to the policy's business exclusions (stage two) into 
the determination of whether an "occurrence" caused "property 
damage" (stage one).  See 367 Wis. 2d 221, ¶¶24-27.    
¶24 Pharmacal's 
second 
error 
stems 
from 
its 
first.  
Because the court thought it must analyze whether there was 
damage to "other property" when analyzing whether "property 
damage" occurred, Pharmacal enlisted the assistance of the 
integrated systems analysis.  
Id., ¶27-28.  By way of 
background, for a tort claim to survive the economic loss 
doctrine, the damage alleged must be to other property——
something other than a loss to the defective product itself.  
Wausau Tile, 226 Wis. 2d at 247-48.  The integrated systems 
analysis is used to ascertain whether damage to a defective 
component of an integrated system constitutes damage to other 
property.  Id. at 249.  In Wausau Tile, we embraced the 
integrated system analysis from the Restatement (Third) of 
Torts, which states in part: 
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2019AP1085 & 2019AP1086   
 
14 
 
What constitutes harm to other property rather than 
harm to the product itself may be difficult to 
determine.  A product that nondangerously fails to 
function due to a product defect has clearly caused 
harm only to itself.  A product that fails to function 
and causes harm to surrounding property has clearly 
caused harm to other property.  However, when a 
component part of a machine or a system destroys the 
rest of the machine or system, the characterization 
process becomes more difficult.  When the product or 
system is deemed to be an integrated whole, courts 
treat such damage as harm to the product itself. 
Id. at 249 (quoting Restatement (Third) of Torts § 21 cmt. e 
(1997)).  Again, the purpose of this test is to ascertain if a 
party may pursue tort remedies, or whether the economic loss 
doctrine bars them, leaving the plaintiff to pursue only 
contract remedies.  
¶25 So rather than focus its analysis on the policy 
language, Pharmacal took this integrated systems analysis from 
tort law and held that such an analysis is "necessary when 
evaluating coverage under a CGL policy."  367 Wis. 2d 221, ¶28.  
Pharmacal painted with a broad brush and seemed to incorporate 
the integrated systems analysis into all determinations of 
whether "property damage" has occurred under the terms of a CGL 
policy.  See id.   
¶26 This move was problematic for several reasons.  As 
we've noted, it runs headlong into the fundamental principle 
running through our insurance cases that policy interpretation 
should focus on the language of the insurance policy.  See, 
e.g., Am. Girl, 268 Wis. 2d 16, ¶¶6, 32, 35; supra ¶16 n.4.  And 
relatedly, this broad directive flatly contradicts our holding 
in American Girl that we resolve whether an insurance policy 
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2019AP1085 & 2019AP1086   
 
15 
 
covers a claim based on the policy language and without resort 
to tort principles such as the economic loss doctrine, and by 
implication, the integrated systems analysis used to assess its 
application.  Compare Am. Girl, 268 Wis. 2d 16, ¶¶6, 34-35 with 
Pharmacal, 367 Wis. 2d 221, ¶¶28, 34-35.   
¶27 This is important because economic loss doctrine 
principles are aimed at keeping tort law and contract law 
separate.  Once again, the "economic loss doctrine generally 
operates to confine contracting parties to contract rather than 
tort remedies for recovery of purely economic losses associated 
with the contract relationship."  Am. Girl, 268 Wis. 2d 16, ¶6.  
The 
economic 
loss 
doctrine 
maintains 
"the 
fundamental 
distinction between tort law and contract law."  Hinrichs v. DOW 
Chemical Co., 2020 WI 2, ¶29, 389 Wis. 2d 669, 937 N.W.2d 37 
(quoting another source).  By keeping these purely economic 
losses in the realm of contract, commercial parties are free to 
assess the economic risks and contract accordingly.  Id.  The 
commercial purchaser is empowered to "assume, allocate, or 
insure against that risk."  Id.  (quoting another source). 
¶28 This is why we made clear in American Girl that the 
economic loss doctrine should not be used to ascertain if a CGL 
policy (a contract) provides coverage.  We followed the same 
approach in Wausau Tile, where even though the tort claims were 
barred by the economic loss doctrine, that conclusion was 
separate from whether the insurer had a duty to defend based on 
the language of the insurance policy.  226 Wis. 2d at 259, 265-
68.  
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16 
 
¶29 In addition, Pharmacal's conclusion was an outlier, 
and raises further doctrinal anomalies.  As the Seventh Circuit 
recognized in Haley v. Kolbe & Kolbe Millwork Co., "[t]he 
economic-loss doctrine generally does not apply to insurance-
coverage disputes."  866 F.3d 824, 828 (7th Cir. 2017).  Yet it 
recognized that we did exactly that in Pharmacal, while at the 
same time affirming our traditional focus on the policy language 
in other parts of the opinion.  Id. at 828-29.  In the end, the 
Seventh Circuit seemingly concluded that Pharmacal was not as 
broad as its language suggests, and determined the integrated-
systems analysis was not appropriate in an insurance dispute 
where the underlying claim concerned leaky windows.  Id.  The 
court of appeals in the decision we are reviewing similarly 
struggled with how to square Pharmacal's adoption of the 
integrated systems analysis with our standard approach of 
applying the facts to the terms of the policy.  5 Walworth, LLC, 
399 Wis. 2d 240, ¶37.  It could not be, the court of appeals 
reasoned, that Pharmacal should be read "as importing language 
that does not exist into a policy."  Id. 
¶30 In this case, the insurers ask us to enforce what we 
said in Pharmacal——that the integrated systems analysis is 
"necessary when evaluating coverage under a CGL policy."  367 
Wis. 2d 221, ¶28.  The insureds, on the other hand, do not ask 
us to overrule Pharmacal.  They instead ask that we limit its 
application——much like the Seventh Circuit did in Haley and the 
court of appeals did below.  But while Haley and the court of 
appeals made admirable attempts to reconcile our conflicting 
No. 
2019AP1085 & 2019AP1086   
 
17 
 
statements, this case illustrates inconsistencies that cannot be 
remedied by affirming both approaches.  We are reluctant to 
reject the holding of a case so recently decided, and to do so 
without being asked by the parties.  But as we see it, this case 
forces us to choose whether to remain consistent with our prior 
cases, or follow the new course charted by Pharmacal.  In the 
end, we conclude we must bring consistency and clarity to this 
area of law that is now muddled by Pharmacal's missteps.   
¶31 Therefore, 
we 
overrule 
Pharmacal's 
holding 
incorporating the integrated systems analysis into insurance 
policy 
disputes. 
 
We 
further 
reject 
and 
overrule 
its 
incorporation of an "other property" analysis into the initial 
determination of whether an occurrence has caused "property 
damage" under an insurance policy.5  The proper approach is the 
one we laid out in American Girl and multiple other cases:  our 
task is to interpret and apply the language of the insurance 
policy.  In doing so, we follow the three-step process we 
outlined above.  We first examine if the policy makes an initial 
grant of coverage, then analyze if any exclusions preclude 
coverage, and finally, review if any exceptions to a particular 
exclusion reinstate coverage.  Am. Girl, 268 Wis. 2d 16, ¶24.   
                                                 
5 While we overrule Pharmacal's improper incorporation of 
the integrated systems analysis into all CGL claims and its 
errant focus on damage to "other property" when analyzing if 
there is "property damage," we do not address the decision's 
analysis on other matters. 
No. 
2019AP1085 & 2019AP1086   
 
18 
 
¶32 These 
clarifications 
in 
place, 
we 
turn 
to 
the 
arguments by each of the three insurers that their policies do 
not provide coverage and they are entitled to summary judgment. 
B.  General Casualty's Policy 
¶33 General Casualty issued a CGL policy to Engerman, the 
general contractor.  Engerman faces claims arising out of its 
allegedly faulty installation and construction of the pool.  
General Casualty moved for summary judgment and contends that 
its policy does not provide an initial grant of coverage to 
Engerman because "property damage" was not caused by an 
"occurrence."  
¶34 General Casualty's policy provides that coverage is 
triggered by "property damage" if the "'property damage' is 
caused by an 'occurrence.'"  "Property damage" and "occurrence" 
are both defined terms in the policy.  "Property damage," as 
relevant here, means "[p]hysical injury to tangible property, 
including all resulting loss of use of that property."  And 
"'Occurrence' 
means 
an 
accident, 
including 
continuous 
or 
repeated exposure to substantially the same general harmful 
conditions."  "Accident" is not a defined term in the policy, 
but Wisconsin courts have interpreted identical policy language 
many times.  Generally, an "accident" is "an event or condition 
occurring by chance or arising from unknown or remote causes," 
or "an event which takes place without one's foresight or 
expectation."  Am. Girl, 268 Wis. 2d 16, ¶37 (quoting Webster's 
No. 
2019AP1085 & 2019AP1086   
 
19 
 
Third New Int'l Dictionary of the English Language 11 (2002); 
Black's Law Dictionary 15 (7th ed. 1999)).   
¶35 When we compare these policy terms to the record, we 
conclude a jury could find that property damage caused by an 
occurrence existed.  We observe and reiterate the basic 
principle "that while faulty workmanship is not an 'occurrence,' 
faulty workmanship may cause an 'occurrence.'"  Acuity v. Soc'y 
Ins., 2012 WI App 13, ¶24, 339 Wis. 2d 217, 810 N.W.2d 812.  For 
example, we held in American Girl that faulty workmanship caused 
soil to settle.  268 Wis. 2d 16, ¶5.  The settling was an 
accident, and therefore an occurrence, that caused property 
damage.  Id.  The court of appeals reasoned similarly in a case 
where faulty work by a subcontractor resulted in leaking 
windows.  Kalchthaler v. Keller Constr. Co., 224 Wis. 2d 387, 
391-92, 591 N.W.2d 169 (Ct. App. 1999).  The court of appeals 
explained that an initial grant of coverage was present because 
the window leaking was an accident, and thus an occurrence, that 
caused property damage.  Id. at 397.  The court of appeals again 
utilized the same approach in a case where faulty excavation 
techniques (faulty workmanship) accidentally caused soil erosion 
(an occurrence) which led part of a building to collapse 
(property damage).  Acuity, 339 Wis. 2d 217, ¶17.  The lesson 
from our case law examining similar policy language is this:  
faulty workmanship is not an occurrence, but faulty workmanship 
can lead to an occurrence that causes property damage.     
¶36 Turning to the summary judgment record, the WJE report 
concluded that cracks in the main pool occurred, and therefore 
No. 
2019AP1085 & 2019AP1086   
 
20 
 
water leaked into the surrounding soil.  This was the result, 
according to the report, of less-than-optimal installation of 
the shotcrete and poor placement of steel reinforcing bars, 
among other reasons.  The improper installation of the shotcrete 
and the incorrect placement of the steel reinforcing bars are 
not enough on their own to constitute an occurrence; if proven, 
that is faulty workmanship.  But the record can support a 
conclusion that this faulty work caused the pool to crack and 
leak, and those cracks became worse as the pool leaked and 
destabilized the surrounding soil.  The cracks, leakage, and 
soil 
damage 
could 
constitute 
accidents——unexpected 
and 
unforeseen events——caused by improper installation.  And these 
cracks and the damage to the surrounding soil also could 
constitute 
physical 
injuries 
to 
the 
homeowner's 
tangible 
property——i.e., property damage as defined by the policy.6  In 
the end, 5 Walworth claims the whole pool complex was 
compromised and needed to be rebuilt.  Therefore, a trier of 
fact could conclude that General Casualty's policy provides an 
initial grant of coverage because there is property damage 
caused by an occurrence as those terms are defined in the 
policy.  As such, General Casualty is not entitled to summary 
                                                 
6 The WJE report states that while the cracks were initially 
caused by less-than-optimal installation of the shotcrete and 
poor placement of the steel reinforcing bars, among other 
reasons, 
they 
continued 
to 
worsen 
in 
part 
due 
to 
the 
destabilization of the soil.  Thus, while the cracks were 
initially an occurrence, their continued growth——caused at least 
in part by the water in the surrounding soil——could constitute 
property damage. 
No. 
2019AP1085 & 2019AP1086   
 
21 
 
judgment.  And because it does not argue at this stage that any 
of its policy's exclusions preclude coverage, we end our inquiry 
here.   
C.  West Bend's Policy 
¶37 West Bend also issued a CGL policy to Engerman.  It 
asserts the policy does not provide an initial grant of coverage 
for two reasons:  (1) there was no "property damage" caused by 
an "occurrence" and (2) Engerman knew about the property damage 
before the policy issued.   
¶38 With respect to the first argument, West Bend's policy 
language granting coverage when "property damage" is caused by 
an "occurrence" is identical to General Casualty's policy.  
Furthermore, both policies were issued to the same insured 
(Engerman) defending against the same claims; West Bend's policy 
applies to the facts in the same way.  Therefore, for the 
reasons explained above, a factfinder could conclude based on 
the facts in this summary judgment record that "property damage" 
was caused by an "occurrence."  West Bend is not entitled to 
summary judgment on this argument. 
¶39 West Bend's second argument fares no better.  West 
Bend's policy only insures "property damage" that "occurs during 
the policy period."  The policy provides that if an insured or 
authorized employee "knew, prior to the policy period, that 
the . . . 'property damage' occurred, then any continuation, 
change or resumption of such . . . 'property damage' during or 
after the policy period will be deemed to have been known prior 
No. 
2019AP1085 & 2019AP1086   
 
22 
 
to the policy period."  So, if Engerman knew of the property 
damage before the policy issued, West Bend's policy does not 
provide coverage. 
¶40 West Bend's first policy issued to Engerman commenced 
on October 27, 2013.  But West Bend argues Engerman knew of the 
property damage well before then.  After the pool complex was 
completed in August 2012, 5 Walworth noticed a leak almost 
immediately.  John Engerman, the President and CEO of Engerman 
and an insured under West Bend's policy, sent and received 
emails in August of 2012 that indicate he visited the pool 
complex and noted that subcontractor Downes replaced the 
stonework that was near the children's pool——the believed source 
of the leak.  The leak persisted into May of 2013, and Downes 
investigated the issue the next month.  Emails in June of 2013, 
that John Engerman was copied on in August 2013, reveal that 
Engerman knew the pool complex, and the children's pool in 
particular, was still leaking.  These emails state that, "The 
auto fill is running 24/7 and cannot keep up with the leak" and 
that, "Clearly it is a LEAK."  West Bend contends these facts 
clearly show that Engerman knew about the property damage at 
issue in this case before its policy began.   
¶41 Engerman interprets the record differently.  It 
contends this issue should be remanded because John Engerman 
testified in his deposition that he believed the leaking in both 
2012 and 2013 referred to waterproofing issues with the 
stonework near the children's pool——not the property damage at 
issue 
here. 
 
Engerman 
further 
maintains 
the 
record 
is 
No. 
2019AP1085 & 2019AP1086   
 
23 
 
insufficient on whether the leaking that occurred in 2012 and 
2013 gave rise to the property damage at issue in this case.    
¶42 We conclude the record is insufficient for us to 
determine, as a matter of law, that Engerman knew about the 
property damage alleged here prior to the commencement of its 
policy with West Bend.  West Bend's argument relies on the 
inference that the property damage in this case was a 
"continuation, change or resumption" of the damage Engerman knew 
about in 2012 and 2013.  But the record does not conclusively 
establish this link.  The WJE report does not connect the damage 
Engerman knew of in 2012 and 2013 to the later cracks in the 
pool and damage to the surrounding soil.  And John Engerman 
testified that he did not know of these specific problems until 
2016.  On summary judgment, we draw reasonable inferences in the 
light most favorable to the non-moving party.  Burbank Grease 
Servs., LLC v. Sokolowski, 2006 WI 103, ¶40, 294 Wis. 2d 274, 
717 N.W.2d 781.  Here, that's Engerman.  So, while West Bend's 
arguments might win the day before a jury, West Bend is not 
entitled to summary judgment on the theory that its policy does 
not provide an initial grant of coverage.7      
D.  Acuity's Policy 
¶43 Acuity issued a CGL policy to Otto Jacobs, the 
shotcrete supplier.  According to the third-party complaint, 
                                                 
7 West Bend does not argue at this stage that any of the 
policy's exclusions preclude coverage.  Its two arguments are 
focused solely on the initial grant of coverage. 
No. 
2019AP1085 & 2019AP1086   
 
24 
 
Otto Jacobs negligently provided subcontractor Downes with 
inferior shotcrete to construct the pool.  Acuity argues that 
its policy does not provide an initial grant of coverage because 
there was no "property damage" caused by an "occurrence."  And 
even if it does, Acuity asserts the policy's "your product" 
exclusion precludes coverage.  Neither argument prevails at this 
stage and on this record.  
¶44 Acuity's policy, like those of General Casualty and 
West Bend, provides an initial grant of coverage when "property 
damage" "is caused by an occurrence."  And it has identical 
definitions of "property damage" and "occurrence" to those 
previously discussed.  The analysis is slightly different under 
this policy, however, because of the nature of the claim against 
Otto Jacobs.  Namely, the allegation is that the product 
supplied by Otto Jacobs for use in the construction project——the 
shotcrete——was defective.  
¶45 Acuity's arguments seeking summary judgment largely 
ask us to see the allegedly defective shotcrete as part of an 
integrated system, the pool complex.  We decline to do so.  
Rather, the proper analysis based on the language of the policy 
is whether the defective shotcrete (assuming this is proven) led 
to an accident, which then caused property damage.  As we have 
discussed, the water leakage, among other things, is sufficient 
to constitute an accident.  And this led to cracking in the 
pool, further leakage, damage to the surrounding soil, and 
eventually, replacement of the entire pool complex.  If the 
shotcrete was defective, a jury could find that it led to an 
No. 
2019AP1085 & 2019AP1086   
 
25 
 
accident (water leakage at the very least) that caused property 
damage.  Therefore, at this stage of the proceedings, Acuity's 
policy does not preclude an initial grant of coverage to Otto 
Jacobs.   
¶46 That leads us to Acuity's alternative argument that 
its "your product" exclusion precludes coverage.  This exclusion 
bars coverage to "Property damage to your product arising out of 
it or any part of it."  We already addressed the definition of 
"property damage" above.  And relevant here, "'Your product' 
means:  a. Any goods or products, other than real property, 
manufactured, sold, handled, distributed or disposed of by:  (1) 
You."   
¶47 Here, Otto Jacobs' product is the shotcrete.  Acuity 
argues that the "your product" exclusion applies because of 
damage to the shotcrete, and damages necessarily incurred to 
repair or replace the allegedly defective shotcrete.  However, 
the record does not clearly establish this as a matter of 
undisputed fact; significant evidence cuts the other way.  The 
WJE report stated the cracks in the shotcrete arose not from a 
deficiency in Otto Jacob's product, but from installation errors 
(by a different company with a different insurer), moist 
conditions in the soil, and placement of the steel reinforcing 
bars.  Therefore, Acuity is not entitled to summary judgment on 
the theory that its "your product" exclusion bars coverage.   
No. 
2019AP1085 & 2019AP1086   
 
26 
 
III.  CONCLUSION 
¶48 Resolution of the parties' dispute requires us to 
overrule portions of our decision in Pharmacal.  The main 
takeaway is this:  When analyzing if there is "property damage" 
under a CGL policy in the initial grant of coverage stage, we do 
not employ the integrated systems analysis nor do we limit our 
review of property damage to damage to "other property."  We 
apply the terms of the policy.  
¶49 Doing so here, we affirm the decision of the court of 
appeals.  With respect to General Casualty's policy, we conclude 
it is not entitled to summary judgment because a trier of fact 
could 
conclude 
there 
is 
"property 
damage" 
caused 
by 
an 
"occurrence" as those terms are defined in its policy.  For the 
same reasons, West Bend is not entitled to summary judgment on 
its argument there is no "property damage" caused by an 
"occurrence."  And West Bend is also not entitled to summary 
judgment on its argument that Engerman knew of the property 
damage prior to the commencement of West Bend's policy because 
the record does not sufficiently establish that the property 
damage here was a continuation, change, or resumption of the 
damage Engerman knew about before the policy began.  Finally, we 
conclude that Acuity is not entitled to summary judgment on 
either of its arguments.  A trier of fact could conclude that 
there was "property damage" caused by an "occurrence" and that 
the property damage is to more than just Otto Jacobs' product or 
arising from the product.   
No. 
2019AP1085 & 2019AP1086   
 
27 
 
By the Court.—The decision of the court of appeals is 
affirmed, and the cause is remanded to the circuit court for 
further proceedings consistent with this opinion.   
Nos.  2019AP1085 & 2019AP1086.pdr 
1 
 
¶50 PATIENCE DRAKE ROGGENSACK, J.   (concurring).  The 
majority opinion appears not to understand the judicial history 
of the commercial law doctrines that underlie Wis. Pharmacal 
Co., LLC v. Neb. Cultures of Cal., Inc., 2016 WI 14, 367 Wis. 2d 
221, 876 N.W.2d 72, Wausau Tile, Inc. v. Cnty. Concrete Corp., 
226 Wis. 2d 235, 593 N.W.2d 445 (1999), Vogel v. Russo, 2000 WI 
85, 236 Wis. 2d 504, 613 N.W.2d 177, Am. Fam. Mut. Ins. Co. v. 
Am. Girl, Inc., 2004 WI 2, 268 Wis. 2d 16, 673 N.W.2d 65 and 
Wis. Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 2000 WI 
26, 233 Wis. 2d 314, 607 N.W.2d 276.  Because it does not 
recognize the judicial history of interpretations of terms in a 
Commercial General Liability (CGL) insurance policy, it relies 
entirely on American Girl, which decision was a sea change in 
judicial interpretations of "property damage" in a CGL policy, 
as I explain more fully below.   
¶51 At times the majority opinion misuses foundational 
commercial analyses such as the integrated system, economic loss 
doctrine and their interplay with the three-step process we use 
to determine whether there is coverage under a CGL insurance 
policy.1  The majority opinion does so, in part, because it does 
not factor into its analysis the purpose of a CGL policy, when 
                                                 
1 We articulated the three-step process in Wis. Pharmacal 
Co., LLC v. Neb. Cultures of Cal., Inc., 2016 WI 14, ¶22, 367 
Wis. 2d 221, 876 N.W.2d 72 (citing Preisler v. Gen. Cas. Ins. 
Co., 2014 WI 135, ¶22, 360 Wis. 2d 129, 857 N.W.2d 136).  First, 
we examine the facts of the claim to decide "whether the policy 
makes an initial grant of coverage."  Pharmacal, 367 Wis. 2d 
221, ¶22.  If so, we examine whether any policy exclusions 
preclude coverage.  Id.  Lastly, "we analyze exceptions to the 
exclusion 
to 
determine 
whether 
any 
exception 
reinstates 
coverage."  Id. 
Nos.  2019AP1085 & 2019AP1086.pdr 
2 
 
it is purchased by a contractor to cover liability that a 
contractor may have to another person, for bodily injury to them 
or to their property.  Stated otherwise, a CGL policy has been 
held to cover the risk of tort liability of a contractor that 
could arise from the contractor's acts that injure other persons 
or their property.   
¶52 I agree that the facts are as yet too undeveloped to 
determine each of the coverage defenses mounted by General 
Casualty, 
West 
Bend 
Mutual 
Insurance 
and 
Acuity 
Mutual 
Insurance.  Therefore, I would affirm the court of appeals.  In 
so doing, I fully examine the judicial history of the risk that 
a CGL policy had been held to cover and the unarticulated change 
of potential coverage for a CGL policy that was first 
accomplished in American Girl.  I also explain the limited 
application of the integrated systems analysis employed in 
Pharmacal.  In so doing, I concur in the remand ordered by the 
majority opinion.  
I.  DISCUSSION 
¶53 Insurance policies insure against various risks of 
liability that may be generated by the insured.  As a general 
matter when a contractor is the insured, a CGL policy insures 
the risk that the contractor may be negligent and cause damage 
to other persons or their property.  Restatement of Law, 
Liability Insurance, Ch. 1, § 7.  If the damages are purely 
economic, contract remedies, not tort remedies, are available.  
Sunnyslope Grading, Inc. v. Miller, Bradford & Risberg, Inc., 
148 Wis. 2d 910, 916, 437 N.W.2d 213 (1989).  This conclusion is 
grounded in the economic loss doctrine, which precludes purely 
Nos.  2019AP1085 & 2019AP1086.pdr 
3 
 
economic damages due to a defective product or service that are 
disguised as tort claims unless personal injury or damage to 
property other than the defective product are present.  Daanen & 
Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 402, 573 
N.W.2d 842 (1998).  Whether the damage to property is to "other 
property" is sometimes difficult to ascertain.   
¶54 In East River S.S. Corp. v. Transamerica Delaval, 
Inc., 476 U.S. 858 (1986), the United States Supreme Court 
explained why there are occasions when determining whether the 
damaged property was, or was not, that of another is difficult.  
In reasoning to its conclusion, the Court employed an integrated 
systems analysis.   
¶55 There, charterers of supertankers brought suit against 
the turbine manufacturer, claiming design and manufacturing 
defects that caused supertankers to malfunction while on the 
high seas.  Damages were sought.  Id. at 860.  In coming to its 
decision the Court said, "In the traditional 'property damage' 
cases, the defective product damages other property.  In this 
case, there was no damage to 'other' property. . . .  [The] 
supertanker's defectively designed turbine components damaged 
only the turbine itself."  Id. at 867.  In so concluding, the 
Court regarded each turbine as a single integrated unit.  Id.  
The Court explained, "Since all but the very simplest of 
machines have component parts, [a contrary] holding would 
require a finding of 'property damage' in virtually every case 
where a product damages itself.  Such a holding would eliminate 
the distinction between warranty and strict products liability."  
Id.   
Nos.  2019AP1085 & 2019AP1086.pdr 
4 
 
¶56 Whether damage that occurs through the acts of the 
insured requires damage to other property for CGL coverage 
varies state by state.  See James Duffy O'Connor, What Every 
Court Should Know About Insurance Coverage for Defective 
Construction, 5 J. Am. Coll. Constr. L. No. 1 (2011) (explaining 
that in states applying the business risk doctrine, the event 
insured is "the possibility that the goods, product or work of 
the insured . . . will cause bodily injury or damage to property 
other than the product or completed work itself, and for which 
the insured may be liable.").  See also, Jeffrey P. Aken & 
Tamara Hayes O'Brien, Contractor Coverage For Construction 
Claims Under CGL Policies, 44 Tort Trial & Ins. L.J. 993 (2009) 
(reviewing whether property damage must be to property other 
than that provided by the insured is decided differently in 
different jurisdictions).   
¶57 Until American Girl, Wisconsin courts had concluded 
that the property damage addressed in a CGL policy was damage to 
other property.  Reviewing that history is important to 
understanding the case before us.  I begin with Vogel because it 
is an early and clearly stated case:  "The risk intended to be 
insured [in a CGL policy] is the possibility that the goods, 
products or work of the insured . . . will cause bodily injury 
or damage to property other than to the product or completed 
work itself, and for which the insured may be found liable."  
Vogel, 236 Wis. 2d 504, ¶17 (citing Bulen v. West Bend Mut. Ins. 
Co., 125 Wis. 2d 259, 264-65, 371 N.W.2d 392 (Ct. App. 1985), 
Nos.  2019AP1085 & 2019AP1086.pdr 
5 
 
which quoted Weedo v. Stone-E-Brick, Inc., 405 A.2d 788, 791 
(N.J. 1979)).2    
¶58 Wausau Tile arose in the context of another CGL 
coverage dispute.  Wausau Tile, 226 Wis. 2d at 266.  It involved 
breach of warranty/contract, negligence and strict liability 
claims.  Id. at 242.   
¶59 Wausau Tile had combined Medusa concrete, aggregate, 
water and other materials to make Terra pavers.  The pavers 
cracked and Wausau Tile sued County Concrete, claiming the 
Medusa concrete was defective.  County Concrete referred the 
claim to its insurer, Travelers Insurance.  Travelers moved to 
dismiss, claiming there was no damage to other property, which 
is the type of damage that was then necessary for a CGL policy 
to afford coverage.   
Physical harm to property other than the product 
itself may also be measured by the cost of repair or 
replacement of the product.  Consequently, we must 
determine whether Wausau Tile has alleged repair or 
replacement costs as a measure of harm to property 
other than the defective product. 
Id. at 248-49.  
¶60 Travelers alleged it had no duty to defend on the 
breach of warranty/contract claims.  Id. at 243.  We agreed 
                                                 
2 The majority dismisses our use of Vogel by adding 
"includes" to modify a Wis. Label quote as:  "simply explains 
that the risk insured in a CGL policy includes 'damage to 
property other than to the product or completed work itself.'  
[Citing] [Wis. Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 
2000 WI 26, ¶27, 233 Wis. 2d 314, 607 N.W.2d 276]."  (Emphasis 
added.)  Majority op., ¶23.  However, in its conclusion that 
there was no initial grant of coverage, Wis. Label explained, 
"[CGL policies] provide coverage for the insured's liability for 
physical injury to, or loss of use of, another's property."  
Id., ¶33.   
Nos.  2019AP1085 & 2019AP1086.pdr 
6 
 
because the damages from those claims were purely economic and 
therefore, they were contract damages barred by the economic 
loss doctrine.  Id. at 259.   
¶61 In consideration of whether the insurer had a duty to 
defend County Concrete on the remaining tort claims, a key issue 
was whether the damage that occurred was to property other than 
the contracted for defective property.3  Id. at 247 (the 
"economic loss doctrine does not preclude a product purchaser's 
claims of personal injury or damage to property other than the 
product itself").  "In short, economic loss is damage to a 
product itself or monetary loss caused by the defective product, 
which does not cause personal injury or damage to other 
property."  Id. (quoting Daanen, 216 Wis. 2d at 402).   
¶62 For many years, it was important to correctly resolve 
the question of what type of property damage was at issue 
because a CGL policy, prior to American Girl, had insured the 
risk of damage to "other property," not damage solely to the 
contracted for product or service.  Vogel, 236 Wis. 2d 504, ¶17; 
Wis. Label, 233 Wis. 2d 314, ¶58.  It was a performance bond 
that insured risk that the work performed would not meet the 
requirements of the contract under which it was performed.  See 
Gaastra v. Vill. of Fairwater, 77 Wis. 2d 7, 252 N.W.2d 60 
                                                 
3 The majority opinion does not understand the two decisions 
we made in Wausau Tile, wherein we denied coverage for the 
contract claims and explained potential coverage existed for the 
tort claims when a defective product causes "personal injury or 
damage to other property."  Wausau Tile, Inc. v. Cnty. Concrete 
Corp., 226 Wis. 2d 235, 247, 259, 593 N.W.2d 445 (1999).  
Nos.  2019AP1085 & 2019AP1086.pdr 
7 
 
(1977); Kniess v. Am. Sur. Co. of N.Y., 239 Wis. 261, 300 N.W. 
913 (1941).   
¶63 Accordingly, we agreed with Travelers, concluding that 
damage to the pavers themselves was not damage to other 
property.  We determined other property was not damaged by the 
allegedly defective cement because the pavers constituted an 
integrated system or product where one component could not be 
separated from the other components.  Wausau Tile, 226 Wis. 2d 
at 249 (citing Restatement (Third) of Torts § 21 cmt. e (1997), 
which acknowledged and explained the use of the integrated 
systems rule).   
¶64 Our opinion in Wausau Tile reasoned that "[d]amage by 
a defective component of an integrated system to either the 
system as a whole or other system components is not damage to 
'other property.'"  Id. (citing East River S.S., 476 U.S. at 
867-68).  The "United States Supreme Court has recognized that 
courts have interpreted the Supreme Court's decision in East 
River S.S. as standing for the proposition that when harm 
results from a defective component of a product, the product 
itself is deemed to have caused the harm."  Wausau Tile, 226 
Wis. 2d at 250 (citing Saratoga Fishing Co. v. J.M. Martinac & 
Co., 520 U.S. 875, 883 (1997)).  
¶65 American Girl also involved a CGL coverage claim.  
However, American Girl provided coverage for contract damages, 
which was an unarticulated sea change from our prior holdings. 
Before American Girl, the first step of our three-step coverage 
analysis for a CGL policy had been to assess whether there was 
damage to property other than or in addition to the insured's 
Nos.  2019AP1085 & 2019AP1086.pdr 
8 
 
defective work.  If that were not the case, as American Girl may 
have held but did not articulate, CGL policies would function as 
performance bonds.  Am. Girl, 268 Wis. 2d 16, ¶94 (Crooks, J., 
dissenting).   
¶66 The claim in American Girl was that Renschler, the 
general contractor for constructing a building, breached its 
warranty by failing to construct a building that was free from 
defects as it warranted it would do in the construction 
contract.  Id., ¶¶4, 21.  Breach of warranty is a contract 
claim.  Tietsworth v. Harley-Davidson, 2007 WI 97, ¶10, 303 
Wis. 2d 94, 735 N.W.2d 418. 
¶67 American Family Insurance argued that because American 
Girl's claim was for breach of warranty/breach of contract it 
was not an "occurrence" under its policy because CGL policies 
are not intended to cover contract claims arising out of the 
insured's defective work.  Id., ¶39.4  While acknowledging that 
it had been held that CGL policies do not cover claims arising 
out of the insured's defective work, American Girl shifted the 
focus of the allegation posed by American Family and responded 
that the lack of coverage in the past had occurred due to 
business risk coverage exclusions in insurance policies.5  Id.  
                                                 
4 Faulty workmanship is not an accident unless it causes an 
unexpected harm, and occurrences are defined as accidents.  
Smith v. Anderson, 2017 WI 43, ¶91, 374 Wis. 2d 715, 893 N.W.2d 
790 (Abrahamson, J., dissenting); Am. Fam. Mut. Ins. Co. v. Am. 
Girl, Inc., 2004 WI 2, ¶5, 268 Wis. 2d 16, 673 N.W.2d 65.   
5 It was possible to find an initial grant of coverage due 
to faulty work of the contractor when that contracted for work 
harmed other property and then to deny coverage based on the 
policy's business risk exclusion to coverage.  However, we had 
repeatedly concluded that there was no property damage of the 
type required by a CGL policy, when no property of another was 
Nos.  2019AP1085 & 2019AP1086.pdr 
9 
 
However, business risk exclusions could apply only if there had 
been an initial grant of coverage under the first step of our 
coverage analysis to which the exclusion was then applied at the 
second step of our analysis.   
¶68 In shifting the focus of the contention American 
Family Insurance actually made, American Girl ignored years of 
our decisions that had held that under a CGL policy, the term 
"property damage" required damage to property other than or in 
addition to damage to the contracted for product or services.  
Stated otherwise, nowhere in the American Girl decision does it 
reflect any recognition that the words of the policy defining 
property damage repeatedly had been interpreted by this court to 
require damage to property other than the product Renschler 
produced for American Girl.6  The majority opinion got by what 
may have been an initial stumbling block by never addressing the 
"other property" concern and concluding that the soil settlement 
was the result of a subcontractor's alleged negligence.  Id., 
¶¶5, 9.  However, alleged negligence of a subcontractor would 
enter only at the third step of our coverage analysis where we 
consider exceptions to any policy exclusions found during the 
second step of the analysis.    
¶69 American Girl's providing coverage under a CGL policy 
for damage because of the defective work of a contractor that 
damaged no identified other property was a huge sea change from 
                                                                                                                                                             
damaged.  See decisions pre-American Girl discussed above.    
6 It was undisputed that the damage at issue in American 
Girl was solely to the defective building that Renschler 
contracted for and constructed.  Id., ¶¶13-16. 
Nos.  2019AP1085 & 2019AP1086.pdr 
10 
 
our past decisions.  In past cases, personal injury or property 
damage to another was necessary to afford an initial grant of 
coverage under a CGL policy.  Wausau Tile, 226 Wis. 2d at 248-
49; Vogel, 236 Wis. 2d 504, ¶17; Bulen, 125 Wis. 2d at 264-65; 
Wis. Label, 233 Wis. 2d 314, ¶58.  Because American Girl did not 
address the question that American Family Insurance posed to 
find an initial grant of coverage, American Girl did not address 
whether the damaged property was "other property."  In so doing, 
it effected a significant change in insurance law, and it did 
not tell the reader about the change that it was making.7   
¶70 Pharmacal presented another CGL policy dispute.  The 
majority contends that Pharmacal "flatly contradicted prior 
cases without addressing those conflicts head on."8  The majority 
opinion cites not one single case to support this broad 
assertion.  However, as I explained above through the use of 
this court's past opinions, it is the majority opinion that has 
not undertaken a sufficient study of the judicial history of CGL 
policies.  Our decision in Pharmacal did not recognize the 
significant change in the definition of property damage under a 
CGL policy that American Girl may have made but did not 
articulate.  Instead, Pharmacal applied our past requirement 
that property damage under a CGL policy must include damage to 
more than the insured's work. 
                                                 
7 Perhaps the court did not recognize that it was making a 
change in CGL insurance law because the court sat five in 
American Girl.  The majority was three justices, with two 
justices dissenting and two justices not participating.   
8 Majority op., ¶3. 
Nos.  2019AP1085 & 2019AP1086.pdr 
11 
 
¶71 In Pharmacal, problems arose when, at Pharmacal's 
request, Nutritional Manufacturing provided a probiotic tablet 
that incorporated a different species of bacteria than Pharmacal 
requested.  Pharmacal, 367 Wis. 2d 221, ¶5.  Nebraska Cultures 
had provided the defective bacterium that Nutritional had used.  
Id.  Once provided, the bacterium was mixed with other 
ingredients and compressed into tablet form.  Id.  None of the 
ingredients 
could 
be 
separated 
from 
one 
another 
after 
compression into a tablet.  Id.   
¶72 Netherlands Insurance and Evanston Insurance moved to 
dismiss Pharmacal's complaint.  They contended that Pharmacal's 
underlying 
claims 
arose 
from 
incorporating 
a 
defective 
ingredient into Pharmacal's probiotic supplement tablets.  The 
insurers asserted that this error did not damage other property 
because the tablets were an integrated system and therefore, the 
other ingredients in the tablets could not be separated out in a 
way that would demonstrate damage to "other property."  Damage 
to other property was required in order to have an initial grant 
of coverage under their CGL policies.  Id., ¶24 (citing Wis. 
Label, 233 Wis. 2d 314, ¶27).   
¶73 In assessing whether the defective ingredient damaged 
other property, we identified the usual three steps to determine 
whether there was potential policy coverage of the claim.  
Pharmacal, 367 Wis. 2d 221, ¶22.  We began with whether there 
was an initial grant of coverage under the terms of the policy.  
Id., ¶23.  We addressed the "standard CGL definition of property 
damage."   
Nos.  2019AP1085 & 2019AP1086.pdr 
12 
 
The risk intended to be insured [in a CGL policy] is 
the possibility that the goods, products or work of 
the insured, once relinquished or completed, will 
cause bodily injury or damage to property other than 
to the product or completed work itself, and for which 
the insured may be found liable. 
Id., ¶24 (quoting Wis. Label, 233 Wis. 2d 314, ¶27 (alteration 
in original)).  We reasoned that the damage to "other property" 
requirement was important because a "CGL policy. . . is not a 
performance bond."  Pharmacal, 367 Wis. 2d 221, ¶26.   
¶74 In order to assess whether the damage that occurred 
from the defective bacterium caused damage to other property, we 
analyzed "whether a supplement tablet is an integrated system 
because if it is, damage to the system has been defined as 
damage to the product itself, not damage to other property."  
Id., ¶27 (citing Wausau Tile, 226 Wis. 2d at 249).9  We employed 
an integrated systems analysis because of the factual difficulty 
in determining whether the defective bacterium damaged only 
itself or also damaged other property.  
¶75 We reasoned that an integrated system analysis is 
sometimes necessary when evaluating whether there is an initial 
grant of coverage under a CGL policy because of the historic 
requirement that damage to property of another was required for 
an initial grant of coverage.  Wis. Label, 233 Wis. 2d 314, ¶27; 
East River S.S., 476 U.S. at 867-68.  Accordingly, whether to 
                                                 
9 The majority opinion errs when it implies that Pharmacal 
concludes 
that 
an 
integrated 
systems 
analysis 
always 
is 
necessary when evaluating coverage under a CGL policy.  Majority 
op., ¶31.  Whether an integrated systems analysis is appropriate 
depends on the factual setting from which CGL coverage is 
asserted.  Wausau Tile, 266 Wis. 2d at 249; Pharmacal, 367 
Wis. 2d 221, ¶31.   
Nos.  2019AP1085 & 2019AP1086.pdr 
13 
 
employ an integrated systems analysis depends on the facts under 
which the insurance coverage dispute arises.  We analyzed the 
undisputed facts to decide whether the tablet was to be treated 
as a unified whole or "whether a defective component can be 
separated out such that the claimed damage constitutes damage to 
property other than the defective component itself."  Pharmacal, 
367 Wis. 2d 221, ¶28; see also East River S.S., 476 U.S. at 867-
68 (explaining that a defective component of a product does not 
damage other property when the component is part of an 
integrated system).  In Pharmacal, we concluded that once 
ingredients were compressed into tablets, a unified whole was 
created, and therefore, there was no property damage to other 
property, which a CGL policy had required for an initial grant 
of coverage. 
¶76 We discussed how supplying an incorrect bacterium 
affected a potential grant of coverage by reviewing whether 
supplying 
that 
bacterium 
was 
an 
"occurrence" 
under 
the 
Netherlands policy.  Pharmacal, 367 Wis. 2d 221, ¶¶51-56.  We 
concluded that the breach of contract in supplying an incorrect 
bacterium was not an "occurrence" in and of itself.  Id., ¶52.  
Glendenning's Limestone & Ready-Mix v. Reimer, 2006 WI App 161, 
¶39, 295 Wis. 2d 556, 721 N.W.2d 704 (explaining that "faulty 
workmanship in itself is not an 'occurrence'——that is, 'an 
accident'——within the meaning of the CGL policy").  Property 
damage or personal injury resulting from the breach must follow 
if there is to be an initial grant of coverage because the 
policy at issue was a CGL policy.  Pharmacal, 367 Wis. 2d 221, 
¶56.  Accordingly, the property damage necessary was damage to 
Nos.  2019AP1085 & 2019AP1086.pdr 
14 
 
other property, which had not occurred.  Id.  Therefore, there 
was no initial grant of potential coverage.   
¶77 The majority opinion overrules Pharmacal, even though 
no party asked the court to do so.10  It overrules Pharmacal 
because it does not understand the integrated system analysis 
and why it was applied in that case to determine whether there 
was property damage to other property once tablets were 
constructed.11  It also does not understand the sea change that 
may have occurred in American Girl, wherein damages for breach 
of warranty (a contract claim) were covered by American Family's 
CGL policy without a finding that the breach of warranty had 
caused damage to other property.   
¶78 The 
majority 
opinion 
asserts, 
"Pharmacal 
wrongly 
stated that 'property damage' must be to 'other property' for 
purposes of determining an initial grant of coverage in a CGL 
policy."12  The majority cites Kalchthaler v. Keller Constr. Co., 
224 Wis. 2d 387, 591 N.W.2d 169 (Ct. App. 1999), in support of 
that contention.  However, Kalchthaler employed our pre-American 
Girl CGL analysis relating to other property.  Kalchthaler 
involved poorly installed windows that leaked, and due to that 
                                                 
10 Majority op., ¶31.  It is risky to overrule a past 
decision without briefs from the parties and when the majority 
does not understand the commercial doctrines that drive the past 
decision. 
11 We have held that certain types of contamination provided 
through the insured's action, when they pose personal injury 
dangers, can constitute property damage under a CGL policy.  
Northridge Co. v. W.R. Grace & Co., 162 Wis. 2d 918, 937-38, 471 
N.W.2d 179 (1991).  Pharmacal did not raise those concerns.   
12 Majority op., ¶3.   
Nos.  2019AP1085 & 2019AP1086.pdr 
15 
 
leakage damaged draperies and wallpaper.  Id. at 397.  In 
explaining 
its 
reasoning, 
Kalchthaler 
said, 
"Under 
well-
established case law, a CGL policy does not cover faulty 
workmanship, only faulty workmanship that causes damage to other 
property."  Id. at 395.  The damage to other property was damage 
to draperies and wallpaper. 
¶79 As it criticizes Pharmacal, the majority opinion 
states the proper standard for assessing property damage under a 
CGL policy:   
This kind of policy is designed to insure against "the 
possibility that the goods, products or work of the 
insured, once relinquished or completed, will cause 
bodily injury or damage to property other than to the 
product or completed work itself, and for which the 
insured may be found liable."  
(citing Wis. Label, 233 Wis. 2d 314, ¶27 (emphasis in the 
original)).13  The majority opinion then relates that when 
considering coverage, "we examine the terms of the policy and 
compare it to the facts of record. . . .  Whether the insuring 
agreement confers coverage depends upon whether there has been 
'property damage' resulting from an 'occurrence' within the 
meaning of the CGL policy language."14   
¶80 I agree with all of that, but what the majority misses 
is that the words, "property damage," in a CGL policy have had 
at least 24 years of interpretation by this court as requiring 
damage to property other than the contracted-for product.15  This 
                                                 
13 Id., ¶15.   
14 Id., ¶16.   
15 See e.g., Wausau Tile, 226 Wis. 2d at 248-49; Vogel v. 
Russo, 2000 WI 85, ¶17, 236 Wis. 2d 504, 613 N.W.2d 177; 
Northridge, 162 Wis. 2d at 932, Wis. Label, 233 Wis. 2d 314, 
Nos.  2019AP1085 & 2019AP1086.pdr 
16 
 
requirement serves the purpose of keeping the risk for which a 
CGL policy is issued (see Wis. Label quoted above) from risks 
that may be insured by a performance bond such as poor contract 
performance.  The words of the policy are key, but the reader 
must understand the judicial history that surrounds their 
interpretation.  See In re Estate of Atkinson, 19 Wis. 2d 272, 
278, 120 N.W.2d 109 (1963) (explaining that the meaning of even 
statutory terms are affected by prior judicial interpretations).   
¶81 The majority also finds fault with Pharmacal's use of 
Vogel and Wis. Label because the "portions cited in Pharmacal 
were not in the initial grant of coverage discussions; they were 
general comments on the purpose of a CGL policy. . . .  The 
cited language simply explains that the risk insured in a CGL 
policy includes 'damage to property other than to the product or 
completed work itself.'"16  The majority is only partially right.  
Discussions of property damage were in general comments on the 
purpose of a CGL policy, but they were repeated when initial 
grants of coverage were discussed.  Vogel, 236 Wis. 2d 504, 
¶¶17, ¶21; Wis. Label, 233 Wis. 2d 314, ¶¶27, ¶33.   
¶82 The majority opinion finds fault with Pharmacal's use 
of the integrated systems analysis.17  The majority also 
characterizes the economic loss doctrine as "tort principles" 
that "[implicate] the integrated systems analysis."18  "Although 
                                                                                                                                                             
¶27.   
16 Majority op., ¶23.   
17 Id., ¶24. 
18 Id., ¶26.   
Nos.  2019AP1085 & 2019AP1086.pdr 
17 
 
both the economic loss doctrine and the integrated systems 
analysis may appear in the same opinion, they address different 
commercial concerns.  Simply stated, the economic loss doctrine 
is a judicial doctrine that prevents suing in tort for damages 
that are simply breach of contract damages, unless other 
property also has been damaged.  Foremost Farms USA Coop. v. 
Performance Process, Inc., 2006 WI App 246, ¶¶13-14, 297 Wis. 2d 
724, 726 N.W.2d 289; Kaloti Enters., Inc. v. Kellogg Sales Co., 
2005 WI 111, ¶27, 283 Wis. 2d 555, 699 N.W.2d 205.  The 
integrated systems analysis is used to determine whether there 
has been damage to property other than the work of the insured, 
when an integrated system is alleged to be factually present.  
East River S.S., 476 U.S. at 867 (see above).  "If damaged 
property is not 'other property' under the 'integrated system' 
test, the economic loss doctrine applies and tort claims are 
barred."   Foremost Farms, 297 Wis. 2d 724, ¶16.   
¶83 The majority opinion relies on Haley v. Kolbe & Kolbe 
Millwork Co., 866 F.3d 824 (7th Cir. 2017), to support its 
attack 
on 
Pharmacal.19 
 
It 
quotes 
Haley 
as 
criticizing 
Pharmacal's use of the economic loss doctrine in the context of 
an insurance coverage dispute.20  Haley has a long way to go in 
                                                 
19 Id., ¶29.   
20 In its discussion of Haley v. Kolbe Millwork Co., 
866 F.3d 824 (7th Cir. 2017), the majority approves Haley's 
statement that applying the economic loss doctrine to an 
insurance coverage dispute is exactly what Pharmacal did.  
Majority op., ¶29.  What Pharmacal actually says is, "the 
economic loss doctrine does not control a coverage dispute and, 
therefore is not at issue here."  Pharmacal, 367 Wis. 2d 221, 
¶32.   
Nos.  2019AP1085 & 2019AP1086.pdr 
18 
 
providing an accurate articulation of commercial doctrines and 
in its reading of Pharmacal.  First, Haley characterizes the 
integrated-system rule as a "common-law rule from the so-called 
'economic loss' doctrine."  Id. at 827 (emphasis added).  
However, they are separate and distinct commercial doctrines 
that have been addressed by the United States Supreme Court, as 
I have explained above.  See East River S.S., 476 U.S. at 866-
68.   
¶84 In commenting on Wausau Tile, Haley asserts that, 
"[a]s the cement was an integral component of the finished 
blocks, the cement had not damaged any 'other property,' and the 
economic-loss doctrine applied."  Haley, 866 F.3d at 828.  Haley 
also asserts that "The economic-loss doctrine generally does not 
apply to insurance-coverage disputes . . . but in 2016, the 
Wisconsin Supreme Court extended Wausau Tile's integrated-system 
analysis to an insurance case involving a general-liability 
policy similar to the ones at issue here."  Id.  Those 
statements from Haley support its belief that the integrated 
systems analysis is part of the economic loss doctrine.  That is 
an incorrect understanding of both commercial doctrines.   
¶85 In regard to the 5 Walworth dispute that is pending 
before us, the integrated systems analysis could be discussed in 
regard to the pool's use of shotcrete in its construction.  
However, the significant and continual water leakage that 
followed construction of the pool may well have damaged property 
of the owner and therefore damaged other property.  This could 
support the conclusion that an occurrence (an accident) had 
occurred that caused property damage to structures outside of 
Nos.  2019AP1085 & 2019AP1086.pdr 
19 
 
the pool itself.  It also is not possible to determine 
conclusively whether the re-bars used in the pool construction 
were a cause of the cracking that resulted in continual pool 
leakage.  Those are fact-based determinations.  And finally, 
because it is not unusual for construction projects of this size 
to have some initial problems that are resolved, the question of 
when John Engerman discovered the leak that eventually proved so 
significant also would benefit from further factual development.   
II.  CONCLUSION 
¶86 Accordingly, given all of the law described above, I 
would affirm the court of appeals.  In so doing, I have 
explained the historic risk that a CGL policy had been purchased 
to cover and I affirm the limited use of the integrated systems 
analysis employed in Pharmacal.  Therefore, I respectfully 
concur. 
 
 
Nos.  2019AP1085 & 2019AP1086.akz 
 
1 
 
¶87 ANNETTE KINGSLAND ZIEGLER, C.J.   (concurring in part, 
dissenting in part).  I agree with the majority that Wisconsin 
Pharmacal Co. v. Nebraska Cultures of California, Inc.1 should be 
overruled.  I also agree that General Casualty and Acuity are 
not entitled to summary judgment.2  However, I disagree with the 
majority's conclusion that West Bend is not entitled to summary 
judgment.  The undisputed facts demonstrate that West Bend's 
insured, Engerman Contracting, Inc.,3 knew of the property damage 
at issue in this case prior to the policy period with West Bend.  
Before the policy period, Engerman knew the pool complex was 
leaking.  The leaking was, at least in part, caused by cracking 
in the pool walls.  Engerman therefore knew of a "resulting loss 
of use of th[e] property," which constitutes "property damage" 
under West Bend's policy.  As a result, Engerman knew of the 
property damage prior to the policy period, and the known-loss 
provision precludes coverage from West Bend.  These undisputed 
facts show that West Bend is entitled to summary judgment. 
¶88 "We will affirm a grant of summary judgment when there 
are no genuine issues of material fact and the moving party is 
entitled to judgment as a matter of law."  Baumeister v. 
Automated Prods., Inc., 2004 WI 148, ¶11, 277 Wis. 2d 21, 690 
                                                 
1 2016 WI 14, 367 Wis. 2d 221, 876 N.W.2d 72. 
2 I therefore join the majority opinion except for ¶¶5, 7, 
39-42, and 49. 
3 Engerman Contracting, Inc., and John Engerman, Engerman 
Contracting's President and CEO, are both "insureds" under West 
Bend's policy.  Accordingly, I refer to them collectively as 
"Engerman."    
Nos.  2019AP1085 & 2019AP1086.akz 
 
2 
 
N.W.2d 1.  "A factual issue is 'genuine' if the evidence is such 
that a reasonable jury could return a verdict in favor of the 
non-moving party."  Midwest Neurosciences Assocs., LLC v. Great 
Lakes Neurosurgical Assocs., LLC, 2018 WI 112, ¶80, 384 
Wis. 2d 669, 920 N.W.2d 767. 
¶89 West Bend's policy contains a known-loss provision 
precluding coverage for "property damage" if the insured knew 
that the property damage "had occurred, in whole or in part."  
The full provision precludes coverage unless,  
[p]rior to the policy period, no insured . . . and no 
"employee" authorized by you to give or receive notice 
of an "occurrence" or claim, knew that the "bodily 
injury" or "property damage" had occurred, in whole or 
in part.  If such a listed insured or authorized 
"employee" knew, prior to the policy period, that the 
"bodily injury" or "property damage" occurred, then 
any continuation, change or resumption of such "bodily 
injury" or "property damage" during or after the 
policy period will be deemed to have been known prior 
to the policy period. 
The policy also defines "property damage" as "[p]hysical injury 
to tangible property, including all resulting loss of use of 
that property," and as "[l]oss of use of tangible property that 
is not physically injured."  
¶90 Engerman has no coverage under West Bend's policy 
because Engerman knew of the property damage prior to the policy 
period.  The policy period commenced on October 27, 2013.  
Before that time, Engerman received numerous emails notifying 
him of the property damage.  He was therefore aware that "loss 
of use" of the pool, which constitutes part of the "property 
damage" under West Bend's policy, had occurred. 
Nos.  2019AP1085 & 2019AP1086.akz 
 
3 
 
¶91 On August 19, 2012, Engerman received an email from 5 
Walworth, LLC, informing him that "the wading pool was empty" 
and "a pool leak was found and supposedly fixed yesterday 
morning——unsuccessfully unfortunately."  Engerman replied the 
next day that he would "like to pay a visit," and he later 
stated in his deposition that he did so.  Engerman followed up 
on August 27, stating "the stone is being replaced [and] that 
was also a source of the water leak."  Engerman's attempts at 
resolving the leak proved unsuccessful.  On June 21, 2013, 
Engerman was forwarded an email complaining "the kiddie pool has 
been leaking since day one, and you guys have come up with all 
sorts of excuses.  Clearly it is a LEAK.  Fix the damn leak."  
The email continued, "The auto fill is running 24/7 and 
obviously can not keep up with the leak."   
¶92 Engerman did aver in his deposition that these emails, 
"to the best of [his] knowledge," discussed leaking that was 
"always contained to [a] trough issue that [he] thought [was] 
rectified at the end of that summer of 2012," and he did "not 
[hear of] anything prior – or afterwards of any ongoing pool 
issues directly."  However, Engerman received one of these 
emails after the "summer of 2012" in June 2013, still before the 
policy period commenced.  Additionally, as stated in the 
engineering firm's report, "It was reported that significant 
cracking developed in the shotcrete walls and bottom of the 
pools soon after construction in 2012, and excessive water 
leakage has continued to occur."   
Nos.  2019AP1085 & 2019AP1086.akz 
 
4 
 
¶93 Based on the evidence in the record, Engerman clearly 
knew 
of 
the 
"property 
damage" 
before 
the 
policy 
period 
commenced.  The definition of "property damage" in West Bend's 
policy includes "all resulting loss of use of that property."  
Such loss of use occurred because, as Engerman undisputedly knew 
prior to the policy period, the pool complex was leaking.  
Whether Engerman thought this leak was caused by cracking in the 
pool walls or a "trough issue" is irrelevant.  The cracks in the 
pool walls were present since 2012, and the pool continued 
leaking notwithstanding Engerman's attempts at rectifying a 
"trough issue."  The only reasonable conclusion, based on the 
evidence in the record, is that at least some of the leaking 
Engerman knew about prior to the policy period was caused by 
cracks in the pool walls.   
¶94 Because Engerman knew there was "resulting loss of use 
of th[e] property," he knew there was "property damage" prior to 
West Bend's policy period.  All further "property damage" 
alleged in 5 Walworth's complaint stemmed from the cracking in 
the pool walls and therefore constitutes a "continuation, change 
or resumption of such . . . 'property damage.'"  As a result, 
under West Bend's policy, all resulting property damage is 
"deemed to have been known [by Engerman] prior to the policy 
period," precluding coverage for such property damage.  Based on 
these undisputed facts, West Bend is entitled to summary 
judgment. 
¶95 For the foregoing reasons, I respectfully concur in 
part and dissent in part.    
Nos.  2019AP1085 & 2019AP1086.akz 
 
5 
 
¶96 I am authorized to state that Justice REBECCA GRASSL 
BRADLEY joins this writing. 
 
Nos.  2019AP1085 & 2019AP1086.akz 
 
1