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Laws-info.com » Cases » Wisconsin » Supreme Court » 1999 » Wausau Tile, Inc. v. County Concrete Corporation
Wausau Tile, Inc. v. County Concrete Corporation
State: Wisconsin
Court: Supreme Court
Docket No: 1997AP002284
Case Date: 05/28/1999
Plaintiff: Wausau Tile, Inc.
Defendant: County Concrete Corporation
Preview:SUPREME COURT OF WISCONSIN
Case No.:                                                             97-2284
Complete Title
of Case:
Wausau  Tile,  Inc.,  a  domestic  corporation,
Plaintiff-Appellant,
v.
County  Concrete  Corporation,  a  domestic
corporation,  and  American  States  Ins.  Co.,  a
foreign  insurance  corporation,
Defendants,
The  Travelers  Indemnity  Co.,  a  foreign  insurance
corporation,  and  Medusa  Corporation,  d/b/a
Medusa  Cement  Company,  a  foreign  corporation,
Defendants-Respondents.
ON  CERTIFICATION  FROM  THE  COURT  OF  APPEALS
Opinion Filed:                                                        May  28,  1999
Submitted on Briefs:
Oral Argument:                                                        February  11,  1999
Source of APPEAL
COURT:                                                                Circuit
COUNTY:                                                               Marathon
JUDGE:                                                                Vincent  K. Howard
JUSTICES:
Concurred:
Dissented:
Not Participating:  Bradley,  J.,  did  not participate.
ATTORNEYS:                                                            For the  plaintiff-appellant, there  were briefs  by
Thomas R. Crone,  Dana J.  Erlandsen, Devon  R. Baumbach and Melli,
Walker,  Pease  & Ruhly, S.C., Madison and oral argument by Dana J.
Erlandsen.
For the  defendant-respondent,  Medusa Corporation,
there was a brief  by Keith W.  Kostecke and  Menn, Nelson,
Sharratt, Teetaert & Beisenstein,  Ltd., Appleton and oral
argument  by Keith  W. Kostecke.




For the  defendant-respondent,  The  Travelers
Indemnity Company, there  was a  brief by John D.  Bird, Jr.,  and
Bird, Martin  & Salomon, S.C.,  Milwaukee and oral argument by John
D. Bird,  Jr.
Amicus curiae  brief was filed  by Frank A.
Scherkenbach,  Jeffrey S.  Fertl  and  Hinshaw  & Culbertson,
Milwaukee for  Wisconsin Gas Company.




No.                                                                           97-2284
NOTICE
This opinion is subject to further editing and
modification.   The final version will appear in
the bound volume of the official reports.
No.                                                                           97-2284
                                                                              STATE  OF  WISCONSIN   :        IN  SUPREME  COURT
FILED
Wausau  Tile,  Inc.,  a  domestic
corporation,
MAY 28, 1999
Plaintiff-Appellant,
Marilyn L. Graves
Clerk of Supreme Court
v.                                                                            Madison, WI
County  Concrete  Corporation,  a  domestic
corporation,  and  American  States  Ins.
Co.,  a  foreign  insurance  corporation,
Defendants,
The  Travelers  Indemnity  Co.,  a  foreign
insurance  corporation,  and  Medusa
Corporation,  d/b/a  Medusa  Cement  Company,
a  foreign  corporation,
Defendants-Respondents.
APPEAL  from  a  judgment  of  the  Circuit  Court  for  Marathon
County,  Vincent  K.  Howard,  Circuit  Court  Judge.    Affirmed.
¶1    N.  PATRICK  CROOKS,  J.      The  court  of  appeals  certified
this  case  pursuant  to  Wis.  Stat.                                         §  (Rule)              809.61   (1997-98),1
asking  this  court  "to  determine  the  nature,  extent  and  scope  of
the   public   safety   exception   to   the   economic   loss   doctrine
enunciated  in  Northridge  Co.  v.  W.R.  Grace  &  Co.,                     162  Wis.  2d
918,  471  N.W.2d  179  (1991)."    Certification  at  1.    We  hold  that
1  All  references  to  the  Wisconsin  Statutes  are  to  the  1997-
98  version  unless  otherwise  noted.
1




No.                                                                           97-2284
the  Northridge  rule  is  not  applicable  to  the  tort  claims  alleged
in  this  case.     Because  the  only  non-economic  loss  alleged  by
Wausau  Tile  is  the  personal  injury  or  property  damage  of  third
persons,  we  conclude  that  Wausau  Tile's  tort  claims  are  barred
by  the  economic  loss  doctrine.
I.
¶2    Wausau  Tile,  Inc.                                                     ("Wausau  Tile")  manufactures,  sells
and  distributes  "Terra"  pavers  to  entities  around  the  country.
Pavers  are  concrete  paving  blocks  made  of  cement,  aggregate,
water,  and  other  materials,  for  use  mainly  in  exterior  walkways.
Wausau  Tile's  pavers  have  been  installed  in  various  locations
throughout  the  nation.
¶3    Wausau    Tile    contracted    with    Medusa    Corporation
("Medusa")  to  supply  the  cement  for  the  pavers  and  arranged  for
County  Concrete  Corporation                                                 ("County  Concrete")  to  supply  the
aggregate.2                                                                   Wausau   Tile's   contract   with   Medusa   contained
warranties  providing  that  Medusa  would  remedy  or  replace  cement
which  did  not  meet  particular  specifications.3
2  It  is  unclear  from  the  record  whether  a  contract  also
existed  with  County  Concrete.    County  Concrete  is  not  a  party  to
this  appeal.
3  The  warranty  from  Medusa  to  Wausau  Tile  stated:
SPECIFICATIONS.                                                               THE   CEMENT   SHALL   CONFORM   TO   THE
PRESENT    STANDARD    SPECIFICATIONS    OF    THE    AMERICAN
SOCIETY   FOR   TESTING   MATERIALS   AND/OR   THE   FEDERAL
SPECIFICATIONS.     THESE  EXPRESS  WARRANTIES  ARE  IN  LIEU
OF   AND   EXCLUDE   ALL   OTHER   WARRANTIES,   EXPRESS   OR
IMPLIED,   ORAL   OR   STATUTORY,   OF   MERCHANTABILITY   AND
FITNESS  FOR  A  PARTICULAR  PURPOSE.      SELLER                             [Medusa]
SHALL  REMEDY  OR  REPLACE,  FREE  OF  CHARGE,  ANY  CEMENT
2




No.                                                                           97-2284
¶4    On  April  16,  1996,  Wausau  Tile  filed  suit  in  Marathon
County  Circuit  Court  against  Medusa,  County  Concrete,  and  their
insurers,   alleging   breach   of   warranty,   breach   of   contract,
negligence,  indemnification,  contribution  and  strict  liability
claims.                                                                       Wausau   Tile   claimed   that   several   of   the   installed
pavers  had  suffered  "excessive  expansion,  deflecting,  curling,
cracking  and/or  buckling."     Compl.                                       ¶12.     Wausau  Tile  asserted
that  these  problems  were  caused  by  alkali-silica  gel  reactions
which  resulted  from  high  levels  of  alkalinity  in  Medusa's  cement
and    high    concentrations    of    silica    in    County    Concrete's
aggregate.
¶5    Wausau  Tile  claimed  that  the  expansion  and  cracking  of
the  pavers  had  led  to  problems  and  property  damages  which  have
given  rise  to  "various  claims,  demands  and  suits  against  Wausau
WHICH                                                                         DOES                                                              NOT   COMPLY   WITH   THE   AFORESAID
SPECIFICATIONS  AND  SHALL  HAVE  NO  FURTHER  OBLIGATION  OR
LIABILITY    FOR    GENERAL,    SPECIAL    OR    CONSEQUENTIAL
DAMAGES   ARISING   OUT   OF   A   BREACH   OF   THE   AFORESAID
EXPRESS  WARRANTIES.
Seller,  having  no  control  over  the  use  of  cement  will
not,  therefore,  guarantee  finished  work  in  which  it  is
used,   nor   shall   the   Seller   be   responsible   for   the
condition  of  cement  after  delivery  to  Buyer                             [Wausau
Tile].     Any  charges  incident  to  inspection  or  tests
made  by  or  on  behalf  of  Buyer  to  determine  compliance
with  specifications  shall  be  paid  by  Buyer.
Runde  Aff.  Ex.  B  at  2  (emphasis  in  original).
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No.                                                                             97-2284
Tile."4    Compl.  ¶12.    Wausau  Tile  alleged  that  it  had  "sustained
monetary  damages  in  remedying  the  property  damage  claims,  is
facing  claims  for  personal  injuries,  and  has  suffered  and  will
continue  to  suffer  lost  business  and  profits."    Compl.  ¶17.    In
connection  with  its  tort  claims,  Wausau  Tile  sought  "actual  and
consequential  damages  arising  from  said  problems  and  defects,
including,  but  not  limited  to,  costs  of  repair,  replacement  and
remedy  of  any  and  all  defects,  complaints  and  resulting  injuries
which  have  arisen  or  will  arise  in  the  future  as  a  result  of  the
use  of  said  pavers."    Compl.  ¶31.
¶6    On  March                                                                 20,                                   1997,   The  Travelers  Indemnity  Company
("Travelers"),  Medusa's  insurer,  filed  a  motion  to:                                                                                                          (1)  dismiss
Wausau   Tile's   negligence,   indemnification,   and   contribution
claims  pursuant  to  Wis.  Stat.                                               §  802.06,  for  failure  to  state
causes  of  action  against  Medusa  and  Travelers  for  which  relief
could  be  granted;5  and  (2)  obtain  a  summary  declaration  pursuant
4  Wausau  Tile's  attorney  stated  at  oral  argument  that  Wausau
Tile  had  been  presented  with  three  formal  personal  injury  claims
and  had  knowledge  of  six  to  twelve  personal  injury  claims  that
had  not  yet  been  filed.    As  of  the  date  of  oral  argument,  Wausau
Tile  had  not  paid  out  any  amounts  in  satisfaction  of  personal
injury  claims,  but  had  paid  various  sums  in  connection  with
property  damage  claims.    In  addition,  Wausau  Tile  stated  that  it
had  expended  money  removing  and  replacing  problematic  pavers  in
an  effort  to  prevent  further  injuries  and  property  damage.
5  The  strict  liability  claim  was  added  in  Wausau  Tile's
Third  Amended  Complaint.    The  Third  Amended  Complaint  was  filed
after  Travelers  made  this  motion  pursuant  to  a  stipulation  of
the  parties  and  order  of  the  circuit  court.     Like  the  circuit
court,  we  address  the  allegations  contained  in  the  Third  Amended
Complaint.
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No.                                                                           97-2284
to  Wis.  Stat.                                                               §  802.08  that  Travelers  had  no  duty  to  defend
Medusa  on  Wausau  Tile's  breach  of  contract  and  warranty  claims.
Travelers  asked  the  court  to  issue  an  order  dismissing  Wausau
Tile's  complaint  and  all  claims  asserted  against  Travelers  on
their  merits.
¶7    The  circuit  court,  Judge  Vincent  K.  Howard  presiding,
granted  Travelers'  motion.     In  a  written  order  entered  on  July
24,                                                                           1997,   the   court   dismissed   Wausau   Tile's   negligence   and
                                                                              strict   liability   claims   against   Medusa   with   prejudice.     In
addition,   the   court   entered   summary   judgment   in   favor   of
Travelers,  holding  that  Travelers  had  no  duty  to  defend  Medusa
in   this   case   and   dismissing   on   their   merits   all   pleadings
asserting  a  claim  against  Travelers.
¶8    In    its    memorandum    decision,    the    circuit    court
determined   that   Wausau   Tile's   complaint   concerned   only   the
suitability  or  quality  of  Medusa's  product  and  that  the  loss  it
sought  to  recover  was  purely  economic.     Although  Wausau  Tile
asserted  personal  injury  and  property  damage  in  support  of  its
negligence  and  strict  liability  claims,  the  third  parties  who
were  the  real  parties  in  interest  as  to  those  claims  were  not
joined,  nor  was  joinder  feasible  or  necessary  for  Wausau  Tile  to
litigate   the   economic   loss   issues.                                    The   court   concluded,
therefore,  that  the  economic  loss  doctrine  precluded  Wausau  Tile
from  maintaining  its  tort  claims  against  Medusa.
¶9    Based  on  this  conclusion,  the  circuit  court  held  that
Travelers  had  no  duty  to  defend  Medusa  against  Wausau  Tile's
5




No.                                                                          97-2284
tort  claims.    The  court  found  that  the  Travelers  policy6  covered
exclusively  claims  for  bodily  injury  and  property  damage.    Since
the   third-party   real   parties   in   interest   for   Wausau   Tile's
claims  of  bodily  injury  and  property  damage  were  not  joined  in
the  suit,  the  court  held  that  Travelers  had  no  duty  to  defend.
¶10   As  stated  previously,  the  court  of  appeals  certified
Wausau  Tile's  appeal  to  this  court.    This  court  accepted  review
of  all  issues  raised  before  the  court  of  appeals.
II.
¶11   We   begin   by   determining   whether   the   circuit   court
properly  dismissed  Wausau  Tile's  negligence  and  strict  liability
claims  against  Medusa  as  barred  by  the  economic  loss  doctrine.
"A  motion  to  dismiss  a  complaint  for  failure  to  state  a  claim
tests  the  legal  sufficiency  of  the  complaint."    Watts  v.  Watts,
137  Wis.  2d                                                                506,                          512,                                     405  N.W.2d                                                                 305             (1987).     See  also  Doe  v.
                                                                             Archdiocese  of  Milwaukee,                                            211  Wis.  2d                                                               312,            331,                             565  N.W.2d                  94
                                                                                                                                                    (1997).     Whether  the  complaint  states  a  claim  for  relief  is  a
                                                                                                                                                    question  of  law  which  this  court  reviews  de  novo.     Daanen  &
                                                                                                           Janssen,  Inc.  v.  Cedarapids,  Inc.,                                                                               216  Wis.  2d   395,                             400,                         573
N.W.2d                                                                       842                           (1998);  Watts,                          137  Wis.  2d  at                                                                                                            512.     For  purposes  of
review,  we  must  accept  the  facts  stated  in  the  complaint,  along
with  all  reasonable  inferences  which  may  be  drawn  from  them,  as
6  Travelers  wrote  a  total  of  eight  policies  for  Medusa.    The
effective  date  for  the  first  policy  was  July                          1,                            1989,  and  each
policy  period  lasted  one  year.    Because  the  provisions  relevant
to  the  duty  to  defend  issue  are  the  same  in  each  Travelers
policy,  we  will  discuss  the  insurance  policies  as  though  only
one  policy  existed.
6




                                                                                                                                                                                                           No.                      97-2284
true.     Watts,                                                                137  Wis.  2d  at                                            512.                                                          See  also  Northridge,   162
Wis.  2d  at  923-24.    Unless  it  seems  certain  that  no  relief  could
be  granted  under  any  set  of  facts  that  the  plaintiff  could
prove,  dismissal  of  the  complaint  is  improper.    Northridge,  162
Wis.  2d  at  923;  Watts,  137  Wis.  2d  at  512.
A.
¶12   The  economic  loss  doctrine  precludes  a  purchaser  of  a
product  from  employing  negligence  or  strict  liability  theories
to  recover  from  the  product's  manufacturer  loss  which  is  solely
economic.7                                                                      Sunnyslope   Grading,   Inc.   v.   Miller,   Bradford   &
Risberg,  Inc.,  148  Wis.  2d  910,  921,  437  N.W.2d  213  (1989).    See
also  East  River  S.S.  Corp.  v.  Transamerica  Delaval,  Inc.,               476
U.S.  858,  870-71  (1986);  Daanen,  216  Wis.  2d  at  400;  Northridge,
162  Wis.                                                                       2d  at                                                       925.     Economic  loss  is  the  loss  in  a  product's
value  which  occurs  because  the  product  "is  inferior  in  quality
and  does  not  work  for  the  general  purposes  for  which  it  was
manufactured  and  sold."    Northridge,  162  Wis.  2d  at  925-26.    See
also  Daanen,  216  Wis.  2d  at  401.
¶13   Economic  loss  may  be  either  direct  or  consequential.
Daanen,                                                                         216  Wis.  2d  at                                            401;  Northridge,                                             162  Wis.  2d  at        926.
7  Sunnyslope  Grading,  Inc.  v.  Miller  Bradford  &  Risberg,
Inc.,                                                                           148  Wis.  2d                                                910,                                                          921,                     437  N.W.2d   213   (1989),  applies  the
economic  loss  doctrine  in  a  commercial  setting,  as  do  many  of
the  other  cases  cited  in  this  opinion.    Recently,  in  State  Farm
Mut.  Auto.  Ins.  Co.  v.  Ford  Motor  Co.,  No.  97-2594,  op.  at  2  (S.
Ct.  May                                                                        4,                                                           1999),  and  General  Cas.  Co.  v.  Ford  Motor  Co.,  No.
97-3607,  op.  at  2  (S.  Ct.  May  4,  1999),  this  court  held  that  the
economic   loss   doctrine   applies   with   equal   force   to   consumer
transactions.    Nothing  in  this  opinion  should  be  interpreted  as
limiting  the  holdings  in  State  Farm  and  General  Casualty.
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                                                                                                                                                                                                                                                                                          No.                 97-2284
                                                                                                                                              Direct  economic  loss  is  "loss  in  value  of  the  product  itself."
Daanen,                                                                        216   Wis.  2d   at                                            401                                                                                               (citing   Steven   R.   Swanson,   The
                                                                                                                                              Citadel  Survives  a  Naval  Bombardment:    A  Policy  Analysis  of  the
Economic   Loss   Doctrine,                                                                                                                   12   Tul.   Mar.   L.J.                                                                           135,                                      140                 (1987)
                                                                                                                                              [hereinafter  “Swanson”]).    All  other  economic  loss  caused  by  the
                                                                                                                                              product  defect,  such  as  lost  profits,  is  consequential  economic
loss.     Daanen,                                                              216  Wis.  2d  at                                                                                                                            401;  Northridge,                                             162  Wis.  2d  at
926;  Swanson  at  140.
                                                                                                                                              ¶14   The  economic  loss  doctrine  does  not  preclude  a  product
                                                                                                                                              purchaser's   claims   of   personal   injury   or   damage   to   property
                                                                               other  than  the  product  itself.     Daanen,                                                                                                                   216  Wis.  2d  at                                             402;
Northridge,                                                                    162  Wis.  2d  at                                                                                                                                                937;  Tony  Spychalla  Farms,  Inc.  v.
Hopkins  Agric.  Chem.  Co.,                                                                                                                  151  Wis.  2d                                                                 431,                438,                                      444  N.W.2d         743
(Ct.  App.                                                                     1989).     Similarly,  claims  which  allege  economic  loss
in  combination  with  non-economic  loss  are  not  barred  by  the
doctrine.    Daanen,  216  Wis.  2d  at  402.    "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.  at  402.
¶15   In   Daanen,   this   court   identified   three   policies
supporting   the   application   of   the   economic   loss   doctrine   to
commercial  transactions.    Id.  at  403.    First,  the  economic  loss
doctrine  preserves  the  fundamental  distinction  between  tort  law
and  contract  law.     Id.     Second,  application  of  the  doctrine
protects   the   parties'   freedom   to   allocate   economic   risk   by
contract.     Id.     Third,  the  doctrine  encourages  the  purchaser,
8




No.                                                                            97-2284
which  is  the  party  best  situated  to  assess  the  risk  of  economic
loss,  to  assume,  allocate,  or  insure  against  that  risk.    Id.
¶16   The  first  of  these  policies  recognizes  that  contract
law  rests  on  bargained-for  obligations,  while  tort  law  is  based
                                                                               on  legal  obligations.     See  id.  at                                                                                                                    404;  Northridge,                                     162  Wis.  2d
at                                                                             933;  E.  Allan  Farnsworth,  Contracts                                                                                                                     §§                                      1.1-.3,  at   3-10            (2d
                                                                                                                          ed.  1990).    In  contract  law,  the  parties'  duties  arise  from  the
                                                                                                                          terms  of  their  particular  agreement;  the  goal  is  to  hold  parties
                                                                                                                          to  that  agreement  so  that  each  receives  the  benefit  of  his  or
her  bargain.     Daanen,                                                                                                 216  Wis.                                                                    2d  at                              404;  Sunnyslope,                                     148  Wis.
2d  at                                                                         916.     See  also  Swanson  at                                                                                                                             158.     The  aim  of  tort  law,  in
contrast,   is   to   protect   people   from   misfortunes   which   are
unexpected  and  overwhelming.    East  River,  476  U.S.  at  871.    The
law  imposes  tort  duties  upon  manufacturers  to  protect  society's
interest  in  safety  from  the  physical  harm  or  personal  injury
which  may  result  from  defective  products.     Daanen,                     216  Wis.  2d
at                                                                             405;  Northridge,                          162  Wis.  2d  at                                                            933.     Thus,  where  a  product
fails   in   its   intended   use   and   injures   only   itself,   thereby
causing  only  economic  damages  to  the  purchaser,  "the  reasons  for
imposing  a  tort  duty  are  weak  and  those  for  leaving  the  party  to
its  contractual  remedies  are  strong."     East  River,                     476  U.S.  at
871.    See  also  Daanen,  216  Wis.  2d  at  405.
¶17   In  this  case,  the  damages  sought  by  Wausau  Tile  can  be
grouped  into  three  categories:                                              (1)    the  costs  of  repairing  and
replacing  cracked,  buckled  or  expanded  pavers;  (2)  the  costs  of
satisfying   third   parties'   claims   that   the   defective   pavers
either  caused  personal  injury  or  damaged  property  adjoining  the
9




                                                                                                                                                                                                                              No.                97-2284
                                                                               pavers,  such  as  curbs,  mortar  beds  and  walls;  and                                                                                                         (3)   lost
profits   and   business.                                                                                                                                           We   consider   each   of   these   types   of
damages  in  turn.
                                                                               ¶18   Repair  and  replacement  costs  are  typical  measures  of
economic  loss.     See  East  River,                                                                                                              476  U.S.  at                                                              870;  Miller  v.
United  States  Steel  Corp.,                                                  902  F.2d                                                           573,             574                                                       (7th  Cir.         1990)
(applying   Wisconsin   law);   Northridge,                                                                                                                         162   Wis.  2d   at                                                          931.
However,   it   is   not   the   measure   of   damages   which   determines
whether  a  claim  alleges  solely  economic  loss.     Northridge,            162
Wis.  2d  at                                                                   931-32.     Physical  harm  to  property  other  than  the
product  itself  may  also  be  measured  by  the  cost  of  repair  or
replacement  of  the  product.    Id.  at  932.    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.
¶19   Wausau  Tile  argues  that  the  costs  of  repairing  and
replacing  the  pavers  do  not  constitute  economic  loss  because  the
pavers  themselves  are  property  other  than  the  defective  product
(Medusa's  cement).    We  are  not  persuaded  by  that  argument.
¶20   Damage   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"  which  precludes  the
application  of  the  economic  loss  doctrine.    See  East  River,  476
U.S.  at                                                                       867-68;  Midwest  Helicopters  Airways,  Inc.  v.  Sikorsky
Aircraft,                                                                                                                                          849  F.  Supp.   666,                                                      671-72             (E.D.  Wis.   1994)                           (applying
                                                                                                                                                                    Wisconsin  law);  Cincinnati  Ins.  Co.  v.  AM  Int'l,                                                                    224  Wis.  2d
456,                                                                           463,                                                                ___  N.W.2d      ___                                                       (Ct.  App.                       1999);  Midwhey  Powder  Co.,
10




No.                                                                           97-2284
Inc.  v.  Clayton  Indus.,  157  Wis.  2d  585,  590-91,  460  N.W.2d  426
(Ct.  App.  1990).    Comment  e  of  the  Restatement  (Third)  of  Torts
§  21  acknowledges  this  "integrated  system"  rule.    It  states,  in
part:
A  defective  product  that  causes  harm  to  property  other
than  the  defective  product  itself  is  governed  by  the
rules  of  this  Restatement.     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.     When  so  characterized,  the
damage    is    excluded    from    the    coverage    of    this
Restatement.                                                                  A   contrary   holding   would   require   a
finding  of  property  damage  in  virtually  every  case  in
which   a   product   harms   itself   and   would   prevent
contractual    rules    from    serving    their    legitimate
function  in  governing  commercial  transactions.
Restatement                                                                   (Third)   of   Torts                           §  21   cmt.   e   (1997)   (emphasis
added).
¶21   Likewise,    the    United    States    Supreme    Court    has
recognized   that   courts   have   interpreted   the   Supreme   Court's
decision  in  East  River  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.     Saratoga
Fishing  Co.  v.  J.M.  Martinac  &  Co.,                                     520  U.S.                                      875,               883      (1997).
In  emphasizing  that  its  holding  in  Saratoga  did  not  affect  this
11




No.                                                                              97-2284
rule,  the  Court  quoted  East  River's  explanation  of  the  rule’s
importance:
Since   all   but   the   very   simplest   of   machines   have
component   parts,                                                               [a   holding   that   a   component   of   a
machine  was  "other  property"]  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.  (quoting  East  River,  476  U.S.  at  867)).8    Other  jurisdictions
also  apply  some  form  of  the                                                 “integrated  system”  rule.     See,
e.g.,  Casa  Clara  Condominium  Ass'n,  Inc.  v.  Charley  Toppino  and
Sons,  Inc.,                                                                     620  So.                                       2d                                                1244,   1247   (Fla.                 1993);  Trans  States
                                                                                                                                Airlines  v.  Pratt  &  Whitney  Canada,  Inc.,                          682  N.E.2d   45,                     58
(Ill.  1997).9
¶22   In  the  instant  case,  it  is  undisputed  that  the  pavers
were    integrated    systems    comprised    of    several    component
materials,  including  Medusa's  cement.     See  Compl.                         ¶¶7-9.     The
8  In  Saratoga  Fishing  Co.  v.  J.M.  Martinac  &  Co.,                       520  U.S.
875,  878,  884  (1997),  the  United  States  Supreme  Court  held  that
the  economic  loss  doctrine  did  not  preclude  a  second  user's
claim  of  damages  for  equipment  added  to  a  ship  by  the  initial
user,  when  a  defective  component  purchased  and  installed  by  the
ship  manufacturer  caused  the  ship  to  fail.    The  Court  concluded
that  the  added  equipment  was  "other  property"  under  the  rule  of
East   River   and   that   the   ship,   as   placed   in   the   stream   of
commerce  by  the  manufacturer,  constituted  the  "product  itself."
Id.  at  879.
9  The  Restatement  of  Torts  and  the  jurisprudence  of  other
state  and  federal  courts  have  guided  the  development  of  the
economic  loss  doctrine  in  Wisconsin  from  its  inception.     See,
e.g.,  Daanen,  216  Wis.  2d  at  403-11;  Northridge,  162  Wis.  2d  at
924;  Sunnyslope,  148  Wis.  2d  at  920-21.
12




No.                                                                           97-2284
circuit    court    determined    that    Medusa's    "concrete    is    an
indistinguishable,  integral  part  of  the  pavers"  which  "cannot  be
separately  identified  from  the  finished  product."    Summary  Judg.
Dec.,  June  25,  1997  at  10-11  (No.  96-CV-187).    Other  courts  have
held  that  various  substances  incorporated  into  finished  products
constitute  integral  components  of  those  products.     See,  e.g.,
Casa   Clara,                                                                 620   So.             2d   at         1247                  (Fla.         1993)   (holding   that
defective  concrete  became  an  integral  part  of  homes  purchased  by
the  plaintiff  such  that  the  homes  were  not                             “other  property”).
Because   the   inference   that   Medusa's   cement   was   an   integral
component   of   the   pavers   reasonably   follows   from   the   facts
alleged  in  the  complaint,  we  must  regard  it  as  true.      See
Northridge,                                                                   162   Wis.  2d   at   923;   Watts,   137   Wis.  2d   at   512.
Accordingly,  we  reject  Wausau  Tile's  contention  that  the  pavers
constitute  property  other  than  the  defective  cement.10
10  Wausau  Tile  argues  that  the  Midwhey  "integrated  system"
rule   set   forth   in   Midwhey   Powder   Co.,   Inc.   v.   Clayton
Industries,                                                                   157  Wis.  2d         585,            590-91,               460  N.W.2d   426     (Ct.  App.
1990),   may  only  be  applied  when  a  purchaser  buys  an  entire
integrated  system  which  later  turns  out  to  have  a  defective
component.    Wausau  Tile  contends  that  the  rule  does  not  apply  in
this  case  because  Wausau  Tile  bought  only  the  component               (the
cement),  not  the  integrated  system  (the  pavers).
In  a  similar  vein,  Wausau  Tile  argues  that  it  is  in  the
position  of  the  "initial  user"  in  Saratoga  Fishing.    Therefore,
Wausau  Tile  reasons,  under  the  rule  of  Saratoga  Fishing,  the
aggregate,  water,  and  other  materials  it  added  to  the  product  it
purchased  (the  cement)  constitutes  "other  property"  for  purposes
of  the  economic  loss  doctrine.
13




No.                                                                            97-2284
¶23   We  conclude  that  the  crux  of  Wausau  Tile's  claim  for
repair  and  replacement  costs  is  that  the  pavers  were  damaged
because  one  or  more  of  their  ingredients  was  of  insufficient
quality  and  did  not  work  for  Wausau  Tile's  intended  purpose.
This   is   the   essence   of   a   claim   for   economic   loss.            See
Northridge,  162  Wis.  2d  at  937;  Sunnyslope,  148  Wis.  2d  at  916.
See   also   D'Huyvetter   v.   A.O.   Smith   Harvestore   Prod.,             164
Wis.  2d  306,  328,  475  N.W.2d  587  (Ct.  App.  1991).
¶24   Second,  Wausau  Tile  claims  damages  in  the  amounts  it
expended,  or  anticipates  that  it  will  expend,  in  remediation  of
third  parties’  claims  of  damage  to  property  adjoining  the  pavers
and  pedestrians'  claims  of  personal  injury.    These  claims  do  not
allege  any  personal  injury  or  property  damages  on  Wausau  Tile’s
part.     Rather,  as  Wausau  Tile  acknowledges  in  its  brief,  these
claims  are  an  attempt  to  recoup  the  commercial  costs  of  settling
the  claims  of  third  parties  which  resulted  from  the  product
Both   of   these   arguments   fail   in   light   of   the   fact   we
determine  elsewhere  in  this  opinion  that  Wausau  Tile  is  not  the
real  party  in  interest  as  to  the  tort  claims  it  asserts.    Wausau
Tile  is  akin  to  the  ship  manufacturer  in  Saratoga  Fishing,  not
the  "initial  user."    See  Saratoga  Fishing,  520  U.S.  at  878.    See
also  Broan  Mfg.  Co.  v.  Westinghouse  Elec.  Corp.,                        597  F.  Supp.
435,                                                                           436              (E.D.  Wis.   1984)   (citing  Twin  Disc,  Inc.  v.  Big  Bud
Tractor,  Inc.,  582  F.  Supp.  208  (E.D.  Wis.  1984))  (dismissing  a
plaintiff   manufacturer's   tort   claims   against   a   defendant
component  supplier  on  the  ground  that  tort  claims  are  premised
on  duties  owed  to  consumers).     The  complete  packages  purchased
by  the  "initial  users"  in  this  case  were  the  pavers  manufactured
by   Wausau   Tile,   which   contained   cement   as   one   of   their
components.    If  the  proper  parties  were  to  bring  the  tort  claims
Wausau  Tile  is  attempting  to  assert,  the  damage  to  the  pavers
would  be  damage  to  the  "product  itself"  even  under  Wausau  Tile's
formulation  of  the  Midwhey  rule.
14




                                                                                   No.                                            97-2284
defect.     See  Wausau  Tile’s  Br.  at                                     20.   As  such,  the  claims
allege  consequential  economic  loss.    See  Daanen,  216  Wis.  2d  at
401.
¶25   Moreover,  even  if  Wausau  Tile’s  claims  were  sufficient
to  allege  personal  injury  and/or  property  damage,  it  would  not
be  permitted  to  litigate  those  claims  because  it  would  not  be  a
real  party  in  interest  and,  as  will  be  discussed  later  in  this
opinion,  joinder  of  the  real  parties  in  interest  would  not  be
feasible.                                                                          See   Wis.   Stat.                                       §                                                                        803.01   (1).11                                    A   real   party   in
                                                                                                                                            interest  is  "one  who  has  a  right  to  control  and  receive  the
                                                                                                                                            fruits  of  the  litigation."     Mortgage  Assocs.,  Inc.  v.  Monona
Shores,   Inc.,                                                                    47   Wis.                                      2d        171,                                                                     179,     177   N.W.2d                              340                     (1970);
                                                                                   Schwartz  v.  Evangelical  Deaconess  Soc'y,                                                                                               46  Wis.                                  2d                      432,      442,
175   N.W.2d                                                                 225   (1970).                                                                                                                                    The   basic   test   is   whether   the
plaintiff's  suit  will  prevent  the  defendant  from  being  harassed
by  other  claimants  for  the  same  demand,  whether  it  will  preclude
the   defendant   from   asserting   any   fair   defense,   offset,   or
counterclaim,  and  whether  the  defendant  will  be  fully  protected
when  the  judgment  in  behalf  of  the  plaintiff  is  discharged.
11  Wis.  Stat.  §  803.01(1)  states:
(1)    REAL  PARTY  IN  INTEREST.    No  action  shall  be  dismissed
on  the  ground  that  it  is  not  prosecuted  in  the  name  of
the  real  party  in  interest  until  a  reasonable  time  has
been   allowed   after   objection   for   ratification   of
commencement    of    the    action    by,    or    joinder    or
substitution  of,  the  real  party  in  interest;  and  such
ratification,  joinder,  or  substitution  shall  have  the
same  effect  as  if  the  action  had  been  commenced  in  the
name  of  the  real  party  in  interest.
15




No.                                                                            97-2284
Mortgage  Assocs.,  47  Wis.  2d  at  179;  State  ex  rel.  State  Bar  v.
Bonded   Collections,                                                          36   Wis.  2d        643,                               651-52,   154   N.W.2d   250
(1967).
¶26   We  agree  with  the  circuit  court  that  Wausau  Tile  would
not  be  a  real  party  in  interest  in  regard  to  any  claims  of
personal  injury  or  property  damage.12     All  property  allegedly
damaged  is  owned  by  third  parties  not  joined  in  this  suit.
Similarly,   third   parties,   not   Wausau   Tile,   sustained   any
personal   injury   which   may   have   occurred.                             Wausau   Tile   is
arguably  one  of  the  parties  responsible  for  harm  caused  by  the
defective  pavers.    As  such,  it  is  clear  that  Wausau  Tile  has  no
right  to  control  the  litigation  or  receive  the  fruits  of  any
claims  of  harm  to  person  or  property.    Further,  because  injured
third   parties   may   bring   their   own   claims   against   Medusa,
recovery  for  personal  injury  or  property  damage  by  Wausau  Tile
would  not  save  Medusa  from  further  harassment  for  the  same  harm.
In   sum,   the   third   parties,   not   Wausau   Tile,   are   the   real
parties   in   interest   for   any   claims   of   personal   injury   or
property  damage.    Other  courts  have  rejected  similar  attempts  by
12  Wausau  Tile  also  does  not  meet  the  criteria  which  would
allow  it  to  pursue  claims  on  behalf  of  those  who  are  real
parties   in   interest   as   a   representative   under   Wis.   Stat.       §
803.01(2).    Wis.  Stat.  §  803.01(2)  provides:
(2)                                                                            REPRESENTATIVES.     A    personal    representative,
executor,  administrator,  guardian,  bailee,  trustee  of
an  express  trust,  a  party  with  whom  or  in  whose  name  a
contract  has  been  made  for  the  benefit  of  another,  or
a  party  authorized  by  statute  may  sue  in  the  party's
name  without  joining  the  person  for  whose  benefit  the
action  is  brought.
16




No.                                                                            97-2284
plaintiffs  to  escape  application  of  the  economic  loss  doctrine
by  accompanying  their  allegations  of  economic  loss  with  claims
of  property  damage  or  personal  injury  suffered  by  third  parties
not  joined  in  the  suit.     See  Midwest  Helicopters  Airways,  Inc.
v.   Sikorsky   Aircraft,                                                      849   F.   Supp.                                         666,   672   (E.D.   Wis.
1994)(holding,    under    Wisconsin    law,    that    neither    the
owner/operator  of  a  defective  helicopter  nor  its  insurer  could
recover  in  tort  the  cost  of  claims  asserted  against  them  by
third-party   owners   of   property   damaged   when   the   helicopter
crashed,  when  the  third-party  owners  were  not  parties  to  the
suit);  Washington  Courte  Condominium  Assoc.-Four  v.  Washington-
Golf  Corp.,  501  N.E.2d  1290,  1294  (Ill.  App.  1986)  (holding  that
injuries  sustained  by  a  third  party  not  joined  in  the  action  did
not  constitute                                                                “personal  injury”  which  would  allow  plantiffs  to
avoid  the  application  of  the  economic  loss  doctrine).13
¶27   In  addition,  as  the  circuit  court  recognized,  joinder
of  the  third-party  real  parties  in  interest  would  be  difficult,
if  not  impossible.    See  Wis.  Stat.  §  803.03(1),  (3).14    According
13  Contrary   to   Wausau   Tile's   assertions,   the   fact   that
Wausau  Tile  actually  incurred  expenses  in  remedying  property
damage  and  repairing  faulty  pavers  does  not  distinguish  this
case  from  Midwest  Helicopters.    Wausau  Tile  voluntarily  incurred
the  costs  it  did  when  it  chose  to  take  on  the  responsibility  of
remediating  the  damage  to  the  pavers  and  other  property  of  third
parties.     It  is  possible  that  Wausau  Tile  assumed  the  duty  to
make  such  reparations  contractually  through  warranties  it  may
have  given  to  the  purchasers  of  its  pavers.      In  any  event,
Wausau  Tile  could  have  declined  to  repair  the  pavers  or  pay  for
the  property  damage  and  left  the  affected  third  parties  to  their
remedies.
14  Wis.  Stat.  §  803.03  states  in  part:
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No.                                                                           97-2284
(1)  PERSONS   TO   BE   JOINED   IF   FEASIBLE.                              A  person  who  is
subject  to  service  of  process  shall  be  joined  as  a
party  in  the  action  if:
(a)   In   the   person's   absence   complete   relief
cannot  be  accorded  among  those  already  parties;
or
(b)  The  person  claims  an  interest  relating  to  the
subject  of  the  action  and  is  so  situated  that  the
disposition  of  the  action  in  the  person's  absence
may:
1.                                                                            As  a  practical  matter  impair  or  impede
the    person's    ability    to    protect    that
interest;  or
2.                                                                            Leave    any    of    the    persons    already
parties   subject   to   a   substantial   risk   of
incurring   double,   multiple   or   otherwise
inconsistent  obligations  by  reason  of  his  or
her  claimed  interest.
(3)  DETERMINATION  BY  COURT  WHENEVER  JOINDER  NOT  FEASIBLE.    If  any
such  person  has  not  been  so  joined,  the  judge  to  whom
the  case  has  been  assigned  shall  order  that  the  person
be  made  a  party.     If  the  person  should  join  as  a
plaintiff  but  refuses  to  do  so,  the  person  may  be  made
a   defendant,   or,   in   a   proper   case,   an   involuntary
plaintiff.    If  a  person  as  described  in  subs.  (1)  and
(2)  cannot  be  made  a  party,  the  court  shall  determine
whether   in   equity   and   good   conscience   the   action
should  proceed  among  the  parties  before  it,  or  should
be  dismissed,  the  absent  person  being  thus  regarded  as
indispensable.     The  factors  to  be  considered  by  the
court  include:
(a)  To  what  extent  a  judgment  rendered  in  the
person's   absence   might   be   prejudicial   to   the
person  or  those  already  parties;
(b)  The  extent  to  which,  by  protective  provisions
in  the  judgment,  by  the  shaping  of  relief,  or
other  measures,  the  prejudice  can  be  lessened  or
avoided;
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No.                                                                         97-2284
to  the  complaint,  Wausau  Tile's  pavers  were  sold  and  installed
in  large  quantities  nationwide.    See  Compl.  ¶11.    Third  parties
having  claims  of  property  damage  or  personal  injury  are  likely
scattered   throughout   the   country.                                     Moreover,   as   the   circuit
court  aptly  pointed  out,  there  is  no  way  to  know  how  many
potential  plaintiffs  have  yet  to  be  harmed  or  will  come  forward
with  their  claims.
¶28   Finally,  Wausau  Tile  claims  lost  business  and  profits.
Wausau  Tile's  lost  business  and  profits  are  indirect  losses
attributable  to  the  inferior  quality  of  the  pavers.    See  Cooper
Power  Systems,  Inc.  v.  Union  Carbide  Chem.  &  Plastics  Co.,         123
F.3d  675,  681  (1997)  (applying  Wisconsin  law);  Daanen,  216  Wis.
2d   at                                                                     401;   Swanson   at                           140.                                                                     Accordingly,   they   constitute
                                                                                                                          economic  loss  which  is  not  recoverable  in  tort.     See  Cooper
Power,                                                                      123  F.3d  at                                 681;     Northridge,                                                     162  Wis.  2d  at                  926;  Bocre
                                                                            Leasing  Corp.  v.  General  Motors  Corp.,                                                                            645  N.E.2d                        1195,         1199
(N.Y.  1995).
¶29   We  conclude  that  Wausau  Tile's  complaint  alleges  only
economic  loss.     Therefore,  the  first  policy  set  forth  by  this
court  in  Daanen  supports  the  application  of  the  economic  loss
doctrine  in  this  case.      Wausau  Tile's  claims  involve  failed
economic  expectations,  which  are  the  province  of  contract  law.
See  Daanen,  216  Wis.  2d  at  406-07.
(c)  Whether  a  judgment  rendered  in  the  person's
absence  will  be  adequate;  and
(d)  Whether  the  plaintiff  will  have  an  adequate
remedy  if  the  action  is  dismissed  for  nonjoinder.
19




No.                                                                              97-2284
¶30   The  second  policy  reason  for  applying  the  economic
loss   doctrine   is   to   protect   parties'   freedom   to   allocate
economic   risk   via   contract.                                                Daanen,         216   Wis.  2d   at     403.
Allowing   purchasers   to   elect   recovery   under   tort   theories
instead  of  requiring  them  to  rely  on  their  contractual  remedies
"rewrites  the  agreement  by  allowing  a  party  to  recoup  a  benefit
that  was  not  part  of  the  bargain."    Daanen,  216  Wis.  2d  at  408
(quoting  Stoughton  Trailers,  Inc.  v.  Henkel  Corp.,  965  F.  Supp.
1227,  1230  (W.D.  Wis.  1997)).    It  strips  sellers  of  the  ability
to  protect  themselves  from  foreseeable  risk  by  negotiating  sales
agreements.    Daanen,  216  Wis.  2d  at  408.
¶31   Wausau  Tile  and  Medusa  entered  into  a  contract  with  a
warranty  which  specifically  addressed  the  suitability  of  the
cement  for  use  in  the  pavers.15    We  do  not  find  it  appropriate  to
address   whether   the   warranty   covers   Wausau   Tile's   alleged
damages;  the  breach  of  warranty  and  breach  of  contract  claims
are  still  pending.     It  is  clear,  however,  that  Wausau  Tile  had
the  opportunity  to  negotiate  a  warranty  and  did  so.    Presumably,
Wausau   Tile   paid   a   price   commensurate   with   the   warranty   it
received.     See  East  River,                                                  476  U.S.  at   873;  Bocre  Leasing,   645
N.E.2d  at  1196;  Daanen,  216  Wis.  2d  at  409.    If  Wausau  Tile  were
permitted   to   reap   the   benefits   of   a   broader   warranty   by
recovering  its  damages  in  tort,  it  would  receive  more  than  it
15  There  is  no  evidence  that  Wausau  Tile  and  Medusa  had
unequal  bargaining  power.     In  general,  a  commercial  situation
involves   entities   with   similar   bargaining   power.                       See   East
River,  476  U.S.  at  873.
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No.                                                                           97-2284
bargained  for  (and  paid  for)  and  Medusa  would  receive  less  than
it  bargained  for                                                            (and  was  paid  for).     Consequently,  the  second
policy  set  forth  in  Daanen  also  supports  the  application  of  the
economic  loss  doctrine  in  this  case.
¶32   The  third  policy  reason  for  applying  the  economic  loss
doctrine  is  that  the  doctrine  "encourages  the  party  with  the
best  understanding  of  the  attendant  risks  of  economic  loss,  the
commercial  purchaser,  to  assume,  allocate,  or  insure  against  the
risk   of   loss   caused   by   a   defective   product."                    Daanen,                                                       216
Wis.  2d  at                                                                  410.     Purchasers  are  generally  better  equipped  than
sellers   to   anticipate   the   economic   loss   which   a   defective
product  could  cause  their  particular  businesses.     See  id.  at
411-12.     Accordingly,  courts  have  required  purchasers  to  guard
against   foreseeable   economic   loss   by   allocating   the   risk   by
contract  or  by  purchasing  insurance.    See  Daanen,  216  Wis.  2d  at
412-13;  Trans  States  Airlines,  682  N.E.2d  at  58-59.    The  result
is  a  more  efficient,  more  predictable  marketplace.    See  Daanen,
216  Wis.  2d  at  410-12.    If  tort  recovery  were  permitted,  sellers
of  products  would  be  "potentially  liable  for  unbargained-for  and
unexpected   risks,"   id.   at                                               411,   leading   eventually   to   higher
prices  for  consumers.     See  id.  at                                      410-12;  Bocre  Leasing,                                      645
N.E.2d  at  1198.
¶33   Wausau  Tile  should  reasonably  have  expected  that  it
might  receive  defective  or  unsuitable  cement.    Because  cement  is
one  of  the  main  components  of  pavers,  Wausau  Tile  should  also
have  foreseen  that  defective  cement  might  produce  defects  in  the
pavers.    Evidently,  Wausau  Tile  did  foresee  this  risk  because  it
21




No.                                                                           97-2284
attempted   to   allocate   the   risk   contractually   with   Medusa.
Wausau  Tile  may  not  now  turn  to  tort  law  in  hopes  of  obtaining
benefits  for  which  it  may  not  have  bargained.
¶34   We  find  that  the  three  policy  reasons  for  applying  the
economic  loss  doctrine  support  the  application  of  the  doctrine
in  this  case.     Because  Wausau  Tile  has  alleged  purely  economic
loss,   the   economic   loss   doctrine   prevents   Wausau   Tile   from
maintaining  its  negligence  and  strict  liability  claims  against
Medusa.
B.
¶35   Next,  we  consider  whether  the    rule  of  Northridge  Co.
v.  W.R.  Grace  &  Co.,                                                      162  Wis.  2d   918,                  471  N.W.2d   179   (1991),
permits  Wausau  Tile  to  maintain  its  tort  claims  in  spite  of  the
economic  loss  doctrine.     In  doing  so,  we  address  the  certified
question:     "the  nature,  extent  and  scope  of  the  public  safety
exception    to    the    economic    loss    doctrine    enunciated    in
[Northridge]."    Certification  at  1.
¶36   Wausau  Tile  alleges  that  the  damaged  pavers  present  a
risk  of  injury  to  pedestrians  on  the  walkways  in  which  they  have
been  installed.     According  to  Wausau  Tile,  this  risk  of  injury
to  pedestrians  amounts  to  a  public  safety  hazard  which  entitles
it  to  bring  its  tort  claims  under  an  exception  to  the  economic
loss  doctrine  contained  in  Northridge.
¶37   In    Northridge,    the    defendant    sold    Monokote,    a
fireproofing  material  containing  asbestos,  to  the  plaintiffs'
contractor   for   use   in   the   construction   of   the   plaintiffs'
shopping   centers.                                                           Northridge,     162   Wis.  2d   at   922.          The
22




No.                                                                           97-2284
plaintiffs   later   sued   the   defendant   for   breach   of   warranty,
strict   products   liability   and   negligence,   claiming   that   the
asbestos  in  the  Monokote  rendered  it  defective,  contaminated
plaintiffs'   building,   and   "presented   unreasonable   danger   to
persons  and  property."     Id.     Plaintiffs  sought  to  recover  the
amounts  it  had  expended  in  inspecting  the  building  and  removing
the  asbestos,  as  well  as  the  decrease  in  value  of  the  property.
Id.     The  defendant  argued  that  the  tort  claims  were  barred  by
the  economic  loss  doctrine.    Id.  at  929-30.
¶38   This  court  held  that  the  plaintiffs  had  stated  claims
for  negligence  and  strict  liability.    Id.  at  923.    We  identified
the  issue  as  "whether  the  plaintiffs  have  alleged  a  tort  claim
for  physical  harm  to  property  (property  other  than  the  allegedly
defective  product  itself)  or  whether  the  losses  complained  of  by
the  plaintiffs  are  only  recoverable  under  a  theory  of  contract."
Id.  at                                                                       931.                         We  found  that  the  plaintiffs  did  not  allege  in
their  tort  claims  that  "the  Monokote  itself  was  inferior  in
quality  or  did  not  work  for  its  intended  purpose,  the  essence  of
a  claim  for  economic  loss,"     id.  at                                   937,  nor  had  plaintiffs
alleged  that  damages  resulted  because  of  harm  to  the  product
itself.    Id.    Rather,  "[t]he  essence  of  the  plaintiffs'  claim  is
that   Monokote   releases   toxic   substances   in   the   environment
thereby  causing  damage  to  the  building  and  a  health  hazard  to
its  occupants."    Id.    This  court  stated:
We  conclude  that  the  complaint  in  this  case  can  be
interpreted  as  alleging  that  a  defect  in  the  product
has  caused  physical  harm  to  property,  property  other
than  the  product  itself.    The  alleged  physical  harm  to
23




No.                                                                              97-2284
other  property  consists  of  the  contamination  of  the
plaintiffs'    buildings    with    asbestos    from    the
defendant's  product,  posing  a  health  hazard.
Id.  at  922.
¶39   For   several   reasons,   the   holding   we   reached   in
Northridge  is  inapplicable  to  the  facts  of  this  case.     First,
the  heart  of  Wausau  Tile's  claim  is  that  Medusa's  cement  was
inferior  in  quality  and  therefore  unsuitable  for  its  intended
use   as   an   ingredient   of   the   pavers.                                  As   we   determined   in
Northridge,  that  type  of  allegation  is  "the  essence  of  a  claim
for   economic   loss."                                                          Northridge,                  162   Wis.  2d   at                    937.                                                    We
specifically  pointed  out  in  Northridge  that  the  plaintiffs  in
that  case  had  not  sought  damages  for  harm  to  the  fireproofing
material  itself  or  alleged  that  the  fireproofing  material  was
inferior  in  quality.    Id.
¶40   Second,  we  developed  the  Northridge  rule  in  response
to   the   unique   facts   of   that   case.                                    Northridge   involved   a
defective   product   which   contained   asbestos,   an   inherently
                                                                                                              dangerous  material.     Northridge,                                                                                                                                         162  Wis.  2d  at                                            923.     Exposure
                                                                                                                                                     to   asbestos   has   been   linked   to   asbestosis                                                                                                                                              (scarring   of   the
                                                                                                                                                                                                             lungs),   various   types   of   cancer,   and   disruption   in   lung
                                                                                                                                                                                                             functioning.    Board  of  Educ.  of  Chicago  v.  A,  C  &  S,  Inc.,  546
N.E.2d                                                                           580,                         588                                    (Ill.                                                   1989);                                                                                            80  S.  Eighth  St.  Ltd.  Partnership
                                                                                 v.   Carey-Canada,   Inc.,                                                                                                  486   N.W.2d                                                                  393,                398-99                                   (Minn.                 1992),
amended  by                                                                                                   492  N.W.2d                            256                                      
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