Wis. SC to review case over failed water softener, four others

MADISON, Wis. (Legal Newsline) -- The Wisconsin Supreme Court has voted to accept a handful of new cases for review, including one over property damage caused by a landlord-installed water softener.

State Farm v. Hague Quality Water was one of the five cases the state's high court agreed to take up, according to a news release last week.

The case questions who is financially responsible for the property damage caused when a landlord installed a water softener at a rental property and it failed.

The court will evaluate the economic loss doctrine and whether tort claims are precluded because -- as determined by the state's Court of Appeals -- the softener is not part of an integrated system with the drywall, flooring and woodwork that was damaged.

The doctrine bars the recovery of purely economic losses in consumer transactions through tort remedies where the only damage is to the product purchased by the consumer.

Landlord Larry Krueger purchased the softener from Menards and installed it in a rental house he owned. The softener was manufactured by Hague Quality Water International.

The limited warranty provided that in the event of a defect, Hague would repair or replace the defective parts but would not be responsible for any "incidental, consequential or secondary damages."

Two years later, the water softener failed, causing nearly $45,000 in damage to the drywall, flooring and woodwork in the rental property.

Krueger's loss was covered by his homeowners insurance policy issued by State Farm Fire and Casualty Company, and he was reimbursed for the loss.

State Farm then sued Hague and its insurer, The Cincinnati Insurance Company, alleging tort claims for the defective water softener.

Hague moved for summary judgment, arguing that all of State Farm's damages were economic and therefore precluded by the economic loss doctrine. A circuit court agreed and dismissed State Farm's complaint on the grounds that the doctrine barred recovery.

The appeals court reversed, stating that "a defective product must be integral to the function of the damaged property before the defective product and the damaged property may be considered part of the same integrated system."

It concluded that "the damaged property in this action -- the drywall, flooring, and woodwork -- are not part of an integrated system with the water softener."

Hague and its insurer appealed to the state Supreme Court.

Justice David Prosser did not participate.

Also last week, the high court denied review in 13 other cases.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.