Larry Krueger bought a water softener from Menard’s. Two years later, the water softener failed and caused flooding in Mr. Krueger’s home, resulting in $45,000 in damages. Allstate, Mr. Krueger’s homeowner’s insurer, paid for the damages, but then sued the manufacturer of the water softener to recover its payment. The manufacturer claimed that Allstate could not recover for the flooding damage under the “economic loss doctrine,” which limits damages to the remedies set forth in the contract for the purchase of the water softener. A Sheboygan County Circuit Court agreed, and dismissed Allstate’s claim.
The Court of Appeals of Wisconsin reversed the decision, holding that the “economic loss doctrine” does not apply when a defective product causes damage to other property, not the purchased item. Because Allstate was suing for damages from the flooding, and not for damages to the water softener, the court of appeals held that Allstate could recover its payment. The case then went to the Supreme Court of Wisconsin. Because Justice David Prosser did not participate, the case was heard by six Justices. Three of the Justices sided with Allstate, and three sided with the manufacturer. As a result of the 3-3 tie, the court of appeals decision stands.