## Facts

- Wausau Tile manufactured and sold “Terra” concrete pavers and purchased cement from Medusa and aggregate from County Concrete.
- Wausau Tile alleged the pavers suffered excessive expansion, deflection, curling, cracking, and buckling caused by an alkali–silica reaction between “high-alkali” cement and “high silica” aggregate.
- Wausau Tile claimed the pavers deteriorated prematurely and created pedestrian safety hazards at installation sites.
- Wausau Tile sued Medusa and others asserting contract and warranty claims and tort claims (including negligence and strict products liability), seeking repair/replacement costs, lost profits, and amounts spent defending or paying third-party personal injury and property damage claims.
- Medusa’s contract warranties limited remedies to remedying or replacing nonconforming cement and disclaimed consequential damages.
- The circuit court dismissed Wausau Tile’s tort claims against Medusa under the economic loss doctrine and granted summary judgment that Travelers (Medusa’s insurer) had no duty to defend; the Wisconsin Supreme Court reviewed and affirmed.

## Issues

1. Whether the economic loss doctrine barred Wausau Tile’s negligence and strict products liability claims against Medusa where Wausau Tile alleged damage to the pavers, economic losses, and potential or actual injury/property damage to third parties.
2. Whether alleged public-safety risks brought the case outside the economic loss doctrine based on Northridge.
3. Whether damage to the finished pavers caused by a component (cement) constituted damage to “other property,” permitting tort recovery.
4. Whether Travelers had a duty to defend Medusa when the viable claims against Medusa sounded in contract and warranty and sought economic loss.

## Decision

- The Wisconsin Supreme Court affirmed the circuit court’s judgment.
- The court held Wausau Tile’s tort claims against Medusa were barred by the economic loss doctrine because Wausau Tile alleged only economic loss as to itself and damage to the product itself.
- The court rejected applying a public-safety exception on these pleadings; the only non-economic harms alleged were injuries or property damage of third persons.
- The court treated deterioration of the pavers from allegedly defective cement as damage to the product itself, not “other property.”
- The court held Travelers had no duty to defend Medusa because the remaining contract and warranty claims sought economic loss and did not allege covered tort-type “bodily injury” or “property damage” caused by an “occurrence.”

## Legal Principles

- In a commercial product transaction, the economic loss doctrine bars tort recovery when the plaintiff’s losses are economic and the only damage is to the product itself; contract and warranty law govern risk allocation.
- Allegations that a defective product could pose safety risks do not by themselves avoid the economic loss doctrine absent allegations by the plaintiff of personal injury or damage to property other than the product.
- Where a component is purchased for integration into a finished product, damage the component causes to the integrated product is treated as damage to the product itself for economic loss purposes.
- A buyer’s expenditures defending or paying third-party claims may remain economic loss as between buyer and seller and do not convert the buyer’s dispute into a tort action.
- An insurer has no duty to defend where the complaint, properly construed after dismissal of barred tort theories, alleges only contract/warranty claims seeking economic loss outside liability coverage for accidental bodily injury or property damage.

## Conclusion

The court held that Wausau Tile’s claims against its cement supplier for defective pavers were confined to contract and warranty remedies because Wausau Tile alleged economic loss and damage to the product itself, and allegations of third-party harm and public-safety risks did not create a tort path; accordingly, the supplier’s liability insurer had no duty to defend.


Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235, 593 N.W.2d 445 (1999)