Insurance Company of North America v. Cease Electric Inc.
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2004 WI 139 SUPREME COURT CASE NO.: COMPLETE TITLE: OF WISCONSIN 03-0689 Insurance Company of North America, Plaintiff-Respondent, Cold Spring Egg Farm, Inc., Involuntary-Plaintiff-Respondent, v. Cease Electric Inc., d/b/a Zillmer Electric and Pekin Insurance Company, Defendants-Appellants-Petitioners. REVIEW OF A DECISION OF THE COURT OF APPEALS 2004 WI App 15 Reported at: 269 Wis. 2d 286, 674 N.W.2d 886 (Ct. App. 2003-Published) OPINION FILED: SUBMITTED ON BRIEFS: ORAL ARGUMENT: September 10, 2004 SOURCE OF APPEAL: COURT: COUNTY: JUDGE: Circuit Walworth John R. Race November 9, 2004 JUSTICES: CONCURRED: DISSENTED: NOT PARTICIPATING: ATTORNEYS: For the defendants-appellants-petitioners there were briefs by Monte E. Weiss and Weiss Law Office, S.C., Milwaukee; and J.P. Fernandes and Hale & Wagner, S.C., Milwaukee, and oral argument by Monte E. Weiss. For the plaintiff-respondent and involuntary plaintiffrespondent there was a brief by Timothy A. Bascom, Richard E. Ceman, Jr., Amy J. Wilkinson and Bascom, Budish & Ceman, S.C., Wauwatosa, and oral argument by Timothy A. Bascom. An amicus curiae brief was filed by E. Campion Kersten and Kersten & McKinnon, S.C., Milwaukee; and William C. Gleisner, III, and Law Offices of William Gleisner, Milwaukee, on behalf of the Wisconsin Academy of Trial Lawyers. An amicus curiae brief was filed by Thomas P. Godar, John D. Finerty, Jr., and Michael Best & Friedrich, LLP, Madison; and Michele Odorizzi and Mayer, Brown, Rowe & Maw, LLP, Chicago, on behalf of Associated General Contractors of America, AGC of Wisconsin, Inc., and Associated General Contractors of Greater Milwaukee, and oral argument by Michele Odorizzi. 2 2004 WI 139 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 03-0689 (L.C. No. 99 CV 391) STATE OF WISCONSIN : IN SUPREME COURT Insurance Company of North America, Plaintiff-Respondent, Cold Spring Egg Farm, Inc., FILED Involuntary-PlaintiffRespondent, NOV 9, 2004 v. Cornelia G. Clark Clerk of Supreme Court Cease Electric Inc., d/b/a Zillmer Electric and Pekin Insurance Company, Defendants-AppellantsPetitioners. REVIEW of a decision of the Court of Appeals. ¶1 Electric ANN WALSH Inc., BRADLEY, d/b/a Zillmer J. The Electric Affirmed. petitioners, and Pekin Cease Insurance Company seek review of a court of appeals' decision affirming a circuit court judgment awarding Cold Spring Egg Farm, Inc., and its insurance damages for carrier, losses Insurance sustained due Company of to failure the North of America, a barn No. ventilation system.1 03-0689 Cease Electric, a contract electrician, asserts that it was retained to manufacture a product, namely the ventilation system. Accordingly, it contends that the economic loss doctrine precludes Cold Spring's recovery under tort. ¶2 We agree with Cold Spring that its contract with Cease Electric was one for services and not for a product. determine that the economic loss doctrine does not Because we apply to contracts for services, we conclude that Cold Spring is entitled to its recovery under services. tort for the negligent performance of We therefore affirm the decision of the court of appeals.2 I ¶3 Cold Spring raises chickens to produce eggs. long-standing business relationship with Cease Electric. It had a In the summer of 1996, Cold Spring entered into an oral contract with Cease Electric to upgrade the ventilation system in one of its barns. Ventilation systems are required to bring fresh, cool 1 Insurance Co. of North America v. Cease Electric, Inc., 2004 WI App 15, 269 Wis. 2d 286, 674 N.W.2d 886 (affirming a decision of the circuit court for Walworth County, John R. Race, Judge). 2 Because we determine that Cease Electric's contract with Cold Spring was one for services, we do not address the proper test for distinguishing mixed contracts that involve both products and services. Similarly, because we conclude that the economic loss doctrine does not apply to contracts for services, we do not reach the issue of whether Cold Spring's chickens constituted "other property." 2 No. 03-0689 air into the barns so that the chickens have sufficient oxygen to live. ¶4 Prior to installation of the new system, Cold Spring had manual ventilation systems in its barns. system, each individual fan had independent of the other fans. its own Under the manual thermostat control If one individual fan failed, the remaining fans would continue to operate. ¶5 The new system was designed so controller would operate all fans in stages. that a single As the temperature in the barn rose, the fan control would engage different fans to bring fresh air into the barn. in the barn fell, the Conversely, when the temperature controller would turn off fans accordingly. ¶6 The "brains" of the new ventilation system was the main fan control unit: the ST-4026. component from Aerotech, Inc. Cold Spring purchased this Aerotech designed the system to have a backup thermostat as a safety device in the event the primary fan control failed. It recommended wiring the backup thermostat separately from the power source for the primary fan control. ¶7 Included with schematic. Based on Electric wire the to the this ST-4026 was diagram, Cold ventilation a one-page Spring system's wiring asked component Cease parts, including the primary fan control and the backup thermostat. Upon completion of the job, Cold Spring terminated its relationship with Cease Electric because it believed that Cease had not completed the project correctly or in a timely fashion. 3 No. ¶8 03-0689 On January 8, 1997, the ventilation system in Cold Spring's barn failed, resulting in the loss of nearly 18,000 chickens. Within a week of the loss, Cold Spring hired Al Dittmar, an electrician with Carroll Electric, to investigate why the fans malfunctioned. ¶9 Dittmar concluded that Cease Electric had improperly wired the main fan control unit to the same power circuit as the backup thermostat. He also determined that Cease Electric's employees had failed to test the new system, which would have revealed that the backup thermostat was not functioning. ¶10 Pursuant to its insurance contract, Insurance Company of North America (INA) paid Cold Spring $118,339.20 for the loss of income and $40,704.89 for the loss of chickens. meanwhile, sustained deductible. a loss of $39,761.02 due Cold Spring, to its policy Both INA and Cold Spring commenced this action in June 1999, alleging that the failure of the ventilation system was the result of the negligence of Cease Electric in its performance of services. ¶11 At the conclusion of a two-day trial, a jury found that the employees of Cease Electric were negligent and that their negligence had caused the plaintiffs' loss. court inserted verdict. It the then stipulated entered amount judgment in of the The circuit damages total into the amount of $204,065.29, representing the amount of stipulated damages plus 4 No. 03-0689 double costs awarded pursuant to Wis. Stat. § 807.01(3) (200102).3 Cease Electric appealed. ¶12 On appeal, Cease Electric maintained that the plaintiffs' negligence action was precluded by the economic loss doctrine.4 It argued that it had provided a product to Cold Spring, the ventilation system. the plaintiffs' case was According to Cease Electric, as one of disappointed expectations resulting in only economic losses to the product, the economic loss doctrine barred recovery in a tort action. ¶13 concluded The court of appeals affirmed the circuit court. that the economic Spring's recovery under tort. loss doctrine did not bar It Cold Insurance Co. of North America v. Cease Electric Inc., 2004 WI App 15, ¶1, 269 Wis. 2d 286, 674 N.W.2d 886. Specifically, the court of appeals determined that Cease Electric had provided only services to Cold Spring and that, under Wisconsin law, the economic loss doctrine did not extend to insurer, service Pekin contracts. Insurance Id. Company, Cease Electric petitioned this and its court for review. 3 All references to the Wisconsin Statutes are to the 200102 version unless otherwise noted. 4 Additionally, Cease Electric asserted that the circuit court erred in (1) refusing to impose sanctions against Cold Spring for its alleged spoliation of evidence and (2) exacting the penalty provisions of Wis. Stat. § 807.01(3). The court of appeals rejected both arguments. Insurance Co. of North America, 269 Wis. 2d 286, ¶¶1, 24. Because we did not grant review of these issues, we do not address them here. 5 No. 03-0689 II ¶14 define This case provides us with an opportunity to further the Wisconsin. parameters of the economic loss doctrine in Before doing so, however, we must first determine whether the transaction at issue was one for goods or services. Interpreting the nature of a contract presents a question of law subject to independent appellate review. See Micro-Managers, Inc. v. Gregory, 147 Wis. 2d 500, 507, 434 N.W.2d 97 (Ct. App. 1988). ¶15 The economic loss doctrine is a judicially created doctrine that seeks to preserve the distinction between contract and tort. Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 403-04, 573 N.W.2d 842 (1998). From its inception, the doctrine has been based on the understanding that contract law, and particularly the law of warranty, is better suited than tort law for arena. dealing with purely Id. economic loss in the commercial Its application to a set of facts also presents a question of law subject to independent appellate review. See Sunnyslope Grading, Inc. v. Miller, Bradford & Risberg, Inc., 148 Wis. 2d 910, 915, 437 N.W.2d 213 (1989). III ¶16 Our discussion begins nature of the contract at issue. with an examination of the Cease Electric contends that the court of appeals erred in characterizing its contract with Cold Spring as one for services. It asserts that it was hired to manufacture a unique ventilation system for Cold Spring's 6 No. barn. 03-0689 According to Cease Electric, it fashioned this system by providing additional component parts that Cold Spring did not have.5 ¶17 The circuit court rejected Cease Electric's claim that it provided a product to Cold Spring. Similarly, the court of appeals determined that Cease Electric had mischaracterized its role in the agreement. Wis. 2d 286, ¶20. Electric to ¶18 contract Like at It concluded that Cold Spring had hired Cease provide ventilation system. the issue Insurance Co. of North America, 269 the service of installing the new that the Id. court was of for appeals, services, we and determine not for a product. Here, it was Aerotech's ST-4026 that created the ventilation system in the barn, not Cease Electric. All Cease was required to do was to follow the one-page wiring schematic to ensure that the controller was power source. properly wired to ventilation fans and a It failed to do so, and Cold Spring brought suit, alleging negligent performance of services. ¶19 A review of the record supports our conclusion. To begin, Cease Electric did not charge Cold Spring a one-time fee for the price of a "system." Rather, the electricians who did the work for Cease Electric kept time sheets and billed their time out on an hourly basis. Evidence of billing is a relevant 5 It is unclear from the record which party furnished the backup thermostat in this case. 7 No. 03-0689 consideration when determining the nature of a contract. Micro- Managers, 147 Wis. 2d at 508. ¶20 Furthermore, the testimony of Robert Cease, a principal of Cease Electric, belies Cease Electric's assertion that it "manufactured" Cold Spring's ventilation system. After discussing the manual system in place before the installation of the Aerotech system, Cease made the following observation about the new fan controller: "The unit itself is sophisticated, but the wiring of it is very simple. You bring power in, you take power out to a fan or a stage of fans. So it's basically inputs and outputs." ¶21 Finally, although Cease Electric claims to have furnished additional component parts for Cold Spring's system, there is no evidence in the record to support this contention. As noted Aerotech. Cease above, Cold Spring had purchased the ST-4026 from The only clear evidence of any "product" provided by Electric is contained merely conduit and wiring. in Exhibit 3, which references Accordingly, we are satisfied that the contract at issue was for services and not for a product. IV ¶22 Having determined that the contract at issue was one for services, we turn next to the applicability of the economic loss doctrine here. loss doctrine product as cannot Recently, this court described the economic holding recover that a solely manufacturer under negligence particularly where the or warranty 8 commercial purchaser economic losses strict liability given by the from of a the theories, manufacturer No. specifically precludes the recovery of such damages. 03-0689 Van Lare v. Vogt, 2004 WI 110, ¶18, __ Wis. 2d __, 683 N.W.2d 46 (citing Sunnyslope, 148 Wis. 2d at 921). ¶23 "Economic loss" for purposes of the doctrine is defined as "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.'" Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235, 246, 595 N.W.2d 445 (1999) (quoting Northridge Co. v. W.R. Grace & Co., 162 Wis. 2d 918, 925-26, 471 N.W.2d 179 (1991)). includes both direct economic loss and consequential It loss. Daanen, 216 Wis. 2d at 401. ¶24 The significance of the economic loss doctrine is that it "requires transacting parties in Wisconsin to pursue only their contractual remedies when asserting an economic loss claim, in order to preserve the distinction between contract and tort." Digicorp, Inc. v. Ameritech Corp., 2003 WI 54, ¶34, 262 Wis. 2d 32, 662 N.W.2d 652. array of damages than In general, tort offers a broader contract. The economic loss doctrine precludes parties under certain circumstances from eschewing the more limited contract remedies and seeking tort remedies. ¶25 There is a split among the jurisdictions as to whether the economic loss doctrine applies to contracts for services. As one divided treatise on noted, whether services . . . ." the "[t]he judiciary doctrine should remains be hopelessly extended to Philip L. Brunner and Patrick J. O'Connor, Jr., Construction Law § 19:10, at n. 14 (May 2004). 9 This court No. 03-0689 has not yet addressed whether the doctrine covers such claims. Indeed, in Daanen, 216 Wis. 2d at 417, we expressly reserved the issue of "whether the doctrine applies with equal force to lies in damages resulting from the provision of services."6 ¶26 The genesis of products liability cases. the economic loss doctrine The seminal case on the economic loss doctrine is Seely v. White Motor Co., 403 P.2d 145 (Cal. 1965). There, the California Supreme Court held that a plaintiff could not recover in a tort action for a defective truck that did not injure person or property, but crashing due to defective brakes. only needed repairs Id. at 150-51. after It reasoned that the losses suffered by the plaintiff were solely economic and due to the failure of the product to live up to the buyer's expectations. ¶27 Id. at 151. Wisconsin first recognized the economic loss doctrine in Sunnyslope, 148 Wis. 2d at 910, another products liability case. There, the plaintiff, a commercial contractor, purchased a backhoe directly from the defendant manufacturer. When the backhoe failed to properly perform, the plaintiff brought a tort action against the manufacturer for damages including the cost of replacement parts, labor charges, and lost profits. 914-15. a Id. at This court denied the plaintiff relief, concluding that commercial purchaser of a product 6 cannot recover solely In accordance with our decision, we withdraw the language in Vogel v. Russo, 2000 WI 85, ¶15, 236 Wis. 2d 504, 613 N.W.2d 177, suggesting that the economic loss doctrine precludes recovery in tort of purely economic losses for the failure of a service to live up to contractual expectations. 10 No. 03-0689 economic losses from the manufacturer under negligence or strict liability theories. ¶28 Id. at 921. The application of the economic loss doctrine in the abovementioned cases is not surprising given the protections afforded by the Uniform Commercial Code (U.C.C.). Adopted by the legislature in 1963, the U.C.C. sets forth the rights and remedies that govern a transaction between parties of relatively equal bargaining power. two commercial Id. at 916. It provides a "'comprehensive system for compensating consumers for economic loss arising from the purchase of defective products.'" State Farm Mut. Auto. Ins. Co. v. Ford Motor Co., 225 Wis. 2d 305, 342, 592 N.W.2d 201 (1999) (quoting Alloway v. General Marine Ind., 695 A.2d 264, 268 (N.J. 1997)). ¶29 Protection against damages caused by a defective product injuring itself is the purpose of express and implied warranties provided for in the U.C.C. at 342. When a product fails to State Farm, 225 Wis. 2d operate as warranted or expected, the proper avenue for relief is a breach of warranty claim. Id. Alternatively, customers can reject the product or revoke their acceptance and sue for breach of contract. ¶30 Under the provisions of the U.C.C., Id. purchasers of defective products are able to recover costs and lost profits, thereby placing them in the same position as if the product had functioned properly. Id. at 343. "'The expectation damages available in warranty for purely economic loss give a plaintiff the full benefit of its bargain 11 by compensating for forgone No. business opportunities.'" Id. (quoting East River 03-0689 Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 873 (1986)). ¶31 Additionally, manufacturers. the U.C.C. provides protections for Through the terms of a contract, a manufacturer can restrict its liability by disclaiming warranties or limiting remedies. Id. lower price. from the In return, the purchaser is likely to pay a Id. "'The limitation in a contract action comes agreement of the parties and the requirement that consequential damages, such as lost profits, be a foreseeable Id. (quoting East River, 476 U.S. at result of the breach.'" 874). ¶32 It is the existence of these rights and remedies that serves as one of the critical rationales underlying the economic loss doctrine. After all, if a commercial purchaser were allowed to sue in tort to recover solely economic loss, the U.C.C. provisions circumvented designed entirely. In to govern that such event, disputes the U.C.C. could be would be rendered meaningless and "contract law would drown in a sea of tort." ¶33 East River, 476 U.S. at 866. Our case law recognizes this underlying rationale. Sunnyslope, this court observed that, "the In legislative protections granted by the Uniform Commercial Code are not to be buttressed by tort principles and recovery." 916. Similarly, just last term, we 148 Wis. 2d at warned of tort law duplicating contract remedies and adding unnecessary confusion into the law. We stated: 12 No. 03-0689 Where there are well-developed contractual remedies, such as the remedies that the Uniform Commercial Code (in force in all U.S. states) provides for breach of the quality, fitness, or specifications of goods, there is no need to provide tort remedies . . . . The tort remedies would duplicate the contract remedies, adding unnecessary complexity to the law. Tietsworth v. Harley-Davidson, Inc., 2004 WI 32, ¶30, 270 Wis. 2d 146, 677 N.W.2d 233 (quoting All-Tech Telecom, Inc. v. Amway Corp., 174 F.3d 862, 865 (7th Cir. 1999)). This reasoning is particularly significant in the present case. ¶34 Here, Cease Electric asks this court to extend the economic loss doctrine to contracts for services. that allowing Cold Spring to escape the It maintains confines of its agreement would permit a classic "end run," eviscerating the doctrine altogether. commercial party Cease suffers a Electric failure in asserts the that when performance of a a contract and the loss sustained is solely economic, the doctrine should apply. ¶35 The major problem with Cease Electric's argument is that it assumes that contract law is better suited than tort law for dealing with purely economic loss in the context of service agreements. It is not. Unlike contracts for products or goods, which enjoy the benefit of well-developed law under the U.C.C., no such benefit exists for contracts for services. This is because the U.C.C. does not apply to service contracts. Stat. § 402.102. 291 N.W.2d 636 Wis. Van Sistine v. Tollard, 95 Wis. 2d 678, 684, (1980). As a result, the built-in warranty provisions that the U.C.C. may provide in a contract for the 13 No. 03-0689 sale of products or goods would not apply to a contract for services. ¶36 Given the inapplicability of the U.C.C. to service contracts, we decline to extend the economic loss doctrine in this case. We note that we are not alone in this regard. See, e.g., Cargill, Inc. v. Boag Cold Storage Warehouse, 71 F.3d 545, 550 (6th Cir. 1995) (citing the U.C.C. and stating that the economic loss doctrine "is associated with 'transactions in goods,' and not with transactions in services"); McCarthy Well Co., Inc. v. St. Peter Creamery, Inc., 410 N.W.2d 312, 315 (Minn. 1987) (explaining that the rationale behind the economic loss rule is that "a recognition of tort actions in cases under the U.C.C. would upset the remedies contained in the U.C.C.; when the rationale is not applicable, i.e., when the U.C.C. does not apply, there is no reason for the [economic loss] rule to apply"). ¶37 The inapplicability of the U.C.C. and its warranties is particularly troubling in light of the facts of this case. Like many agreements between purchasers and providers of services, the agreement between Cold Spring and Cease Electric was oral rather than written. Because of the informal circumstances surrounding most oral contracts for services, the policy provisions underpinning the application of the economic loss doctrine do not readily apply. ¶38 basis In Daanen this court identified three policies as a for application actions: of the economic loss doctrine to tort (1) to maintain the fundamental distinction between 14 No. tort and freedom contract to law; allocate (2) to economic protect risk by commercial contract; 03-0689 parties' and (3) to encourage the party best situated to assess the risk of economic loss to assume, allocate, or insure against that risk. Wis. 2d at 403. ¶39 216 We address each in turn. Even though the distinctions between tort and contract law at times may seem blurred, they differ in the interests that each protects. Tort principles protect not only the individuals harmed but also demonstrate a public policy to protect society against the unreasonable unexpected injury. "Morass": An risk of harm from accidental and Christopher J. Faricelli, Wading Into The Inquiry Into the Application of New Jersey's Economic Loss Rule To Fraud Claims, 35 Rutgers L.J. 717, 723 (Winter 2004). ¶40 On the other contract law is allocate the risks that hand, an bargaining of operating parties non-performance. principle to a Id. behind contract at will 722. The disappointed party to the contract is protected against nonperformance by the benefit of the bargain. Id. at 722-23. Thus, when a contract is broken, the breaching party is liable for restoring the non-breaching party to the position he or she would have Michelle been Kristin Simultaneous in, regardless Hart, Expansion Tort and of or Dilution negligence Contract?: of or New Contract intent. Jersey's Theory, 26 Rutgers L.J. 495, 496 (1995). ¶41 As noted above, contract law is not better suited than tort law for dealing with negligently provided services. 15 Tort No. 03-0689 law provides an incentive generally to guard against negligent conduct in the provision of services. the ability to deter certain If tort law is avoided, activity is impaired because contract remedies and warranties may be easily disclaimed. Tort principles address more than merely a private interest between two commercial companies; they also address society's interest in minimizing harm by deterring negligent conduct. ¶42 Admittedly, contract law also advances a societal interest in seeing that bargained for promises are performed. The fundamental premise in the application of contract law is that the bargaining remedies. parties will allocate the risks and As the facts demonstrate in this case, however, this fundamental premise simply is not at work with many service contracts. ¶43 Often the circumstances surrounding service contracts are simple and informal (e.g., electricians, plumbers, lawn care providers, etc.). In light of the societal interests behind the application of tort principles, and the inapplicability of the fundamental premise supporting contract law, the policy of maintaining the distinction between tort and contract law does not warrant the invocation of the economic loss doctrine here. ¶44 Likewise, the second policy consideration of protecting the parties' freedom to allocate economic risk by contract is contracts, not oral implicated. Certainly, or can written, provisions allocate risk and limit by parties means remedies. of Yet to service contractual given the informality of such agreements, few parties actually address the 16 No. allocation of risk or the limitation of remedies. discuss it themselves nor hire attorneys to 03-0689 They neither draft written agreements. ¶45 Once again the concept of the parties engaging in discussions of pre-negotiated liability in the event of breach seems to fly in the face of the reality of routine service contract relationships. Although the freedom to allocate economic risk by contract should not be impinged, applying the economic loss doctrine to limit recovery based on the premise that the parties have indeed exercised that freedom simply makes no sense. ¶46 Finally, we examine the third policy that the party in the best position to assess the risk of economic loss should be encouraged to assume, allocate, or insure against the risk. requirement of pre-negotiated agreements seems to The presuppose that each party to the service contract can negotiate the terms with an identical level of bargaining power. In many service contract relationships, the information disparities between the parties do not support such a presupposition. ¶47 Here, Cold Spring argues that a contractor has more knowledge than the buyer concerning the service that is provided. Cease Electric responds that Cold Spring is in the better position to assess what economic loss will occur to their business if the service fails. Who can better assess the risk of economic loss seems to fall to a case-by-case application. Thus, the third policy consideration, as a general rule, neither 17 No. supports nor negates the application of the 03-0689 economic loss doctrine to service contracts. ¶48 On balance, we conclude that the policy considerations underlying the economic extension here. loss Instead, doctrine do they buttress not our support decision its not to extend the doctrine given the inapplicability of the U.C.C. ¶49 In ramifications reaching that this would result, accompany doctrine to such agreements. we a are mindful decision to of the extend the Wisconsin courts have previously held that claims for professional malpractice lie both in tort and contract. See, e.g., Milwaukee County v. Schmidt, Garden & Erikson, Wis. 43 2d 445, 453, 168 N.W.2d 559 (1969) (architects); Smith v. Long, 178 Wis. 2d 797, 803, 505 N.W.2d 429 (Ct. App. 1993) (attorneys); Milwaukee Partners v. Collins Engineers, Inc., 169 Wis. 2d 355, 363, 485 N.W.2d 274 (Ct. App. 1992) (engineers). Because actions against professionals often involve purely economic loss without personal injury or property damage, the economic loss doctrine could be used to effectively extinguish such causes of action in tort. ¶50 Inevitably, this court would find itself on a slippery slope of having to decide whether an exception should be made for some or all professional groups. For an illustration of this problem, we need look no further than what is occurring in Illinois, where the state supreme court has exempted some professions from the economic loss doctrine, Congregation of the Passion v. Touche Ross & Co., 636 N.E.2d 503, 515 (Ill. 1994) (accountants), Collins v. Reynard, 607 N.E.2d 1185, 1187 (Ill. 18 No. 03-0689 1992) (attorneys), but not others, Fireman's Fund Ins. Co. v. SEC Donohue, Inc., 679 N.E.2d 1197, 1201 (Ill. 1997) (engineers), 2314 Lincoln Park West Condominium Ass'n v. Mann, Gin, Ebel & Frazier Ltd., 555 N.E.2d 346, 353 (Ill. 1990) (architects). ¶51 to This inconsistency in application has led one justice criticize the decision-making "exception of the month." process Congregation N.E.2d at 525 (Heiple, J., dissenting). lamented that such a case-by-case of as creating an the Passion, 636 That justice further approach "[fails] to coherently differentiate between these professional groups," and therefore "[places] trial judges and litigants in the unenviable position of guessing which additional professions will receive protection Fireman's under Fund [the Ins., state's] 697 economic N.E.2d at loss 1202 doctrine." (Heiple, J., dissenting). ¶52 Today, we choose to avoid those ends by avoiding this beginning. Accordingly, we determine that the economic loss doctrine is inapplicable to claims for the negligent provision of services. and increased This bright line rule will limit the uncertainty litigation that would accompany any other decision. V ¶53 In sum, we agree with Cold Spring that its contract with Cease Electric was one for services and not for a product. Because we determine that the economic loss doctrine does not apply to contracts for services, we conclude that Cold Spring is 19 No. entitled to its recovery performance of services. under tort for the 03-0689 negligent We therefore affirm the decision of the court of appeals.7 By the Court. The decision of the court of appeals is affirmed. 7 Prior to oral argument, Cold Spring and Insurance Company of North America filed a motion asking this court to reconsider its granting of the petition for review. That motion was held in abeyance pending the court's decision on the merits of this case. The court now denies Cold Spring's motion. 20 No. 1 03-0689
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