In Mech. Inc. v. Venture Elec. Contrs., Inc., No. 2018AP2380, 2020 Wisc. App. LEXIS 170, the Court of Appeals of Wisconsin, District Two, considered whether a party may bring a negligence claim for purely economic damages. In upholding the lower court, the appellate court found that a party is barred by the Economic Loss Doctrine from bringing a negligence claim for purely economic damages.

Both parties involved in this action were subcontractors on a building project at the Great Lakes Research Facility for the University of Wisconsin-Milwaukee. As a result of Venture Electrical Contractors, Inc. (Venture) not paying for requested work, Mechanical, Inc. (Mechanical) sued Venture for $11,961.31. Venture, in turn, countersued in negligence for $1.1 million for costs incurred due to delays and untimely performance. Mechanical sought dismissal of the negligence claim based upon the Economic Loss Doctrine. Finding that the Economic Loss Doctrine applies to purely economic losses, the trial court dismissed Venture’s negligence claim. Venture appealed to the Court of Appeals of Wisconsin.

The Economic Loss Doctrine

In the United States, most states apply what is commonly referred to as the Economic Loss Doctrine. Under the Economic Loss Doctrine, a party cannot bring a negligence action for purely economic claims, but rather must bring the action in contract. The purpose of the Economic Loss Doctrine is to limit parties to a contract to the remedies within said contract for damages that are purely economic as those damages are typically bargained-for within the agreement.

In Mechanical, the appellate court addressed whether damages for delays and untimely performance could be brought in negligence. First it concluded that damages related to delays and untimely performance are purely economic. After determining that the damages were purely economic, the court affirmed the lower court’s application of the Economic Loss Doctrine to bar Venture’s negligence claim.

This case serves as a good reminder that, prior to filing suit, subrogation practitioners should be aware of how the applicable jurisdiction applies the Economic Loss Doctrine. In addition, practitioners should be aware that said rules may require a more nuanced understanding of what damages are purely economic.