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1325 North Van Buren5/17/2005
n of law. See id. As such, the application of the economic loss doctrine to a set of facts presents a question of law subject to de novo review. See id., .
Furthermore, the construction or interpretation of an insurance policy presents a question of law to which we apply de novo review. Hull v. State Farm Mut. Auto. Ins. Co., 222 Wis. 2d 627, 636, 586 N.W.2d 863 (1998). The same rules of construction that govern general contracts are applied to the language in insurance policies. "Judicial interpretation of a contract, including an insurance policy, seeks to determine and give effect to the intent of the contracting parties." American Family Mut. Ins. Co. v. American Girl, Inc., 2004 WI 2, , 268 Wis. 2d 16, 673 N.W.2d 65. As such, insurance policies "are construed as they would be understood by a reasonable person in the position of the insured." Id.
In determining whether a party's claims are covered under an insurance contract, we first examine whether the insuring agreement makes an initial grant of coverage. Id., . "If the claim triggers the initial grant of coverage in the insuring agreement, we next examine the various exclusions to see whether any of them preclude coverage of the present claim." Id. If an exclusion does apply, we must then look to see whether there is an exception that reinstates coverage for that claim. Id. However, " n exception pertains only to the exclusion clause within which it appears; the applicability of an exception will not create coverage if the insuring agreement precludes it or if a separate exclusion applies." Id.
A. The Economic Loss Doctrine Does Not Apply Here
1325 asserts that the trial court incorrectly applied the economic loss doctrine to dismiss 1325's negligence claims against T-3, and erroneously ruled that T-3 had no insurance coverage arising from such claims. 1325 insists that: (1) the economic loss doctrine does not operate to preclude coverage for 1325's contract claims, as Wisconsin law recognizes that claims alleged in contract against an insured can form the basis for coverage under a CGL policy; (2) the "integrated system" rule is factually inapplicable to bar CGL coverage; and (3) the economic loss doctrine does not bar professional liability insurance coverage for a construction manager's negligent failures of its independent common law duty to provide professional services. Because we conclude, in light of the recently decided Cease Electric, that the economic loss doctrine does not apply here because the contract at issue was one for services, and not for a product, we will address only those portions of 1325's arguments relevant to that conclusion.
"The economic loss doctrine is a judicially created doctrine providing that a commercial purchaser of a product cannot recover from a manufacturer, under the tort theories of negligence or strict products liability, damages that are solely 'economic' in nature." Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 400, 573 N.W.2d 852 (1998). In Sunnyslope Grading, Inc. v. Miller, Bradford and Risberg, Inc., 148 Wis. 2d 910, 437 N.W.2d 213 (1989), the supreme court evaluated the reasoning behind prohibiting recovery under tort for purely economic losses resulting from the purchase of a product, and concluded that the intent and effect of warranties and the Uniform Commercial Code do not contemplate recovery under tort principles. Id. at 916, 920-21. Discussing a United States Supreme Court case prohibiting recovery under tort theories for purely economic losses in a commercial litigation regarding a purchased product, the court explained: "The question of product value and quality is intended to be addressed by warranties and the
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