Yes, it's a rare occurrence, but it does happen. As I stated above, if you're only just at the required level to upgrade, you have a 25% chance of failure. Here's a rundown of the chances:
Each item is assigned an Upgrade Complexity (hereafter named UC - don't confuse it with
Union Cove), plus a "SamehFactor" (hereafter named SF). At a Skill Level equivalent to the UC + SF, there is a 0% chance of failing the upgrade. I assume that some items are deliberately set at above Level 10 so that there's some variety in play. The SF is hardcoded at 5 - this means, and I quote, "The number of levels above the level at which a sim can first upgrade the object at which the Sim would reach minimum chance of failure". Finally, if an upgrade failure is going to occur, it will occur at any time between 15% and 40% of the time required to upgrade.
The upgrade complexity of any stove is 4, however this was deprecated in 2008 (that means, it isn't being used by the game any more).