USA – NEW JERSEY Trends and Developments Contributed by: Jeffrey M. Pollock, Pollock Law, LLC
pleadings to establish that no potential exists, so an insurer can now deny a defence at the outset on facts the insured has had no chance to contest through discovery. MIST Pharmaceuticals v Berkley Insurance Co (11 May 2026) extends the same logic to directors and offic- ers cover over a substantial dissent. Berkley funded a defence for roughly five years before disclaiming under a capacity exclusion barring claims “in any way involving” wrongful acts the insured person commit- ted in his capacity at entities other than the named insured. The Court holds the exclusion unambigu- ous, requires no causal nexus between the excluded capacity and the alleged harm, and finds no estoppel because Berkley reserved its rights repeatedly and explicitly throughout. Justice Fasciale, joined by Jus- tice Hoffman, dissents at length: exclusions demand narrow construction, ambiguity should favour cover- age, and estoppel should bar an insurer that signalled partial coverage for years from asserting a total bar. The dissent is the most useful document in the case for policyholder counsel because it identifies what the majority sets aside. Read together, Norman Interna- tional and MIST establish that expansive connective phrasing – “in any way connected with”, “in any way involving”, “arising out of”, “related to” – now car- ries its literal breadth in New Jersey. Insurers drafting exclusions have their instruction, and they will follow it. The counter-argument – that both cases merely enforce unambiguous language and that ambiguity would still favour the insured – holds as far as it goes; it simply concedes that the threshold for finding ambi- guity has risen materially. Merck is the exception that proves the point Merck & Co v ACE American Insurance Co (App Div, 1 May 2023) remains the most celebrated recent poli- cyholder victory in the state. The Appellate Division holds that a hostile or warlike action exclusion does not bar coverage for losses exceeding USD1.4 billion that the NotPetya malware caused, even accepting that the attack traces to the Russian Federation. No court had applied such exclusions outside clear war or concerted military action, and the insurers, having never updated decades-old language against well-
known state-sponsored cyber risk, could not stretch it to reach a commercial pharmaceutical business. But Merck is a weaker precedent than its reputa- tion suggests, for two reasons policyholder counsel should state candidly to clients: • It is an Appellate Division decision. The Supreme Court granted certification and the parties settled in January 2024, so the state’s highest court never ruled. • Events have overtaken its central rationale that insurers failed to update their language, because the London and US markets now deploy express cyber and state-backed attack exclusions. Merck rewarded insurer neglect at a moment when that neglect was general. It will not do the same work against the exclusions now in the market, and New Jersey will receive those exclusions, on the evidence of Norman International and MIST , considerably more warmly than Merck implies. The settlement itself teaches how coverage law now gets made. An insurer facing an adverse intermediate decision has every incentive to settle before an affirm- ance, and a policyholder holding a large intermediate win has every incentive to take the money. The ques- tions most worth answering therefore reach a court with authority to answer them least often. The Fair Conduct Act: a legislative correction, judicially paced The legislature, not the judiciary, produced the period’s genuine expansion of policyholder rights. The Insur- ance Fair Conduct Act, signed on 18 January 2022, gives uninsured and underinsured motorist claimants a private right of action against insurers for unrea- sonable delay or unreasonable denial. It authorises damages up to three times the coverage amount, plus interest, attorneys’ fees and litigation expenses. That intervention is itself evidence for the thesis, because the legislature acted only after concluding that the common-law bad faith standard fell short. The Appellate Division gives the statute a genuinely favourable construction in Tenenbaum v Allstate Insur- ance Co (29 April 2026). The court rejects the insurers’
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