A New Jersey state court ruled that a war exclusion does not apply to cyberattacks, siding with pharma giant Merck Inc.’s stance that its insurers cannot assert the exclusion to avoid coverage of its more than $1.4 billion losses from a 2017 cyberattack. Judge Thomas Walsh granted Merck’s bid for partial summary judgment, finding the war exclusion precludes only a physical act of warfare instead of a malware hack, and stated that the insurers did nothing to change the language of the exemption to reasonably put the insured on notice that it intended to exclude cyberattacks.

“The ruling may provide comfort to those concerned about insurer attempts to raise war exclusions in the context of cybercrime,” commented Partner Peter Halprin. “As the court notes, the insurers were well aware of malware and potential state involvement but chose not to revise policy exclusions to encompass such scenarios.”

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