War Exclusion Doesn't Bar Merck's $1.4B Cyber Loss


Property policies' war exclusions do not apply to cyberattacks, a New Jersey state court ruled, siding with pharma giant Merck & Co.'s stance that its insurers cannot assert the exclusion to avoid coverage of its more than $1.4 billion losses from a 2017 cyberattack.

State Superior Court Judge Thomas J. 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. The ruling was issued from the bench in December, and a written version was made public Thursday.

. . .

The Merck ruling's reasoning dovetails with insurers' difficulty to attribute that malware attack to a specific or an alleged nation-state, said Joshua Gold, a partner from Anderson Kill who also represents policyholders.

"Cyber criminals are crafty in cloaking their true identities, motives and hacking tools, almost always using deception and misinformation in the process of an attack," he said.

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