Insurers Can't Use War Argument: Court Rules in Favor of Merck in $1.4 Billion Cyberattack Coverage Case

A New Jersey appellate court ruled that a group of insurers can’t use war as an argument to deny Merck & Co Inc MRK coverage from the $1.4 billion cyberattack that happened in 2017.

The court said the insurers must help the pharma giant cover losses from the cyber attack that the U.S. blamed on Russia.

New Jersey appellate division judges said that the NotPetya cyberattack didn’t involve military action and can’t be excluded from coverage under a warlike-act exclusion.

“The exclusion of damages caused by hostile or warlike action by a government or sovereign power in times of war or peace requires the involvement of military action,” the judges wrote. “Coverage could only be excluded here if we stretched the meaning of ‘hostile’ to its outer limit.”

The 2017 NotPetya attack disrupted computer systems worldwide. Thousands of Merck computers were damaged, Wall Street Journal reported, after malware entered the pharmaceutical company’s systems through accounting software used in the company’s Ukraine operation.

“The United States didn’t say ‘NotPetya is an act of war against the United States, and we’re going to launch a military response,’” Mark Mosier, a Merck lawyer, said, the report added.

“It was a virtual cyber nuclear attack,” Philip C. Silverberg, a lawyer representing several of Merck’s insurers, told judges in February.

Price Action: MRK shares are up 1.04% at $118.12 on the last check Wednesday.