Mist Pharmaceuticals (Mist), sought coverage from Mist’s insurer, Berkley Insurance Company (Berkley) under a Directors and Officers (D&O) policy for the damages and costs of defense arising out of two lawsuits. Those lawsuits alleged Joseph Krivulka, Mist’s Chairman, engaged in self-dealing between Mist and other entities he controlled. Berkley denied coverage to Mist, stating that coverage was not available to Mist arising out of allegations in the suits due to Krivulka’s roles with other entities. The primary question in Mist Pharms., LLC v. Berkley Ins. Co., 2026 N.J. LEXIS 397 (2026), before the New Jersey Supreme Court was whether Berkley properly denied coverage for losses “in any way involving” wrongful acts by Krivulka serving in a capacity for any other entity than Mist.
Mist entered a D&O policy with Berkley in 2014 that covered Mist, including Krivulka in his role as Chairman, for any claims made against them for any alleged “Wrongful Act.” A “Wrongful Act” to mean any allegations of a breach of duty or neglect against either Krivulka, in his capacity as Chairman, and Mist. The policy included coverage for damages and costs of suit, but not to any claim arising out of damages not covered, or excluded, by the policy. One such exclusion, the “Capacity Exclusion,” stated that Berkley would not have to make any payments for a claim against Mist or Krivulka based upon or arising out of “or in any way involving any Wrongful Act” by Mist or Krivulka (in his capacity as Chairman).
An outside LLC filed the two lawsuits in question against Mist and Krivulka alleging that Akrimax Pharmaceuticals (Akrimax), a pharmaceutical company Krivulka formed in 2007, which he operated, and of which the LLCs were members, engaged in a scheme to divert funds from Akrimax to Mist. Akrimax was not an insured under Mist’s policy with Berkley.
Shortly after receiving the suit in late 2015, which named Mist, Krivulka, and several other Mist-related entities Berkley did not insure (including Akrimax and other entities owned or controlled by Krivulka), Mist submitted the claim to Berkley. After initially providing partial coverage, an ultimate decision by Berkley disclaimed coverage entirely. Causing Mist to file suit.
Mist advanced several claims against Berkley, primary amongst them was that Berkley misinterpreted the Capacity Exclusion. Mist argued that the D&O policy should cover “dual capacity” situations where an officer acts on behalf of both an insured and an uninsured entity. Berkley countered, arguing the plain meaning of the Capacity Exclusion barred coverage to Mist because all of the underlying allegations arose out of Krivulka’s self-dealing and misconduct as a director of Akrimax, an uninsured entity, not Mist.
The Supreme Court agreed with Berkley, finding that the underlying lawsuits fell squarely within the Capacity Exclusion. It determined that the repeated “or” in the exclusion indicated the exclusion should be read in the disjunctive, meaning that each term separated by an “or” is, on its own, sufficient to trigger the exclusion and deny coverage. That meant the phrasing “based upon” or “arising out of” or “in any way involving any Wrongful Act” should be interpreted very broadly. Here, there are allegations against multiple Krivulka-controlled entities, all of which share one common feature – Krivulka’s role as a director of an entity not insured by Berkley. Each allegation against Mist, or Krivulka as an insured through Mist, was related to his capacity as a member of an uninsured entity. Therefore, each of the allegations asserted against Krivulka, and therefore against Mist, implicate conduct outside of the scope of his covered capacity as the Chair of Mist, and thus excluded from coverage. The Court further disagreed with the “dual capacity” claim, stating that even if Krivulka was acting on behalf of Mist, the “scheme” allegations arose out of his role at Akrimax – an entity Berkley did not insure, and all of the claims against Mist or Krivulka were related to his leadership of Akrimax.