A D&O policy’s capacity exclusion bars coverage for claims alleging that an insured director or officer acted in a dual capacity for insured and uninsured entities, according to the Supreme Court of New Jersey’s ruling in Mist Pharmaceuticals, LLC v. Berkley Insurance Company, 355 A.3d 253 (N.J. 2026).
Plaintiffs brought underlying claims against an individual defendant and numerous entities that he majority-owned and controlled as director, member, or manager. One entity defendant was the Insured Entity under the subject policy, and the individual defendant was an Insured Person in his capacity as a director, member, or manager of that Insured Entity. Plaintiffs alleged in the underlying claims that the individual defendant improperly diverted funds and opportunities from one of the non-insured companies to benefit his other companies, including the Insured Entity.
The policy’s capacity exclusion precluded coverage for claims “based upon, arising out of, directly or indirectly resulting from or in any way involving any Wrongful Act of an Insured Person serving in their capacity as director, officer, trustee, employee, member or governor of any other entity other than an Insured Entity or Outside Entity, or by reason of their status as director, officer, trustee, employee, member or governor of such other entity.”
Focusing on the exclusion’s broad prefatory language, the court readily found the underlying claims were at least “in any way involving” the Insured Person’s acts in his capacity as a director, member or manager of the non-insured entity defendants because there were no allegations against only the Insured Entity or the Insured Person in his capacity as a director, member or manager of the Insured Entity that were unrelated to his acts in his capacity as a director, member or manager of a non-insured entity.