SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1027-18T4

SUPERIOR INTEGRATED

SOLUTIONS, INC.,

Plaintiff-Respondent,

v.

MERCER INSURANCE COMPANY

OF NEW JERSEY, INC.,

Defendant/Third-Party

Plaintiff-Appellant,

v.

EVANSTON INSURANCE 

COMPANY a/k/a MARKEL

CORPORATION,

Third-Party Defendant-Respondent.

___________________________________

Submitted March 16, 2020 – Decided July 10, 2020

Before Judges Fasciale and Rothstadt.

On appeal from the Superior Court of New Jersey, Law 

Division, Middlesex County, Docket No. L-1518-16.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the 

internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
2

A-1027-18T4

Thomas, Thomas & Hafer, LLP, attorneys for appellant 

(Mark R. Sander and Charles W. Skriner, on the briefs).

The Killian Firm, P.C., attorneys for respondent 

Superior Integrated Solutions, Inc. (Eugene Killian, Jr. 

on the brief).

PER CURIAM

In this dispute over an insurer's duty to defend, defendant Mercer 

Insurance Company of New Jersey, Inc. (Mercer), appeals from the Law 

Division's July 10, 2018 order granting summary judgment to Mercer's insured, 

plaintiff Superior Integrated Solutions, Inc. (Superior) and to third-party 

defendant Evanston Insurance Company a/k/a Markel Corporation (Evanston); 

a September 14, 2018 order denying in part Mercer's reconsideration motion;

and from the September 21, 2018 entry of a final judgment against Mercer in 

the amount of $337,495.73 in favor of Superior. Superior's complaint arose from

Mercer's refusal to defend Superior against claims made by a competitor, Reynolds 

& Reynolds Company (Reynolds) in a 2012 lawsuit. In that action, Reynolds alleged

that Superior infringed upon Reynolds's copyrighted computer program in its 

attempt to solicit Reynolds's customers and persuade them to use Superior's services.

On appeal, Mercer argues that it had no duty to defend Superior under the 

"advertising injury" coverage provided in its policy and, even if covered, 

Reynolds's claims against Superior were excluded from coverage by other policy 
3

A-1027-18T4

provisions because Superior's acts were intentional and related to computer 

programing activities. In addition, Mercer argues that Superior's activities 

began before Mercer's policy was in force, and the motion judge miscalculated 

the amount of fees and costs incurred by Superior during the underlying action. 

We affirm.

I.

A.

Superior coordinates and integrates software applications for car dealers' 

use in managing their financial and customer information. Superior purchased 

a liability policy from Mercer in 2011, which it renewed for an additional year 

beginning in November 2012. 

Under section 1 of Part II B of the policy, Mercer was obligated to defend 

Superior in any action brought against it for, among other claims, "damages for . . . 

advertising injury covered by this insurance." That obligation expressly excluded

"suits seeking damages not covered by this policy or allegations within a suit which 

are not covered by this policy." 

Section 11 of Part II B further explained the coverage for an "advertising 

injury." It stated the following:

We pay for the benefit of insureds, up to the limit of 

liability shown in the Declarations or Declarations 
4

A-1027-18T4

Supplement, those sums that insureds become legally 

liable to pay as damages because of: 

1. Advertising Injury; . . . as described and covered by this 

policy, arising out of a covered offense. 

. . . . 

This Supplemental Coverage applies only to the 

following: 

1. Advertising Injury arising out of an offense committed 

in the course of advertising goods, products, or services of 

your business/operations covered by this policy. 

Under the policy, "[a]dvertising injury" is defined as:

1. Infringement of copyright, slogan, title or trade dress.

2. Misappropriation of advertising ideas or style of doing

business.

3. Oral or written publication of material that: slanders or

libels a person or organization; disparages a person's or

organization's goods, products, or services.

4. Oral or written publication of material that violates a 

person's right of privacy.

. . . .

Advertising Injury . . . [does] not include bodily

injury or property damage.

The policy also contained a number of exclusions from coverage, including 

claims for "[i]njury arising out of oral or written publication of material, done by or 
5

A-1027-18T4

at the direction of any insured with knowledge that such is false or such would 

violate the rights of another and would inflict the injury," and for "[i]njury arising 

out of oral or written publication of material whose first publication took place prior 

to the beginning of this policy or such coverage under this policy." 

The policy also excluded "Computer Software Professional Activities." That 

exclusion stated the following:

Under Part II B, the Contractual Supplemental Coverage 

and the Personal Injury/Advertising Injury Supplemental

Coverages do not apply to damages arising out of the 

rendering of, or failure to render, any professional advice, 

product or service by you or on your behalf in connection 

with the selling, licensing, franchising, creation of, 

modification of, integration of, or furnishing of internet 

access, website design, or computer software including 

electronic data processing programs, downloadable 

programs, designs, specifications, manuals and 

instructions.

B.

While Mercer's policy was in force, on November 1, 2012, Reynolds filed its 

lawsuit against Superior in the United States District Court for the Southern District 

of Ohio.

1

 According to its complaint, Reynolds developed and provided 

"automobile dealer management systems" (DMS) to automobile retailers. DMS 

 

1

 See Reynolds & Reynolds Co. v. Superior Integrated Sols., Inc., Docket No. 

1:12-cv-00848 (United States District Ct. for the Southern District of Ohio, 

Western Division). 
6

A-1027-18T4

allowed dealers to organize and use inventory, customer contacts, financial and 

insurance information, and to perform other tasks in order to manage an automotive 

dealership. Reynolds's primary DMS was a program called ERA through which its 

customers were provided with a "hosted data server" located at either "the 

dealership, or 'in the cloud,'" and "a licensed terminal emulator software solution . . .

which serve[d] as a secure gateway through which data [could] be transmitted 

between the ERA server(s) and the end-user computers (i.e. "PCs") at the 

dealership." 

Reynolds alleged that shortly after providing a July 2012 software update, its 

customers began to complain about problems with the system. Reynolds discovered 

that Superior made an unauthorized copy of a Reynolds-authored file that Superior 

made available to its customers on its website. Reynolds further alleged that 

Superior "directed its customers to make such unauthorized copies in violation of 

the Reynolds Customer Agreement" and that Superior engaged in a "scheme to make 

and distribute unauthorized copies of" Reynolds's file. According to Reynolds,

Superior "actively solicited and induced Reynolds'[s] customers to provide 

[Superior] with access to ERA and/or to allow [Superior] to integrate with ERA in 

violation of the Reynolds Customer Agreements." 
7

A-1027-18T4

Reynolds stated that Superior's services had "little or no value to Reynolds'[s] 

customers unless [Superior had] access to the DMS and/or [could] integrate to the 

DMS." Reynolds concluded that Superior "actively persuaded Reynolds'[s] 

customers to breach their promise to Reynolds, so that [Superior] could peddle their 

unauthorized services to these customers for a fee." 

Reynolds also alleged that Superior's copyright infringement and inducement 

of Reynolds's customers to breach the Reynolds Customer Agreement "substantially 

injured" Reynolds, "[a]t a minimum," by causing "serious technical and performance 

problems" for Reynolds's customers and Reynolds having had to divert significant 

resources to diagnose and solve the technical problems. It further alleged that 

Superior "profited from its theft of Reynolds'[s] intellectual property by selling 

integration services made possible only by its copyright infringement and 

unauthorized and contractually prohibited hostile integration." (Emphasis added).

The complaint also alleged Superior's "motive was profit-driven." Based on those

allegations, Reynolds sought an injunction and damages for: (1) direct copyright 

infringement; (2) contributory copyright infringement; (3) tortious interference with 

contract; and (4) violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030.2

 

2

 Reynolds amended its complaint in 2013 to allege that Superior advertised 

that it had an allegedly infringing computer program available on its website 
8

A-1027-18T4

C.

Superior notified Mercer of the lawsuit and demanded coverage and a defense. 

Thereafter, in an exchange of communications, Mercer denied coverage and a 

defense, citing a number of exclusions in support of its decision. Superior 

challenged Mercer's reliance on the cited exclusions, but Mercer did not change its 

position. 

Superior settled Reynolds's claim, without any payment to Reynolds, but only 

after having incurred $591,353.83 in costs by defending the action. However, 

Superior was able to recover from Evanston $337,500 of its costs under a separate

"Information Technology Professional Liability and Data Breach and Privacy 

Liability Insurance Policy" it purchased from Evanston. 

Superior then filed its complaint for breach of contract in this action against 

Mercer. It later amended the complaint to include a claim for breach of the duty of 

good faith and fair dealing. Mercer filed responsive pleadings, including a thirdparty complaint for indemnification and contribution against Evanston, and 

Evanston filed its answer denying liability. 

 

that customers could download. However, Superior never gave Mercer a copy 

of that amended pleading or renewed its demand for a defense and coverage.
9

A-1027-18T4

On April 27, 2018, Superior and Mercer filed motions for summary judgment. 

Evanston later filed a cross-motion for summary judgment as to Mercer's claim. 

After considering the parties' oral arguments, the motion judge entered an order on 

July 10, 2018, granting Superior's motion against Mercer, denying Mercer's motion 

against Superior, ordering Mercer to pay Superior $253,853.83 in damages, granting 

Evanston's cross-motion for summary judgment against Mercer, and dismissing with 

prejudice Mercer's third-party complaint. The judge set forth his reasons in a nearly 

thirty-page written decision. 

In his decision, and contrary to Mercer's position, the motion judge found that 

Superior's conduct underlying the Reynolds action constituted "advertising" because 

Reynolds alleged Superior infringed its copyright by copying, distributing, and 

selling Reynolds's program and by instructing Reynolds's customers on how to 

install the software, which Superior made available for download on its website. The 

motion judge concluded that Reynolds's complaint asserted a claim that Superior 

caused Reynolds an "advertising injury," as contemplated by Mercer's policy,

through copyright infringement. 

Next, the judge found that the "Computer Software Professional Activities 

Exclusion" relied upon by Mercer was inapplicable. Although the policy stated this 

exclusion applied to Part II B, "Part II B lists a host of different areas of coverage, 
10 A-1027-18T4

many of which would be rendered meaningless if this [exclusion] were applied—

including the provision that provides coverage for advertising injuries." Therefore, 

because there was "no way to apply [that e]xclusion to the portion of supplemental 

coverage that covers advertising injuries without rendering that coverage 

meaningless," the judge found the exclusion inapplicable. Although the judge also 

found that Mercer's "Statutory Communication Violation Exclusion" applied to deny 

coverage as to Reynolds's claims relating to the Consumer Fraud and Abuse Act, the 

judge found that Mercer still had a duty to defend Superior because "the duty to 

defend will attach" as long as some claims were covered. 

Addressing the claims against Evanston, the judge found that the Evanston 

policy and Mercer's policy were to be treated as "co-primary," meaning Mercer 

would be responsible for the balance of the defense costs, after Evanston and 

Superior's settlement, which amounted to less than the fifty percent Mercer should 

have paid. Therefore, Mercer owed Superior $253,853.83. Last, the judge found on 

Mercer's motion that Mercer did not breach the implied duty of good faith and fair 

dealing.

Thereafter, Superior filed a motion for an award of attorney's fees under Rule

4:42-9(a)(6) and for entry of final judgment. Mercer filed a motion for 

reconsideration of the July 10, 2018 order. On September 14, 2018, the motion judge 
11 A-1027-18T4

entered an order granting Mercer's motion for reconsideration in part to correct a 

mathematical error, thereby reducing Superior's defense costs in the Reynolds action 

by $17,931.79, but denying the remainder of the motion, explaining his reasons in 

an attached statement in which he found that Mercer's motion was an attempt at "a 

second bite of the apple because it disagree[d] with the [c]ourt's decision." 

Addressing the amount awarded to Superior, the judge stated that although Mercer

had originally sought a reduction of $31,847.12, it did not challenge Superior's 

calculation of the error to be $17,931.79. The judge concluded by stating that Mercer 

was required to pay forty-one percent of Superior's defense costs, "far less than it 

could have been responsible to pay if the costs had been split equally between 

Mercer and Evanston." 

On September 21, 2018, the motion judge granted Superior's application for 

attorney's fees, awarded $101,573.69 in such fees, and entered a final judgment in 

Superior's favor in the total amount of $337,495.73, inclusive of fees. The judge 

stated his reasons in another statement attached to the judgment. This appeal 

followed.

II.

Our review of a ruling on summary judgment is de novo, applying the same 

legal standard as the trial court. Lee v. Brown, 232 N.J. 114, 126 (2018). Where a 
12 A-1027-18T4

motion judge determines on summary judgment that an insurer had duty to defend, 

"the judge's conclusions and interpretation of the record are not entitled to our 

deference." Wear v. Selective Ins., 455 N.J. Super. 440, 453 (App. Div. 2018); see 

also R. 4:46-2.

III.

We first address Mercer's contention that summary judgment should not 

have been granted to Superior because Reynolds's claims were not covered as 

Superior never engaged in "advertising" or they were excluded by the policy's 

"intentional acts exclusion," which the motion judge overlooked, the 

"personal/advertising injury exclusion," the "Computer Software Professional 

Activities Exclusion," and the "prior publication" exclusion. 

A.

First, Mercer argues that the Reynolds's complaint never alleged a covered

"advertising injury" because Reynolds never alleged that Superior engaged in 

any "advertising." Citing to different sources, both parties agree that the plain 

meaning of "advertising" involves not merely the sale of an item or service, but 

also drawing the public's attention to the service or product for the purpose of 

attracting customers. Their disagreement focuses on whether the Reynolds's

complaint alleged advertising or only uncovered tortious acts by Superior. 
13 A-1027-18T4

Primarily relying on the Supreme Court's opinion in Information Spectrum, Inc. 

v. Hartford, 182 N.J. 34 (2004), Mercer contends that "selling" is not 

"advertising" and the Reynolds's complaint never alleged any advertising by 

Superior sufficient to trigger its duty to defend. We disagree.

The duty to defend derives from the language of the policy. Hartford Accident 

& Indem. Co. v. Aetna Life & Cas. Ins., 98 N.J. 18, 22 (1984). Whether that duty 

exists is dependent upon "[t]he interpretation of [the] insurance policy upon 

established facts[, which] is a question of law for the court to determine." Wear, 455 

N.J. Super. at 453. "In considering the meaning of an insurance policy, we interpret 

the language 'according to its plain and ordinary meaning.'" Flomerfelt v. Cardiello, 

202 N.J. 432, 441 (2010) (quoting Voorhees v. Preferred Mut. Ins., 128 N.J. 165, 

175 (1992)). "If the terms are not clear, but instead are ambiguous, they are 

construed against the insurer and in favor of the insured, in order to give effect to 

the insured's reasonable expectations." Ibid. 

Disputes about an insurer's duty to defend are "generally determined by a 

side-by-side comparison of the policy and the complaint, and [the duty] is 

triggered when the comparison demonstrates that if the complaint's allegations 

were sustained, an insurer would be required to pay the judgment." Wear, 455 

N.J. Super. at 453 (citing Sears Roebuck & Co. v. Nat'l Union Fire Ins. Co. of 
14 A-1027-18T4

Pittsburgh, 340 N.J. Super. 223, 241-42 (App. Div. 2001)). "In making that 

comparison, it is the nature of the claim asserted, rather than the specific details 

of the incident or the litigation's possible outcome, that governs the insurer's 

obligation." Ibid. (quoting Flomerfelt, 202 N.J. at 444). 

"The duty to defend is not abrogated by the fact that the claim may have 

no merit and cannot be maintained against the insured, either in law or in fact, 

because the cause of action is groundless, false, or fraudulent." Sears Roebuck 

& Co., 340 N.J. Super. at 241-42. "If the complaint is ambiguous, doubts should 

be resolved in favor of the insured and thus in favor of coverage." Voorhees, 

128 N.J. at 173-74 (citing Cent. Nat'l Ins. v. Utica Nat'l Ins., 232 N.J. Super. 

467, 470 (App. Div. 1989)). The analysis of the allegations is not limited to the 

complaint itself, but rather "facts outside the complaint may trigger the duty to 

defend." SL Indus., Inc. v. Am. Motorists Ins., 128 N.J. 188, 198 (1992). If 

after conducting its analysis, an insurer decides that it will not provide a defense for 

a claim, its decision is subject to "an obligation to reimburse for defense costs to the 

extent that the defense is later determined to have been attributable to the covered 

claims and, if coverage is not determinable in the underlying action, it is later 

determined that there was in fact coverage." Wear, 455 N.J. Super. at 455 (quoting 
15 A-1027-18T4

Muralo Co. v. Emp'rs Ins. of Wausau, 334 N.J. Super. 282, 289-90 (App. Div. 

2000)). 

In Information Spectrum, the insured was accused of direct copyright 

infringement (the sale of infringing software) and the copyright holder never 

alleged that advertising engendered that injury. Info. Spectrum, 182 N.J. at 36-

38. In affirming our earlier opinion, Information Spectrum, Inc. v. Hartford, 

364 N.J. Super. 54 (App. Div. 2003), the Court held "[f]or the 'advertising injury'

provision[s] of [a] policy to apply, the harm alleged must be 'caused by' the 

advertising act itself and not by the underlying purloinment." Info. Spectrum, 

182 N.J. at 38. 

Quoting with approval from our opinion, the Court stated that in order to

resolv[e] whether a duty to defend attaches in this 

context requires not only that the injury fall within one 

of the four categories [defined in the policy] (which 

only the copyright infringement does) but also a 

determination of whether the claimant asserts that an 

injury was caused by the insured's advertising of its 

good[s] and services.

[Id. at 37 (quoting Info. Spectrum, 364 N.J. Super. at 66).] 

"[T]he advertising activities must cause the injury—not merely expose it." Ibid.

(quoting Info. Spectrum, 364 N.J. Super. at 66). Under Information Spectrum, 

the test is whether the relationship between the advertising activity and the 
16 A-1027-18T4

copyright holder's injury is causal or incidental. Id. at 38. If it is causal, there 

is coverage; if the advertising activity is only incidental, then there is no 

coverage. Ibid.

In Information Spectrum, an insured under a policy with similar 

provisions was sued for selling a counterfeit "computerized police reporting 

system" and demonstrating that system at a police convention.

3

Info. Spectrum, 

364 N.J. Super. at 59-61. That caused the filing of a lawsuit against the insured 

for "infring[ing a] copyright, violat[ing] the Lanham Act (15 U.S.C. § 1125(a)), 

misappropriat[ing] trade secrets, . . . breach[ing] the marketing 

agreements[,] . . . quantum meruit, fraud, tortious interference with contractual 

and prospective economic relationships, and intentional spoliation of evidence." 

Id. at 61. The pleading "alleged a claim of 'reverse passing off,'" and stated that 

the insured "marketed, and continues to market, its computer assisted dispatch 

and reporting system by misrepresenting it as a product of [the insured's] sole 

 

3

 Although "[w]e assume[d] without deciding that such a demonstration would 

constitute an act of advertising within the meaning of this policy[, s]ee Elan 

Pharm. Research Corp. v. Emp'rs Ins. of Wausau, 144 F.3d 1372, 1377 (11th 

Cir. 1998) (defining advertising as '[a]ny oral, written, or graphic statement 

made by the seller in any manner in connection with the solicitation of 

business.')," we concluded the demonstration occurred outside the policy period 

and therefore was not a covered advertising injury. Info. Spectrum, 364 N.J. 

Super. at 66. 
17 A-1027-18T4

design and development." Id. at 65 (alteration in original). The copyright holder 

"never alleged that the insured advertised the offending product." Info.

Spectrum, 182 N.J. at 38. 

"We conclude[d] that [while] only the copyright infringement claim f[ell]

within the policy's enumerated offenses[,] . . . because the [pleading]

contain[ed] no assertion that any of the pleaded injuries, including the copyright 

infringement claim, were caused by any advertising by the insured, no obligation 

to defend was triggered." Info. Spectrum, 364 N.J. Super. at 63. As we stated, 

and the Supreme Court affirmed, "falsely advertising that a product created by 

another was designed and manufactured by the advertiser," was not an 

advertising injury under the policy. Id. at 65. Further, we noted that in order 

for advertising injury coverage to apply, the underlying action must allege "a 

discre[te] piece of advertising." Id. at 66 (alteration in original).

Contrary to Mercer's argument here, what occurred in Information 

Spectrum is different than this case. Reynolds alleged that Superior profited from 

its theft of Reynold's intellectual property and was able to sell its integration services 

"only by its copyright infringement and unauthorized and contractually prohibited 

hostile integration." It did not allege that Superior was representing Reynolds's

product as its own. Rather, through its infringement, Reynolds alleged that Superior 
18 A-1027-18T4

was able to inform potential customers that they would be able to continue to 

integrate with Reynolds's system while using Superior's services.

Comparing the plain language of the policy to Reynolds's allegation that 

Superior "profited from its theft of Reynolds'[s copyrighted] intellectual property by 

selling integration services made possible only by its copy infringement," we 

conclude that Reynolds's complaint asserted a "discrete piece of advertising" giving 

rise to a covered claim of an advertising injury which triggered Mercer's duty to 

defend. Here, not only was Superior charged with "purloining" Reynolds's protected 

intellectual property, but also with soliciting customers services that it would not 

have been able to promote without including in its information that they could 

interface with Reynolds's program while using Superior's services. Because 

Reynolds specifically claimed that Superior infringed by incorporating Reynolds's

protected intellectual property in making its product known to Reynolds's customers 

and others, Superior demonstrated the requisite causal link between the advertising 

activity and the offense (copyright infringement). That "advertising," and the 

infringement employed in that advertising gave rise to colorable claim of an 

"advertising injury" under Mercer's policy. See Elan Pharm. Research Corp., 144 

F.3d at 1377 (stating that "[a]ny oral, written, or graphic statement made by the seller 

in any manner in connection with the solicitation of business" constitutes advertising
19 A-1027-18T4

(quoting Black's Law Dictionary 54 (6th ed. 1990))); see also Flomerfelt, 202 N.J. 

at 444 (stating that "if a complaint includes multiple or alternative causes of action, 

the duty to defend will attach as long as any of them would be a covered claim and 

it continues until all of the covered claims have been resolved").

Moreover, although an insured's advertising activities must be a cause of the 

claimant's injury, it does not necessarily mean such advertising activities must be the 

only cause of the injury. Info. Spectrum, 182 N.J. at 37. Information Spectrum does 

not suggest that the infringement must be contained within the "four corners" of the 

advertisement. 

Also, the language of the insurance policy does not demand that copyright 

infringement occur in the advertising itself. To the contrary, the language of the 

policy is broad, defining "advertising injury," in part, as: "[i]nfringement of 

copyright, slogan, title or trade dress." 

B. 

Mercer next argues that even if Reynolds's complaint sufficiently alleged that 

Superior advertised, the complaint never alleged that the copyright infringement was 

caused by plaintiff's advertising. We find no merit to this assertion. 

"[I]n ascertaining whether a duty to defend has been triggered by a claim against 

the insured, the claim must be examined for allegations of injuries caused by the 
20 A-1027-18T4

insured's advertising." Info. Spectrum, 364 N.J. Super. at 66. "[C]overage under 

the advertising injury provision requires 'a causal connection between the 

advertising and the injury . . . .'" Id. at 65-66 (quoting Tradesoft Techs., Inc. v. 

Franklin Mut. Ins., 329 N.J. Super. 137, 152 (App. Div. 2000)). 

Here, Reynolds's complaint alleged that but for Superior's infringement it would 

not have had any ability to successfully solicit Reynolds's customers, who already

had Reynolds's programs in place. Those allegations satisfied the requirement that 

the injury be causally related. Whether those allegations are later proven to be untrue

is irrelevant to our determination. Because the duty to defend is broader than the 

duty to indemnify, see Hofing v. CNA Ins., 247 N.J. Super. 82, 88 (App. Div. 1991), 

we will not relieve an insurer of the duty to defend where a "'potentially coverable' 

claim[] require[s] a defense," Abouzaid v. Mansard Gardens Assocs., LLC, 207 N.J. 

67, 80 (2011) (quoting Stafford v. T.H.E. Ins., 309 N.J. Super. 97, 103 (App. Div. 

1998)), regardless of whether "the cause of action stated cannot be maintained 

against the insured either in law or in fact—in other words, because the cause is 

groundless, false or fraudulent." Id. at 81 (quoting Danek v. Hommer, 28 N.J. Super. 

68, 77 (App. Div. 1953), aff'd, 15 N.J. 573 (1954)). 
21 A-1027-18T4

C.

Our conclusion that the claims were covered as "advertising injuries," 

requires us to next consider whether the claims were otherwise excluded by 

other provisions of the policy. We conclude they were not excluded.

"[I]f an excluded claim is made, the insurer has no duty to undertake the 

expense and effort to defeat it, however frivolous it may appear to be." Wear, 

455 N.J. Super. at 456 (quoting Grand Cove II Condo. Ass'n v. Ginsberg, 291 

N.J. Super. 58, 72 (App. Div. 1996)). However, "exclusions must be narrowly 

construed; the burden is on the insurer to bring the case within the exclusion." 

Flomerfelt, 202 N.J. at 442 (quoting Am. Motorists Ins. v. L-C-A Sales Co., 155 

N.J. 29, 41 (1998)). "[E]xclusions are ordinarily strictly construed against the 

insurer, and if there is more than one possible interpretation of the language, 

courts apply the meaning that supports coverage rather than the one that limits 

it." Ibid. (citations omitted). 

Courts will find "a genuine ambiguity to arise where the phrasing of the 

policy is so confusing that the average policyholder cannot make out the 

boundaries of coverage." Wear, 455 N.J. Super. at 454 (quoting Weedo v. 

Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979)). But, "[f]ar-fetched 
22 A-1027-18T4

interpretations of a policy exclusion are insufficient to create an ambiguity 

requiring coverage." Ibid. (quoting Stafford, 309 N.J. Super. at 105). 

Moreover, exclusions "are presumptively valid and enforceable 'if they 

are "specific, plain, clear, prominent, and not contrary to public policy."'" Ibid.

at 454 (quoting Flomerfelt, 202 N.J. at 441). "[I]f the words used in an 

exclusionary clause are clear and unambiguous, 'a court should not engage in a 

strained construction to support the imposition of liability.'" Mem'l Props., LLC v. 

Zurich Am. Ins., 210 N.J. 512, 528 (2012) (quoting Flomerfelt, 202 N.J. at 442).

"Courts must be careful, however, 'not to disregard the "clear import and intent"

of a policy's exclusion . . . .'" Wear, 455 N.J. Super. at 454 (alteration in 

original) (quoting Flomerfelt, 202 N.J. at 442). 

(i).

With those guiding principles in mind, we turn to Mercer's argument that its 

"intentional acts" exclusion relieved it of its duty to defend. The exclusion appeared 

in section 11 of Part II B and stated the following:

Advertising Injury Exclusions.

We do not insure any of the following:

1. Injury arising out of oral or written publication of 

material, done by or at the direction of any insured with 

knowledge that such is false or such would violate the 

rights of another and would inflict the injury. 
23 A-1027-18T4

[Emphasis added.]

Mercer contends that this provision excluded coverage for claims arising out 

of Superior's "intentional acts" and that since "it is clear that all of Reynolds's claims 

in its [c]omplaint alleged intentional conduct" by Superior, the claim was excluded 

and therefore Mercer had no duty to defend. We disagree. 

The exclusion states that intentional injuries, rather than intentional acts, 

caused by the insured are excluded from coverage where publication is made with 

knowledge it is false or violative of another's rights. The burden was on Mercer to 

establish that Reynolds's complaint alleged an intentionally caused injury. See 

Hammer v. Thomas, 415 N.J. Super. 237, 249 (App. Div. 2010) (stating that the 

insurer has the burden to bring the matter within the policy exclusion). Mercer failed

to meet its burden because it cannot cite to any allegation made by Reynolds that 

Superior intended to injure Reynolds with its conduct. 

A claimant's mere allegation of intentional harm does not alone justify an 

insurer's refusal to provide a defense. In order to bring the insured's conduct within 

the exclusion there must be evidence that the insured subjectively intended to injure 

the claimant. See SL Indus., 128 N.J. at 212. "Absent exceptional circumstances 

that objectively establish the insured's intent to injure, we will look to the insured's 

subjective intent to determine intent to injure." Voorhees, 128 N.J. at 185. 
24 A-1027-18T4

Here, Reynolds never alleged that it suffered an intentional injury. Reynolds 

never alleged Superior intended to harm Reynolds. Rather, the complaint stated 

Superior's copyright infringement was profit-driven. Reynolds alleged it was injured 

when Superior, while promoting its services in pursuit of realizing profits, used 

Reynolds's protected intellectual property to assure customers they could still use 

Reynolds's system. The exclusion did not apply to bar coverage or relieve Mercer 

of its duty to defend. 

We are not persuaded by Mercer's contention that the allegation of Superior's

intentional copyright infringement was sufficient to establish an intentional injury. 

The coverage provided for an "advertising injury," in the form of copyright 

infringement, did not limit the coverage to only negligent acts. Even if it did, by its 

nature, copyright infringement is a strict liability tort, and intent to injure is not 

relevant. See Major League Baseball Promotion Corp. v. Colour-Tex, Inc., 729 F. 

Supp. 1035, 1039 (D.N.J. 1990); see also Shapiro, Bernstein & Co. v. H. L. Green 

Co., 316 F.2d 304, 308 (2d Cir. 1963). To allege a claim for copyright infringement, 

a plaintiff must state: "(1) ownership of a valid copyright; and (2) unauthorized 

copying of original elements of plaintiff's work." Kay Berry, Inc. v. Taylor Gifts, 

Inc., 421 F.3d 199, 203 (3d Cir. 2005). Intent is not an element of the claim. 
25 A-1027-18T4

(ii).

Next, we address Mercer's argument that coverage was excluded under the 

Computer Software Professional Activities Exclusion. As the motion judge 

correctly found,4that exclusion does not exclude coverage for Superior's alleged 

conduct. Construing the exclusion narrowly, this exclusion applies specifically to 

Superior's rendering of service or advice to its customers or other covered persons. 

It does not apply to a claim made by a third party for injuries caused by Superior 

where Superior was not selling computer software programs to that party. 

Moreover, as the motion judge also found, adopting Mercer's interpretation would 

render numerous coverages provided under in Part II B meaningless, including the 

one provided for an advertising injury. According to the judge, there was "no way 

to apply [that e]xclusion to the portion of supplemental coverage that covers 

advertising injuries without rendering that coverage meaningless." "A contract 

'should not be interpreted to render one of its terms meaningless.'" Porreca v. City 

of Millville, 419 N.J. Super. 212, 233 (App. Div. 2011) (quoting Cumberland Cty.

 

4

 Mercer misconstrues the motion judge's conclusion, stating he concluded that 

the policy would be left covering nothing if the computer software professional 

activities exclusion applied. However, the motion judge never stated the policy 

would cover nothing. Instead, he concluded that the coverages listed in Part II 

B would be meaningless if this exclusion applied.
26 A-1027-18T4

Improvement Auth. v. GSP Recycling Co., 358 N.J. Super. 484, 497 (App. Div. 

2003)).

(iii). 

Next, Mercer argues it was justified in denying coverage based on its policy's 

"prior publication" exclusion.5 The "prior publication" exclusion states that Mercer 

does not insure "[i]njury arising out of oral or written publication of material whose 

first publication took place prior to the beginning of [the] policy or such coverage 

under [the] policy." Mercer contends that an advertisement published by Superior 

on its website in 2009 triggered the "prior publication" exclusion, thus warranting 

relief from its duty to defend the 2012 complaint. We find no merit to this contention 

as Reynolds never alluded to the 2009 publication and, in any event, it has no relation 

to the copyright infringement alleged in Reynolds's 2012 complaint. In order for 

Mercer's prior publication exclusion to apply, the injury alleged in the complaint had

to have arisen out of those prior publications. There is no evidence that it did. 

III.

Mercer also contends that the motion judge did not make adequate findings of 

fact and conclusions of law when he approved the total amount of Superior's defense 

 

5 Although defendant raised this exclusion below, the motion judge did not 

address it in his statement of reasons. 
27 A-1027-18T4

costs in the Reynolds action, and that he did not properly allocate Mercer's 

responsibility between covered and non-covered claims. We disagree. 

"The general rule is that when the insurer has wrongfully 

refused to defend an action and is then required to 

reimburse the insured for its defense costs, its duty to 

reimburse is limited to allegations covered under the 

policy, provided that the defense costs can be apportioned 

between covered and non-covered claims." 

[SL Indus., 128 N.J. at 214-15.]

The burden of establishing the claimed fees' reasonableness is on the insured, 

but "the burden of [proving] . . . whether those fees can be allocated and, more 

importantly, how they should be allocated, . . . fall[s] upon the insurer who allowed 

the difficulties of allocation to accrue through its refusal to defend." Hebela v. 

Healthcare Ins., 370 N.J. Super. 260, 280 (App. Div. 2004).

Here, Mercer never challenged the reasonableness of Superior's revised 

defense cost. Rather, Mercer challenged Superior's initial calculations, which were 

later corrected in response to Mercer's reconsideration motion. Mercer never raised 

any issue as to allocation and offered no proof suggesting a different allocation than 

determined by the judge. Under these circumstances, Mercer failed to meet its 

burden. We have no cause to disturb the result. 
28 A-1027-18T4

IV.

Finally, because we agree with the motion judge's granting Superior summary 

judgment, we need not address Mercer's arguments about the denial of its motion for 

reconsideration of that judgment.

Affirmed.