A federal court in New Jersey recently held that the construction of an ambiguous policy term is not a matter suitable for judgment on the pleadings, thus denying AIG from avoiding coverage for a $67 million antitrust settlement. Rather, the only way to establish the meaning of an ambiguous term, the court explained, is to ascertain the intent of the parties, which requires “meaningful discovery.”

In January of last year, National Union Fire Insurance Co., a unit of AIG, brought suit seeking a declaration that it was not obligated to defend or indemnify Becton Dickinson & Co. in two antitrust suits that it settled for 67 million dollars. In those underlying cases, Becton was accused using kickbacks and incentives to illegally acquire a monopoly in the hypodermic products and disposable syringes markets. Questions arose as to whether those antitrust suits were covered by the policy.

National Union moved for a judgment on the pleadings arguing that because the policies only covered “personal injury” and “advertising injury,” the antitrust suits were not covered. Ambiguity arose, however, because the contract specifically included “unfair competition” among the various types of “advertising liability” covered under the policy. But the term was not defined.

AIG argued that inclusion of “unfair competition” alongside other intellectual property torts (piracy and idea misappropriation) suggested that its scope was limited solely to intellectual property theft. The court rejected AIG’s argument and denied the motion, stating “[t]he only way to ascertain the meaning of [a disputed] term would be through meaningful discovery.”

The case is National Union Fire Insurance Co. of Pittsburgh v. Becton Dickinson & Co., Case Number 2:17-cv-00691, in the U.S. District Court for the District of New Jersey.