N.J. Stat. Ann. § 59:10-4

Local public entities--authority to indemnify. Local public entities are hereby empowered to indemnify local public employees consistent with the provisions of this act. A local public entity may indemnify an employee of the local public entity for exemplary or punitive damages resulting from the employee's civil violation of State or federal law if, in the opinion of the governing body of the local public entity, the acts committed by the employee upon which the damages are based did not constitute actual fraud, actual malice, willful misconduct or an intentional wrong.